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Automotive Axles Ltd
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Ladies and gentlemen, good day, and welcome to the Automotive Axles Limited Q2 FY '23 Earnings Conference Call hosted by Batlivala & Karani Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Sailesh Raja from Batlivala & Karani Securities. Thank you, and over to you, sir.
Yes. Thanks, Inda. Good afternoon, and thanks to everyone who have been to Automotive Axles 2Q FY '23 earnings conference call. Today, we have the senior management team of the company, Mr. Muthukumar N., President and CEO of Meritor HVS India Limited; Mr. Nagaraja, President and Whole-Time Director, Automotive Axles and Mr. Ranganathan, CFO, Automotive Axles.
Now I would now like to turn the call to Mr. Muthukumar for his opening remarks, followed by the Q&A. Sir, you may begin now.
Thank you, Sailesh. Good afternoon, ladies and gentlemen. Once again, happy to be back with you, and I'm sure that everyone of you will be good and safe. Just wanted to give you before starting the [indiscernible] about Meritor, about the comment [ made ] it better together. All of you know that it would be eager to hear some [indiscernible] -- as indicated earlier, the integration process is going on smoothly. We are around day 90 after the official integration between both the company. And the statements are both coming President and CEO, with [indiscernible], we're excited to welcome Meritor employees to come in. Together, coming from Meritor will move further and faster in developing economically viable decarbonized powertrain solution.
Ladies and gentlemen, you all know that coming to targeting towards going to destination zero in order to make this moderate much more better place to live for the future and the same is with Meritor, a great combination working.
The Chairman of our JV, Dr. Baba Kalyani, conveys wishes to the team, and we feel that we bringing great changes to the organization, and it's also for good for the future. I think both the team, [ Jennifer ] and the Group President in [ UD Global ] and Dr. Baba Kalyani, conveyed their best wishes to the members of the shareholders of Automotive Axles.
With that introduction, ladies and gentlemen I'm sure that you will have a lot of questions at the end and to the answer impact, but I'm reporting Nagaraja to talk about where are we now in terms of our footprint, how the business is, what is the activities that we are doing in our sustainability and what type of product that we are using followed by Mr. Ranganathan will talk to you about the financials for the quarter and how we are performing. I'll come back to you on the last slide and only the focus for continuously into the time situation.
With that introduction, ladies and gentlemen, over to Mr. Nagaraja for the general introduction. Over to you, Nagaraja.
Thanks, Muthu. Just a question here, which slide we are in?
We are on Slide 3. Slide 3, Nagaraja, snapshot Q2 FY '23.
Okay. Thanks, everyone. Again, good afternoon, and Nagaraja here. As you can see here the -- while the management to touch upon the revenues separately, we've been doing a reasonably well in terms of revenue, EBITDA and PBT.
And just to give you brief background about our manufacturing location and everything. We have 4 manufacturing locations, [indiscernible] plant in Mysore, and we have satellite plants in both the Jamshedpur and Pantnagar and have a warehouse in also mainly to support to the customer for the last mile. So we have 2,000-plus employees. We have customers, all the major OEs, we supply our products and our products consists of axle base and suspension systems. And as you can see, as far as independent manufacturer response, excluding the OEs who have got a backward integration, we are #1 in axle and #2 in brakes.
Next slide, please. So Muthu did mention about the green initiative and especially sustainability road map. It's not just that we are supplying product to meet the market demands. But how do we manufacture them? How do we ensure that there is a good balance between our industrial activities and then still maintain Mother Earth? So we started off the journey in 2017. As you can see, we started introducing green energy, we were about 20% at that point of time. But over the last 5 years, there's a significant improvements have been made. We not only -- now we are about 70% of our energy is coming out of renewable energy.
And then we are also focusing heavily on controlling the emissions in all parts of our manufacturing activity. There was one mandate just about a month ago, we talked to the suppliers and we started encouraging our supplier also to embrace this green technologies in every aspect of manufacturing.
So on the right side, we are looking at how is the main 6 pillars of our model, one is starting off with the green energy goal I talked about and how do we sustainably manufacturing, whether it's use of water, our elimination of some of the substances which are hazardous to environment. We also started working on the IoT basically Internet of Things. In fact, as we speak, 2 of our production lines have been completely digitized and then we continue to work with the society now whether it is education or planting trees or connecting with the other layers in the society, team has been fully engaged. Corporate government is one thing our Board is very, very -- I would say that very, very focused in that area and the Board has been guiding us to ensure that not just in our corporate function, but at all levels, including all the stakeholders, we're focusing on that.
Next slide, please. Okay. So -- as you can see, we are catering to those diverse markets and almost all the customers, both in India also globally, whether it's a truck trailer on the aftermarket or even as this renewed focus coming on the military, especially Make in India. We continue to support that. Our focus going forward will be more on the off highway where we are looking at developing the specific solution and having, as you know, come in knowledge and the capability in the off highway is going to really help us.
We continue to ensure [ guidance ] still remain our largest customer, but now we are expanding and adding more products with the other customer, whether it's Tata, Mahindra [indiscernible] and so we also export to [ Yury ] from India. And we can also continue to do more exports to the other Meritor locations.
So with that, I'll pass it on to Ranganathan to go through the financials.
Thank you, Nagaraja. Thank you, Muthu. On the financial results, I hope you have all of you seen the performance but just give a quick snapshot.
The revenue for the quarter is about INR 475 crores as compared to INR 310 crores in the last year same quarter. There only growth of 54% and EBITDA is about INR 5 -- 51 crores as compared to INR 23 crores last year in the same quarter. The EBITDA percentage, what we see is about 10.7% versus 7.5% which is close to about [ 43% ] increase. The EBITDA pivot stands at 8.5%, which compared to 4.5% last quarter. So pivot level, the percentage growth is close to about 89%, thanks to the volumes and also the cost performance.
As for the half year performance is concerned, the half year revenue growth is INR 977 crores as compared to INR 566 crores last year same quarter. EBITDA, it's about INR 104 crores for the 6 months at 10.7% and compared to INR 39 crores last year at 7% this year. PBT, we were at 8.4% for the first half year, with INR 83 crores on absolute values. Last year, the same 6 months, the PBT at 3.8% at INR 21.7 crores as an absolute values.
Overall basis, the volume definitely yielded a good amount of leverage, as well as the material cost and other conversion cost performances also driving the bottom line in spite of the heavy commodity impact we need to observe in the last 6 months.
With this introduction, probably I'll give -- I'll ask Muthu to take over the growth through mission [ '25 ] strategies as well as the key actions going forward. Muthu?
Thank you, and one minute ladies and gentlemen. Maybe I can touch base on the growth base on the growth in the...
You can finish up the growth.
As for the growth is concerned, all of you know '21, '22, the MHCV market is close to over 300,000 levels. As such now, we are anticipating the whole year '22, '23 at 375,000 to 380,000 meter level. So definitely, we, as an organization is focusing on a grow revenue, we will be at the market. We try to work on and to grow beyond the market growth. We try to -- our growth rates, we always try to aim at growing a little ahead of the market growth rate. So our focus continues on that.
As part of the machine '25 enhanced profitability is a very, very key initiatives. All of you are noticing when the market goes up and down, we are able to control the cost and try to bring the reasonable profitability as the volume divides.
So a new business win, Muthu and team is continuously working with almost all segments in terms of the enhancing the [ share ] business, our focus in the -- how the aftermarket business or our antique export business.
So operational excellence, whether through the material performance, our IoT definitely is a key focus. We are working on it. We are also working on the digitization as well as the paperless office initiating part of operational excellence. Every function in Automotive Axles is working on excellence in their own function, which gives them overall operational excellence, which brings a consistent and cost benefits in the long term.
Customer focus and customer value is always our key focus area, which comes through the value proposition to the customer in terms of the most of the cost delivery as well as the new product introductions.
And overall outlook, the market is looking better. We hope we may -- the market is in the better than the previous quarter. I will definitely perform as a market and the volumes for the Q3. So as I said, the focus will continue for industry for [indiscernible]. Commodity definitely is getting softened. Maybe in the second half of the year probably will definitely have some advantages going in the second half of this financial year.
Our focus continues on the operational excellence, commercial costs and other material cost performances. And -- but our key actions broadly safety, our primary focus. So we work on all the safety measures, employee first, safety first. And also, we are also taking the ESG as Nagaraja has explained earlier through the green initiatives. So we are continuing to focus on those things, make sure that the green initiatives not only in Automotive Axles and also the entire value chain. So though it is softened and more or less, it has got us settle down but we are also continuously taking care of the entire system as well as the employees that the recording pressure on the whole system is low.
As for the cost measures are concerned, definitely, our initiatives to the operational excellence, definitely, we'll continue to focus on the cost performance metric. More importantly, the commodity price changes, we are closely watching on and managing the business that doesn't really affect the total performance.
Our business growth strategy, all of you have known that last time, Muthu also mentioned that we have a long kind of a long-term agreement with our supplier, customer Ashok Leyland as well as we won a gold award for a great cost savings as a value proposition to our share price we got at our last time. Again, as a matter of fact the focus is on export definitely continues, definitely, we are seeing good opportunities and definitely, we will -- our organization would benefit in the coming days.
Improved operational performance, increased the share of business, that's always a focus area for full-time team. So we are working with all OE customers. And we are also constantly looking at the product development at one of the strategic initiatives to give a value proposition as well as to get a better position with the customers. Digitalization and as I said, paperless office continues drives across the organization as part of the green initiatives, which is a brief kind of performance update all of you.
Are you open for the questions?
Thank you, Nagaraja, just before we open to question. Maybe we can on Slide #5 where the circular economy where Nagaraja presented. If you go to the bottom of the slide, it shows what is the initiatives that your company is taking towards migrating to renewable power. This is a small printing mistake, the replacing of LPG with the LNG is not in December '22 but December '23. I just wanted to bring it to our notice, sorry for the typing error.
With that, I think Sailesh, you can take it forward for the question and answer.
[Operator Instructions] Our first question is from the line of Chetan Gindodia from AlfAccurate Advisors.
Sir, question...
Mr. Gindodia if you could come closer with your handset. We can't hear you very clearly.
Hello? I wanted to understand what are the initiatives that is to grow ahead of the CV industry and to increase our content for [indiscernible]? That's the first question.
Second question is with respect to our new suspension product and products to increase our share in the LCV market what is the update on this? And if you can also share the revenue breakup between brakes and axles, that would be great.
Okay. I will -- thank you questions. I'll it one by one. I think the -- in terms of the growing revenue number, one of the areas the initiatives that we are doing and we want to be ahead of the market. You would very well seen that both in the market in terms of top line is better than the market both in commercial vehicle segment, particularly 7.5 tonnes and above. So your company will continue to innovate the products, introduce the product that is needed for a new application and keep on going.
The second question in terms of addition of the adjacencies or addition the value. So we continue to improve on the content for axle -- content for vehicles, one content per axle by increasing the bracket [indiscernible] to the customer. But in terms of adjacency, you know that we are [indiscernible] the third one. The relaunch of the product at this point in time is doing well, we will continue to do in that segment. I think maybe next 1 year, we will see the substantial quantum of suspension have been so in terms of companies [indiscernible].
But I'm sorry, gentlemen you wanted it between the brakes and axles that we know at the [ pharmacy ], we don't share normally the scaleup business with the customers, our shares between different verticals and also our export content. I'm sorry, I'm afraid I'm not able to provide you that information at this point in time. I hope this clarify your question.
Yes, yes. Just as a follow-up, I wanted to understand now with coming up as a partner. Is there any change likely to our relationship with the subsidiary -- medical subsidiary? And is there a plan for merger or increasing our share of business, wallet share with the other non-solid OEMs also?
Clearly, this [indiscernible] been coming from [indiscernible] will brings a lot of an enormous opportunity for us to export the [indiscernible]. There are many customers get come into force and very strongly the relationship where we can penetrate. At the same time, there are a lot of customers where Meritor has defend strongly where we'll have an explored [indiscernible] for coming. The management team we are working very strongly.
At this point in time, the relationship being both the partners are going very strong, and we are working on the long-term strategy. We don't have any plans at this point in time of the changes to the existing secure what we had in terms of the JV.
[Operator Instructions] The next question is from the line of Sunil Kothari from Unique Portfolio Management.
Congratulations for good number. Sir, the presentation, Mr. Ranganathan clearly mentioned that commodity price softening will definitely help us by second half. Up to now, we were not able to take any benefit. So would you like to talk about the possibility of maybe margin, if not numbers or the scope of reducing costs and what type of benefits that it will give?
Thank you, Mr. Kothari for asking this question. I can understand your angle, didn't take margin [indiscernible] really appreciate.
I think Ranganathan touched on the point that commodity softening builds the little pressure. But all of you know in the commodity went up, all of you have appreciated that we are able to do back-to-back to the customers and trying to recall the money. The same thing will happen when the commodity comes down and we'll be talking on to the customers in the commodity. Of course, there is a little time difference which is money but I want to be very, very clear with the commodity grows up and down, other than the base impact in terms of the percentage. It's not going to have a huge impact into our bottom line.
Ranganathan, please correct me if I'm wrong on that particular statement?
You're absolutely right, Muthu. So definitely, the commodity as the principal is going up or going down. We have a specific understanding with the customers to pass on to them. Definitely, the commodities softening definitely, there is [indiscernible] and the [indiscernible] will pass on to them. And so end of it, it's no gain or going loss for us. Only thing is other than that, it creates a base impact ever in terms of the percentage, plus or minus, depends on [indiscernible] going up or down, sir.
Okay. And sir, my second question is with coming in, may not be in a very near term, next 18 months. But over a period, do you feel there is a scope to bring some products which enhance our market -- market size. If you can talk a little bit about the possibility without mentioning any numbers?
Thanks for this question but obviously, -- at this point of time, I know many of you attended Mr. Ashok the management at coming a couple days before -- investing called public basis and it is too early for us to predict that what product we're going to bring in [indiscernible]. Please understand that axle is a difficult vertical and engine the on company is a different vertical. And while we will be bringing a lot of synergies in terms of scale, in terms of axles, in terms of growing revenue, it's going to take a little more time for bringing in a product because both the products are unique by nature, and it's not immediately we can [indiscernible] these 2.
So we are discussing on strategically on what all could be the potential opportunity short term and in the long term and continue to work, but rest assured that we are going to bring a great opportunity for the organization, and we will to make this organization to grow exponentially. That's for sure.
Great to hear, sir. And my last question is, sir, looking at the performance, we already crossing the all-time high numbers of the -- our revenue, hopefully, by this year, which we have done in 2018, '19 and looking at the overall economy and the demand. Would we like to talk about the industry demand scenario on the ground, what you're observing? What's your expectation for maybe next year? How do you see this -- medium to heavy and other products moving on?
As you rightly said with the current indication of what we have completed first 2 quarters will be profited INR 950 crores. And as you're right, in looking at the market predictions for the next 2 quarters, we will definitely profit our previous peak of 2018 even though the market has come back only to 70% to 72% of 2018 peaks. This is still can answer to many of you that we are growing -- outgrowing the market growth and in [indiscernible] So your organization, your company will continue to focus on the growth and we will reach the [indiscernible] much before our competition market.
But in terms of the industry growth, as you said, the industry is growing very, very strong and steady, while the commodity prices in India is softening, steel prices is coming down, then a certain -- I will talk about some of the factors that could influence the market rather than what we are talking about the Russian-Ukraine war continuing. We're putting lot of set down to the European system and the cost of in terms of the power even has gone up, except for the big advantage for India for doing more and more export in India than the other countries.
You know the cost of living or the inflation is high in North America and also [indiscernible] and also the dollar -- depreciating in dollar or is appreciating in dollar and other currencies were going to give a destined turnover for India in terms of exports.
But in terms of the local inflation, because of the fleet operators, even though the fleet utilization is one of the peak. Now still the fleet operators are finding extremely difficult to take a decision to invest money in terms of buying the vehicle. The availability of some is also in terms of delay.
These are certain impediments that can be done, but looking at the pent-up demand between 2018 and now, a lot more even though we were talking about COVID even before [indiscernible] further before COVID the market that come down for, mainly in commercial, there is a good demand available for this. We need to have the right product. We count the same product getting sold in 2018 is getting sold now. We are getting a bigger truck, bigger axles and a new ICE platforms are coming in.
So I believe that the market between this year and next year expect to grow at least about 15% in the next year to come with -- this is the current prediction. But the recession, what is going to -- we talk about the reductions in the global market, '22 in North America and Europe may have some impact to us, but we strongly believe that the prediction currently, the India GDP is going to drop only by a point, which means the commercial vehicle segment will still continue to grow with what our prediction.
You would've seen the latest analysis on the medium and heavy commercial. The industry predicts that by FY '24 it said we reached the previous peak. Originally, in earlier investor calls, we are told by FY '25, we will get in back to the FY '18 numbers. But the latest prediction in the market, even though with a 1% drop in GDP, then research predicts that in 2040 from the India will touch the 2018 numbers or cross that number.
But ladies and gentlemen, just believe it's not the question number [indiscernible] in terms of the tonnage to the [indiscernible] because we are going for a bigger vehicle, bigger axle, bigger tonnage. If you calculate again, 2018 numbers in terms of the tonnage, we are already on top of that.
[Operator Instructions] The next question is from the line of Viraj Kacharia from Securities Investment Management.
Just 2 questions. First is on the off highway peaks with Cummins coming in, you briefly talked about off-highway being an opportunity growth. Can you elaborate what is the administrative market opportunity? What kind of products -- one can kind of look at and who are the major players who are currently serving the market?
Well, I don't -- thank you for the question. It is a very good lead and I would like to say that we come in do have a very strong presence in off highway. Talking about the global market, in India market, and that gives a big avenue for automotive to project into this. In terms of the product, there will be a back alone. In terms of trade, we are continuing to have new products taking into India and try to see the market.
As you see, we have definitely grown in both in terms of exports and also in some time toward the year at about 2014 and 2018. But I think it will take a lot of time because a lot of new products we can build because the Indian volumes are also is much, much lower. Where we're going to do a lot of export to India outside, that's there. So we been definitely we are working very closely with [indiscernible] what type of opportunities available and how we can go the customers together. And these are the synergies we'll come to know next 2 quarters, maybe a compound of them you may [indiscernible] the investor call together with the [indiscernible]
But any perspective you can share? I mean, the off-highway space, I mean this from an India per sector? What will be the market opportunity and axles and rated products? And who are the other major players competing in the market?
There are a few players, somebody from overseas and somebody from India, but I don't want to name about competition in this investor call. And -- but there are good competition available in terms of the local players and also global players. But as we said, this market is a quite good market. And definitely, the actual market for the axle is quite good. And even if we capture about 20% of the market, will give a substantial increase in our top line. I think that's.
But the biggest challenge here with most of the off highway customers in India, they have a captive actual manufacturing. You know in [ JCV ] in India a big customer, but they have a captive manufacturing. That's where the biggest challenge. The [indiscernible] to impact manufacturing. These are the things which puts a very, very difficult challenging, but it's not that it is not achievable. We'll be definitely able to penetrate and grow because of the product premium or product superiority that Meritor has.
Okay. Second question was largely on the export piece. You briefly talked about the opportunity in terms of the cost of manufacturing in Europe. So we have been making efforts for the last many years now. But if I have to look at, say, the new parent coming together, they are historically had a very strong focus on exports. And for them, India is one of the most cost competitive markets globally. So for us, if I have to look at mix, say, 5, 7 years kind of a thing, pretty long term, how should one understand our export evolution post Cummins coming in?
Typically like what you said coming with an enormous opportunity, very support of exports and joint venture. And also, there have been a strong believer that India is a great company to do best cost [indiscernible]. So we will be definitely accelerating our journey towards exports.
So earlier, it was a little different because of the product segment that we have been serving -- the huge -- largest lead time, which the customers are looking at and we have manufacturing across all over the world. So with this, definitely there's going to be a lot of shift, a lot of great value addition that's going to come from India. In terms of not only the axles and brakes, but also in some of the [indiscernible] and comparing the [indiscernible] exports can do.
There's a few projects to tell us because but we are not giving you the numbers, you are not able to really see the growth in exports what we are doing. It's not that we are doing great, but definitely, we are inching towards but this will be an accelerated process. But we'll be able to give you a concrete -- the plan maybe in about next 2 quarters, you see that how much you are going to do one entire integration proper and our strategies with that. But at this point in time, believe me ladies and gentlemen, the management is towards utilizing India for the globe.
Just one clarification for exports, on your new products, Automotive Axles will be the entry for supply either for India globally high because, I mean, in case of Meritor India, they have multiple ventures. Sometimes the product comes in, then let's say sometimes it doesn't, so just trying to understand the product categories which Meritor and you also cater to will be the sole entity from that point of view, right?
See, if you ask me the sole entity, the entity [indiscernible] different winning because we have from one side of our giant venture partner, [indiscernible] on the other side coming another partner exports is there. But one thing please understand the [indiscernible] what Automotive Axles in terms of axle manufacturing, none of the other side has. So if it is going to be related to axles and brakes, we can rest assured that it will be -- the manufacturing will be at Automotive Axles only.
But the other JV in India, the private entity, we are primarily into servicing and marketing. You don't have any manufacturing base?
They don't have any manufacturing, but they have a strong engineering presence, the product is coming out of some [indiscernible] IP is compelled by them. And the product application is not just selling the product manufacturing from India, the application and service support globally for those applications is all being drawn from the other company. It's not just a servicing company, but it's basically a company which designs, develops the product and convert into the manufacturing for India.
[Operator Instructions] The next question is from the line of [ Sreedhar Galani ] from [ Axis Securities ].
I just have a few follow-up questions. First, I would like to understand that if the commodity prices rises, then you have a pass-through effect, which is generally with the lag. When now the prices are correcting itself, so in terms of percentage, if you could give us a guidance as to how much your top line will also be affected?
Ranganathan, do you want to answer?
No, no, I didn't get your last sentence. Commodity softness? Can you repeat the question?
If the commodity prices now softens is correct. Then I say some of the commodity prices caused by, say, 5%, then your top line, I also believe will be affected because of the pass-through agreements that you have with your customers?
Quite -- that definitely will be there. So as effect, we had taken into the system, obviously, that you have any correction to that extent in the top line as well as in the middle cost.
So my question was like you say, if it's 1%, if it corrects, then your top line shall be affected by 1% or a little higher because there's obviously a processing cost involved in other costs also?
No, no, no. It's actually a purely commodity price. There is no other cost that will get impacted in the commodity price changes. Secondly, I just want clarity I want to give it to you. Must be knowing, but just clarifying it -- so we measure it in terms of the number of axles, the supply -- number of days we supply. The commodity is more a market conditions, okay? But more or less, the very little -- very small fluctuations might be there in the top line, but margins are well protected. I don't think we have any concern on it. So we are more focusing on it in terms of the volumes and the commodity is going to match to the market conditions as well.
Okay. Okay. And sir, second question follow-up is on the exports. Like if you could just -- if it's possible if you can share to which markets you are currently exporting and once Cummins comes into the picture to which the possibility of other markets that will open up?
If you again look at the exports from India, you know Meritor presence in North America, South America, China, Europe, Australia. Currently, you ask where are we exporting? We are not exporting the full axle but we are exposing the system and subsystem to China, to North America, to Europe, a little quantity to South America. Opportunities are very, very competitive and they are being really good. But what is happening is in the last couple of months, the amount of research that we have seen on the [indiscernible] side is having a huge impact for everybody to take the decision.
While there are favorable factors like the cost of something is going up, the fuel prices is going up the later prices going up, the largest fixed cost is had a huge impact over the last couple of years. Of course, that market is softening. So we are doing for every region. Because we are selling the products, which are -- we have very specific capability that we have developed in Automotive Axles.
Okay. Sir. And one last question on the spaces of open from Cummins since it was at a very low price. So if you could just say or like what is the status of that and comments on those? If you could make like if the company via [indiscernible] in future? Is it looking to increase stake?
Ranga, you can answer?
Voice is very low so I'm not hear the question. Sorry can I repeat it?
Sure, sir. Sir, I just wanted to understand the status of open offer from Cummins since it was at a fairly low price. Like is there a possibility of the increasing stake in the company more in the future?
No, we don't have any such information on hand at this moment of time. It's a procedure as we [indiscernible] following it. So obviously, we had to wait and watch. We have no information, not any kind of glimpse from outside what they're going to do.
[Operator Instructions] Our next question is from the line of Radha.
Congratulations to the entire management team for good such results. So my first question was regarding export -- so I believe in exports, apart from Meritor, we have 2 major clients that is Volvo Thailand and also you mentioned UD Trucks in your opening remarks. So given that this is one of the major drivers for our growth. So is there any other customer addition to this list?
Okay, we have secured the business of Volvo Thailand way back in the year 2018 for supplying brakes and axle from our competition. And this is a customer which Meritor globally was not on [indiscernible]. If you look at our strategy today, Meritor has plants in China, in Australia, Europe, South America and we don't go and compete with them in other basins where we want to supply. While we are continuously working, Nagaraja and team continue to be working on innovation to ideate product along with engineering to see it much more we can do it for ES2 and Volvo now UD Trucks, both the same company name, Volvo has been taken over by globally, UD Trucks [indiscernible]. Now the UD Trucks start of Volvo now not become [indiscernible] -- so we are continuing to work with them to find out what and similar to other customers who did not Meritor entities. We will not go and compete with other areas where Meritor is already sort [indiscernible]. In those cases, we only supplying the competent system in here so the last main connectivity [indiscernible]. I hope this clarified your question.
Yes, sir. Also, continuing the same question. So from the total revenue, what is the total dilation in direct exports for first half FY '23?
I wish [indiscernible] share that normally, as you said, the CFO [indiscernible] exposing earlier things, we have a policy of not sharing the segment-wise sales or we don't give a breakup plan.
Okay, sir. Sir, I believe that we have a lot of product, new product launches in pipeline. And given that we are eventually into BS VI space, so could you give us some comments on what are the -- how many product launches are expected in FY '23? And from that, how much has been done in the first half?
Let me take back a little bit from FY '20 when the [indiscernible] migration was done. You all know that we prefer we have launched before different platforms, almost more than 35 different part numbers for the customers in the new platform. Almost every other product, what we have been supplying in BS IV, we have made the development and gone into the new branches, which is giving more efficiently, better cost and of course, better reliability for the product. You all know that the migration from BS VI, most of the customers' demand for doubling of the warranty has become a mandatory and America has been successful in launching the product. That is why we are saying that post BS VI, our growth has been studied, and it's almost faster.
At this point of time, for some of the ICT we are launching the product, there are 2 more platforms which the team is working between Nagaraja and our engineering team is working, and we'll be launching those 2 platforms for the ICT segment to penetrate that is doing a preliminary product validation, product application support and all. Maybe by middle of FY '23 or quarter end, we'll be launching those products.
Understood, sir. Also in this quarter, we have seen that there is significant improvement in margins. And a lot of it is also coming from reduction in employee and other expenses. So a few of the factors that we have been working on is the automation and digitization and of course, some operational efficiency and also lower freight costs must have contributed to this. But is there anything else also that has contributed that maybe I'm missing out?
Nagaraja, you want to answer? I think the team is doing omninitiative, ensuring the reducing the scrap in the plant, improving the [indiscernible].
Nagaraja can give some room lights on the area, what you're doing for commercial improvement?
There are a couple of things, as Muthu mentioned, one is we have been continuously working on the productivity improvement. These are all the standard things where we are looking at can we line -- run the line to the production rate. Can we improve the automation by multi manning the machine.
So -- and also, we are looking at how we can improve the yield as part of earlier, we are talking about every step, how can we grow and minimize the waste [indiscernible] minimize the rejection. Those things we continuously work on that. And that has really contributed for maintaining or even optimizing our commercial cost.
Okay, sir. Just one last question. With respect to Cummins acquisition, so on the management side, I believe that the automotive access management will continue to remain independent. But apart from that, what kind of -- what kind of changes can we expect on the management level?
Ranganathan, you want to address the...
Yes, yes. That time Ken Hogan is our commenced Meritor Global Head and Muthukumar that is the India Head. And of course, at the organization level, me and Nagaraja continues in operation financial perspective. At this moment of time, this is what is there today. And so as you go along, any changes, all of you actually will come to -- at this moment of time, we don't have any other information for.
I just wanted to let all the [indiscernible] -- the management changes of acquisition of Cummins America is a different thing, but we have very clearly committed that none of our customers, none of our employees, none of our shares will have any impact on this and continue to focus on customer focus and continue on innovation, focus on continue the various examples we have for profitability improvement. And of course, people are our key. While the market that's seeing no amount of exists in the last couple of years particularly post-COVID and the people, we have highest engagement of people and our team is working in time.
So the management changes will happen at a different level. But in terms of operations, in terms of running the business, in terms of core system, will continue be governed by our [indiscernible] system, and we'll continue to work on this. So I just want to reassure you that these management changes are not going to put that into any of the impact which will have impact on to our either the customer deliveries or in terms of the quality or in terms of running the business efficiently.
Our next question is from the line of Shashank Kanodia from ICICI Securities.
Just wanted to check incrementally for [indiscernible] passenger domain, the orders are flowing the [indiscernible] process. So how does our content [indiscernible] change in metric versus would it [indiscernible] petrol diesel [indiscernible]?
Maybe you may have to remove -- you are talking from a headphone or something. Line is very -- [indiscernible] cracking. Can you repeat it sir?
Yes. So I'm asking that in the [indiscernible] passenger people remain, a lot of new orders are on the electric person, right? So how does our [indiscernible] change for a [indiscernible] versus the traditional [indiscernible]?
Got it. See, there's a government announcement that government is going to by about 45,000 to 50,000 buses in this year. And of course, predominant of that is going to be electrical. At this point of time, if you look at the Indian electrical vehicle for buses, most of them are remote mounted and [indiscernible] person, our regular axles is being used, for example, [indiscernible] in electric vehicles, our axles are being used are more bound conciliation.
We are also working with lot more new companies who are into this business and continue to see how we can present. So while we know that the buses are going to come in more, we are continuing to make sure that our -- we are not getting impacted because of this and we continue to grow in that segment also.
I can say that today, in India, there are more than about 25 companies which are working on the electrification of the vehicle, be it the truck, be it in LNG or be it buses and vans. At least I would probably save more than 50% of the content, we are available.
Sir, apart from Tata Motors, the [indiscernible] intake or JDM Motors also because this also putting orders in electric personnel?
Yes. Tata Motors have made their own axles. JDM notary, they are importing, but we are working closely to see how we can penetrate into those markets. But Tata Motors as you rightly said, they have their own capability and they are using it. However, for e-axle, we are working with all customers because we have a capability and we are trying to see that how we can penetrate into that. But it's too early for the e-axle market to come in India or in India globally. And it does take some time.
One of the surveys say by 2032 to 15% of the market in vehicle side will be electrified. So a long way to go, but your organization is preparing itself that even if the launch is on [indiscernible]
Ladies and gentlemen, for your information, I just want to let you all know that we are in every segment of the new power that is going to come whether it is a hybrid, whether it's hydrogen, whether it's a remote mount electrification or battery operated EV, the company is giving solutions to the customer to [indiscernible] engineers.
Sir, you mentioned e-axle is not even in India. So none of the OEMs are using it?
E-axle is an option is available in India. It is being it evaluated, it is being tested. It's an option available in India, but at this point the OEMs are contemplating at what time we need to do. So actually, the government is giving a upside, and it won't be available. So at the end of the day, we actually have remote mounted, the customers have to decide and we will decide only in the business case is going to be better. So it becomes a very, very important need of OEM and us, the systems provider received, it's not only a custom of affordable but people, but at the same time, the business case also should make sense to them.
Throw some light, how expensive is it because of the contribution action?
Sorry, [indiscernible] I will defer this question. But at the end of the day, it is going to be expensive, but we are working to see what the total cost of ownership is better is what we are looking at.
Sir, secondly, initial remark, you mentioned that in the [ energy wise ], you had already again a peak this year, right, is a [indiscernible] domain. So next year, given that we are guiding for some 15% volume growth for the industry. So in that case, can we enter for more even that the [ tonnage ] growth might not be that great?
Next year, the number was the [ 468 ] rather material [indiscernible] is what people are saying. When I say next year, it's '23, '24 -- FY '24. They are predicting that it will cross that number. But what I'm saying is in terms of tonnage, the number of the vehicles which are our and substantially gone up, which is definitely, given current year if we are talking the FY '18 standard, this is what the prediction.
Okay. So we might still grow in line with the industry next year as well, right? So for 2030?
Industry moving towards [indiscernible] which were not available earlier. That's a low rating changes have made in all [indiscernible]. So if you see that there is a 10% to 15% increase in tonnage as an average has happened between FY '18 to now for the same number of reasons.
Okay. And sir, one last thing. As per your Vision 2025, what is the margin range that you are working with? Or are you targeting?
Ranganathan showed you in the previous or -- previous slide.
Which one?
He is asking about FY '23 margin.
No, I'm asking about FY '25 [indiscernible] documents. So what is the margin that you're targeting?
No, I know that's what you are asking about our EBITDA in FY '25.
We are very aspirational in terms of the growth. As I said, there are 2 things. Definitely, our aspiration to [indiscernible] always be there. We really see the market grows, definitely, we will do the margin will go along with that market. So surely, we have a growth prospect that within the Mission '25 really driving is all about. All the initiatives to grow revenue as well as the operational excellence to build the cost competitiveness. You'll definitely see our company is performing well. The market is going up [indiscernible] are there in terms of expectations.
Our next question is from the line of Sunil Kothari from Unique Portfolio Management.
Sir, being on the call, Mr. Muthukumar, is there comments Meritor [indiscernible]. My request or my message is to convey the way we are taking efforts internally, the way we have our strategy vision. We have our e-mobility or hydrogen-driven vehicles, every products we are having.
Look, the market, we, as an investor, are not able to get the right valuation, the reason being -- you are the only company which is having manufacturing your own brakes and marketing also done by a parent and other group organization. So it is giving a little bit discounting to the valuation. So with the change in parent comments coming in, if you can convey the message from people like us, minority shareholders -- because there is IT that can be parked in parent company and you can charge technology fees or royalty or whatever.
But this local marketing done in a different organization manufacturing them in different organization, that is not the existed actually that type of any example or trend in the Indian stock market. If you look at whether it's Cummins, they have 100% subsidiary. But whatever Cummins India is producing that has been delivered and marketed by Cummins India only. So I would request to convey this message to the Board Cummins Board, please.
Thank you, Mr. Kothari, for bringing that to our [indiscernible] and your concern. I just wanted to -- while we will definitely convey your -- the message, you have perception some of this of both the JV partners. I also like to reiterate that what we are doing is completely as per the process of law and believe it's going to be beneficial for us. I think this process has been evaluated by both the JV partners to make sure that it brings more and more by transferring into the business and more and more conversion to India. But however, we have taken note of your concerns on the feedback, which we will definitely take it back to the board of the company.
Basically, sir, you transparently disclosed the number. So we don't have any doubt on numbers. Point is this type of arrangement always create discomfort in the minds of minority holders. So that's the message I would like to comment.
I fully understand that you are concerned, definitely, we'll take it to the right [indiscernible]
Thank you. Ladies and gentlemen, that was the last question. I now hand the floor back to Mr. Sailesh Raja for closing comments. Over to you, sir.
Thank you all for attending this session. We especially as the Automotive Axles team for the time. Muthu Sir, would you like to make any closing comments?
Yes. Thank you very much, I think. Thanks, ladies and gentlemen, for all of you for joining this call. I absolutely thank all of you for the confidence that you are giving to our organization and take from the leadership team and we are continue to support with the one which makes us to perform. Trust me and believe me that this acquisition by Cummins in this company do to bring a lot more technology, large turnaround for the organization, which is going to be for good. You all know that Cummins as a very strong aspiration, not on the top line revenue, bottom line every day but the destination deal, which makes Mother Earth as a better place to live than what we are today and in our journey.
So your company will continue to invest on sustainability. The company will continue to make sure that all the products and services we produce will lead the sustainability standards in the days to come.
Once again, thanks Sailesh, thanks everyone for taking time to join with us. With the small road I wish to -- I wish every one of you a very, very happy and prosperous new year. And let's look at how the next year is going to turn around and make all of us much more profitable and at the same time, much more satisfied human.
Thank you very much.
Thank you. Ladies and gentlemen, on behalf of Batlivala & Karani Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.