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Ladies and gentlemen, good day, and welcome to Q4 and FY '25 Sandhar Technologies Limited Earnings Conference Call hosted by Emkay Global Financial Services Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Chirag Jain from Emkay Global Financial Services Limited. Thank you, and over to you, sir.
Thank you, Amshad. Good morning, everyone. On behalf of Emkay Global Financial Services, I would like to welcome you all to the Q4 and FY '25 Earnings Conference Call of Sandhar Technologies Limited. Today, we have with us from the management team Mr. Jayant Davar, Chairman, Managing Director and CEO; and Mr. Yashpal Jain, Chief Financial Officer and Company Secretary. We will begin the call with opening comments from the management team, followed by a Q&A session. Over to you, sir.
Good morning, ladies and gentlemen. Let me welcome you all to the quarter 4 and 12 months earnings call -- con call of Sandhar Technologies Limited. I want to thank Emkay Global for putting this together.
On the call with me from our company is my colleague, Mr. Yashpal Jain, who is the CFO.
To begin the call, let me talk about how the world is for us, for our sector. You're aware of the geopolitical situations and what kind of challenges they are bringing to the world. The automotive world on a global level is surely facing headwinds and with a lot of uncertainty because of the tariffs and so on and so forth, as well as insecurity on the part of a lot of the population, there has been a little bit of a drag on the auto sector. And I do believe that both the United States and the EU will continue to have some turbulence not just this year, but in the continuing years as well. You have seen marquee brands like Tesla and all also face challenges in the sales and also the -- a quick ramp-up of several competitors who entered the field of non-IC engines to bring up competition.
So -- where India is concerned, I do believe that India is comparatively stable, and we are seeing a decent demand, and we do expect that the industry, as most I think, will continue to grow in high single digits even in this year.
As per Sandhar is concerned, Sandhar the circumstances of what I have mentioned above, has continued to perform well, and we have achieved a total income growth of 11% compared to quarter 4 2024, and 10% compared to full year of financial year 2024 at a consolidated level. We anticipate sustaining this growth momentum. Of course, this is subject to geopolitical conditions, market demand, the performance of the auto sector and other related factors.
The India business for us has achieved a growth of 13% compared to quarter 4 of financial year '24, and 13% growth according to the full year of financial year 2024. The consolidated EBITDA grew by 9% in quarter 4 to INR 109 crores versus INR 100 crores and grew by 14% year-on-year in financial year 2024 to get to INR 400 crores of EBITDA in '25 versus INR 351 crores in financial year '24. The EBITDA for India business grew by 12% in quarter 4 '25, which is INR 97 crores versus INR 86 crores, and grew by 21% in '24-'25, which is INR 357 crores in '25 versus INR 295 crores in 2024.
I am also very pleased to share that all our joint ventures are experiencing strong growth and consistently improving performance. Further, pleased to share that all our joint ventures are PAT positive in quarter 4 and for the full year financial year 2025. The success is driven by focused cost control, localization efforts, enhanced business synergies. We remain confident that this growth trajectory will continue and grow. Collectively, our joint ventures have recorded a total income of INR 303 crores with an average EBITDA close to 13%.
We are also thrilled to announce that Sandhar Ascast Private Limited, our wholly owned subsidiary, has successfully acquired the high-pressure and low-pressure aluminum die casting business of Sundaram Clayton Limited at their Hosur plant for a total consideration of INR 163 crores. This strategic acquisition marks a significant milestone in our growth journey, allowing us to diversify our operations and enhance our manufacturing capabilities.
By integrating Sundaram Clayton's legacy with our expertise, we are poised to drive innovation and expand our product portfolio, tapping into the new markets. We took over and start -- took over the operations on the April 1, 2025.
Well, for us, the key benefits of this acquisition include entry into the low pressure die casting market, enhanced production capacity with higher tonnage machines, broadened product offering, including essential components for automotive and industrial applications. We are excited to welcome the talented team from Sundaram Clayton and look forward to achieving new heights together.
On the overseas business, the performance of the overseas business has been a drag for us in quarter 4 as well as for the full year of operations, the sustained losses marked by low demand and slowdown in Europe. We are closely watching the situation over there. And as per preliminary indicators, the volume should increase in financial year 2026, not so much from the growth in Europe, but from the addition in the wallet share of the components that we have.
The company's expansion projects in Pune for cabins and fabrication and die cast are expected to commence commercial production by the end of March 2025, should start to happen now. Our EV business has started commercial production of battery chargers and is getting a very positive response from the market, the customer base is gradually increasing with more and more customers added.
With that, I will conclude my opening remarks. And in fact, I should also mention here that, that's a question that we've been having from all of you for a long time is the smart locks. You would be happy to know that Sandhar Technologies received the EV [ Best Part ] Development Award from Suzuki Motorcycle during their annual supplier meet. Now this particular product line is ramping up, and we do expect a gradual but sure [ portrait ] growth in this particular year.
On the CSR front, we've dedicated ourselves to sustainable business practices that address economic environment and social challenges. Our efforts go beyond just business concerns. We want to create a positive impact on the communities that we serve. So we are focused on diversity and equal opportunities. As we go forward, our focused areas working towards ESG and SGD, diversification of product portfolio, expanding customer base and increasing content per vehicle, which we've been doing; improvement on ROCE and ROI, consolidation of operations and generation of more free cash flows and deleveraging of our balance sheet. Those are the agenda items and KRAs for us that we must continue to improve and achieve as we go forward.
With that, thank you all once again. We are open to questions.
[Operator Instructions] The first question is from the line of Tushar Gupta from Sagun Capital.
Congratulations for a good set of numbers. Sir, I want to know about what are the CapEx plan for the financial year 2026? And what is the market for EV charger, how much we can expect a revenue from this segment?
So the CapEx plans for '25/'26, largely like we have a CapEx policy in case like that it is equal to a depreciation at the group level. So from the normal maintenance CapEx and the growth CapEx, we are expecting around close to INR 180 crores to INR 200 crores in this financial year, '25/'26.
And sir, how much large this EV charger and controller market can be and how much revenue we can expect from this segment?
Tushar, to just give you this, we have a 3-year plan for the EV business. This will be the first full year of operations where we have targeted numbers, which are comparatively smaller in the range of between INR 10 crores to INR 15 crores but it's ramping up very quickly to a INR 100 crore level within the next 3 years.
Sir, 1 more thing. What is -- like we have acquired Sundaram die casting unit. So how much we can expect from that revenue potential and all?
Yashpal, do you want to give the numbers?
Yes, sure. So like Sundaram Clayton, we have acquired the ongoing business on a slump sale basis. And this year, we are expecting a revenue of around INR 402 crores -- in between INR 425 crores, sir. This is the revenue expectation from that business, and it is again subject to the demand in Indian market as well as the overseas market to -- because it's only dependent on the customer schedules also. But we are expecting this revenue to range between INR 400 crores and INR 425 crores. And it has, I would say, potential to grow further. But yes, that has to be seen in the coming years. And I believe we maintain a certain ratio of 2.5x to 3x in long run. So we would like to achieve it going forward in the next 2, 3 years of time.
Sir, 1 more thing. Like as we see in Q4, we have increased our EBITDA margin. So it can be going forward or it kind of stable?
It will be stable.
Please highlight...
Yes. So in last 2 to 3 years, in the calls, we have been emphasizing that we are -- I mean, the task of improving our EBITDA margins also as well as the earnings before tax also including ROCE. So you can expect another improvement of 30 to 40-point basis in this FY '25/'26. But I think that is the upper level that a component industry can achieve given the market situation. So 30% to 40% we are expecting a healthy improvement in EBITDA in FY '25/'26.
The next question is from the line of Saket Kapoor from Kapoor & Co.
Just to reiterate what you mentioned in terms of the EBITDA margin trajectory, can you specify what -- I missed your number, but you mentioned the 30%, 45%. Can you come again?
Yes. We expect an improvement of 30 to 40 bps means 0.3% to 0.4% in EBITDA margin FY '25/'26. But again, that is dependent, as you know, on the industry challenges also and the demand pattern also.
Correct. And sir, in terms of the Sundaram unit acquisition, sir, what are the current metrics for the unit in terms of the revenue and the profitability?
So like, as we mentioned in the filing, currently, the unit was operating close to a revenue of INR 390 crores, something or I think INR 376 crores because it keeps on fluctuating. But for this financial year '25/'26, we are expecting a revenue fall of around INR 400 crore to -- in between INR 425 crores. The reason is that we have started the operations in their premises. But during the intermittent period, during the financial year, we will be shifting the entire operations to our own premises. So that is the reason considering all those factors and a little bit disruptions. We expect our revenue to between INR 400 crores and INR 425 crores. But in long term, as you know, we keep our financial metrics that any business should deliver an asset ton of 2x to 3x or 2.5x to 3x lively. So in next 2 to 3 years, we would like to scale up to that -- those levels.
And what are the current margins and the profitability for the unit if you could mention, sir?
So largely it is with the die casting like single high digit or at the most 9.5% to 10% is the -- I mean in the ADC segment, 9% to 10% is a healthy margin, if 1 can achieve. So I don't think anything would be changed, that would continue.
No, no, that's what I was saying, because we are not seeking to expand on a larger CapEx base. That is the reason we are more focusing on improving the return on capital employed once the investments are through. So largely the EBITDA change remains between 9% to 10% in ADC. That is also a very good EBITDA margin one should say.
And sir, even we have disposed of 1 of the units, correct me there. So if you could just explain the rationale for that. We did sell 1 of our units during this interim period only.
So you are referring to 1 of the residential lines or exit of joint venture. Can you elaborate further.
Yes. So I'm referring to the joint venture.
So there was 1 of our old joint venture, Jinyoung Sandhar Mechatronics. So the expectation with which we formed the joint venture with our Korean partners and the level of activities were not up to the mark and we are reviewing our JVs also in the sense that we want to scale up the business. And the Jinyoung has been, I would say, financially and operationally not performing well in the last 5 to 6 years, sir. So there were serious talks within the organization also, and management was of the view that the long-term objectives of our organization of [ Sundaram ] might not be fulfilled while continuing the joint venture. So we plan to exit the joint venture.
And sir, when we look at the consol numbers, although there is a significant increase in terms of the revenue profile, but the margins and the contribution to the profitability is flat as you have already alluded in your opening remarks. So if you could just give us some more understanding on how at a consolidated level, especially the margins are going to shape up. I just wanted to highlight a point that on a revenue top line of INR 1,014 crores, we post PBT of INR 50 crores for the consolidation, whereas in this kind of loan on the revenue, I think it's 700 -- on a top line of INR 758 crores, the profitability is INR 50 crores. So the PBT number moves up by INR 5 crores on an increase in the top line by INR 225 crores or INR 240 crores. So if you could just explain the dilution of margins when we go on consolidation and what steps -- because in your opening remarks you did mention that our targets are to improve the margins at both the stand-alone and the committed levels and all steps are being in the angle to achieve that. So if you could just throw some more light on that side.
Yes, sure. So basically, in the opening remarks, if you remember, our MD also mentioned that the European business has been a big drag for us during the financial year '24/'25. So if we compare the growth between the Indian subsidiaries and the foreign subsidiaries, the Indian subsidiaries have outperformed. Basically, we have large subsidiary, Sandhar Engineering, which is into the sheet metal business. And for the last 3 years, I mean, we have set up 3 manufacturing greenfield projects in the same. Now all those have started -- I mean the revenue started flowing in, I would say, the right direction, and the business has ramped up.
The middle drag has come from the European business. So we have sustained our annual loss of close to INR 21 crores in the European business. Otherwise, rest all other joint Indian subsidiaries, they are performing very well. They have already crossed the breakeven levels and in the coming -- I mean, in this financial year '25/'26, they will be posting healthy margins also.
As far as European subsidiaries are concerned, we are reworking on our strategy over there because as you know, the demand is sluggish in the overseas market, whether it's the U.S. or the European market and there's a lot of confusion is also prevailing with respect to tariffs and how the business deals will be happening between Europe and America versus the Asian countries. So in a bit to revise the operations, we are taking some strategic calls, and we are expecting that FY '25/'26, we would not be facing this much of losses in the overseas business. And our first task is to ramp up the operations over there and to cut down the losses in overseas business. So this is how the strategy there. Otherwise, the Indian subsidiaries, they are performing very well, and they will continue to perform.
Last point, and I'll join the queue. Sir, firstly, in terms of, I think, the closing capital work in progress balance at the standalone and the consol level, so what are the new capacities that will get commissioned during the year, and also on a conservative outlook, also on a top line of INR 3,900 crores, which we posted last year, what should be the stable rate of growth in the top line? You did added to what margins would look like the trajectory. So what should be the top line trajectory, sir, which we may guide through for this current financial year?
So the capital work in progress is largely INR 113 crores is on account of the advance that we paid to Sundaram Clayton as a part of a tranche of payment as per the business transfer agreement. So INR 113 crores is comprised of that, which we have already discussed that, that business will be generating a revenue of INR 400 crores to INR 425 crores because we bought this business for INR 163 crores and INR 113 was paid prior to 28th of March and remaining INR 50 crores were discharged prior to 11th of April. So this is how the major CFD is being routed. Remaining CFDs on account of the other 2, I would say, the Pune projects of CFD and aluminum die casting, which MD sir has also mentioned, now they are -- I mean, the commissioning has been done and the commercial production will start within this quarter. So they will be adding up, but in the first year, the ADC and this cadence and fabrication being a heavy industry, it takes 2 to 3 years to ramp up the production. So there would be addition to the revenue, but that would be close to around INR 40 crores, INR 50 crores in this first year.
As far as the top line projections are concerned, auto industry, ICRA and other agencies have issued the report would be a high single-digit growth only. But we expect that we might be landing a growth of not lesser than what we have done in the last year. With the new business and plans adding up, I think we can land something around 14%, 15% of the top line growth in the company with the sales -- stable growth in the auto industry in India that we project.
The next question is from the line of Resham Jain from DSP Asset Managers.
So just on the overseas piece, we have spoken about it. But given that it is taking slightly longer and obviously, it can test anyones fiction. But from the strategy perspective, over the next 2 years, 3 years, what are the kind of guardrails you're keeping for that business? Because somehow the recovery is not coming there. And the overall debt also is significantly higher. The net debt-to-EBITDA on the overseas business is also on a higher side. So how do you see the overall restructuring, what are the 3, 4 important steps you are planning to take there to improve the overall profile of the business?
Resham, thank you for that question. I know it's been a thorn in the side for a while now. But just to brief you on what we've been doing. What we've been doing is that we've been replacing higher cost capital. We've added more businesses and more products in that particular business. And the effects of that have already started to show. So if you even look at the last quarter, the last quarter was much lesser losses compared to the previous quarter. And we do believe that with the improvement that is happening that started to happen in the last quarter, that improvement will continue and we will be able to mitigate the losses that we have.
On a long-term basis to a 3-year basis, our capacities in Romania, which got delayed because of the war, are now being utilized. Mexico had gone down on account of confusion with the U.S. and other things are back in operation. So from a perspective of regular operational strategy, we do believe that the losses that occurred will be mitigated to a large extent in the year '25/'26 where the future is concerned, you are aware that we have a lot of strategic advantages of having this business, and this is the reason why we could manage to get the business in India and with now this new Sundaram Clayton acquisition, we are amongst the top few players in the country from being nowhere at 1 point of time. And this is on account of the specialized componentry that we do.
So we are hopeful that, that strategic stay in our city has helped us and our job is to make sure that we not only mitigate the losses, but effected into profits. You are aware that the EBITDA margins in our overseas business was actually higher than our India business. And we are hopeful that beginning from the next quarter itself, you will see a huge amount of change coming in terms of positive direction.
Yashpal, do you want to add something?
Sure. So as far as, like, we are expecting the business to revamp in the coming 2 to 3 years of time, we are in the process of tapering long-term plans. Also if you remember like, in India also 2 years back we are struggling with the same margins, but we have taken many efforts and starts towards improving our margin base also and going with the healthy product line. The same would be mapping to overseas operations also. And I think the FY '25/'26 won't see the losses to those quantum, which we have seen in FY '24/'25. And soon the operations will be back on the track.
Thank you sir for giving that confidence. So that's the first one. The second is on the overall revenue. We have touched almost INR 3,900 crores this year. And given that you have acquired a new business plus several new wins, how do you see the overall revenue panning out for FY '26, broad numbers?
So like by industry, as we have seen the reports, it's a single large digit growth, right? But still we are expecting that 14%, 15% or so growth should come up in our revenues, thus we'll be working because you know the customer schedules keep on changing every quarter. So large depend on third and fourth quarter. But still basis the stable growth in the industry, we are expecting a healthy growth of 14% to 15% in the revenue, but our more focus would be on improving the margin base. So like -- more focus on the margin base...
Sir, just to clarify, the 15% is without INR 425 crores of Sundaram Clayton, right?
Yes, you can expect that.
The next question is from the line of Preet from InCred AMC.
I would like to ask about the debt level. In previous con calls, you mentioned that you will be keeping your debt levels below INR 700 crores, and now, obviously, for the acquisition purpose, you have to take the debt and the debt levels have gone beyond that. Do you have anything the peak debt how much you can go? Or will you be further increasing debt? Or it will be now staying constant at this level?
So like on March '25 consol level, we have net debt of INR 740 crores, right? And largely, which includes a payment of INR 130 crores -- INR 113 crores in the last week of the March to Sundaram Clayton as an advance to the purchase consideration. So majority of the acquisition price we already factored in March '25. Another INR 50 crores has been factored in April '25. And I think the debt level should not go beyond what we have seen in the gross debt levels of INR 850 crores in the month of March at 1 point of time because we will be generating EBITDA, as I've told in the previous question-and-answer session that 30 to 40 bps, we are expecting an improvement in EBITDA. And this year, we closed at an EBITDA of INR 399.79 crores on a round side, it is INR 400 crores. So again, with a 15% around growth in turnover, we'll be having the healthy inflows of cash from operations, which we would be using for our expansion needs, and we won't be relying on higher debt levels for our organic -- as far as organic expansion and organic operations are concerned. If something inorganic comes up, then that would be again backed by the revenue of that business. So that I'm not factoring right now.
Got it. And 1 more question from my side. What would be your outlook -- are you -- what do you expect from the subsidiary business in the coming years? Will it be able to reach the breakeven? And if not, then in which year you expect the subsidiary to come back to the breakeven levels at least?
So Indian subsidiaries have already crossed the breakeven level because Sandhar Engineering was a new subsidiary that we floated in '21 -- FY '21/'22. So that has already crossed the breakeven. It was a sheet metal, 3 units were installed in the company.
As far as overseas is concerned, as we have discussed, I mean, just before this call also, we are working on improving the operational efficiencies and the margin base in overseas. And I think this year, by the end of this year, we should be very near to the breakeven in overseas business.
And how much do you expect from JV, similar profit levels, which we have seen in FY '25? Or it will be improved further?
So largely, the JVs, the operations have stabilized because initially most of our JVs were formed during COVID, that's the reason they were reeling under the business losses and other factors. But now they have ramped up, and as far as told in the beginning also that localization has been focused on the JV side, I think they should be able to maintain. But again everything remains on the customer side and also how the political conditions prevail across the globe. But there's no reason as of now that the JV should be going back to the losses.
The next question is from the line of Radha from B&K Securities.
Congratulations for good results. Sir, your capital employed in the consolidated business stands at INR 2,000 crores if you exclude the INR 130 crores of investment in Sundaram Clayton. So this capital product is including the working capital. So is it fair to assume that the company has invested out of this INR 2,000 crores, INR 600 crores is in the overseas business?
Radha, the investment in overseas business, the capital import is INR 530 crores, 5-3-0 -- out of this INR 2,000-odd crores of capital employed.
And are you investing any further in the overseas business in the next 2 years?
Well, that gradually, we will see because if you remember, in Romania, we were supposed to install 16 machines. We have done 5 machines as of now, but we are seeing how the business is ramping up in overseas. This is that we will take a call. But right now, the priority is to break even the operations over there. So right now, we don't have any heavy CapEx plan in the overseas business.
Secondly, the Sundaram Clayton overall working capital cycle is always double of Sandhar's working capital cycle. So when we integrate this wholesale plant from come next year, so will this working capital cycle continue that they have? Or do you think that it will be reduced to Sandhar's level?
So this working capital cycle you are telling from Sundaram versus their customers or how? Can you elaborate, please?
Yes, I'm checking the Sundaram Clayton overall business working capital cycle since I will not be able to get for the -- separately for the wholesale plant.
Yes, exactly because Sundaram has another business in [indiscernible]. So they call it a party business. So -- but like we have acquired Sundaram, so any connection from Sundaram is already over. They were the sellers and we were the buyers. Now our working capital cycle will be more or less from that business to our present profile.
And sir, just wanted to know why did the current promoters sell this plant? And also a bit color on what kind of payback are you expecting? Is it fair to assume 15% ROCE is a sustainable return ratio that we can expect from this business?
Yes. So INR 163 crores we paid to acquire the business. This year, we are expecting a revenue of INR 400 crores to INR 425 crores. And as you know, we keep a target of 2.5x to 3x of asset turn in next 2 to 3 years of time that we'll be scaling. And we remain confirmed to our ROCE of 15% that we have discussed and mentioned earlier also. But yes, that ROCE will be coming gradually over a period of time, but not immediately in this financial year.
Any color on why did the current promoter sell this point, sir?
Yes. So basically, Sundaram Clayton, again, they are integrating or I would say they are exiting the noncore businesses. And this component in die casting -- sorry, aluminum, LPDC, HPDC was not their core business. That's the reason if you remember, see, they exit the plastic business also. So they are exiting the noncore businesses, which they are not into. So the reason to my understanding is the same that they want to continue their strategic and core businesses. That's the reason they are hiding off their noncore businesses.
And sir, out of the INR 180 crores and INR 200 crores CapEx plans that you have announced in this year, anything that -- how much would we be investing for this wholesale plant of Sundaram Clayton? And what is the overseas sales mix from this INR 400 crores?
So like -- around INR 200 crores of CapEx plan that I have said, we will be investing around INR 20 crores to INR 25 crores to upgrade the Sundaram Clayton lines once it is shifted to our premises. And it also excludes the INR 50 crores of the balance consideration that we have discharged in the month of April, right?
As far as overseas is concerned, as I told, we will be evaluating as and when required once the capacities are ramped up, the order base is expanded. Already, we have in Romania 5 machines installed. In other operations, we are not seeking any heavy CapEx over there, except the maintenance and the very, very regulatory requirements. That's all.
No, my question was, the Sundaram Clayton wholesale plant, how much is the domestic sales and overseas sales?
It's a domestic sales only, sorry, I missed your question. It's a domestic sale only. We have acquired a domestic business. The domestic sale, there's no overseas sale from this plant.
And the customer would entirely be TVS?
We have option. There's no noncompeting clause. Right now, it is TVS but we can expand to any other customer base. And we -- as far as LPDC is concerned, we are forging into that business for the first time. So we have larger customer demands. Also for LPDC, we might cater to other customers also. That depends on future strategies how we plan. But as of now, TVS is the main customer.
And sir, what parts does this plant make? And in terms of tonnage, you've mentioned that 1 of the rationale is increase in tonnage. So what is the current capacity of the company in die casting and how much would it increase from this plant?
So that I'll get back to you because tonnage and those capacities, I need to check with the business teams.
The next question is from the line of Saurabh Jain from Sunidhi.
Congratulations for the good set of numbers. Sir, my question was to take forward from the last participant on the CapEx. So you said INR 180 crores to INR 200 crores of CapEx for FY '26, and our maintenance CapEx, roughly around INR 160 crores to INR 170 crores. So there is no major plans for growth CapEx for FY '26, right? And this is in context of our current capacity utilization also -- capacity utilization for FY '25 vis-a-vis including the upcoming ramp-up possible in FY '26.
So first, answering your CapEx. So like we are keeping a plan of close to INR 200 crores, more or less equal to our annual depreciation.
[Technical Difficulty]
Mr. Saurabh, sir, I may request you to rejoin the question queue. The next question is from the line of Rajit Aggarwal from Nilgiri Investment Managers.
Sir, will it be possible to share the numbers for your overseas bills. What was the loss in Q4, and specifically the top line of Mexico plant?
So the losses, the console losses at the overseas on an annual basis is INR 21.09 crores. And fourth quarter is INR 3.74 crores.
Okay. And on Mexico, specifically?
Mexico is close to INR 120 crores of annual revenue.
All right. And will it be possible to share some update on some of the products that you mentioned in Q3 that delayed, for example, the mirrors for Hyundai and the SOPs are expected to begin July, August. Are those timelines still -- will the timeline still hold? And there were some new parts and sheet metals, which were supposed to be launched in Q4 and the ongoing quarter of FY '26?
So the [ EC ] mirrors you are talking about?
For Hyundai. Yes.
So Hyundai, the latest update is that by September they will be going for this. So there is a little bit delay of another, I think 1, 1.5 months. So September, they have given us the revised date because they are working on the model in which they want to fix it. So that's the reason for delay from the OE side.
Secondly, sheet metals, most of the new plants already -- because sheet metal is a continuous part development process and the model keeps on changing on the customer side. So it's a continuous development. So there is no, I would say, the closer of the opening data. It continues the part development because the volumes are ramping up in the shipment. And you can see we have registered a good growth in sheet metal in this financial year compared to the last financial year. It's about 33% of growth that we expect -- that we derived in sheet metal business. And it will continue with the growth momentum because the plants are scaling up, all the 3 plants are scaling up in Sandhar Engineering and 1 plant is in Sandhar Technologies, which is the parent company. All 4 are scaling up and giving us a good business.
The next question is from the line of Ankit from Adezi Ventures Family Office.
My first question is with regard to the current inventory situation with your clients. So is that lower or higher than usual? And how is the inventory for 2-wheelers at the dealership level currently?
Can you come back on that question, please?
I didn't hear the question too, please.
I'm saying what is the current inventory situation like for our dealerships and with your clients? Is it lower or higher than usual?
Well, it's difficult for me to say. We know that there were some production issues, for example, at Hero on account of some supply issues, and therefore, their manufacturing and production went down in the last couple of months. But I understand they've started ramping up now according to the orders that we are getting. With the others, again, I would say from whatever news we have, of course, we have limited information compared to what FADA would have, but from whatever information we have, it is well within the range of the 45-day inventory targets that most of these OEMs do.
Understood. And I mean, looking ahead for next year, what is the kind of revenue and EBITDA margin aspirations that you're looking at?
So revenue, we are expecting a growth of around 14%, 15% in FY '25/'26. And EBITDA margin, we have kept a target to go for further improvement by 30 bps to 40 bps basis.
What is our EBITDA margin number in that case?
Expectedly, if you add back, I think the figures can be right -- because we have closed EBITDA of 10.20% on a consol basis, another adding 10.5% to 10.60%, roughly it can be close to INR 470 crore, INR 475 crores with the growth plan, sir.
Understood. And what is the key areas of confidence that take us to this higher growth and EBITDA margin for next year?
So if you see that in the last 3, 4 years, we were investing heavily in setting up new greenfield and brownfield projects. Most of those plants have been commissioned and now they are scaling up the production. We are getting good responses from the customers. So going forward, there would be a neutralization of the fixed cost because the volumes will be increasing while the fixed cost will be remaining constant. So what are the variable cost minus the prices will be coming, it will be adding up to our margin base.
Secondly is that we have taken many of the internal exercises to increase our operational efficiency as well to integrate some of the common operations also. So all these will be going to give us the desired results in this coming financial year as well as the succeeding financial years also.
Understood. And finally, what has been the commodity cost outlook like? And what is the outlook looking like for next year?
So very difficult to predict because commodity is something which is fluctuating especially when the geopolitical situations are worsening. So any time -- I mean, sometimes it just pops up with the higher trajectory. So I think more or less it should be within the same range during what we have witnessed in the current financial year.
Currently it's moving in a similar range to, say, last quarter?
Yes, more or less. Unless there is some massive change in the geopolitical conditions or the trade deal, that is a different situation there.
The next question is from the line of Saket Kapoor from Kapoor & Co.
Sir, you mentioned that for our overseas operations, we have made investment to the tune of INR 530 crores. Is that number correct, sir?
Capital employed INR 530, yes.
Okay. And sir, we posted revenue for FY '24 at INR 488 crores and for FY '25, it is INR 452 crores. So there is a decline and -- is this the number for which we have employed INR 530 crores as the capital employed?
So like -- looking to the last year's performance, you should not compare ideally because last year has not been healthy. Everyone is seeing a fall in the overseas business, Europe and American markets. So I mean the 1-year, single year's performance, we cannot benchmark it to the investment that we have done because investments are always done with a larger perspective from a long-term use. And the businesses keeps on, I mean, facing the cyclic -- cycles, I would say, in the ups and down cycles. So last year was a down cycle. But the situation never remains the same. The coming year, succeeding years would be the better one. And you will see that the capital that we have employed does not goes waste and the plants will be generating a healthier top line as well as the bottom line also.
So sir, also on a conservative basis and taking things ahead, what should be the contribution from the overseas operation going at say, 2, 3 years down the line? Or is it very difficult to speak on the foreign operator because of the geopolitical situation as they stand today?
Yes. So if you recall 2 years back or I would say, 1.5 years back itself, we were having a EBITDA margin of 13.5% above in the overseas business. And again, we plan to go back to the same levels. The geopolitical situations of that, like the tariffs and other things, I think they should be stabilizing because all the countries are sitting together now to work out the trade deals on. So sooner or later, they should be sorted out and the operations would -- I mean, these are all expectations, depending on what the forecasts are coming. We expect the operations to go back to the earlier position and contributing a healthy margin risk to our overall operations.
Since you alluded to the tariff part of the story, currently, sir, for our overseas operation, what are the current tariff trajectory and the proposed 1 for our overseas operations? What should the tariff look like?
So like directly, we are not hit out with the tariffs because we have a pass on with the customers also. So it's directly the country agnostic, how the country behaves between 2 countries. So directly, there's no hit as far as overseas also concerned or domestic is concerned. But let's see how it works out and how the demand is there and what are the preferences between the countries in terms of exports and exports that we need to see after second quarter. I think by second quarter it should stabilize well.
And just initially we find the first half of Q1 to be the flat quarter in terms of the auto component or the lean period is there for or what should be strengthening in, in terms of how the first half and the second half is split between revenue works out?
So traditionally, first half is a little bit weak, and second half is high because second half is like festivals in India, also the demand is also there. So the revenue split normally is around -- I mean, it's very difficult to say, but normally, we see it around between 45:55 or 40:60. This is how the split is.
And lastly, sir, firstly, if you could also allude towards the current utilization levels, if that number could be explained, because we are into a lot of products and to that tensioning out on utilization levels might be difficult for both Indian and the overseas operation. And second point is, sir, post our IPO in 2018, somehow investing community has not been able to -- value creation has not happened. So has the management figured out or [ ironed ] out the reason for which the valuation -- the value creation generally has not happened for Sandhar, in particular. And what steps can we expect going ahead that may create value for your investors at large going ahead?
So answering your first question, like in terms of capacity utilization, at 1 point of time, it is very difficult to say how all the businesses because we have been adding the capacity, we have been modifying our basis and the set up also. But like for sheet metals, the new plants, they are already above 70% now, right? As far as SMB lines are concerned, I mean, they work on a different pattern. So we don't have that much of idle capacity, if you say. We have available capacities also in which we can expand. So we plan out our operations basis that only and we used to invest accordingly.
Similarly, in the overseas, like 11 machines are pending to be deployed in Romania as per our initial plans. But again, we will be taking the call once we get the existing investment ramped up and the volumes increases. So that is a call that we take basis the demand and basis available capacity.
So if you really ask me whether we are -- overall basis, 80%, 70%. So for different vertical, different plants, it's a different metric, all together. But we keep the facilities with us. We keep the capacities with us because the customer demand keeps on fluctuating. And every time we can't go and keep -- start our expansion. So that's the reason it is a holistic view for next 2 to 3 years. We plan out our expansions also and the addition to CapEx also.
As far as your -- another last part of the question is concerned that post-2018 IPO, Sandhar could not create value. So you see like there has been multiple reasons. One is that after '19, the auto industry again went into the bad year and there was a degrowth in the auto industry. That was 1 of the reasons. Second, all of us know that the pandemic has hit globally. So 2 to 3 years where, I would say, we've got washed off. Post IPO, you can see the timing of these all events that coincided with our IPO timing. But again, if you see last 3 years' performance, we are back on the track. We have already moved to a double-digit margins, which the market was expecting. And I think our growth and improvement will continue. Now there seems to be no reasons as to -- we'll go back to the worst time, sir, I would say.
Can you comment on the credit rating, sir, when our credit ratings are due? And what is our current cost of fund?
So like our credit ratings are due next year now, we've already done our ratings renewed from India ratings as well as ICRA. And our average cost of borrowings like it lands something around -- because the rates are competitively higher, so it's roughly around 7%, 7.5% of the average rate of borrowing, including the movement in working capital that we found. So we have got around 10.5% in between.
10.5% is our cost of fund?
Yes, average, I would say, not [ exactly ]. It's average cost of funds that will apply.
Okay. And lastly, sir, you alluded to INR 200 crore CapEx for the current year. So -- and what should be then our current maturities? And what should we like to close the year, although we are in the first quarter only in terms of the closing debt numbers?
So like I think in the earlier part of today's call, so I mentioned that this year we are expecting an improvement of 30 to 40 bps in our margins also. They will be sufficient enough to generate cash from operations. At the same time, we have planned for INR 200 crores of CapEx, excluding the INR 50 crores that we have paid to Sundaram Clayton as a part of the final closure deal. So I think there should not be any reason that, that should escalate in the normal organic for the organic business. So it should be within the levels what we are perceiving right now within INR 850 crores of the levels, I should -- I think it should not breach. And we have sufficient cash flows to repay and honor our repayment commitments and schedules with the lenders.
And what are the current maturities for this year?
They are close to INR 100 crores -- it's INR 100 crores roughly this year.
The next question is from the line of Tushar Gupta from Sagun Capital.
So I need 1 clarification that you have mentioned that 14% to 15% of revenue growth is excluding INR 400 crores to INR 425 crores from [ debt subsidy ]. Is that correct? So we can expect around INR 4,800-plus crore of revenue?
So like we have given 14%, 15% in between, yes, you are right -- that's excluding the Sundaram Clayton, that's another growth we can expect from our existing business. So basis that you can work out the figures whatever it works out. And INR 400 crores to INR 425 crores is between the target we have set for Sundaram Clayton.
Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Well, all I want to do is thank the Emkay team, and thank you all for your patience. We've tried to answer your questions to the best of our ability. But if anybody has anything more, you can write to the company, and we'd be very happy to give you details of whatever you seek, whatever is possible within the domain of the law. We are very excited to see that the next year. We are very bullish, and we hope that with everything the way it is and with the mitigation of the geopolitical scenario that exists, we will grow even further than our aspirations that we hold today. With that, I want to thank you all for your time and patience.
On behalf of Emkay Global Financial Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.