Endurance Technologies Ltd (CN)

NSE:ENDURANCE

Earnings Call Transcript 2024-Q1

[Operator]

Good morning, ladies and gentlemen. Welcome to the Endurance Technologies Q1 FY '24 earnings conference call hosted by Axis Capital Limited. [Operator Instructions]I now hand the conference over to Mr. Nishit Jalan from Axis Capital. Thank you and over to you sir.

[Nishit Jalan, analyst]

Thank you. Good morning everyone. Welcome to Q1 FY '24 post-results conference call of Endurance. From the management team, we have with us Mr. Anurang Jain, Managing Director; Mr. Ramesh Gehaney, Director and COO; Mr. Massimo Venuti, Director and CEO, Endurance Overseas; Mr. Satrajit Ray, Director and Group CFO; and Mr. Raj Mundra, Treasurer and Head, Investor Relations.I'll now hand over the call to Mr. Jain for his opening remarks, post which we can have Q&A. Over to you Anurang.

[Anurang Jain, executive]

Thank you and good morning to everybody. I would like to share details of how we have done in the first-quarter of this financial year FY '24. In India, in the first-quarter of FY '24 as per the SIAM data, the 2-wheeler industry sales grew by 1.21% compared to quarter 1 of the previous financial year. Scooters grew by 9.16% and motorcycles degrew by 1.57%. The automotive industry in India had a growth of 2.7%. The standalone income of Endurance grew by 13.3%. In our overseas operations, in quarter 1 of this financial year, the EU and the U.K. market saw an increase of 18% in the volume of passenger cars sold, while our European sales grew by 12.6% in euro terms, and 22.4% in rupee terms.I will now brief you on the financials of the first-quarter of FY '24. During quarter 1 of this financial year as compared to previous year's same quarter, our consolidated total net income grew by 16.4% to INR 21,185 million, to INR 24,666 million. Consolidated EBITDA grew by 38.2% from INR 2,444 million to INR 3,378 million. Consolidated EBITDA margin was at 13.7%. The profit after tax grew by 58.1% from the previous year and was INR 1,635 million at 6.6%. This included the income of the Maharashtra PSI scheme incentive of INR 340.22 million. There was no consolidated net debt, and the company had a positive cash available of INR 5,092 million.During quarter 1, our standalone total income grew by 13.3% from INR 16,201 million to INR 18,361 million. Standalone EBITDA grew by 35.2% from INR 1,782 million to INR 2,409 million with an EBITDA margin of 13.1%. Standalone profit after tax grew by 61.3% and was INR 1,305 million at 7.1%. We have included the income of Maharashtra PSI scheme incentive of INR 340.22 million. There was no net debt and there was a standalone positive cash available of INR 3,742 million. We would like to mention that Endurance is focused in both its Indian and European operations of profitable growth and growing higher than the industry. The detailed financials are available with the stock exchanges and on the Endurance website.I would now like to share certain key points for this first quarter of FY '24. In quarter 1 FY '24, 75.1% of our consolidated total income, including other income, came from Indian operations, which included the Maxwell sales also, income also and the balance 24.9% came from our European operations. In India, till date in FY '24 to INR 3,070 million of new business was won from OEMs other than Bajaj Auto, which included Royal Enfield, TVS, Hero MotoCorp, Jaguar Gradual Land Rover, Mahindra and Mahindra and Case New Holland. This business win of INR 3,070 million was all new business.The total business win for EVs till date is INR 6,000 million. These orders are mainly from Ather Energy, Bajaj Auto, Hero Electric, Greaves Electric and Aptiv. I would like to mention that we have INR 24,877 million worth of request reports from OEMs. Since FY '20 in India, INR 31,940 million of business has been won, out of which INR 24,120 billion, which is 76% is new business and INR 7,820 million is replacement business. The INR 24,120 million new business will reach peak sales in FY '25 and FY '26, and is mainly for suspension, castings and brake assemblies.The TVS business wins in this period has been INR 5012 million and is growing. Some of the new business wins, which will start in this financial year FY '24 are the TVS INR 404 million suspension business, will start at Kolar, Karnataka plant by end of quarter 3 of this financial year. Royal Enfield alloy wheel business win of INR 395 million, which is our fifth OEM plant in alloy wheel business, will start supply from quarter 3 of this financial year. Hero Electric Suspension business of INR 489 million, which is a Halol, Gujarat plant will start supply for next month. We have also won the CVS brake business of INR 273 million from Okinawa, and this business will start from quarter 4 this financial year at Waluj, Aurangabad.The Greaves Electric suspension business of INR 194 million will start from our Kolar, Karnataka plant from next month. The Greaves Electric brakes business of INR 290 million will start from our Waluj, Aurangabad plant also from next month. The Ather suspension business of INR 150 million will start from next month at our Kolar, Karnataka plant. The Ather Brakes business of [ INR 1591 million ] supplies have started, and will reach peak in FY '25. We have also received an additional INR 1,200 million order for supply front fork and shock absorbers from Hero MotoCorp, which has started at our Halol, Gujrat plant in June '23. We got the orders in April '23, and approximately INR 50 million to INR 60 million of supplies have already started.The new 35 dia air suspension forks was supplied to KTM Austria, will start by end of FY '24 with the help of KTM technology from our Waluj, Aurangabad plant. The value of the business will be INR 400 million per annum and will be exported to KTM Austria. Our BMS assembly line, which is a surface-mounted technology line will start operations from next month at Waluj, Aurangabad plant. The peak value of business will be INR 800 million per annum, and we'll start manufacturing BMS' for Maxwell.For electric vehicle scooters, we are ramping up our capacity to 240,000 sets per annum of 8 casting parts for EV battery pack and motor housings. The total value will be INR 1,000 million per annum, which has started and will reach peak in FY '25. For Ather Energy, we have started fully machined 5 channel aluminum casting at our Vallam plant, will be the full business value of [ INR 410 billion ], which will peak next financial year.For our aluminum forging business, we are increasing our capacity from 280,000 parts per annum to 600,000 parts per annum, at an additional business value of INR 750 million from our Waluj, Aurangabad plant. This business has started and will reach peak also in FY '25. We have added Jaguar-Land Rover as a new EV passenger car customer with a business value of INR 240 million and business will start in March '24. These are aluminum forgings, which are required for brake assemblies, which support the battery housings. And these forgings will be exported to U.K.At our Chakan plant, Pune, we are installing machines for structural aluminum castings like swing arms, subframes and structural fairings for both EV and ICE models which are going in for light weighting, for Bajaj Auto, for KTM, for Piaggio and for TVS. This business starts this year and will peak also next year in FY '25.The Suzuki scooter front fork business for INR 1,398 million will start from our Waluj, Aurangabad plant in July 2024, and we are installing a 1 million front fork numbers new assembly line for it. Apart from Bajaj Auto and RE, we have now added TVS for supply of inverted front forks and rear mono shock absorbers. These supplies will start in quarter 1 of FY '25 and the business value is INR 266 million.Last week, we are happy to tell you that we won the business from Honda 2-wheelers or HMSI, for front pocket shock absorbers for their new and first EV scooter, which the SOP will be in October 2024.For Bajaj Triumph bikes, we have won orders for front fork, shock absorbers, brake disk, alloy wheel and aluminum castings, including the swing arms. The SOP has already started in July '23. The value of this business is INR 3,300 million, which is at a vehicle volume of 120,000 numbers per annum. On trial, the ETL value content is INR 28,000 per bike.For HMC and Harley Davidson, we for aluminum castings, for suspension, for brake disk and aluminum forging. The SOP has also started for this. The peak business value will be INR 853 million in FY '25. And that will be -- that will be at an annual volume of 80,000 bikes per annum. On Harley Davidson, our EPL content is INR 10,000 per bike.The electronic vehicles market continues to offer a significant opportunity for growth to the auto components sector. Therefore, at Endurance, we have taken a major step forward to harness this opportunity by executing a shared subscription and purchase agreement for acquiring 100% of equity share capital of Maxwell Energy Systems Private Limited in a phased manner. We have recently increased our equity stake from 51% to 56% in Maxwell, as per agreement. Maxwell is in the business of Advanced Electronics, particularly in the battery management systems or the BMS for 2-wheeler EVs and automobile 2-wheeler battery packs.We have won BMS business of INR 1,290 million in FY '23 and INR 596 million till date in FY '24 and have a pipeline of RFPs of INR 1,168 million. Till date since FY '22. INR 3,457 million business has been won by Maxwell, which is expected to fully realize in FY '26. With the current order book, order pipeline and technical strength between Endurance and Maxwell, we are confident of achieving our goals in the advanced electronics space.In FY '24, we are focusing on a substantial sales growth and a positive EBITDA at Maxwell. With the acquisition of our past Italian collaborations, Adler and Grimeca in 2020 and of Frenotecnica and NewFren in 2022, we are creating a center of excellence in Italy for the business of premium components in the 2-wheeler segment, giving profitable growth opportunities to our overseas operations and the Endurance Group.As disk brake assembly business is growing with addition of Bajaj, TVS, Royal Enfield, Yamaha, Hero MotoCorp, Ather and HMSI, a new business, our second plant in Waluj, Aurangabad has been set up for the increase in volumes and has already started new operations. We will start at this week assembly supplies to Hero MotoCorp from March 2024 and to HMSI or Honda 2-wheelers of February 2025. With this new plant, our disk brake capacity has increased to 6.2 million numbers per annum and brake disk to 8.1 million numbers per annum.As far as supply of 2-wheeler ABS assemblies are concerned, we already started supplies to Bajaj Auto and Royal Enfield. We've already reached a run rate of 400,000 ABS assemblies per annum. As you may be aware, the competition is largely from Bosch, which controls the major market share in the Indian ABS 2-wheeler market. We are in the process of supplying a dual-channel ABS also by end of quarter 3 of this financial year, and we have scaled up additional assembly lines by 200,000 ABS assemblies per annum, which will take our capacity to 600,000 ABS assemblies per annum. We are further planning to increase the volumes to 1.2 million single and dual channel ABS assemblies per annum, for the second half of FY '25. We have in March '23 started manufacturing ABS valves, it is not only a technology component, which help -- but it has helped in substantially lowering our costs.Due to increased orders from Bajaj, Yamaha India, TVS, Hero Electric and now Royal Enfield, we've added a new plant at Chakan to help increase supplies to 4.5 million wheels per annum. This plant has already started operations. We have recently won our first alloy wheel business of $395 million per annum from Royal Enfield, which supplies will start from quarter 3 of this financial year. With these new orders now, we now plan to further increase our supplies to 420,000 alloy wheels per month.As far as Europe is concerned, in FY '24, we have won EUR 16.93 million business, mainly from the Volkswagen Group for their EV passenger cars. I would also like to point out that Endurance both in India and Europe is actively pursuing its focus on gaining access to new technology and focusing on new product organic and inorganic growth. In quarter 1 of FY '24, our aftermarket sales degrew by 4.25% from INR 963.19 million in the previous year to INR 922.25 million in quarter 1 of FY '24. A major reason for degrowth was due to lower sales in the domestic market, due to the tighter credit controls which we implemented or negotiating higher sales targets for this financial year. We are exporting our aftermarket parts to 31 countries now. We are now adding Turkey as a new country. We have already won the orders and the supply should start in this month. Aftermarket sales growth is a large focus for us, and we are very confident that we'll have a good growth in this financial year.In quarter 1 FY '24, the export sales for India's standalone business grew by 31.2% from INR 404.82 million in the previous year to INR 531.16 million in quarter 1 FY '24. The major sales growth came from machine casting exports to [ Paul Motors ] in U.K. and IVECO in Italy, including Case New Holland. Also for 2-wheeler suspension exports for KTM plants in Austria, China and Southeast Asia.On the environmental front, I would especially like to mention that Endurance is striving for being carbon neutral in its plants by effective use of solar power and wind power, trading carbon sinks by driving tree plantations and thereby creating dense forests and driving use of natural gas and LPG in place of electric power and furnace oil. The use of furnace oil has completely stopped. We have achieved a carbon-neutral percentage of 31.8% in quarter 1 of FY '24, and the aspiration is to reach greater than 50% in the next 3 years. This has increased from 22.6%, which we achieved in FY '23. We're also focusing lowering hazardous waste generation and to achieve 0 waste to length.At Endurance, it will be our continuous endeavor to grow through organic and inorganic growth, with a focus on technology upgradation, quality improvement, cost and environment health and safety. We will do our best to fulfill our stakeholder expectations by following our 5 values of customer centricity, integrity, transparency, teamwork and innovation. We at Endurance have a very positive outlook based on a very -- based on our new large business wins in the last 4 years, including for electric vehicles, both in India and Europe.With these opening remarks, I would now like to invite questions from all of you. We also have with us the Maxwell Founder, Mr. Akhil Aryan and Mr. Alex Collet, and as well as Vishwas, who is the CEO of Maxwell. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Mumuksh Mandlesha from Anand Rathi.

[Mumuksh Mandlesha, analyst]

Congratulations on good numbers and order wins. Just starting on the first point on the India new orders ramp up, the latest presentation talked about ramping up to INR 23 billion by FY '25, and I think Q4 quarter it was INR 16 billion. So what is leading to the increase, sir?

[Anurang Jain, executive]

See, I think this is largely the business wins which we have had for suspension brakes and aluminum casting business, and also, we have now the Triumph and Harley-Davidson product just started, increase in exports to Austria or KTM, increase in exports of aluminum castings, to Ford, Case New Holland, IVECO. And of course, I would say a really good growth from TVS. TVS, like I said, we have won INR 5,000 million of business. And this business is really growing, it's really growing. Bajaj, in spite of it's -- though it's grown in a small way, but our content per vehicle is so large that -- so for us, Bajaj grows, then we grow much higher, because we have a lot of content per vehicle.The areas volumes have increased. The inverted front forks volumes, both for Bajaj RE has increased, and of course, exports to KTM. So I would say that -- I mean, the new business wins is largely happening for brake suspension and aluminum castings.

[Mumuksh Mandlesha, analyst]

So basically you mean that the volumes expectations have increased than what was earlier. So that would lead to the better order numbers?

[Anurang Jain, executive]

People like HMSI, for example, didn't have a very good growth, especially in motorcycles, they degrew 18.6%. What we are finding from July, I mean there's a very good growth, good-- I mean the volumes you have got from July to March '24 is pretty good. So we will see a very good growth. But then because, as you know, we have 3 plants specifically for them mainly, in Aurangabad, Sanand and in Kolar. But at the same time, this new EV bill, which I told you, of INR 6,000 million. So a lot of business which I mentioned, whether it's Ampere, it's for Ather, for Hero Electric, this business will also start from these outstation plants, in Kolar and in Halol, which we get better economies of scale. And now with HMSI doing well, I'm really expecting the outstation plants to do much better, because our profit is actually based on plant, what the profit plant makes.

[Mumuksh Mandlesha, analyst]

Right, sir. Just on the EV specific business, I mean, there are some volume ramp-up issues happening with the new age players like Amperes, Bounce, Hero Electric and Ather. So any risk you see to the orders, account of challenges to this player sir?

[Anurang Jain, executive]

What we have been told is that right -- starting for September; because see what they are doing is, they are also reorganizing I think, their battery engine and battery packs to, I think, smaller sizes. We'll have to wait and see what is this new FAME-III subsidy that we don't know yet. But definitely, that has taken a hit, as you know, in -- from the month of June. So in July, we saw a growth again, but they're definitely not back to the volume which they were.So I think what we hear, is that everybody is getting into variance of downsizing the battery pack or the battery engine, and seeing that they become more viable in terms of charging price to the customers. So I think from September to January, all these customers which I mentioned, are telling us that they will slowly get back to track of what they were. So let's wait and see, because it's very difficult to predict the future. But right now -- but I'm quite optimistic with the thrust on EV, which is there. I think it's a question of time that the EVs will do, especially on the scooter front.

[Mumuksh Mandlesha, analyst]

Right. But just -- just a little specific on some of the players where there's penalty imposed to them, Hero Electric, so any risk, I mean, where -- are they seeing to ramp up the volumes?

[Anurang Jain, executive]

Yes. So they have all indicated that they will be ramping the volumes, some from September onwards and some from January onwards.

[Mumuksh Mandlesha, analyst]

Got it, sir. Sir, lastly, on the Europe margins, which were lower sequentially, it seems other expense was higher. Any reason for that, sir?

[Anurang Jain, executive]

No. I will request Massimo Venuti to answer. But I think -- I mean, our EBITDA was I think 16.1%, I mean, in Europe -- I mean, I don't think anybody makes this kind of margins, if you ask me, be it Indian owner component in the industry or overseas operations. So to 16.1%...

[Massimo Venuti, executive]

Europe, we closed the previous quarter with EUR 68.8 million [indiscernible] EUR 61.1 million of the previous financial year, with an increase of EUR 7.7 million, which means 12.6% in terms of turnover. In terms of EBITDA, we closed with EUR 11.1 million, 16.1% compared to EUR 8.4 million or 13.7% of the previous financial year. So it means that we grew 31.8% in terms of EBITDA. In terms of net result, we closed with EUR 4.2 million, 6.1% compared to EUR 2.9 million the previous financial year, 4.8% with an increase of 43.7% compared to the previous financial year. These are the results of this quarter.

[Anurang Jain, executive]

Now I'd just like to mention, if you see the quarter 1, both in India and Europe, compared to our sales growth, which has been there, I think our EBITDA and PAT margins have grown substantially higher, and that's what I maintained right, on 2016, our profit should grow higher than the sales growth percentage. And that is -- that's a very big focus. And there's a lot of efforts being made on increased sales, increased economies of scales from our plants, better cost efficiencies. So this is our philosophy that's in the DNA of Endurance.

[Operator]

We move on to the next question that is from the line of Aditya Jhawar from Investec.

[Aditya Jhawar, analyst]

Good set of numbers and order wins. My first question is that if you can repeat what is the quantum of vehicle content in Triumph? I mean, the content per vehicle? Was it 28,000 in Triumph and 8,000 in Harley?

[Anurang Jain, executive]

Yes. So it's 28,000 in Triumph, 10,000 in Harley, and Chetak is also, I think it's 10,000 -- Chetak is also 10,000.

[Aditya Jhawar, analyst]

Okay. Okay. And you also mentioned that what is the aggregate revenue you're expecting from these 2 models. And you also mentioned that the annual [Technical Difficulty] so can you please repeat the annual volume of Triumph and Harley?

[Anurang Jain, executive]

Yes. So I think around INR 3,300 million -- slightly more than INR 3,300 million per year is the [Technical Difficulty] based on 120,000 bikes per annum for Triumph. So you can compute the value I know that, right? But I've already given you that figure.

[Aditya Jhawar, analyst]

And Harley?

[Anurang Jain, executive]

And Harley is about INR 850 million, and there our content is -- that's on 80,000 sets per annum. Because see, we don't know exactly what is the ex-factory selling price, so I don't know the percentage there. Yes, I can just tell you in rupees, what is our order value.

[Aditya Jhawar, analyst]

Yes. Yes, that's quite helpful. The second question is on the European business. So Massimo, if you can highlight how should we think about growth, this 12% constant currency growth in euro terms is quite encouraging. So how should we think about growth in the next few quarters, and similarly on margins?

[Massimo Venuti, executive]

Okay. So speaking about the turnover, the market saw an increase of 18% compared to the previous year and Endurance Overseas only, let me say, 12.6%. But if you consider the increase of turnover, speaking about the product, without considering [ tooling, ] Endurance Overseas grew 20%. But at the end of the day, I can tell you one thing, you can't, as I told you in the past, compare the turnover of the company compared to the registration, because in the last 2, 3 years, as probably you know, we have been affected by the shortage of semiconductor. And certainly that -- a lot of the cars that we are registering in this moment in the European market, has been produced in 2020 and 2021. And the OEM put these cars in the stock waiting the semiconductor in order to finish the car.So in this moment, the market, unfortunately, demand is very weak due to the high level of inflation, due to a high level of interest cost. And my expectation for the next quarter is that, the market will go down. This is my personal opinion, considering the production will go down compared to the registration.In terms of profitability, I'm absolutely hoping is that we can recover in an important way the EBITDA compared to the previous year, because fortunately, the effect of the energy and gas is becoming sustainable in our field. So even if we are waiting the winter period, I don't see any kind of problem, because it's probably we closed the contract with our customer, in order to recover more or less 80% of the potential increase of energy costs compared to today. So I'm pretty optimistic. In fact, the 16.1% of EBITDA reached in the previous quarter can demonstrate that we have been able to recover more or less 3% of EBITDA compared to the previous financial year.

[Aditya Jhawar, analyst]

Okay. That's absolutely great, Massimo. Now my next question is actually Anurang, the order wins are pretty impressive. Now amongst all the order wins, can you please highlight some specific order wins, which gave us entry to a new customer for a new product line or certain orders which strategically are important, might be small right now, but over a period of time, you see a further increase in scope, for specific small order wins?

[Massimo Venuti, executive]

Okay. So first of all, the strategy of Endurance in Europe in the past and also today was to focus the business on 4, 5 major customers that are doing more or less 80% of the total market in Europe. In the previous quarter, Volkswagen Group reached more or less 30% of our total turnover. [indiscernible] is 22%, Mercedes 10% and BMW, 3.5%. But let me say, you can't see the previous quarter. The important thing that you underline is that in the last 4 years, Endurance Europe was able to acquire EUR 240 million of new business. This is the major important result of our team in Europe, and we are seeing about EUR 86 million, more or less 40% for electric application and 47%, EUR 110 million for [indiscernible] application.Speaking about the new customers, probably you know, Endurance was very strong in Germany, with Porsche and in Italy with Volkswagen. But starting from 2019, we entered in an important way without it. Please consider that -- consider this EUR 230 million we acquired only without the strategic problem, 100% electric for more or less EUR 60 million. This is the most important thing for the future, because the stability of Audi in the history of the European market was absolutely confirmed by the results of the new model. So this is the most important acquisition of new customers of the [ last ] period of time in Europe from our point of view.

[Aditya Jhawar, analyst]

That's quite helpful, Massimo. My final question, in our dual channel ABS, Anurang, are we seeing some issues in terms of ramping up? Or is there -- there has been a little bit of a delay in commercializing the dual-channel ABS?

[Anurang Jain, executive]

Yes. So I think the development testing has taken slightly longer time. Now the samples have already been submitted and now -- I mean, now the question is of the collaboration at Bajaj and also at RE. And that's why we are pretty sure, end of quarter 3, we should start the SOP. Because now there's a lot of confidence on the ABS systems. We have our own proven ground, which really helps. We have very good trained riders. We have 4 very good trained test riders, which are employed by Endurance. So it will be very fast. It will be very fast. The technology is proven, it's very good technology. So it's no issue.

[Operator]

The next question is from the line of Pramod Amthe from InCred Capital.

[Pramod Amthe, analyst]

So first one is with regard to this premium bike segment, where Harley, the Triumph, both of you had your orders. So wanted to know, does this open up new set of components for you or does it open up ideas for new technologies you can imbibe, and scale up over the next couple of years, both for domestic and export markets?

[Anurang Jain, executive]

Yes. Yes. So I will not specify the products. But definitely, like I said, we are looking at new products, which are future, which are EV agnostic. We're looking at collaborations, technology. Collaborations and JV also, in products which we are not doing today. I had slightly hinted to it even in the last quarter, but I cannot talk about it till it's done. But we are very, very active on this thing.And we at Endurance, let me tell you we have a very large focus of also increasing our business of non-2-wheelers, which is 4 wheelers, as well as also for the nonautomotive segment. So this is a very, very large focus now going forward. And that's why you'll see that, we are focusing on new EV wins as -- and of course, EV and hybrid wins in Europe also. So you can see the focus we have towards the way the industry is moving.But yes, to answer your question, there would be new products, which we are actively pursuing with new opportunities, which includes products also in the electronic space for EVs. But we'll talk about it once we are ready, we'll tell you.

[Pramod Amthe, analyst]

And just to take -- Triumph and Harley. So does this give you an entry into the global purchase offices of these companies? Because these 2 models are -- seems to be doing India-specific manufacturing? Just wanted to understand your thought process on the same.

[Anurang Jain, executive]

See, I think there must be understanding with Bajaj on the Triumph and Hero MotoCorp on the Harley Davidson. Definitely, these volumes will be both for India as well as for the export markets. So ours really is more of a deal to export. Right now, we have not seen, to my knowledge, any direct interest from Triumph in U.K. or Harley-Davidson in the U.S. So right now, what I was talking to you about, is the production which has started last month for both Harley-Davidson as well as for Triumph?

[Pramod Amthe, analyst]

And second one -- you made on the EV side. Considering the FAME incentive uncertainty for 2-wheelers and FAME-III, we don't know how that will shape up. Do you see any opportunity -- you already play a decent role in 3-wheelers in India, and considering that and 3-wheelers seems to be penetrating much better and seems to be having a less of FAME raise. Do you see more opportunity panning out in the 3-wheeler EV space for you, and have you identified anything to play there, or do you feel it's a low content play in there?

[Anurang Jain, executive]

No, no. This has already started for breaks, for castings, for suspension. In fact, like I mentioned a few quarters back also on an investor call, I got 11 aluminum casting for a 3-wheeler compared to a 2-wheeler, because you have to think, for case extension there are 2 parts, battery housing there are 2 parts, there is motor housing. So question is, the parts are different. And that's why we at Endurance, I would just like to mention here, our biggest strength is in Europe and India, that we are very strong in casting, including engineering, including tool-making. And there are not many players.Many players who are financially strong, have the ability to invest and have that technology and product and in process. And if you see metals, whether it's aluminum die casting or aluminum forging is the future, because this will not go away whether it's EV or it's any other vehicle which comes in the world. And this is the bigger strength of Endurance, which will help us grow, of course, for the proprietary business and new products. But today, we are in a very good place, I would say. And we are getting a lot of inquiries and maybe the next quarter, I'll give you some better news on the 4-wheeler space, of some export casting orders and all.So what I'm saying is, I mean, to be honest, our product range is very, very good. It's only that clutch is just 5% of our business. That too 80% in motorcycles, and I don't see much of a traction to be honest, in motorcycles. So that's also here to stay for a long time. But that only time will tell. But we at Endurance with our product strategy, are now getting into electronics, advanced electronic space, look at the future strategy for EVs. We're in a pretty good space and we are taking, I think, strategic calls which we feel will give us very good growth in the future; because I believe that India is -- I mean, is set for a very good growth in future.

[Operator]

The next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services.

[Jinesh Gandhi, analyst]

Congrats on a good set of numbers. So quickly on ABS, based on our current 2 orders of Bajaj and RE, any sense on what kind of market share now we have at a broader ABS level, and particularly for the share of business between Bajaj and RE, what kind of share of business we will be having there?

[Anurang Jain, executive]

See, right now, we are at 400,000 and with dual channel we will go to 600,000. We believe the market is about 3 million to 3.5 million. I mean, the ABS requirement is about, let's say, 3.5 million. So we are still small. So the growth opportunity is big, because we are technology proven, we are very competitive. There's not a single quality warranty issue in the last 2 years, and that's our strength.So we are going step by step, because, like I said, it's better to go step by step. And at the same time, we are also improving our margins by doing backward integration. I've been talking to all of you on stainless steel grade hoses, which our import substitutes are doing in-house. The valves, which were also imported is now in-house. And now in future, there will be one more product, which I'll talk to you about, which will also give us a good scale, because we want to make money. These are high technology products that we want to make a lot of money. So that's our strategy.Though we are doing a lot of outsourcing through our Endurance vendor association, vendor partners, but we are also doing backward integration on key components. I've also mentioned about the paper manufacturing plan for paper -- for friction materials for clutch assembly, which should start by quarter 4 or early next financial year.So we are very strategically focused on doing technology components and critical process of in-house, that has been a philosophy in the last 30, 35 years.

[Jinesh Gandhi, analyst]

Right. Right. And second question pertains to, again, India business. So given that we are seeing recovery in 2-wheeler volumes now and also, there is improvement in -- or stability in commodity prices. Any sense from by when we should be going back to 14% plus margins, which we used to enjoy in pre-COVD period?

[Anurang Jain, executive]

See, again, I will tell you, when we did 15% margins, 15.5%, that time the RMC price in India was 62%. Today, I believe we are still at 66.5% -- 66.8%. So we have done 13.1%, bit 66.8%, when we did 15% with 62%. We did actually 15.5% with 62%. So we are improving, still good I'd say. I mean if you ask me, they are improving, but these numbers sometimes mathematically can look different.But I think the raw material trend, I must say from July is further going down, especially on the aluminum. There's a 9% decrease in the aluminum alloy rates, which is a good thing for us in quarter 2. Steel has also gone down by about 1.8%. So I think -- but it's nowhere near the levels of FY '21, when we were at 62%. So there's a long way to go. But as the raw material percentage goes down, you will see EBITDA percentage improving at percentage -- improving, because we are debt free, as you know, net debt free. So you'll see this improving. But I think the trend is downwards now. The trend is downwards on the RMC.

[Jinesh Gandhi, analyst]

Got it. Got it. And last part on the ER businesses on the incentives, so incentive run rate seems to be improving vis-a-vis what we used to get earlier. So how should we look at the annualized run-rate for incentives and how long that will continue?

[Anurang Jain, executive]

Okay. I will request Mr. Satrajit Ray to talk to you about the existing incentive scheme and even the new one, which is coming up.

[Satrajit Ray, executive]

See, this existing scheme under which we are booking a megaproject incentive, it is 2013 to '19 scheme. So here, the way you book it is, you book at over 7 years in as equal of a tranche as possible. So still -- I know where your question is coming from, because till last year, it was more like INR 60-odd crores. So this year, in quarter 1, you've seen INR 34 crores. So expect another INR 34-odd crores in second quarter also, because the way this is booked, we book 90% of this and upon certain formalities getting completed, we book the other 10%, okay? So it's not as if -- suppose, the total amount was INR 700, so we would be booking INR 100 every year, right? So out of INR 100, I would be booking INR 90, and certain triggers taking place over the next 2, 3 years, the other INR 10 would be booked. So it is not exactly equal year-on-year. So that answers the first part of your question.The second part is from next year under the existing scheme, you will see a drastic reduction because a major part of the booking has -- would take place by financial year 2023-2024. So it will go less than half of this amount next year. And in the next 3 years, it will be in single-digit growth because that would be the 10% amount which would get booked for the last 3, 4 years. But what is interesting to note is, that Maharashtra government announced -- you would know that, a new scheme from 2019 to 2024 megaproject incentive scheme, with a threshold of INR 350 crores of CapEx. So we expect to apply for that sometime next year, either in Q4 or next year Q1. So that, again, will open up this kind of -- and that incentive in totality is expected to be larger than what we were eligible for, under the 2013 to '19 scheme.So therefore, you can expect this to continue with a lag of 1 or 2 years going forward. Does that answer your question, Jinesh?

[Jinesh Gandhi, analyst]

Yes, understood very, very helpful. And lastly, in terms of CapEx, so would you indicate the CapEx for FY '24 both for India and Europe?

[Satrajit Ray, executive]

See India, you expect around INR 350-odd crores. But as we have told you in the past, it will also depend on opportunities, if we get certain opportunities and these CapExes could be short gestation CapEx. So suddenly a good business opportunity comes up, we'll go for it. But otherwise, you can take a INR 350 crores odd numberEurope, Massimo had announced last time, so Massimo, please?

[Massimo Venuti, executive]

Yes, we closed the first quarter with EUR 10 million cash out for investments and the total expectation for the financial year is EUR 60 million, because we told you in the previous presentation, where in Italy, the production capacity for the electrical vehicle total volume production of Mercedes, and so, huge investment for this financial year.

[Operator]

The next question is from the line of Viraj Kacharia from Securities Investment Manager.

[Viraj Kacharia, analyst]

Congratulations for good numbers in such a [indiscernible]. Most of the questions have been answered. Just had one query on the suspension business. So if you can just give some perspective, 1, in terms of the customer mix, who will be the top 3 customers now and how does your share compare in, say, incumbents versus say the new age EV startups?

[Anurang Jain, executive]

See, in fact, we are supplying now suspension to all the 2-wheeler and 3-wheeler OEMs. TVS, we started in a small way for their smaller bikes. Like I said, we have won about INR 409 million of new businesses starting in quarter 3 of this financial year. So that's the first suspension business, after we got large orders for alloy wheels and for brakes.So if you see the -- if you see the top customers, it, of course, would be Bajaj with KTM and it would be HMSI Honda. It would be Royal Enfield. I think these 3 would be the top shares, but we are supplying to everybody now. And we are seeing a huge growth potential. I told you, with Suzuki, we have won a INR 1,400 million order just for front forks for their highest selling scooter, which is starting in July '24. These are very important business and large business wins, and they are growing the best, and they are doing the best today in the market. The share is lower than HMSI, but they're growing very fast.

[Viraj Kacharia, analyst]

In terms of a share in the new age EV, any color on that?

[Anurang Jain, executive]

See, I don't know the share of each of the suspension business, I don't know. But if you see suspension business on the whole. So front forks, we are about 40%, shock-absorbers 37% of the market, just to answer your first question, if you talk about quarter 1 of this financial year. Overall, we are about 40% of the front fork requirement in India, and shocker is 37% requirement.

[Viraj Kacharia, analyst]

Okay. Second question is on the die casting business. Our focus historically has been, we have been more strong on the 2-wheeler, 3-wheeler side. But when I look at the 4-wheeler piece, is there any thought process or any traction we're getting in the...

[Anurang Jain, executive]

Yes, absolutely. See, to make more money, we have got into machining for all the 2-wheeler and 3-wheeler castings to add value, over the years. And we have seen our margins improve there. At the same time, on the 4 wheelers, Hyundai, Kia, Tata Motors and Mahindra. Mahindra has seen a huge, I would say, traction, we've already won more than INR 1,000 million of orders, which have already started. But apart from this, I think there's a huge focus -- with a focus on other large customers, including Maruti, which we are going to focus on. Exports we're going to focus on large more -- because today the kind of strengths which I mentioned earlier, we have, very few players have. I can count the competition on my fingertips, which have the financial strength and the technology and product and process in India. And there are huge opportunities. The question is how much we want to invest?So like I said, our focus is definitely on 4-wheelers and non 2-wheelers to increase the share as we go along in future years, whether it's through castings or it's through other new products. And that's a very, very large focus for us, because it will also slightly derisk the 2-wheeler focus which we have in India. I mean overseas is largely 4-wheelers only. So I would say now, we have told the marketing department to go all out on 4-wheeler orders.

[Viraj Kacharia, analyst]

Okay. But is there an opportunity in suspension also?

[Anurang Jain, executive]

Well, there are opportunities there also. There are opportunities everywhere. But I think when the time comes, I will speak about all this. But just to let you know, we are highly focused on all, on 4 wheelers.

[Operator]

The next question comes from the line of Kashyap Javeri from Emkay Investment Managers.

[Kashyap Jhaveri, analyst]

Congratulations for a great set of numbers. At the outset, let me appreciate the disclosures that you have now started giving in your presentation about the order wins. And within that, the new orders that you won, I really appreciate those kind of disclosures, which are quite detailed in nature.I have 2 questions. The first one is on the order book on Slide #5, where we have given separation in terms of what is the new order win and what is the replacement orders? When you talk about new order wins. Are those -- how do you split those orders also, between one of the disclosures that you have given again in the presentation, like newly launched vehicle? And how much is, where we would have probably replaced somebody who is already supplying to the existing models? Why I'm asking this question is that, when we are strengthening in or trying to estimate the revenue growth, these newly launched vehicles would be replacing some of the vehicles to which we are already supplying components also. So what kind of revenue growth then one should build in?And second question is about the CapEx, where you mentioned about INR 350 crores in India, and roughly about EUR 60 million in Europe. In your FY '23 annual reports, there are some capital advances up to about INR 170 crores already [ paid down ]. So when we sort of look at cash flow number, should we do the whole EUR 60 million plus INR 350 crores? Or some part of that has already been spent in the previous year. These are my 2 questions.

[Anurang Jain, executive]

Okay. So I'll answer the first and Mr. Ray can answer the second. So what we mean by replacement orders is actually the existing models of customers being replaced with the new models or having upgradations. But they do give a LOI right? HMSI is going for new upgrades in scooters, and other plants. So we already have an LOI for that also. But it's very important to have these LOIs also, so that you know that it's continued your share of business. So for us, replacement is when the existing vehicle has been upgraded or replaced by the customer. So that is what I mean by replacement order, okay? The new order is completely new order wins, could be new vehicles, could be new -- products, for example, if I'm not supplying brakes to Hero, starting brakes to hero or driveshaft, we have won new order wins. So that is more about that. So new is new, completely new for a new vehicle, like Triumph, Chetak or Harley Davidson, that's new.Or if I'm not supplying -- like I said, I'm not supplying all the products to all the OEMs. So when we start a new product, so that is new. You know what I'm saying?

[Kashyap Jhaveri, analyst]

So just to clarify here, of this INR 2,400 crores or INR 2,412 crores worth of new orders, it is quite possible that once these models are launched or once they've reached the peak, some of the vehicles that we are already supplying might actually see probably lower volumes, in which case the existing number of revenue might actually see a tapering off? Is that somehow possible?

[Anurang Jain, executive]

So whatever you say, all this is possible; because like I said, uncertainty is a new normal. So question is, I'm telling you the LOI values, based on POs and LOIs. But in future, something can do worse, something can do better, so that's a part of business.

[Kashyap Jhaveri, analyst]

Sure, sure. And on the CapEx side?

[Satrajit Ray, executive]

Yes. On the CapEx side, when we said that India will see around INR 350-odd crores and Europe, will see EUR 60 million, for the consolidated number, you have to add INR 350 crores plus EUR 60 million. And to give you more color in quarter 1, the standalone CapEx has been INR 72 crores, and consolidated CapEx has been INR 160 crores, which also ties up with what Mr. Venuti said that, in quarter 1, he spent EUR 10 million in Europe. But just one pointer here, Europe's steady state CapEx is not EUR 60 million per year. [indiscernible] also '23, '24.

[Kashyap Jhaveri, analyst]

Sir, I missed out on the last. I think there were some issues in the network. I missed out on -- after you said EUR 60 million is not a steady state number, you mentioned some number after that?

[Satrajit Ray, executive]

No, I said that India expected CapEx for '23, '24 is INR 350 crores. [Technical Difficulty] that in Europe, the expected CapEx for '23, '24 is EUR 60 million. I also told you that in quarter 1 in India, we've spent INR 72 crores. And on a consolidated basis, including Europe, we have spent INR 160 crores. So Mr. Venuti said, that this INR 160 crores included EUR 10 million of Europe CapEx during quarter 1. So your question was that, any part of INR 350 crores or EUR 60 million, has that been spent in '22-'23, the answer is no. This is only for '23-'24, and the last part of my answer was, that EUR 60 million is not Europe's steady state CapEx, Europe historically has spent something like EUR 30 million per year.

[Operator]

[Operator Instructions] As there are no further questions, I now hand the conference over to the management for the closing comments.

[Anurang Jain, executive]

No, we have no further remarks to make. But just would like to thank everyone for taking the time out and coming on this call. Thank you.

[Operator]

Thank you, members of the management team. Ladies and gentlemen, on behalf of Axis Capital Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.