Endurance Technologies Ltd (CN)

NSE:ENDURANCE

Earnings Call Transcript 2022-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to the Q4 FY '22 Earnings Conference Call of Endurance Technologies Limited hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Nishit Jalan from Axis Capital. Thank you, and over to you, sir.

[Nishit Jalan, analyst]

Yes. Thank you, Margaret. Good morning, everyone. Welcome to the Q4 FY '22 Results Conference Call of Endurance Technologies. From the management team today, we have with us Mr. Anurang Jain, Managing Director; Mr. Ramesh Gehaney, Director and COO; Mr. Massimo Venuti, Director and CEO, Endurance Overseas; Satrajit Ray, Director and Group CFO; and Mr. Raj Mundra, Treasurer and Head, Investor Relations. I will now hand over the call to Mr. Jain for his opening remarks, post which we can start the Q&A. Over to you, Mr. Jain.

[Anurang Jain, executive]

Thank you very much, and good morning to everyone. I would like to share details of how we have done in the fourth quarter of FY '22 and in the financial year of FY '22. In India, in the fourth quarter of FY '22 as per CM data, the 2-wheeler industry sales de-grew by 18.4% compared to the previous financial year. Scooters de-grew by 22.4% and motorcycles de-grew by 16.5%. The automotive industry in India had a de-growth of 13.6%. In Europe, in quarter 4, there was a de-growth of 10.8% in the European Union automotive sales.

On the financials, I will briefly talk to you about the fourth quarter FY '22 and then on the financial year FY '22 numbers. In quarter 4, our consolidated total net income were INR 20,914.76 million as compared to INR 21,397.7 million compared to quarter 4 of the previous year. Consolidated EBITDA was INR 2,698.12 million as compared to INR 3,390.47 million in quarter 4 of FY '21. Consolidated EBITDA margins was at 12.9%. The net profit was INR 1,361.8 million at 6.5%. There was a Maharashtra state mega project incentive in quarter 4 of INR 43.47 million.

In quarter 4, our stand-alone total income was INR 15,640.65 million as compared to INR 16,015.26 million in quarter 4 of FY '21. Stand-alone EBITDA was INR 2,064.65 million, as compared to INR 2,394.16 million in quarter 4 FY '21. The EBITDA margin was at 13.2%. Stand-alone net profit was INR 1,147.34 million at 7.3%. There was the Maharashtra state mega project incentive in quarter of INR 43.47 million.

For the financial year FY '22, our consolidated total net income was INR 75,901.78 million as compared to INR 65,777.31 million in financial year '21. Consolidated EBITDA was INR 10,056.76 million as compared to INR 10,709.24 million in the financial year '21. Consolidated EBITDA margin was at 13.2%. The net profit was INR 4,607.09 million at 6.1%. This includes the Maharashtra state mega project incentive of INR 633.9 million.

In FY '22, our stand-alone total income were INR 57,214.81 million as compared to INR 47,865.83 million in financial year '21. Stand-alone EBITDA was INR 7,530.52 million as compared to INR 7,451.35 million in financial year '21 with an EBITDA margin of 13.2%. Stand-alone net profit was INR 3,817.43 million at 6.7%. This includes the Maharashtra state mega project incentive of INR 633.9 million. There was no net debt, and there was a consolidated positive cash available of INR 4,586 million. The detailed financials are available with the stock exchanges and on the Endurance website.

I would now like to share certain key points for the financial year 2022. In FY '22, 75% of our consolidated total income, including other income, came from Indian operations and the balance, 25%, came from our European operations. In India, in FY '22, INR 7,450 million of new business was won from OEMs other than Bajaj which included HMSI, TVS, Hero MotoCorp and Royal Enfield. This included INR 1,595 million of new orders for EVs, including INR 530 million order from Ather for brake systems and INR 700 million worth of orders from Polarity smart bike for suspension and brakes.

New order wins also included the nonautomotive casting business of INR 1,200 million for applications like gensets and 5G telecom. This business -- both these businesses will start in this financial year. I would also like to mention that we have INR 20,380 million worth of requests for quotes from OEMs, which are in process.

We are extremely happy to inform you that we have executed the share subscription and purchase agreement for acquiring 100% of equity share capital of Maxwell Energy Systems Private Limited in a phased manner. Maxwell is in the business of embedded electronics, particularly in the battery management systems or the BMS for automobile EVs and battery packs. With the rapid transitions into EVs, the battery management systems are expected to have a good growth. We plan to leverage Maxwell's deep technical expertise developed over the years and its BMS deployment experience both in India and Europe. We aim to offer our products to multiple new clients, including Indian and overseas automotive OEMs and manufacturers of battery packs.

At present, Maxwell supplies to over 70 automotive OEMs and battery pack makers spread across 15 countries, including India, France, Spain and U.S.A. Since its inception, Maxwell has deployed over 65,000 smart BMSs in EVs and stationary storage systems and has active orders in the pipeline of over INR 1,500 million from OEMs in India and Europe. This also includes orders from one of the largest 2-wheeler OEMs in India.

The upfront fixed payout of 51% equity stake is INR 1,350 million, the balance payout of maximum INR 1,730 million will be based on achievement of targeted financials between FY '23 and FY '27. The 51% stake will be purchased in quarter 1 of this financial year, and the balance 49% stake will be purchased in 5 tranches spread over the next 5 years.

As informed in the February quarterly investor call, we have added a new product, which is the drive shaft. The drive shaft is a high-technology proprietary product and an EV agnostic product in an automotive application. A drive shaft transforms the torque generated from an engine through its transmission to the wheels. The application is for 3 wheelers and 4 wheelers, including some LCVs. The Indian drive shaft market is approximately INR 20,000 million per annum for 3- and 4-wheeler applications. The competition in India is mainly from GKN Driveline and Nexteer Automotive.

We're starting business with Bajaj Auto from July 2022 as a new state-of-the-art plant is already set up at Waluj, Aurangabad. We have also started the development of drive shafts with Mahindra for the Alpha electric vehicle 3-wheelers and samples have been supplied for testing at Mahindra. We also recently got the LOI from TVS for drive shafts for the Duramax 3 wheelers. Our USP at Endurance is our short development lead times, competitive price, world-class manufacturing and a strong supply chain. At Endurance Overseas, as informed earlier, we have also acquired 100% stake in a small company, VEICOLI S.R.L, Italy. VEICOLI enables fleet operations to increase route efficiencies, enhance safety, optimize maintenance activity and lower fuel costs. With this acquisition, we seek to expand our innovative solution offerings in the mobile sector in Europe.

I would also like to mention that Endurance is focusing on a more value-add and profitable product mix in its future business, which includes braking, suspension and casting supplies to 2- and 3-wheeler electric vehicle OEMs and start-ups. 200-cc plus motorcycle brakes and clutch assemblies with help of acquisition of Adler and Grimeca in Italy in the year 2020. The 200-cc plus motorcycle brakes business has already started last year, and the 200-conference call plus motorcycle clutch business will start in the second half of this financial year.

The other product mix focus areas are the paper-based clutch assemblies, replacing the cork-clutch assemblies for motorcycles, continuous variable transmissions or the automatic clutch for scooters, with Hero MotoCorp, we are at an advanced stage of testing and we expect to start supplies from quarter 4 of this financial year. We will also be increasing our anti-lock brake systems or the ABS business for the 150-cc plus motorcycles with our collaboration with Beijing West Industries. As you are aware, we already started supplies to Bajaj Auto and Royal Enfield.

We're also increasing our business of 200-cc plus motorcycle inverted front forks and adjustable rear mono-shock absorbers. This is with the help of our collaboration partners, KTM AG. We are working with KTM to increase supply of both on-road and also start with off-road motorcycle higher technology inverted front forks and rear mono-shock absorbers and we've already made a 3-year plan for it. We're also focusing on fully finished machine castings as compared to raw castings and semi-finished castings for 2, 3 and 4-wheelers.

As disc-brake assembly business is growing with the addition of Bajaj, TVS, Royal Enfield, Yamaha, Hero MotoCorp and HMSI new orders, we are increasing our planned capacity of disc-brake assembly from 285,000 brake assemblies a month to 570,000 brake assemblies a month and discs from 375,000 numbers a month to 675,000 numbers a month. Our second brakes plant in Waluj, Aurangabad has been set up for this increase in volumes and have already started operations. By October 2022, which is this year, we should be supplying 470,000 disc-brake assemblies a month from both our brake plants.

We are happy to inform you that the supply of 2-wheeler ABS assemblies to Bajaj Auto has started in last week of September 2021. And also, ABS assembly supplies have started Royal Enfield from February 2022 onwards. Our plan is to reach a run rate of 400,000 ABS assemblies per annum by September 2022. As you may be aware, competition is mainly from Bosch, which controls a major market share in the Indian ABS motorcycle market, which requires approximately 3 million to 3.5 million ABS assemblies per annum. So this, as you all know, is a very large business opportunity for Endurance.

We also focused on supply of our products for EV 2 and 3 wheelers. We have already started supplies of brake assembly, suspension and aluminum castings, both for electric scooters and 3 wheelers. Our focus is to supply our EV products to 2 and 3 wheeler OEMs and also new start-ups and companies, including Ola Electric, Ampere, Okinawa, Polarity, Ather and Hero Electric. We have now also started focusing on e-bicycles business especially for our suspension and brakes, both for India as well as for overseas.

Due to increased orders from Bajaj Auto and Yamaha India, and a new INR 1,446 million alloy wheel order from TVS, we have added a new plant at Chakan, Maharashtra, to help increase supplies from 240,000 alloy wheels a month to 320,000 alloy wheels a month. The plant will start operations in this month itself. The supplies to TVS are starting in June, which is next month. We also recently won the front alloy wheel rim order from Hero Electric, and supplies will start in this financial year. The volumes are expected to increase to INR 1.2 million wheels per annum by FY '27 with an approximate sales value of INR 1,350 million per annum.

As far as Europe is concerned, in FY '22, we have won EUR 71.4 million of business from Porsche, Daimler, Case New Holland, BMW and Stellantis. This includes a EUR 40 million new order for transmission housings for mild hybrid and full hybrid EV applications for Stellantis. This business will start in the second half of 2023.

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. I would also like to mention Endurance has also entered 2 backward integration product areas, which are import substitutes also. First is aluminum forging and access lamps required for our inverted front forks. Endurance has entered into a technical collaboration with FGM Italy and supplies have started at our Aurangabad plant from April 2022, of Bajaj Auto as well as for direct exports to KTM.

The second product is wire steel braid hoses for ABS applications for mid- and high-end bikes. These supplies have also started at our Aurangabad plant. Both these our projects will help us in our future profit growth of both inverted front forks as well as for ABS. In the financial year FY '22, our aftermarket sales grew from INR 3,116.21 million in the previous year to INR 4,212.33 million in the financial year FY '22. The aftermarket business was at 7.36% of our net India stand-alone sales in the financial year FY '22 it is the only B2C business we have in the group.

We are also exporting our aftermarket parts to 30 countries, and we will be adding 4 more countries in this year. The export sales for India's stand-alone business increased by 22.15% from INR 1,834.84 million in FY '21 to INR 2,241.19 million in the financial year FY '22. This mainly included increase of sales of aluminum -- machined aluminum castings to GETRAG, our overseas as well as our aftermarket exports.

On the environment front, I would especially like to mention that Endurance is striving to being carbon neutral in its plants by effective use of solar power and wind power, creating carbon things by driving tree plantations and thereby creating dense forest and driving use of natural gas and LPG in pace of electric power and furnace oil. We're also focusing in lowering hazardous waste generation and to achieve 0 waste to landfill.

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 all our stakeholder expectations by following the 5 values of customer centricity, integrity, transparency, teamwork and innovation. With these opening remarks, I would like to invite questions from all of you. I'm extremely happy to inform you that we have both the Maxwell founders, Mr. Akhil Aryan and Mr. Alex Collet to take your questions on Maxwell. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Nitin Arora from Axis Mutual Fund.

[Nitin Arora, analyst]

The first question is on this new acquisition. So one, I wanted to know what was the push from the existing promoters to sell this business? When the business is doing so good as per your opening commentary, because I'm assuming the promoters are cash rich. And second, how do you bring the value to the table in this kind of a business because it's a very new business for you because what we have seen being more of suspension and die casting. So being into a thermal management, how your value add gets added more here? That's my first question. Then I have 2 more questions after that.

[Anurang Jain, executive]

Yes. So I think what I'll do is I will answer the second part first, and then I'll request Akhil Aryan to answer the first question, okay? So as you know, the battery management system is the brain of a battery pack. The battery management system is amongst the highest value EV products, I believe it's about 5% to 7% of an EV vehicle. That's the wallet share which it enjoys. Now you all are seeing the thrust on EVs, the government push on EVs environment sustainability is a big thing. So we could not have lost such an opportunity with a company with such a, I would say, experience over the last 5 years in deployment of over 65,000 vehicles having that experience and a very strong, I would say, product strength, which I will request Akhil Aryan and Alex Collet to explain to you later.

Along with the strengths of the client base, which Endurance enjoys over the last 34 years, as well as our strength in manufacturing and supply chain. And that's the reason Endurance -- this is the first, I would say, though most of our products are -- I mean, 95% of our products are EV agnostic. But this is the first EV, I would say, specific product for Endurance, which is high value, as we've always said, we can do high-value areas. And so this was, I think, the rationale of getting into the space. And we believe, like all of you believe, that EVs is the future. We believe scooters such as 3 wheelers are already gaining traction are going to increase, but I'm sure it will be followed by other EVs. So we had to be a part of this journey. And that was the rationale from Endurance side. And I will request Akhil Aryan -- sorry.

[Nitin Arora, analyst]

Yes. So just one -- I'm sorry for stopping you here. Just I mean I understand BMS is, let's say, going by your value it's a 5%, 10% of the overall vehicle. Even let's say, another product, a motor or a motor controller unit are tricky products, more than 15%, 20% of the product. Why not there as well? So the question was more not because there is an opportunity size, the question is that we have 0 R&D in this product. And generally companies do acquire any new tech product and they have done R&D and they want to scale up that R&D to an eventually good product. So is it rational just because there is some value to it, let me put money? I'm asking more from a scale-up perspective that what you will bring to the table. It's more of the money which you'll be putting going ahead, if you can share some numbers in this company what's the maximum revenue it can do or the capital employed? And my question was more from that direction rather than there is an opportunity size. So the other products also has the opportunity size. So my question was why we are a thermal management where we don't have not done any R&D?

[Anurang Jain, executive]

See, firstly, like I mentioned that Maxwell has a very strong technology base, which I will request Mr. Akhil Aryan and Alex Collet to explain that to you. But at the same time, as far -- and at the same time, they have experience over the last 5 years of deploying more than 65,000 vehicles, both in Indian and European roads. Already approximately 50,000 vehicles are running in EVs, which are -- they will explain, there are many EV like Hero Electric, Okinawa, there are -- Ampere, there are many companies where already the BMS is available. They have a long experience on that.

So I'll leave that question to them because they are better positioned to answer. And they also have, like I said, over INR 1,500 million worth of orders. We plan to do about INR 400 million in this financial year. And as you know that we are also interacting with our client base. So we see a great opportunity. Plus you have motor controllers, you have batteries but the question is we have to see where the opportunity is. And this acquisition includes the complete technology, the strength of its people and whatever their worked for in the last 6 years, to I mean build a very, very strong company in terms of technology. So I will now hand over to Mr. Akhil Aryan as well as Alex Collet to answer the first part of your question, but I would like them to answer the technology part first if they can. Akhil? Hello, Alex.

[Akhil Aryan, executive]

Yes. Hello, everyone. My name is Akhil. I think to answer the question around R&D and technology, the first thing I'd like to highlight is that Maxwell is not a BMS company. It's an advanced electronics company, and that BMS is our flagship product. So with regards to motor controllers, telematics and others, we have built the company from the standpoint of developing core capabilities around advanced electronics. And the BMS is the manifestation of that in its first format.

Coming to the point of what Endurance brings to the table and why we are very excited and interested in this partnership, I think that we must acknowledge that when it comes to electric vehicles, the market is at an inflection point. Not only are there new-age OEMs that have launched their vehicles, but now the -- I would say, the age old tried and tested OEMs that have deployed millions of vehicles in India and abroad are taking electric vehicles very seriously Hero, Bajaj, TVS, Honda, you name it, they're all entering the EV market either this year or the next one.

There is an exponential growth in demand even adoption from customers on electric vehicles, as we've seen, has been quite significant. But the reality today when it comes to companies like Maxwell is that there are supply chain -- not issues, but I would say, challenges with regards to semiconductor access, the operational issues of being able to scale up the business, even though we have a strong product, R&D, technology and team, when road meets rubber, we have to be able to scale up our manufacturing and supply chain to be able to deliver to large OEMs that are relying on us to sort of supply these products on the assembly line.

From our standpoint, both the ability to take our technology and get into conversations with global OEMs, which is something that's very difficult, and Endurance has, of course, built a long-standing partnership with practically every single global OEM out there, being able to showcase our technology and make a case for our products to enter those vehicles as they get on their electrification journey as well as inheriting from the core values and I'll say the skills around operational excellence of Endurance that we can adopt that in order to strengthen the supply chain and be able to supply reliably, I think that we are very, very excited about that.

Last thing I'd like to highlight, we spoke about what is being invested, what is the future for Maxwell. And I think that the third party is the resources that will come inside of Maxwell as part of this transaction are going to help us expand the advanced electronics R&D team and the BMS is not going to be just the only product in our product portfolio. With Endurance, we are planning on building a portfolio of high value, high value addition to our customers as well, electronics that help improve the pace at which the planet and especially India is moving to an electric future.

[Operator]

The next question is from the line of Aditya Jhawar from Investec Capital.

[Aditya Jhawar, analyst]

Congratulations to the team for foraying into BMS and strong set of numbers. My first question is on BMS. The number one is that we have seen some ramp up in the last couple of years in the revenue stream and expectation is that it will only increase in the next 3 to 4 years. Now in this backdrop, Anurang, if you can give a sense on what could be the profitability that you expect when the business reaches a critical mass? That is question number one. And following the question on the BMS line, so what is the thought process of having an in-house manufacturing for this product versus outsourced manufacturing? And what could be the CapEx requirement for BMS over the next couple of years?

[Anurang Jain, executive]

See, as you know, I never give forward-looking numbers. I don't do that. I mean like I mentioned, we have about INR 1,500 million, over INR 1,500 million worth of orders already. And Endurance always believes in profitable growth. You have seen it in the last 6 years since the IPO. And I can only say that with our strength of our supply chain, with the strength of our manufacturing in-house in future, with our client base who trust us after so many years and the strong technical capabilities which we have in Maxwell and the experience we have the deployment of vehicles on road and the corrections made of any issues which may have been placed, that experience which is there cannot be taken away. I can only say that we have made a very robust plan up to FY '27. And of course, it will be -- the focus will be on profitable growth as we have always done in the past.

[Aditya Jhawar, analyst]

Okay. Anything on CapEx, Anurang?

[Anurang Jain, executive]

As far as CapEx is concerned on the technology front, the CapEx is already part of the business plan. But yes, any investments which will help to further grow the business beyond the business plan, of course, we would like to do it. We would not like to miss any opportunity there as far as the sales growth is concerned. Also in future, once the in-house operations also start, at that stage also whatever investments which are required, what I believe is not very high for a company like Endurance. And that will be also in future because we have a very strong I mean supply outside. We cannot name them, but very, very strong suppliers. So we'd like to, of course, we work with them. But as a growth in business, we also have plans to do this in-house. And -- but the CapEx is not significant enough to really affect Endurance, to be honest. So that's the way I'd like to put it.

[Aditya Jhawar, analyst]

Sure. Sure. Perfect. Now if you see in the last few months, this entry into BMS and drive shaft, these 2 verticals could potentially add about 1.5% of revenue in the next couple of years each. So do you have any number in your mind that the new areas that you would like to enter, whether organically, inorganically, technological partnership what that number could be? Do you think that there is an aspiration that you have that 20% of the revenue should come from the new product that you plan to launch in the next few years? Any such number in your mind?

[Anurang Jain, executive]

See, we, of course, have a number for Maxwell. We also have a number at Endurance. But I cannot give these numbers at this stage because I don't like to give forward-looking numbers because there are so many uncertainties in this world. And these numbers for some reason, can be less, can be more. That only time will say. But I can say one thing that Maxwell acquisition is a part of our focus of embedded electronics and this focus started with starting ABS, as you know, which is hydraulic electronic control unit. Even our high-end products of Adler has electronics, we are also working on adaptive electrical wave shock absorber in future front fork.

So electronics is something we have taken up. We'll be setting up an electronics lab at Chakan in Pune, soon. We have a very, very strong team at Maxwell, which will also help us in our journey of embedded electronics. So I would say that apart from our products, which ABS already started in future suspension and brakes, I mean suspension and transmission, which is the clutches. We have a -- like, I mean, Mr. Akhil Aryan said that we have also new products, which we are planning to launch. But BMS is today the flagship product, and that's why we are talking more about that. And that's also a high value-add product. And that's the opportunity which we had in Endurance and we took it.

So you have to see what opportunities are available. And we are very confident of this product and new products, which both will be done at Maxwell and at Endurance. And definitely, we -- I mean, it will be a profitable growth. And definitely, it will not be 1%, 1.5% let me assure you that. I mean we don't acquire businesses and get into businesses to have such low percentages of share of business. So I can just leave you with that.

[Aditya Jhawar, analyst]

Sure. That's helpful. And my next question is on Europe business. So how should we think about margins in FY '23? Are you seeing some of the headwinds of metal and gas prices receding? While aluminum, we have about INR 2 crores. But for the gas price increase, will be able to pass a significant portion to the customers. That's the first question on Europe.

[Anurang Jain, executive]

So I'll request Mr. Massimo Venuti to answer that. Massimo?

[Massimo Venuti, executive]

Yes. I'm here. So for sure, the situation today in Europe is really tough due to the situation of the energy cost. Energy and gas reached an unbelievable price also before the Ukraine war. But now I believe that also for the next 6 months, 9 months, the situation will be more or less stable also because in the last period of time, we have seen also the situation of future, more or less flat with the actual price. Only to remind you in this moment in the last quarter, we have had an increase of more or less 430% for the gas and 320% for the electricity compared 1 year ago. And so for sure, this situation is not sustainable in the medium long term. Something happens from -- in our negotiation in our discussion with our customers because they understood very well that they can go ahead in this direction without recognize this increase of cost to the supplier because otherwise,90% of the supplier base will go in bankruptcy.

With BMW, we obtained a part of this recovery, even if in our product portfolio, we are seeing about only 5% of our total turnover. We are discussing also with the other customers. But frankly speaking, our expectation is that in the short time, a quick solution between NATO and Russia and Ukraine regarding the situation because this is the only way to reduce the impact of the energy and gas in the European market because we need a lot of time in order to be independent from Russia, and this is not feasible in the mid, long term in the short time because of this situation is affecting important way the automotive business. In the previous quarter, as Mr. Jain told you, we lost 20% in terms of market, but please also the amount of April was very bad, minus 22% and the petition for May more or less the same.

Regarding the material, for sure, it's a big problem because we have an important increase of aluminum even it's in the last week. Apparently, there was a reduction of 2%, 3% compared the last quarter of the last quarter 2021. For us, it's not a problem, as you know, because every 3 months, we have a review and we recharge this cost to the customer. But for sure, this increase of material costs affected our EBITDA. We closed in this financial year with 14.1% in terms of EBITDA, but without consider the impact of the increase of aluminum the EBITDA should have been 15.2%. And so 1.1% is the reduction of EBITDA due only to the increase of aluminum.

And on top of this, the energy cost effect in the total financial year '21, '22, was EUR 6.4 million, and certainly 3.2% of our EBITDA. So even if the situation continues to be very tough, at Endurance Overseas we've been able offsetting these 2 aspects to reach the 18.3% of profitability that is more or less the same profitability of the previous year. For sure, the only way to overcome this period of time are the volumes. If we don't increase the volume if the market don't start again with a normal level of volume the situation will be very tough. But this will depend from the semiconductor, from the war in Ukraine also from the interest rate and also the inflation.

As you know, in European markets, we are not used to work with the 6%, 7% of inflation. And so I believe that in some way in the future, in the next month, the situation will continue to be tough, but I want underline 1 aspect in the European market of the previous financial year. In this year, we have been able to acquire EUR 71 million of new business. This is the best performance of the last 5 years in terms of acquisition. And certainly that the market is moving for sure into the electric technology. But at Endurance we are a reliable partner for our customers, otherwise, we were not able to acquire the level of business. And so I continue to be optimistic for the future profitability of the company.

[Operator]

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

[Jinesh Gandhi, analyst]

A couple of questions on the Maxwell acquisition, what is the minimum valuation that you'll have to pay for the balance acquisition of stake? Maxwell indicated INR 1.7 billion. But the minimum would be?

[Anurang Jain, executive]

See that's a figure, I'm sorry, I cannot share with you. No. I can't share that figure with you, I've told you the maximum. See like I said it depends on the targeted financial achievement in the next 5 years.

[Jinesh Gandhi, analyst]

Understood. Understood. No worries. Second question is with respect to the competitive advantage, which Maxwell brings to the table on the BMS side vis-a-vis many players who are there in the market who are also offering BMS. This question primarily needs to be seen in context that neither Endurance nor Maxwell has PLI benefit, unlike many of your competitors. So in that context, what gives us confidence to gain share despite cost disadvantage or rather despite incentive disadvantage?

[Anurang Jain, executive]

Okay. This, I will request Mr. Akhil Aryan to answer this. But just let me tell you one thing that our manufacturing operations will be at Waluj, Aurangabad which enjoys a mega project incentive. So as you know, whatever we invest, we get 100% back within 7 years, 6 years or 7 years. That cannot be avoidable. We are fortunate to be in an area like Waluj, Aurangabad, which is in D zone and Maharashtra state has a very good -- we have a very good experience of paying in this money. So whatever incentive we get, it is paid well on time. And only during COVID, there was a slight delay, but they are very, very good at that, the Maharashtra government. So let's not ignore that fact. So whatever we invest, we are going to get a very large incentive, 100% of all the investments we do on this, which is not available to everybody who's not in Waluj, Aurangabad. So I want to start and then I'll hand it over to Mr. Akhil Aryan to answer you.

[Akhil Aryan, executive]

Yes. So to answer the question around competition, I think what's very important to understand is that Maxwell started as a company in 2017. Today, we have over 5 years that we spent developing the R&D not only just working on the R&D in the lab, but really deploying this inside of vehicles that are on the road that are driving for millions of kilometers. If you look at the other BMS players out there, you either have, for example, some mega suppliers like Continental, Bosch, X, Y and Z that are focused primarily on the 4 wheelers in Europe or in North America. The companies that are actually supplying BMSs and advanced electronics to the -- I would say to the OEMs that have mass deployment in India are not necessarily coming from India. They are either in a simple protection circuit modules that are being imported from China or some small in-house development that some of the new age start-ups are doing.

There are sure some global, I would say, BMS players that are trying to enter India through some partnership or contract manufacturing in India. But the reality is that there is absolutely no company like Maxwell that has deployed these products on Indian roads, learned from the issues, the challenges that are very specific to India, right? We are not a European company trying to push products into India, which just optimized manufacturing. We have optimized the product. We have optimized the value engineered the product. So from a cost standpoint, it's not just about incentives. It's also about choosing the right components. It's about how do you build better software, an embedded software that goes inside of the microcontroller that eliminates some of the hardware for components and reduces cost.

I think that given the fact that we have tried and tested this product, they are also far more safer and reliable as a choice for India OEMs or OEMs that are wanting to deploy in India or abroad. We have also been one of the only companies in the world, not just in India to build functionally safe ISO-26262 compliant BMSs that are automotive grade, which are MSIL D, ASIL C rated this is an extremely difficult certification to get. There are less than 10 companies globally that would potentially have this, including the OEMs. And we are one of the few companies that started their journey in 2018 and took us 3, 3.5 years to get there.

I also want to highlight that from a technology standpoint, right, since we started the company and also coming from a strong software background myself, we have built the entire product and technology on this platform. So you've taken a platform approach instead of a product approach, which allows us to essentially leverage the same code base across all different BMSs which means that whether you are deploying a BMS for a small 2-wheeler, 4-wheeler, bus, truck, the core technology and algorithms will be consistent and the learnings that we get from one deployment will inherent into the future deployment.

This also means that there is a strong technology and software back end to the actual hardware that is being supplied. So I want to stress upon the fact that we are a technology company and the hardware is a delivery mechanism of the embedded software that we are developing. What does that mean? It means that every BMS that we are deploying has over 260 configurable parameters that we can configure and that allows us, this software flexibility allows us to use the same hardware across different chemistries. So I'm sure all of you are aware, there are different lithium ion chemistries that are being deployed in different types of vehicles. There are different types of cells and technologies that are being used in the electrification journey.

Now instead of having to do R&D every single time and develop new products and new boards for every new chemistry, we have invested into the technology of a platform that allows us to configure the same hardware and use it across chemistries across applications. The software also allows us to get to market faster because we have spent a lot of time on the R&D and built it in a configurable manner. So we have faster time to market. We have a better inherent technology, the algorithms for state of charge, state of health, state of energy and power, which effectively lead to better range estimation, faster charging and range optimization as well. All of those have been optimized for India. But like Anurang also mentioned, we have deployments in 15 countries. So we are C certified, we are supplying to customers in European production. And so these algorithms have really advanced over the last 5 years to a point that they are highly accurate. So that helps us beat competition, so to say, when we are in the market.

All of this being said, the 2 other things that I want to highlight, which also help us win. One is that we have built a very strong in-house R&D team we are not doing a licensing business, where we license technology from somewhere, and we are just contract manufacturing and supplying it over here, like some of the other players in the Indian market today. We have over 100 team members in India that are focusing on R&D. So if there is, for example, a new feature that needs to be developed if there is some new R&D to be done for faster charging, improved range, better safety we can do that in-house inside of our company in India and deploy it at the customer end.

Lastly, on the cost since you mentioned, I think that, of course, incentives are a big part of the cost, but I believe that the product itself has to be designed, value engineered and designed for the safety, the features that you want to offer to the customer and also value engineered for mass deployment. So we've really focused on the design and the product itself. And now with Endurance leveraging better supply chain, operations, manufacturing, we'll be able to beat competition on prices while also offering better quality and value to the customer.

[Jinesh Gandhi, analyst]

Got it. Second question pertains to who are our key customers currently and which all segments do we cater to?

[Akhil Aryan, executive]

Yes. So we work with various different OEMs. Of course, there are many new-age OEMs that we work with. I can name a few of them, some of them, I can't name just yet. For example, the ones that we're in production with there's a company called Electric Motion in France that has been building motorcycles with our BMS for over 3 years now. There's Ray Electric in Spain that we've also done a press release with that our building high-performance scooters based out of Spain, and they have been in production with us for quite some time. In India, we've been working with many large battery pack makers. So again, unfortunately, can't name them just yet very soon now that they know about this partnership, we will get their consent, and we'll be able to name them in the future. But as it stands, I can tell you, practically speaking, the top 5 battery pack makers in India, whether lead acid or lithium ion are working with us and in production.

When it comes to OEMs in India, again, unfortunately, can't name some of these OEMs because they have not yet, I would say, formally launched their vehicles in some cases or formally announced their suppliers and partners, but I can tell you that some of the world's largest, not only India's largest but some of the world's largest OEMs has selected us as their BMS supplier after a rigorous testing and validation almost 1.5 years because it's also their entry into electrification, so they want to make sure they're choosing the right partners. And this is sort of what has led to a very strong order pipeline like Anurang mentioned, and we will be entering into production with these OEMs very shortly this year and also next year.

[Jinesh Gandhi, analyst]

Okay. And when you said world's largest OEMs you're referring on the 2 wheelers side?

[Akhil Aryan, executive]

Yes, 2 and 3 wheelers.

[Jinesh Gandhi, analyst]

Okay. Okay. And lastly, can you talk about the other products which you are working on, which would be your focus area beyond BMS?

[Akhil Aryan, executive]

Yes, absolutely. So look, essentially, the way that you should think about Maxwell is the company that is focusing on building core capabilities at the intersection of those core capabilities, we'll be building new products in the future. Those capabilities can be defined as sensing, estimation and functionally safe actuation, which means that we will be using advanced sensors to sense data, use that data, have proprietary algorithms that estimate values from that data. And based on the destination, take action in a functionally safe manner, and BMS is, of course, one of the key products at that intersection.

Now apart from BMS, one of the products that we have already started doing R&D on telematics. We believe that the telematics controllers are going to be a very valuable component into the subassemblies of electric vehicles and as the world moves towards not only in electric but also a connected mobility environment moving forward. Practically, all the new-age OEMs want their vehicles connected to the cloud, they want to collect data from that. They want to analyze that data. They want to offer services on top of that. And all of those things will be unlocked with the telematics gateway, which has to be, again, functionally safe and automotive grade, which is our, I would say, next product, so to say, which will be the telematics controller.

We also have a high-voltage BMS that will be built for automotive, I would say, 4-wheeler and buses, truck applications. So we're going to be investing heavily on building a, again, ISO 26262 compliant automotive BMS for high-voltage applications, not only on the mobility side, but also on stationary . So as we move towards renewable energy, there's a big ESS, grid collected batteries, UPS's opportunity, telecom opportunity that -- with 5G and 4G can closely the battery backup that go inside of these applications. There are really a lot of different variations in terms of application of the BMS that we will build for and also new product platforms like the TPU itself that we will also go into.

[Jinesh Gandhi, analyst]

Got it. And just a clarification on the European business, did we indicate that we have been only able to recover energy cost inflation on the 5% of our portfolio and the balance 95% is what we are in discussion with?

[Anurang Jain, executive]

Well, I will -- Massimo, can you reply that?

[Massimo Venuti, executive]

Yes. No, we are able to recover due to our contract with our customers, the material cost, the increase of material cost. And so it means that is more or less 1% of our EBITDA, okay? But regarding the energy that affected our profitability in the previous financial year more or less 3.2%, we are discussing with our customers. Still today, only BMW recognized the increase of these energy costs, but BMW, unfortunately, is 5% of the total portfolio -- customer portfolio of Endurance. And so BMW, the increase of price of BMW has an impact of more or less EUR 350,000 per year. Now we are discussing with our major customers. Our major customers, as you know, are Volkswagen Group with more or less 25%, Stellantis Group will be another 27% and Daimler with 18%. And we are working in order to try to convince them to recover the part of this increase of energy in our price.

[Jinesh Gandhi, analyst]

Got it. And in this quarter, we have seen substantial increase in the European business RM cost on Q-o-Q basis. Is that more to do with the mix or that's a reflection of higher aluminum and energy prices?

[Massimo Venuti, executive]

Sorry. Can you repeat the question, an increasing which other expenses?

[Jinesh Gandhi, analyst]

Raw material costs?

[Massimo Venuti, executive]

Raw material cost is due to the increase of raw material. Only in this quarter, we have had an impact in the cost of material of EUR 6 million due to the increase of aluminum. In the total financial year, the increase is EUR 15 million. But this increase of cost is 100% recognized by our customers. And so you have the impact in the cost of material and also in the revenue. For this reason, you had a reduction in your EBITDA in terms of percentage because the total amount remains the same, but in terms of percentage, you have an impact, 1.1%. And in fact, we closed the EBITDA with 14.1% in terms of percentage without consider the increase of aluminum EBITDA would have been 18 point -- sorry, 15.2%, 1.1% of difference.

[Jinesh Gandhi, analyst]

Got it. Got it. And sorry, 1 last clarification on the India business. The incentives which we are getting, they are getting over by FY '24, right? And the additional incentives which we are in discussion with the government, can you clarify that?

[Anurang Jain, executive]

Okay. Now I'll request Mr. Satrajit Ray who's our Director and CFO, to answer this.

[Satrajit Ray, executive]

Jinesh, the incentives to give you broad numbers, out of roughly INR 446 crores over the last few years, we booked INR 265 crores already, okay? So the balance will be booked over the next 3 to 4 years, and we'll apply for 2019 to 2024 scheme, where the threshold of application is on CapEx spend above INR 350 crores. So I can't tell you what the number will be when we apply sometime hopefully next year. At that point in time, once we get an eligibility certificate, we'll be able to talk about that. But another input would be that out of the INR 265 crores that we booked, we've already recovered INR 147 crores from Maharashtra government.

[Operator]

[Operator Instructions] The next question is from the line of Ronak Sarda from Systematix.

[Ronak Sarda, analyst]

Anurang, first question, just a clarification on the Maxwell acquisition. A couple of things here. One, the upfront payment of INR 135 crores. How much does it -- I mean how is the value goes into the company? And how much is paid as a part of buying shares of [ Tata Motors ]. And secondly, did you -- I mean, did you give a breakup of the INR 150 crores order book in terms of how much is exports, domestic or the vehicle segment? If not, if you can share that, please?

[Anurang Jain, executive]

See, the first part, as far as the INR 135 crores, I mean that is something we will not be able to share there. And what was your second question?

[Satrajit Ray, executive]

About INR 150 crores breakup of order book.

[Anurang Jain, executive]

Akhil would you just give that? Yes. Yes. So I'll request Akhil Aryan to give that.

[Akhil Aryan, executive]

So just clarifying the question is the order pipeline, does that come from India or Europe the breakup and applications is that correct?

[Ronak Sarda, analyst]

Exactly. Yes.

[Akhil Aryan, executive]

Yes. So I would say that so far, I will say this year, our business is going to come about 50-50 from India and from Europe. We plan on increasing the India share moving forward, especially because India is focused and key market for us. So in terms of orders going forward, especially the orders that we have in our pipeline, a large portion of that, so I would say, over 80% comes from India. Fundamentally driven by the OEMs that I previously mentioned, we are entering into production with not just on the vehicle side but also on the battery pack manufacturing and assembly I also mentioned in the start that we are at an inflection point in India when it comes to electric vehicles and lithium ion batteries in general. So a lot of business coming from India it is actually growing at a faster and faster pace as we go quarter by quarter. But that being said, a large portion of the order book currently comes from Indian customers that we have been quoting and sort of really integrating our product with for the last 1.5 years. We are in the final stretch of entering production very soon this year as well as gaining some products next year.

In terms of the split of applications, a large portion of our focus has been 2 and 3 wheelers. So I would say, at least, again, from the order pipeline, about 70% of that will come from 2-wheelers and 3-wheelers the rest of it will come from a split of stationary storage, industrial applications, some other automotive applications that are smaller in size, which includes bicycles, kick scooters and so on. And last but not the least, some samples sales that they've started for the 4-wheeler application because we want to try and enter that maybe starting next year, we want to start quoting the customers and integrating with them as soon as possible so that when push comes to shove, we have a product to launch.

[Ronak Sarda, analyst]

Sure. Sure. And like you highlighted, I mean, you'll be you're targeting the entire spectrum of automotive from 2 wheeler to buses. So how do you see the development to production time now with Endurance backing and the Endurance cross leveraging opportunity?

[Akhil Aryan, executive]

Look, I think the company right now is already in production, right? So we are not waiting for production. We are seeing supply and in production with many of our customers the Endurance partnership helps us simplify that, right? So we are looking at this partnership to both consolidate our supply chain, operations, manufacturing, R&D, and at the same time, amplify business growth by entering new OEMs, new markets, new customers that, of course, Endurance has access to much better than us as it stands. So we already have the supply chain in place. We have a strong partner for manufacturing that is helping us assemble these boards deliver to our key customers that are in production. And as time passes, we will potentially try and bring that in-house again consolidate the strength, lower the cost for us, improve our margins and be able to control the supply chain fully instead of having to depend on external sources.

[Ronak Sarda, analyst]

Right. Right. Anurang, couple of questions on the India business. Well, could you highlight what was the ABS production for FY '22 of sales value. And how do you see that in FY '23? And similarly, how -- what was the revenue from, let's say, Hyundai, KIA or the 4-wheeler aluminum casting, have we ramped up to the overall order book of around INR 200-odd crores?

[Anurang Jain, executive]

No. As far as Hyundai and Kia is concerned, it is approx -- we have done -- I will just tell you, we have done -- first, I'll tell you about FY '22 so it was -- with Kia and Hyundai, we have done. I will just -- just give me a minute. I will just do the right...

[Ronak Sarda, analyst]

Sure.

[Anurang Jain, executive]

So we have done about INR 140 crores in last year, which is FY '22, and of course, this figure will increase now. I don't like to give forward-looking figures. But yes, I told you we have won INR 235 crores worth of orders. So let's look where it goes. We have a new plant at Vallam set up for that. And what was your earlier question? I'm sorry.

[Ronak Sarda, analyst]

ABS similar, I mean, either production number or value for FY '22? And how do you see that ramping up, especially with semiconductor issues for this year? I mean, just a direction.

[Anurang Jain, executive]

See, I'd just like to put it by September '22, we'll reach the run rate of 400,000 per annum. And I think though we started in the month of -- we started in October of 2021. We started 5,000, then did 7,000 then we did 10,000. We are reached 13,000 we also reached, I think, a figure of 18,000. The question is it's a bit volatile because of the ABS ECU supplies we get from Mando HELLA. But now the position has improved. Even the Shanghai lockdown didn't help much, as you know, there was a lockdown in the last few weeks. But now things are opening up, and we are very confident that based on whatever stocks were there, the pipeline is there in process, in transit. And looking at this, whatever Mando HELLA has told us, that's why we are very confident by March, we'll be able to reach the full run rate and continue with the supplies because after we have reached 400,000. And of course, we are talking to other OEMs also, it's not only -- we always have supplies Royal Enfield, Bajaj. The opportunity is huge 3 million to 3.5 million mainly controlled by Bosch, so we have a long way to go. Then, of course, we can think of starting to increase further the capacity beyond 400,000.

[Operator]

[Operator Instructions] The next question is from the line of Arvind Sharma from Citi.

[Arvind Sharma, analyst]

First more on the number side, sir, revenue and EBITDA for the European operations in euro terms, if you could be share for our fourth quarter?

[Anurang Jain, executive]

Massimo? Quarter 4...

[Massimo Venuti, executive]

Yes.

[Anurang Jain, executive]

Would have the quarter 4 euro numbers? In fact we...

[Massimo Venuti, executive]

Sure. We closed the previous quarter with a total income of EUR 62.6 million compared to EUR 61.4 million of the previous financial year. Total EBITDA EUR 7.9 million compared to EUR 11.4 million of the previous financial year, 12.6% in terms of percentage. Net result, EUR 2.7 million compared EUR 5.5 million in the previous financial year, and so it means 4.4% of net results. Without aluminum cost and without energy costs, the EBITDA in the quarter, would have been 18.3% compared to 18.6% of the previous financial year.

[Arvind Sharma, analyst]

Now coming to the Maxwell acquisition, so it's my reporting term, will you it be reporting as part of the standalone numbers? Or would it be a separate entity? Just asking because right now, it's -- your European business is simply confirmed as stand-alone, but naturally, if Maxwell is not reported in stand-alone, then we'll probably need some more detail. So will it be reported as a separate entity or will it be part of a stand-alone business?

[Anurang Jain, executive]

As and when the acquisition is consummated at that point in time, it will be a subsidiary of Endurance.

[Arvind Sharma, analyst]

All right, sir. So we need to get separate numbers for that it will not be just...

[Anurang Jain, executive]

Yes. They'll be separate -- it will be a part of the consolidated accounts. But at the time of the annual report, you will get a separate subsidiary numbers as is statutory requirement.

[Arvind Sharma, analyst]

Sure, sir. Just finally, if you could just explain the BMS front, is there any trend where the OEMs might be in-sourcing, i.e., going for backward integration in terms of BMS? Because right now, whatever you said, it seems that there is a dependence on OEMs outsourcing the BMS. So could it be because of proprietary reasons or maybe competitive reasons, OEMs kind of go and backward integrate that BMS?

[Anurang Jain, executive]

I will request Akhil Aryan to answer that.

[Akhil Aryan, executive]

Yes. So I think, again, there was a question around competitive advantages. And I think that I'll repeat my answer to some extent over there. If you think about it from an OEM standpoint, right, right now, unlike the -- for example, the Teslas or Athers of the world, when they were trying to get into market, they've invested 10 years to try and build the product. But now with the electric vehicle journey becoming very real, a lot of OEMs need to get to market faster, right? So the time to market has to be kept into consideration. The second from a safety and reliability standpoint, a lot of OEMs need to focus at the vehicle level at offering vehicle-level services to the customers just like a lot of the new age OEMs are doing whereas at the component level, they need something that is tried, tested, safe and reliable that can hit the roads in a fast, swift but reliable manner. And so they're looking for strong partners that have done the R&D. Just like us, for example, we started in 2017 when the EV revolution was not as strong, right? And we sort of spent the time removing all of the different issues and glitches that come along the way.

Next, like I mentioned, from an R&D standpoint, there are a lot of improvements that can happen at an algorithms that embedded software level, power management and battery management overall as well as charging and range optimization. And all of the R&D today, we have 100-member team that is doing at R&D with Endurance support with growing to over 250 people. And any OEM for that matter, for 1 component, they are not setting up 300 member teams to try and build 1 component, optimize that component to a point where it's the world's most efficient or optimized product for what it does.

The last thing that I want to highlight is when it comes to, of course, you have seen the world with a semiconductor shortage standpoint and how difficult it is to really even bring supply chains and operations together to make 1 single board a reality. From a cost standpoint, you've seen the cost of semiconductor components going up significantly. Now in our case, because we are supplying to many OEMs, both India and international, we have the -- I would say, the benefit of being able to buy in larger volumes, those components have better -- I will say, stronger relationships not only with a Tier 2 but also Tier 3 and Tier 4 partners to ensure that those components reach us in time.

So what we have to offer to OEMs even from a partnership standpoint is not just a fact of whether they want to do this in-house or not. But whether it comes to faster time to market, better technology, tried and tested supply, in-house R&D optimize cost, improved features moving forward all of that comes to them at an optimized cost when they work with us versus trying to do everything by themselves.

[Operator]

The next question is from the line of Karan Kokane from Ambit Capital.

[Karan Kokane, analyst]

Congratulations on a good set of numbers. Sir, I have a question on the India business and the Europe business as well. So I just wanted to understand what is the impact of the EV shift on the castings business? So what is the mix of engine parts within castings that can get impacted by the shift to electrification? So that would be my first question.

[Anurang Jain, executive]

Yes. So like I mentioned earlier also, as far as castings are concerned, we already started supplies for Bajaj Chetak and soon we will be start starting supplies for the Bajaj 3-wheelers. We are also in touch with other EV makers for castings. So I just like to just give you a flavor that why casting becomes EV agnostic because, of course, like say, for example, I take, I mean, a 2-wheeler. So you have in an IC engine casting tied to your prime cases, left-hand right-hand mode of cover left-hand right-hand, look cylinder blocks, then look cylinder head and cover. When it comes to 2-wheeler EV, you have the base MCU, you have the terminal waste, terminal power terminal ground, housing battery upper hosing battery lower plate middle, plate upper motor hosing. So you have more number of castings and the value is the same in spite of the weight being lower. So here in 7 components, which are higher weight than 9 castings in an EV, which are lower weight and the value add being similar.

When you come to 3-wheeler, you have similar castings, but you also have the case transmissions, both LH and RH added to it. So the types of castings are different. There are more number of castings having lower weight of course in 3-wheelers, there are almost 11 types of casting versus 9 type of castings in a 2-wheeler compared to 7 each in a 2-wheeler 3-wheeler but the weights are lower. And as far as 2-wheeler is concerned and 3-wheelers, the castings are more than 11 so the weight is higher overall, but the value add in an EV is much higher. And I've mentioned this in the past also.

[Karan Kokane, analyst]

Okay. Second question is on the Europe business. So we have seen a strong sequential growth in revenues in the European business in Q4 so is that largely explained by the input cost inflation pass through? Or is there something else going on over there as well?

[Anurang Jain, executive]

Massimo?

[Massimo Venuti, executive]

Sorry, can you repeat the question, please?

[Karan Kokane, analyst]

Yes, sir. So basically, we've seen a strong sequential growth in European revenues. So is that explained by the input cost inflation pass-through? Or is there something else over there?

[Massimo Venuti, executive]

So if we are thinking about the last quarter, we closed with EUR 1.2 million of increase of turnover compared to the previous year. But if I offset the increase of material, the reduction of turnover, it has been 4.2%. And certainly the increase of turnover in the last quarter is only due to the raw material and also the total financial year compared to the previous 2021 even if you see a reduction in total financial year, that is more or less an increase that is EUR 10.6 million. 5.1% if I offset the increase of materials, there is a reduction of more or less 4%.

[Karan Kokane, analyst]

Okay. Okay. Understood. And Anurang, just a last question on this Maxwell acquisition. Do we have any synergies with our existing business product segments with this BMS product, initially somebody asked what is the benefit that Endurance is bringing to the table? So you talked about your customer access. But beyond that, existing product lines and BMS, any synergies that you're seeing over there? That would be my last question.

[Anurang Jain, executive]

Here like I mentioned, we have already started our foray into embedded electronics when we got the ABS business from our clients. And like I said, we are setting up -- I mean, our own embedded electronics lab in Chakan in Pune. We are getting into electronic products for other products like I said, for brakes, transmission and suspension, high-end products. And at the same time, we're getting into new electronic parts also. And I think with the acquisition of Maxwell, like, Mr. Akhil Aryan mentioned, we'll be adding a lot of new products, which they had planned and we -- and what we have planned. So it will make our, I would say, our journey much, much more easier now with such a strong team of 100 people at Maxwell and going up to 250. At the same time, we will, of course, have our own electronic lab in Chakan. So now embedded electronics is a very large focus at Endurance for the future.

[Operator]

The next question is from the line of [ Jay Shah from Capital BMS ].

[Unknown Analyst]

Congratulations for a good set of numbers. I just wanted to get a macro picture, Anurang sir, from you that how is after all these headwinds that we faced in the past 3, 4 years have actually come out quite stronger. Now how does the industry look going forward, may be 2-wheelers, 3-wheelers or even passenger vehicles and utility vehicles across domestic plus Europe. I mean Europe, maybe there might be some headwinds for the next few months. But what is the scenario on ground? Is it taking for good business the auto industry as a whole has been facing a lot of brand the transitions and commodity headwinds, everything, but we still managed to somehow stay strong? So what is the picture looking like on a macro basis going forward? Not looking for any specifics.

[Anurang Jain, executive]

So I talk about India then I'll request Mr. Venuti to -- Massimo Venuti to talk about Europe. So if you see our India business, as you know, 80% of that business is for 2 wheelers. So motorcycle and scooters, largely, it is for motorcycles. And if you see the 2-wheeler sales in FY '18 or I would say the manufacturing in India. FY '18 was 23 million 2 wheelers. In FY '19, it was 24.4 million. FY '20, which was a month of I would say, one of the bad years was 20.9 million. FY '21 went down to 18.4 million, mainly because of the first quarter, which we lost in the first COVID, but it really is -- the pent-up demand really made up in the next 3 quarters. And in FY '22, we have had the lowest number in years, which is 17.9 million. Now the challenges which we are facing, as you know are, of course, the semiconductor shortages. Today, I know our OEMs are losing anywhere between 40,000 to 60,000 vehicles a month, which is -- and they're telling us there's a strong pent-up demand, which is playing up.

Now the question is, according to me, till the electronics settles down, which people are telling us from quarter 2 is when they expect in India. But we'll have to wait and see because for our ABS, I've said it will be September. So we'll have to see how -- because India is I've always mentioned, is a 24 million 2 wheeler market, and it has to grow there are reports saying it should go to 30 million by FY '26, FY '27. So the question is it will all depend on the external environment. Today is a semiconductor. Secondly, the commodity prices have gone through the roof. Last 7 quarters we have seen unprecedented increases in steel and aluminum with small okay dips here and there, which is there. At the same time, you have ocean freights, which have gone up substantially. There is a shortage of containers. So we are living in a very, very difficult period. So in fact, if you ask me personally, so we are a cash-positive company. But it's been one of the most challenging years and I can say both India and Europe. And Massimo will also say that it's been one of the most difficult years and to reach these numbers are because of our past strategy, which I've always said is of outsourcing to good suppliers, consolidation of appliance, even which we did during COVID period and a very strong sourcing team which we have and our operational efficiency.

And that's why you see the kind of margins in one of the most difficult periods which at least I can say I have faced after the 2008 financial crisis. So I'm, of course, very positive about the future. I really hope the semiconductor issues get sorted out fast, which is according to me, the major reason now for lower volume, both in India and Europe. Massimo, would you like to add anything about Europe?

[Massimo Venuti, executive]

Yes. Yes. So first of all, I remark your position regarding the stronger situation of Endurance into the market. One of the major point of kind of Endurance, I continue to say in Europe in this moment is we are debt-free and also in a difficult financial year like the 2022, we have been able in Europe to increase our cash -- net financial position of EUR 5 million. Today, we have EUR 25 million of cash, and this can make the difference in the future 12, 18 months because for sure, the period is very tough and apparently considering also the outcall of April the projection of May and June will be very tough the future. But from my point of view, we have to see the situation of the automotive market considered in the last 5 years. So in Europe, we lost EUR 4 million of registration. We sold in 2024 13 million vehicle. And you can imagine what does it mean for a manufacturing company as we have. When you reduce your -- another 30%, 35%. But in Endurance, we also compared to the project COVID situation only is not the current work probably past 17%, 18% due to the important acquisition done in the past.

Why I'm positive for the future because we are taking a business. And please consider that one of the major problems in the past was our dependence from an important way from the visual technology, gasoline, internal combustion engine. Today, we acquired business and we have visibility at the end of 2027. I know that the interest of everybody is tomorrow morning, but for me, when I go to sleep in the end and I know that Endurance in 2027 has more or less 80% of the actual product portfolio acquired in electric, plug in and [indiscernible] believing that I'm hoping is compare 24 months ago. For sure, we are seeing about the future but in a year, tough as '22, we close with 14% of EBITDA and making profit, making cash profit increase reducing our financial debt or increasing our increase with the visibility of more or less EUR 60 million of investment that we have to do in the next 3 years for the new project. In the electrical field I want to be obvious, even if the situation today is very tough, you can imagine. At the moment, it's not only a problem of electricity. The another probably more raw material Europe and 90% of the raw material to produce battery from Russia and China. And so later, we have to be to about the transition because probably we have to postpone the use that will oblige the OEM to produce only electrical vehicle starting from 2030. But I'm pretty sure that something will happen in the next month. At Endurance I continue to say, the most important thing is the acquisition of new order for the future.

[Operator]

The next question is from the line of Jay Kale from Elara.

[Jay Kale, analyst]

Congratulations on a good set up. So my first question is regarding your existing products market share in the EV portfolio. So how should 1 look at it while we understand that you've been you've acquired this Maxwell and you want to increase your content per vehicle on the EV side of it as well. But if you look at your existing products market share, it may be -- these are initial days, but it could be a little lower than what your vehicle market share is for the suspension product. So any steps that the company is taking to improve our EV market share in their existing products? And how should 1 look at that portfolio in the next 4, 5 years the suspension or casting products for the EV?

[Anurang Jain, executive]

Yes. See, the way that I'd like to put it is that, as you know, we have already won about 150 million worth of orders for EVs or brakes or suspension, mainly largely. Of course, the Bajaj 2 and 3-wheelers, we are in 100% whatever they make as of now. And I can only say that because it is very early days because today, is about less than 1% of the total market, the last saw the total automobile market. So I can only say that we are engaged with every single EV company, which matters. And we are going all out to take business. And like I said last time, we were a bit late in the day we started our engagement process a bit late. But we are making up pretty fast now because of our strength of our technology, our pricing, we are making sales than to put it that we are highly focused to get more and more business.

And it's a bit too early to talk about our wallet share. I can only say the pricing is quite similar. I think I've already shared the pricing is quite similar of the casting front, and suspension also, we see is quite similar to EV suspensions, compression and the tension process may vary. But it's very similar. The pricing is similar, the braking prices are similar. So I don't see any issue once we get the business. In fact, what is that major business coming from scooters where today, the Endurance share of business is hardly 8% of off India. And this we need to really grow. And fortunately, EVs are coming more in scooters compared to motorcycles. So for us, all the scooter business, which we win is going to be extra I'm not seeing many motorcycle companies coming in barring Revolt or Torque. And so I think the scooter business will be additional business. But having said that, we are fully engaged on scooters, motorcycles, 3 wheelers.

[Operator]

We'll take 1 last question, which is from the line of Kumar Saurabh from Scientific Investing.

[Kumar Saurabh, analyst]

Sir, my question is more around the asset and depreciation. So if I look at the depreciation, it's almost 16% of net fixed asset, usually, the auto industry, it's around 10%. So with that, what is the reason for high depreciation? And what is your annual maintenance CapEx? And again, related to asset, the asset turns from last 3, 5 years from 3.5%, it has fallen to 2.8%? So can you highlight the reasons? And how do you see it panning out in the next 2, 3 years?

[Anurang Jain, executive]

Yes. So I request Satrajit Ray to answer this.

[Satrajit Ray, executive]

So the first question is on depreciation, right?

[Kumar Saurabh, analyst]

Yes.

[Satrajit Ray, executive]

Yes, okay. So you look at I don't think one should look at Endurance and compare it with other auto ancillaries in India because Endurance is distinctly broken into 4 businesses, one is die casting, one is suspension, one is brakes, one is clutch, which is transmission. So the asset requirement of these businesses are different. So in case of Endurance, if you look at the annual numbers, you will see that our depreciation annually is about INR 200 crores. So which follows the company's rate of depreciation. So I don't see, I mean, a problem with that. And -- it has nothing to do with the kind of percentage it should be on the gross tax asset because you are looking at 4 distinct businesses. You are seeing a blended number at the company level. So probably that percentage is not represented. Now what was the second question?

[Kumar Saurabh, analyst]

Sir, what is the maintenance CapEx?

[Satrajit Ray, executive]

Inference CapEx is next to nothing because in the last 2 years, about 70%, 75% of our CapEx has gone into expansions. In fact, last year, the major 2 expansions were in the brakes and our alloy wheel expansion, which we have disclosed in our previous conference call. So maintenance CapEx, 2%, 3%, 5%. It's never more than that.

[Kumar Saurabh, analyst]

Okay. And sir, the last question was on asset turns. So which I see next has fallen from 3.5% to 2.8%. So what is the view going forward for next 2, 3 years?

[Satrajit Ray, executive]

The problem is that if you see last year probably is not the best year to compare. I mean, it's a very difficult comparison. In quarter 1 of 2021, we were at nowhere. Then the next 3 quarters were very strong. So last year again, you see major whatever growth you are seeing is a function of metal price increase. So asset turnover numbers probably are not as representative as they would be steady state business situation.

[Kumar Saurabh, analyst]

Sure. So we are confident on the demand comes back and the auto cycle revise, they will again go to their -- the best of the scenarios.

[Satrajit Ray, executive]

Yes.

[Operator]

As there are no further questions from the participants. I now hand the conference over to the management for closing comments.

[Anurang Jain, executive]

Well, we have no further closing comments. Whatever we had to say in my opening remarks, I mentioned that and whatever questions we have, we have answered. So there are no further closing comments.

[Operator]

Thank you. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.