Endurance Technologies Ltd (CN)

NSE:ENDURANCE

Earnings Call Transcript 2023-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to the Q4 FY '23 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]

Thank you so much. Good morning, everyone. Welcome to Q4 FY '23 Post Results Conference Call of Endurance Technologies. 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 of Investor Relations. I'll now hand over the call to Mr. Jain for his opening remarks, post which we can begin the Q&A session. Over to you, Mr. Jain.

[Anurang Jain, executive]

Thank you, and good morning to everyone. I would like to share details of how we have done in the fourth quarter of FY '23 and in the whole financial year of FY '23. In India, in the fourth quarter of FY '23, as per the CM data, the 2-wheeler industry sales degrew by 4.15% compared to the previous financial year. Scooters grew by 11.9% and motorcycle degrew by 10.1%.

The automotive industry in India had a degrowth of 0.5%. In Europe, in quarter 4, there was an increase of 17.9% in the European Union automotive sales. On the financials, I will briefly talk to you about the fourth quarter of FY '23 and then the financial year FY '23. In quarter 4, our consolidated total net income grew by 7.8% and was INR 22,551.54 million as compared to INR 20,914.76 million in quarter 4 of the previous year.

Consolidated EBITDA grew by 13.5% and INR 3,062.1 million as compared to INR 2,698.12 million in quarter 4 FY '22. Consolidated EBITDA margin was at 13.6%. The net profit grew by 0.2% and was INR 1,364.67 million at 6.1%. This includes the [indiscernible] megaproject incentive in quarter 4 of INR 3.71 million.

In quarter 4, our stand-alone total income grew by 6.1% and was INR 16,595.76 million as compared to INR 15,640.65 million in quarter 4 of FY '22. Stand-alone EBITDA degrew by 0.3% and was INR 2,058.34 million as compared to INR 2,064.65 million in quarter 4 of FY '22. The EBITDA margin was at 12.4%. Stand-alone net profit degrew by 8.9% and was INR 1,045.11 billion at 6.3%. This includes the Maharashtra state megaproject incentive in quarter 4 of INR 3.71 million.

For the financial year FY '23, our consolidated total net income grew by 16.6% and was INR 88,494.73 million as compared to INR 75,901.78 million in FY '22. Consolidated EBITDA grew by 7.6% and with INR 10,816.93 million as compared to INR 10,056.76 million FY '22. Consolidated EBITDA margin was at 12.2%. The net profit grew by 4.1% and with INR 4,795.76 million at 5.4%. This includes the Maharashtra state megaproject incentive of INR 589.27 million.

Our subsidiary Maxwell Energy had a sales of INR 180.29 million with an EBITDA loss of INR 118.51 million. In FY '23, our stand-alone total income grew by 18.8% and was INR 67,957.07 million as compared to INR 57,214.81 million in FY '22. Stand-alone EBITDA grew by 7.2% and was INR 8,074.34 million as compared to INR 7,530.52 million in FY '22, with an EBITDA margin of 11.9%.

Stand-alone net profit grew by 7.1% and was INR 4,089.17 million at 6%. This includes the Maharashtra state megaproject incentive of INR 589.27 million. There was no net debt, and there was a consolidated positive cash available of INR 4,193 million. The detailed financials are available with the stock exchanges and on the Endurance website.

I would like to share 3 points for the financial year FY '23. In FY '23, 77% of our consolidated total income including other income came from Indian operations, and the balance 23% came from our European operations. In India, in FY '23, INR 9,350 million of new business was won from OEMs other than Bajaj Auto, which included HMSI, Hero MotoCorp, Ather Energy, Hero Electric, Mahindra, TVS and Tata Motors.

This new business will include INR 7,800 million of new business and INR 1,550 million of replacement business. The total business win for EVs till date is INR 6,004 million. This includes INR 3,765 million new orders for EVs, mainly from Ather Energy, Hero Electric, Greaves Electric with Ampere and Aptiv in this financial year. This INR 604 million of EV business win at Endurance does not include INR 1,290 million of new EV business win at Maxwell Energy.

In FY '23, EV business wins was 42% of the total business won at Endurance and Maxwell. I would like to mention that we have INR 25,668 million worth of request for quotes from [ OLX ]. Since FY '20 in India, INR 28,880 million of business has been won out of which INR 21,060 million is new business and INR 7,820 million is replacement business. Out of INR 21,060 million new business, INR 4,410 million happened in FY '23 and a further INR 6,920 million will happen in FY '24 and the balance INR 9,730 million will happen in the financial years '25 and '26.

Some of the new business wins, which will start in this financial year, a PBS INR 402 million suspension business, which will start at our Ola Karnataka plant from November 2023. Hero Electric suspension business of INR 489 million, which will start at Halol Gujarat plant from June '23 onwards. We have won the CBS Brakes business of INR 273 million from Okinawa the EV scooter later, and this business will start from October '23 at our Waluj, Aurangabad plant. The Greaves Electric or the Ampere suspension business of INR 155 million will start from our Ola Karnataka plant from August '23.

Also, the Greaves Electric Ampere brakes business of INR 290 million will start at our Waluj, Aurangabad from August 2023. The Ather suspension business of INR 150 million will start in June '23 from our Kolar plant at Karnataka. The Ather brakes business, we have done a very large business of INR 1,591 million. Supplies have started, and this will reach peak in the next financial year of FY '25. Apart from the INR 9,350 million business wins, we have received an additional INR 1,200 million order from Hero MotoCorp for supply of front fork shock absorbers from our plant at Halol in Gujarat. This business has started in April '23, which is last month. The ABS capacity is being now ramped up to 600,000 single and dual channel ABS assemblies by July 2023. This, of course, will be at our Waluj, Aurangabad plant. We have the new 35 tire air suspension forks were supplied to KTM Austria will start by end of this financial year with the help of KTM Technology from our Waluj, Aurangabad plant. The value of this business will be INR 400 million per annum and will be directly exported to KTM in Austria.

Our battery management system assembly line, that's the SMT line, will start operations from July '23 at our Waluj, Aurangabad plant. The value of the business when it reaches it's peak will be at INR 800 million per annum. For the EV scooters, we are ramping up our capacity to 240,000 per annum for the battery pack at the motor housing EV aluminum castings, the total value of this business won is INR 1,000 million per annum which will start in this financial year and will reach the peak in next financial year. For Ather Energy, we have started fully machine [indiscernible] channel aluminum casting [indiscernible] plant with a full business volume of [ 200,000 ] per annum and the value of INR 410 [ billion ]. This business will peak in this financial year. For our aluminum forging business, which we started with our collaboration with FGM Italy, we are increasing the 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 -- this additional business was started this year and reach peak in FY '25. At our Chakan plant near Pune, we are installing machines for structural aluminum castings like swing arms, subframes and structural bearings for both EV and IC models, which are going in for lightweighting for our Bajaj Auto, KTM, Piaggio and TVS. This business starts in this year and will peak in next financial year of FY '25. The Suzuki scooter front fork business of INR 1,398 million, which we won in the last financial year will start from our Waluj, Aurangabad plant in the next financial year of FY '25, and we are installing a 1 million front fork numbers new line for the same.

Apart from Bajaj Auto and Audi, we have now added TVS for supply of inverted front forks. The supplies will start in quarter 1 of FY '25 and the business value is INR 212 million. I would like to mention that our customers now recognize Endurance as a trusted and people partner in the value chain in terms of both technical and financial strengths.

The electronic basis market continues to offer significant opportunity for growth with the auto component industry. I estimated that the India EV market will touch INR 150 billion by 2030, growing at a CAGR of 90% in the next decade. Therefore, at Endurance, we have taken a major step towards the same to harness this opportunity by executing a share subscription and purchase improvement by acquiring 100% of equity share capital of Maxwell Energy Systems Private Limited in a phased manner.

We have concluded the acquisition of 51% stake in Maxwell in July 2022. Maxwell, as you know, is in the business of advanced electronics particularly in the battery management systems or the BMS for 2-wheeler EVs and automobile and 2-wheeler battery packs. We are happy to inform you that we have won INR 700 million order of BMS from Hero Electric, and INR 495 million of business from Greaves Electric or Ampere which supplies will start in July '23 and September '23 of this financial year.

We have won new BMS business of INR 1,290 million in FY '23 and INR 496 million till date in financial year 2024. And we have a pipeline of RFPs of INR 1,310 million. Till date, since FY '22, INR 3,286.2 million business has been won by Maxwell, which is expected to fully realize in the financial year '26. With the current order book, order pipeline and technical strength between Endurance and Maxwell, we are confident of achieving our goals in the embedded electronics space.

In FY '24, we are focusing on a substantial sales growth and a positive EBITDA. To help overseas operations to grow in the European 2-wheeler component profitable aftermarket business, we have acquired Italian company Frenotecnica on July '22. This company is involved in the business of friction materials and components for braking systems, like brake pads for 2 wheelers. Also, in November '22, we acquired the Italian company New Fren SRL. New Fren is engaged in the business of brake discs, centrifugal clutches, pads and brake shoes for 2-wheelers.

The acquisition of our past Italian collaboration with Adler and Grimeca for clutches and brakes in 2020, Frenotecnica in 2022 and now with this acquisition of New Fren in November, we are creating a center of excellence in Italy for the business of premium components in the 2-wheeler segment, giving profitable growth opportunities for the Endurance Group. Last year, we had sales of approximately EUR [ 50 ] million and we want to double this in the next few years.

As this brake assembly business is growing with addition of Bajaj, TVS, Royal Enfield, Yamaha, Hero MotoCorp, Ather and HMSI. Our second plant in Waluj, Aurangabad has already started operations. With this new plant, our display assembly capacity has increased to 6.2 million numbers per annum and the break disk capacity has increased to 8.1 million numbers per annum. As you're aware, the supply of 2-wheeler ABS assemblies to Bajaj Auto and Royal Enfield have started, we have reached a run rate of 400,000 ABS assemblies per annum. As you are all aware, competition is mainly from Bosch, which controls the major market share in this Indian ABS 2-wheeler market. We're also in the process of supplying a dual-channel ABS also by quarter 2 of this financial year, and we have scaled up additional assembly lines by 200,000 ABS assemblies per annum, should take our capacity to 600,000 ABS assemblies per annum.

We are further planning to increase the volumes to 1.2 million, both single and dual channel ABS assemblies per annum for the second half of the next financial year, which is FY '25. We have in March '23 also started manufacturing the ABS valves, which is an [indiscernible] substitute, which is not only a technology component, but will help us in substantially lowering our costs. Also due to increased orders from Bajaj, Yamaha India, TVS and Hero Electric, we have added a new plant at Chakan to help increase our supplies and volumes to 4.5 million wheels per annum from 2.8 million wheels per annum.

This plant has already started in July '22. We will reach peak supplies in quarter 2 of this financial year. As far as Europe is concerned, in FY '23, we have EUR 183.87 million of new business, mainly from the Volkswagen Group, Daimler and Stellantis. In the last 2 years, EUR 158 million business has been won. I would 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.

As mentioned earlier, Endurance has also entered integration product areas versus aluminum forging active plants for inverted front forks with the help of a collaboration with FGM Italy. We already started supplies to Bajaj Auto and directly to KTM. We also won orders for stem assembly under bracket aluminum forging for Hero MotoCorp and we are actively engaged on new business wins with other OEMs to supply of aluminum forgings other than inverted front forks.

As you note, this is used by EVs for lightweighting also, and that's why the capacity is being increased from 280,000 parts per annum to 600,000 parts per annum in this plant at Waluj, Aurangabad. The second product, of course, is the [indiscernible] brake holders for the ABS application for mid- and high-end bikes, these supplies already have started from last year. Both these projects are helping us in our profitable growth. In FY '23, aftermarket sales grew by 2.91% from INR 4,189 million in the previous year to INR 4,310.9 million in financial year '23.

We are now exporting our aftermarket parts to 31 countries and aftermarket growth is a large focus area for us. In FY '23, our export sales for India's stand-alone business, we grew by [ 5.6% ] from INR 2,241.19 million in the previous year to INR 2,116.23 million in FY '23. The major impact was due to lower export sales in country -- in the regions of Africa, South America as well as our neighboring countries.

On the environment front, I would especially like to mention Endurance is striving to be in carbon neutral in its plants by effective use of solar power and wind. Creation of carbon sinks by driving tree plantation and thereby creating dense forests and also by driving use of natural gas and LPG gas in place of electric [indiscernible] and furnace oil. As mentioned earlier, the use of furnace oil has been completely stopped at Endurance.

We achieved a carbon-neutral percentage of 22.6% in FY '23, and our aspiration is to reach 50% in the next 3 to 4 years. We're also focusing on lowering hazardous waste generation to achieve zero waste to landfill. At Endurance, it will be a continuous endeavor to grow through organic and inorganic growth with a focus on technology, upgradation, quality improvement, [indiscernible] environment, health and safety.

We will do our best to fulfill our stakeholder expectations by following applied values of customer centricity, integrity, transparency, teamwork and innovation. We at Endurance are very positive. We have a very positive outlook based on our new large business wins, including for electric vehicles, both in India and Europe.

With these opening remarks, I would like to invite questions from all of you. We have one of the Maxwell founders, Mr. Akhil Aryan and our Maxwell CEO, Mr. Vishwas, also on the line for taking your questions on Maxwell. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Aditya Jhawar from Investec.

[Aditya Jhawar, analyst]

Congratulations for resilient performance. And thank you also for putting out a detailed presentation. My question is on the European business. Massimo, if you can highlight that what was the government contribution [indiscernible] for the energy prices. And considering the energy prices have come down, what is our expectation for support in FY '24?

[Massimo Venuti, executive]

Yes. So in the previous quarter, in the third quarter of 2022, '23, we closed with more or less 17.8% of EBITDA and we recover 100% of the increase of energy cost considering the support from our customer and also the incentive from the government. Only for the fourth quarter of the previous financial year, the Italian government gave to the company 45% of credit assets. And certainly that -- thanks to this 45% plus of the contribution from customer, we offset the impact.

For this reason, we came back to a normal, let me say, profitability for [indiscernible] government, we reduced this contribution from 45% to 20% and so it means more or less an impact considering the same volume of the previous quarter of EUR 1.2 million. And so the expectation for the future months is, for sure, a reduction due to this, reduction of contribution, but please consider that the energy cost is going down in an important way.

Only to give you an idea today, in the market. Yesterday, the energy closed with [ 120 ] and the gaps with 35%. And so it means more or less 25% less compared to the previous quarter. And so my expectation is that we can try to offset this reduction or contribution from the government with the reduction of energy cost into the market.

[Aditya Jhawar, analyst]

Okay. That's quite helpful, Massimo. So overall, what is our expectation for margin in FY '24?

[Massimo Venuti, executive]

The expectation for sure is to improve their profitability compared to the previous year. This I can guarantee. We closed the total financial year with 14.5%, and please consider that with the same level of aluminum of the previous financial year, the profitability in terms of EBITDA should have been 14.9% and 5.1% in terms of net result. My expectation considering that in this moment, I'm [indiscernible] situation in terms of volume and also energy cost is to improve the profitability compared to the previous financial year, for sure.

[Aditya Jhawar, analyst]

Okay. That's quite helpful. My final question is that how is the outlook shared by the OEMs in Europe? Are you seeing a higher level of wholesale dispatches to replenish the inventory. How is the situation in terms of the consumer sentiments on the ground?

[Massimo Venuti, executive]

So certainly, the same thing is not so positive, as you can imagine, due to the high level of inflation, we are waiting a recession, because this is the situation to the market, not only in Europe, but it's probably also in United States. The previous quarter closed with an increase of registration of 18% and the total financial year with an increase of 2.9%. But we are so far from the volume -- normal volume pre-COVID situation because considering the 2019, the market closed with minus 24% compared 2019. The positive aspect is that also [indiscernible] was positive, more or less the market in Europe closed with 17% of increase. An important impact is due to the increase of production in Germany, only to give you a view in January, the market closed with an increase of 29% of production, in February 24%, in March 67%. So from my point of view in this moment, we are at benefit in terms of registration due to the delivery of the car stopped in the last 18 months for several problems, as you know, a supply chain for semiconductor and so on.

Now the OEM is increasing the stock waiting the situation in terms of demand. But in this moment, the same thing is not positive due to the inflation.

[Operator]

The next question is from the line of [indiscernible].

[Unknown Analyst]

Congratulations on a good performance. So you indicated the new orders for both stand-alone and Europe that will be ramped up in the next few years, so this would be a gross addition, right? And can you indicate on net basis concern running down of old orders, what kind of growth outperformance you see over the industry in both India and Europe?

[Anurang Jain, executive]

See, as far as India is concerned, it's very difficult to know what will be phased out and we know what is going to be added. And that also depends on the volumes which are mentioned in the LOI or in the purchase orders. But I can only say that we will always outperform industry, which we have done, if you see even last year, the 2-wheeler industry sales were 8.3%, automotive industry sales were 11.8% led by I think passenger cars. But Endurance sales growth was 18.8%. Europe also, the EU industry sales last year was 2.9%. We have grown 12.7% in euro terms.

So I can only say that we will outgrow -- there would be -- it's very difficult to say the impact of sales going down because of, I mean, on existing. That's why I always say there is a replacement business and there's a new business. And also in my opening remarks, I mentioned that the new business, which we have won, how it is going to increase in the next 2 to 3 years. So very difficult to say. I can only say we will grow higher than industry. And that's why we are taking a lot of orders and that's why I emphasized on that, both total order wheels as well as EV business with both India and Europe.

[Unknown Analyst]

On the EV specific components. So we are yet endorsed into BMS? And what are any plans to look at other EV specific components going ahead, sir?

[Anurang Jain, executive]

See, right now, we are looking at other electronic components also. But right now, our major focus is to cut and grow and become profitable in Maxwell. And that is our focus. So that's the reason we have won a lot of new business assets in FY '22. And this year, we want to be positive at the EBITDA level with a substantial growth. So we need to see that we really strengthen Maxwell and make it a very financially strong company with the customer strength in this company. So that is the focus of -- of course, Mr. Akhil Aryan, [indiscernible] founders, our CEO, Mr. Vishwas, as well as all of us at Endurance.

So right now, I think focus is -- Europe is a huge opportunity. The way the 2 large orders we won, we have a pipeline of orders, I mean, RFQ. So we are just going after orders, many things have not mentioned, but we are really focused on really growing this company. So other electronics, we are -- it is there in our mind. So if a good opportunity comes, we will take it side by side. But right now, the focus is on the BMS.

[Unknown Analyst]

Just last question. How do you see the 2-wheeler industry growth for this year? How is demand picking up, sir?

[Anurang Jain, executive]

See, to be honest, from what the customers tell us, it can be 10% to 12%. But having said this, question is very difficult because there are so many uncertainties in the future, very difficult to say whether what the growth will be. So as far as we at Endurance are concerned, what is in our control is to take new order wins, and that's what we are doing. We are just going after orders in both India and Europe which is I've been mentioning it also the last 1 year, and we have been very fortunate to get very, very good business wins, both for EV as well as brake suspension, castings and so I can only say that.

[Operator]

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

[Jinesh Gandhi, analyst]

Quickly wanted to check on a couple of things. One is on the European business, this quarter, 17.8% margin, which we have reported. Obviously, there is some bit of seasonality to it. But is that -- are we now back to normalcy or the [indiscernible] related compensation as it reduces, we will see some further moderation?

[Anurang Jain, executive]

Okay. I will request Mr. Massimo Venuti to answer that.

[Massimo Venuti, executive]

Can you repeat the question because I didn't understand, sorry.

[Jinesh Gandhi, analyst]

Or the EBITDA margins in this quarter is 17.8%...

[Operator]

Sorry to interrupt, sir. Mr. Gandhi, your voice is little muffled, I would request you to use your handset, please?

[Jinesh Gandhi, analyst]

Is it better?

[Operator]

Thank you. Please continue.

[Jinesh Gandhi, analyst]

My question is on European margins. The 17.8% EBITDA margin for fourth quarter. Any sense on how it would have been without compensation from the Italian government and in that context, how do we see the trend over the next couple of years on the European margins?

[Massimo Venuti, executive]

Yes. So first of all, regarding the incentive from the government, as I told you before, in the first quarter, we received 45% of the total energy cost only for the previous quarter. Starting from the first [indiscernible] incentive reduced to 20%, okay? This was the incentive from the Italian government. In Germany, they fixed a price cut with EUR 150. And so it means that in this moment, we are not receiving nothing from the Germany government due to the fact that the price of energy is lower compared to the price cap, okay?

So the profitability in the last quarter of this financial year or the previous financial year, it was more or less normal considering the stand-alone insurance overseas because we have been able to offset 100% of the increase of energy cost. Regarding the future, our expectation is to increase the profitability compared to the previous year due to the fact that in this moment the energy cost is going down in an important way. The gas reach in this moment is more or less EUR 30 compared to [ 15 ] of the [indiscernible] situation in 2019. And the energy is [ 120 compare to50 ]. So it's completely another world compared to the previous financial year.

If you consider that in the previous financial year, the leverage of electricity was 280. Today, we are seeing about 120. Speaking about gas, the leverage was 120. And today, we are seeing about 30 and so if the price will remain more or less the same with the stability of volume and from my point of view, we can come back in the normal profitability.

[Jinesh Gandhi, analyst]

Okay. So this 17.8% is near normal margins for us going forward...

[Massimo Venuti, executive]

Normal margins in the previous quarter we closed with EUR 67 million of turnover, okay, EUR 68 million of turnover [indiscernible] as compared to the previous year. [indiscernible] that in our profitability, compared to the previous year, you have to consider a good impact on volume and also an important reduction of energy cost. It will depend from the volume in the next month. If the volume continues to be higher compared to the previous year, I'm pretty optimistic on staying the same level of profitability.

[Jinesh Gandhi, analyst]

Okay. Got it. And Massimo, can you talk about what was the actual profits, net profit?

[Massimo Venuti, executive]

That in the previous quarter, we closed with EUR 4.5 million, 6.7%. And if I speak about the total financial year, we closed with EUR 12.1 million, 4.9%.

[Jinesh Gandhi, analyst]

Got it. Second question for you, Mr. Jain, with respect to the India business on the aluminum die casting, we have started to get good orders on the [indiscernible]. So any sense on the electric scooters, the content now what it is vis-a-vis the IC scooters. In the past, you've indicated it is broadly similar now, but since I've got the orders, is it in line with what we were looking at earlier?

[Anurang Jain, executive]

So definitely, orders which we have got from, say, Ather Energy, in fact or from Hero Electric, Okinawa, definitely, [indiscernible]. So the thing is definitely the orders for brake suspension, [indiscernible] breaks and suspension. Somebody has been casting, Ather has also given us the side channel casting. So the question is, of course, whatever we are taking is in line with -- it is in line with the value of business win or I would say, per vehicle content, which should be for brake, suspension and customer. It is there. But of course, this is only a start because we really got into the market for taking new orders just about 1.5 or 2 years ago maximum.

We were a bit late in the frame. But now we are really, like I said, [indiscernible] has been for EV last year. So we are now going very, very aggressively. So I would say it takes time to really add castings to all the OEMs. So it's just a start of a journey. We have a long way to go including for BMS also. We have done good order wins, but still a long way to go.

[Jinesh Gandhi, analyst]

Okay. Okay. Got it. And lastly, on the India business margins. So clearly, we have seen the good impact of commodity prices, along with lower volumes in the cooler side with some recovery in 2-wheelers and commodity prices seeing some moderation. Would it be fair to say we should be back up in early things now in the coming year and then moving towards 14%-15%?

[Anurang Jain, executive]

I think it will depend a lot on the aluminum and steel prices, how they behave. In fact, aluminum prices are still going up. It's almost doubled compared to FY '21. And that's the reason, when in FY '21, RMC percentage in India was 62%. EBITDA margin, I think in that year was 15.57% we closed in that year. Now it is 66.7% in FY '23, 66.7% is 4.7% higher, and we closed at 11.9%. So I think a lot has to do with, I think, the RMC percentage also. On the cost front, of course, we are doing everything, whether it's other expenses, employment cost in terms of efficiency of people.

Of course, I mean, we are doing everything to see how we can sweat our assets, improve OE's in our plant in original equipment efficiencies. So there's a lot of work going on. But I'm told that the EBITDA margin amount in FY '23 has been the highest so far reported at Endurance. Not the percentage, the amount. It's an absolute amount, if you see. So that also indicated that we have done better in spite of challenging situation.

[Jinesh Gandhi, analyst]

True. But going forward, at least the product mix will also be improving given that fully machined costing for EV's and ABS...

[Anurang Jain, executive]

You're right. It depends on the volumes of the product mix, ABS upside down front forks, brake systems which we are putting up. So all this will definitely help. So of course, we are very, very highly focused to increase these margins. We must come back to at least 13.5% to start with.

So that is our focus, and we'll do our best to achieve that.

[Jinesh Gandhi, analyst]

Sure. This is very helpful. And thanks to the team for putting up a very detailed presentation .

[Anurang Jain, executive]

That was important, I thought -- we thought.

[Operator]

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

[Pramod Amthe, analyst]

First one is with regard to the after-sales parts where I think you indicated you plan to nearly double the contribution to sales to around 10%. . Where is this confidence coming? What action you are taking up? Because your sales is organically growing and you plan to increase your contribution. So you're almost like 2.5x to 3x the current sales, run rate to achieve in 2 years. Can you give some color on that?

[Anurang Jain, executive]

So as a market, as a percentage to India sales is concerned, it is at 6.5%. Our mission is to go to 10%, for sure, as -- now the question -- and that was the plan for FY '23 to go step by step from 6.5% to 7.5%, 8% and then take it forward in the next few years. The -- which happened last year was which we made the budget in February and March of 2022. We all expect the issues which were in Africa, South America, Sri Lanka, Bangladesh, there were a lot of issues, that are related to available of currencies, their macroeconomic factors. So they were -- so there were many points like this where we -- where we could not -- I mean, the sales they don't happen to those markets. So we are definitely confident that this year, starting from, I think June, July already, things have improved in Sri Lanka, Bangladesh, we see.

Africa also, we are seeing an improvement. So we feel that this year, of course, will be a much better year than last year. That's the plan. But -- and it's a very, very high focus area because it is a very important area for us. So we -- our target actually just to correct you was 10% of India sales by FY '26 is what we had mentioned, those were FY '26 is which tend to the -- India sales is also growing, as you are seeing, 18.8%. So every year, that's going to grow. So expression of that we want to reach in FY '26. But of course, exports forms a very important part also of our sales growth exporting to 31 countries. We want to add another 5 countries in this financial year. We're in the process of doing that. So I can only say it remains a very large focus area for profitable growth and we are doing everything. If you see our domestic sales that has really done quite well in this year. So I mean, I'm very optimistic that this year will be a much better year than last year.

[Pramod Amthe, analyst]

Sure. So I thought I agree with you that you had focus rates. I thought since there was a course correction in FY '23 and you again, we are searching the same. So is there a further concrete action on the ground to support those medium-term targets. That was a broader question.

[Anurang Jain, executive]

Yes. So there are a lot of actions happening in Indonesia and Brazil. We have actually launched very special type of shock absorbers for Honda and other Japanese OEMs. And they are very different from the suspension or shock absorber we supply in the Indian or the other markets. So we are slowly gaining entry into these large markets where we were not there. So that itself is an effort, it takes time for us to realize good volumes and good sales value. But there is a lot of effort, even going into Tier 2, Tier 3 towns focusing pan India for all our products to keep up good growth in all the 4 parts of India. So there are many, many initiatives happening on that front.

[Pramod Amthe, analyst]

Sure. The second one is with regard to your transmission price business. If I'm right, it contributes around 5% of your sales.

Considering the transition to EV and the risk. What is your -- what are your thought process in terms of taking this business in the medium term? Are there any new products possible there to make it a substantial part of the business?

[Anurang Jain, executive]

So, here, I think -- see, in this 5.5% of business, 80% is for motorcycles. There, we are not seeing any traction, much of a traction into EVs. So our transmission business, what we are planning is to get new customers in. And also, like we have done for, say, ABS it got its front forks, we've gone into making aluminum forgings for that. As well as for ABS, we have started with steel plated hoses and now [ clutch ] from March, we have started.

So similarly, we are planning to even start a paper manufacturing plant by July '23, which will help us be more profitable and lower the -- I would say, dependence on imports from the U.S. or from China. So this effort is going on as far as the transmission plant is concerned. So question is how we can increase the business, especially for motorcycles.

And I would also say about 3 wheelers though 3 wheelers we supply to everybody. So once 3 wheelers become fully EV, could happen by 2030 or maybe earlier, I don't know. But luckily 80% of this 5.5% business is for motorcycles where I don't see anything happening to be honest to be able to lower this business. In fact, we are trying to focus to get more volumes on the clutch business or more -- or adding more customers.

[Pramod Amthe, analyst]

And the last question is to Maxwell Promoters. Why to check after the Hero Electric win, we haven't had anything substantial one, even though the industry has moved on to new AI standards. So I wanted to get your feel in terms of what is the actual changes the industry has taken care post, pre-cordinating the high standard and what role Maxwell has played or planned to play in next 1 year? Because my sense was this was a crucial point for changing just the BMS and part of the system and you could have play the role. So if you can explain that, that will be helpful.

[Unknown Executive]

Yes. So just clarifying that the question is how are we responding to the movement on the AIS standards and how we are using this as an opportunity to grow our order book in the business. Is that the question?

[Pramod Amthe, analyst]

Yes.

[Unknown Executive]

Yes. So I think that you're absolutely right. The new AI standards are, firstly, very important for the industry and secondly, an opportunity for us to enter into long-term contracts with significant OEMs. And like Anurang mentioned, we have won that business even from our focus, like I said, even on previous calls, is to become long-term partners, these meaningful partners, this volume creators of 2025 or 2030.

So that's the horizon that we operate on, meaning that -- we are not trying to go after all of the OEMs that are making, say, a few hundred vehicles at every month or so, basically focusing on the big business things that we believe are going to lead to really the EV revolution at the control. So if you see the win that we've had the Hero Electric, which is one of the significant players already on the road, they are making a big move with Maxwell transitioning even the vehicles that are currently -- their are current models that have been deployed in hundreds of thousands of units every year will moving forward be using Maxwell BMS.. Other one is Ampere ,again, like you know, one of the significant volume creators after the acquisition like Greaves, they have actually doubled down their capacity, their team, their plan for new vehicles and so on.

And with both of these companies, not only are we working with them on new vehicles, but also helping them transition their existing vehicles to AIS-156 compliance standard along with localization of their BMS, which was previously being bought from another country. Over and above that, you already know we have significant business. We are the sole supplier to Hero MotoCorp on their Vida platform.

We are also currently in conversation with a few large OEMs on their new vehicle launches as well as helping them transition to AI-156. So I want to just sort of reemphasize on the fact that -- as it stands, Maxwell is -- has been and is in a very strong position to enable OEMs to get a 100% localized BMS that is compliant with AIS-156 that is functionally safe. And the new products that we recently introduced, which has enabled us to win these businesses, which is CT-Lite is a product that is especially designed to be both cost and quality focused for the Indian 2- and 3-wheeler market. So I think that we are absolutely living up and exceeding our plan on new orders win using the opportunity of AIS-156.

[Pramod Amthe, analyst]

Sure. And the last one is, thanks for the detailed presentation. A small request is since your order book on EV is improving, like the other segments, you have indicated sales convention from this order books, if you can give the next 2, 3 years' outlook in the PPT, how this order between converting into sales, that will be helpful and a guiding post.

[Anurang Jain, executive]

Yes. See, I think overall, we have mentioned how it's increasing, gonna increase in future. Have you mentioned that future? Whatever -- I think that has been put up.

[Pramod Amthe, analyst]

Yes, I think the total order of INR 6 billion you mentioned, but how that will come out into sales each of the year, like you have talked about other?

[Anurang Jain, executive]

I think that's been mentioned. How do you convert -- we've not given. But we have given overall behavior. Okay. So we'll have an internal call -- discussion on that.

[Pramod Amthe, analyst]

Sure.

[Operator]

The next question is from the line of Arvind Sharma from Citigroup.

[Arvind Sharma, analyst]

First question would be on the EV business again. How do these new orders or new revenue from EV business compared with the AI's in terms of margins? .

[Anurang Jain, executive]

It's a very sensitive question, but I think I've answered it in the past calls, I would say it's good. I don't invest where I don't make money. Okay.

[Arvind Sharma, analyst]

Sure. Sure, sir. Sir, second would be, you shared the revenue for European business in rupee term. I know you can back calculate, but if you could just for the sake of accuracy also share the revenue, EBITDA and PAT in euro terms, the way we normally do?

[Satrajit Ray, executive]

First, let Mr. Jain finish the answer to the first question, Arvind.

[Arvind Sharma, analyst]

Sorry, sorry, sir there was some communication ga sir.

[Anurang Jain, executive]

Okay. So I'll just put it this way, that definitely the profitability is good. Otherwise, we wouldn't be taking this business and I would say the main, I think, focus also for Endurance is not only business in its business wins in our plants where the capacity being used is less and that's why I specifically mentioned the new orders that are coming in our Kolar plant in Karnataka, Halol plant in Gujarat. Plants which have -- about capacity being used. So we are reinforcing this new additional order because it's not a part of the INR 9,350 billion this euro business of INR 1200 million has been a really a good run from April '23 onwards. It will really help us in get economies of scale and really improve the profitability these plants, which have been dragging us down last 2 years. You know what I'm saying. So these are also the focus areas and we are putting our EV business wins in these plants because we are doing the similar business of suspension or castings or brakes.

[Satrajit Ray, executive]

[indiscernible] exactly which numbers of Europe you were looking for? .

[Arvind Sharma, analyst]

Sir at a normal revenue EBITDA and PAT, PAT i think you've shared EUR 4.5 million, the revenue and EBITDA.

[Satrajit Ray, executive]

So you're talking about quarter 4 or full year?

[Arvind Sharma, analyst]

Quarter 4, sir.

[Massimo Venuti, executive]

Okay. We closed in the quarter 4 with EUR 67.4 million of income compared to EUR 62.6 million of the previous financial year, an increase of 7.6%. speaking about EBITDA, we closed with EUR 12 million, 17.5% compared to 7.9% -- EUR 7.9 million of the previous financial year, 12.6% with an increase of 51.9% in terms of EBITDA. Net result EUR 4.5 million, 6.7% or in percentage compared EUR 2.7 million of the previous financial year, with an increase of 63.4% compared to the previous year.

[Arvind Sharma, analyst]

Sure. Apologies for the communication lag on the first question.

[Operator]

The next question is from the line of Vimal Gohil from Alchemy Capital Management.

[Vimal Gohil, analyst]

My question is on the engine casting business. Now what I'm looking for is specific differential between your intent per vehicle in the engine castings for ICE vehicles versus your aluminum casting for battery cases, how are these 2 in terms of comparison? Is the content higher or lower? .

[Anurang Jain, executive]

Yes. So I already mentioned this in the past that if you see our EV two-wheelers if I compare ICE with EV. Like for ICE, we have say 7 parts.

The Prime cases are 2 covers are Cylinder block, Cylinder head cover, Cylinder head. Here, we have -- there's a battery housing upper and lower. There is motor housing, there's plates, upper and middle, terminal ground, terminal part, terminal pace Base MCU, there are 9 parts. But here, the weight is 2 kgs less. But the value add is just 5% less. You know what I'm saying. I'm just trying to give you some idea. Now when you come to three-wheelers, we have similar 7 parts, but here, we have 11 parts. Because here also the case transmission, left and right, which is added to the 9 parts. And here, the value is, of course, much higher to almost is 25%, 30% higher on a weight, which is 1.5 kg lower. So in fact, these businesses are very good. When I just say that, these are very good businesses, which we have been. And that's why I said we are [indiscernible] sets of castings. Mainly for the factory housing, motor housing and all these other smaller ones, which I didn't mention.

[Vimal Gohil, analyst]

Understood. Understood, sir. Sir, just one follow-up there. If -- when you say that your total ICE dependent business, it would include your clutches and your engine casting parts. If you can just give me the break up there? How much is that as a total percentage of your stand-alone business?

[Anurang Jain, executive]

No.See, I have not completed this because castings are so varied, two-wheeler, three-wheeler, four-wheeler, i don't have that breakup. I cannot answer that. I can only -- I have answered to transmission is 5.5%, with 80% is motorcycles, where I'm not seeing much of a traction, to be honest. I don't see anything happening if you ask me to lose that such business. But I've just given you a sense of the pricing versus the weight. Do you know what I'm saying? Number of customers. Beyond this, it's not correct to give no more details, to be honest.

[Vimal Gohil, analyst]

Understood. Sir, lastly, a question for the Maxwell Promoters just risk, sir, to the BMS business overall, if you -- do you see some of these OEMs actually taking their battery management in-house? How do you see that as a risk to our business? Will they sort of continue to get support from players like us? Or like in the passenger vehicle industry, we have seen that most of the battery management has been taken in-house. So how do you see that as a risk?

[Anurang Jain, executive]

So I'll request Akhil to answer that. Akhil or Biswa?

[Akhil Aryan, executive]

Yes, sure. So I think I've spoken about this subject quite a few times. If the reality is building a BMS is a -- it is a higher risk and low value opportunity for OEMs, if you think about it, right?

So BMS is a critical component that goes inside of the battery and its not just sort of an analog device which has just a hardware, but there are algorithms and software that need to be built both for safety as well as accuracy. So whether it is state of charge, state of health, state of energy, state of power, all of these algorithms need to be designed. There need to be different configuration parameters that need to be put in place for working with different types of charges, safety parameters for acceleration for range estimation for charging control, so on and so forth. Though what we have seen and also I think you made a statement saying that passenger vehicles, most people are designing it in-house. I don't think that's accurate. I think that there is also a significant opportunity for us to enter four-wheelers in the near future. In my understanding, there are components that OEMs are trying to build in-house but when it comes to safety critical components, they are relying on companies that have spent like at least in our case between all of us, we spent over what, 8 years building the technology that we are putting out in the market today. We've deployed it over hundreds of thousands of vehicles at millions of kilometers validated with no failures on the road.

So that credibility is something that really helps us build a narrative in front of OEMs, but when they're designing new vehicles instead of taking a bet on building something that could be detrimental if there was any issue on the road even to their brand or to their product line. They choose to work with people who have, I would say, domain and index knowledge as well as technology that is tried and tested on the road, which is why we are seeing success with significant OEMs. Now the OEMs that you might be referring to that has built their own BMS as -- -- perhaps OEMs that started much before. For example, when you were -- let's say, a Tesla or an Ather or someone like that, and you started 10, 11 years ago, at that time, we did not have a mature offering of Tier 1 OEMs bringing this technology to. So they are basically forced to design the technology in-house and build it themselves.

But any of the OEMs that are launching, say, even the significant OEMs that are launching their EV products today, there is actually, to some extent, a fight against time, right? You don't have 5 years to design your own BMS and design every single product and build sort of vertically integrated technology. So at least from the perspective of OEMs designing their own BMS we don't see that as a risk. What we do see is OEMs wanting to design their own battery. They want to own the IP on the battery level. And so they typically want to -- so with the cell design the electromechanical assembly and buy a BMS from something like Maxwell and assemble it by themselves into a proprietary design. So that's what we are seeing on the 2-wheeler side. I think that, that trend will continue. There will be other advanced electronics like Anurang mentioned, that we are also venturing into beyond the BMS. So it's not like we are putting our head in the sand and saying, okay, BMS will be here forever. We are also exploring other advanced electronics beyond the BMS that we will be bringing to market very shortly under the Maxwell sort of umbrella. And the goal primarily is to, like I say, our mission is to accelarate BIS transition an all-electric future. And for that, there will be various different advanced electronics required. BMS is our flagship sort of offering today and I think that will continue both for two-wheelers as well as passenger vehicles in the near future.

[Operator]

The next question is from the line of Mukesh Saraf from Avendus Spark.

[Mukesh Saraf, analyst]

My first question is on the castings business. Could you give a sense of currently what proportion of the castings are fully finished and probably, how do you think that proportion can look in the next couple of years based on what you already mentioned on that business going?

[Anurang Jain, executive]

So I would say that 75% are either selling finished or fully finished. Our target is, of course, there are some sticky customers who still want to do it in-house where most of the OEMs are getting it out but they don't want to get into issue of rejections being sent back after machining is a big. So I think today, if you see fully machined, I think it would be more at about 40%, 45%, I think, just for the guess I'm taking. But fully -- but to go -- if we go to fully machined at 75%, 80%, that would be a good target to achieve, which, in fact, many customers are asking us to do that. And that requires investment also.

So we will go phase wise. I can't [ give to buy then ] in future. But definitely, I can only say that all the new business we are taking is only with machine castings. And the historic based on the investments we want to do, we look at good step by step...

[Mukesh Saraf, analyst]

And this is the outside of Bajad Auto sir. These customers that you're talking about who are getting, is that...

[Anurang Jain, executive]

No, no, this I'm telling you a total figure with Bajaj Auto But of course, I see, I would say, Bajaj Auto also, there are certain which are fully machined also, there are certain which are not machine also. So we have to still -- the non-machine people, we start, we'll to go to set finished or fully finished because the mindset is to do it in-house with a few of them. Bajaj is a leader in doing fully machined. And also four-wheelers is largely fully machine only unlike Tata Motors, Mahindra, it's largely fully machine, which is a very good things. There are some exceptions but largely fully machined.

[Mukesh Saraf, analyst]

Right, right, sir. And my second question is on the EV business that you've been mentioning, these order books like you have INR 6 billion odd. How are we kind of looking at this same subsidy probably not being extended? And how are we safeguarding say, the volume targets because these are based on peak annual basis -- peak production basis. So is there -- I mean, do you see a risk of subsidy not being extended and the production at the OEMs falling? We have seen some of these OEMs in the subsidies got caught, their volumes actually fell quite a bit. So how are we looking at that angle?

[Anurang Jain, executive]

See, one of our customers Ather, already you've seen in the papers last week that they want to get a frame subsidy, there's no issue there. Future, what happens beyond FY '25, I cannot say. But see, we as Endurance, we have to invest in the journey of EV where there is a large focus by the government and by the OEMs and for environmental reasons. So as far as we are concerned, our job is to take the business, which we are doing. What happens in the future, to be honest, I mean I can't comment whether they'll extend the subsidy, what happens to these companies, I have frankly no idea.

[Mukesh Saraf, analyst]

Actually, sir, my question was more towards on the profitability side. How have we safeguarded if the volumes actually are much lower than what the company -- the customers have indicated?

[Anurang Jain, executive]

Yes. So I see. So the question is, if the volumes don't happen, of course, we'll do I mean, less sales. But most of these orders, like I mentioned, are from existing plants. We are trying to increase sales and profitability from the existing plants. We're not setting up a new plant and then most of the capacity is already are there whether its for assembly or it's for other processes, we already have the -- I mean the investment that -- so the best part of this is that we're doing it from our existing plants. I don't need to add much to do this business. No, so that's why I mentioned in our opening remarks from this plant, we are doing it, all these businesses that I mentioned.

[Operator]

The next question is from the line of Aashin Modi from Equirus Capital.

[Aashin Modi, analyst]

Sir my first question is regarding -- so we have 2 products in testing and validation. One is CVT with HMCL and dual channel ABS with Bajaj and RE.

So if you could tell us where are we on that?

[Anurang Jain, executive]

See, as far as the CVT is concerned, it is still at HMCL, but that is -- I would admit is going a bit slow. The kind of traction we were expecting is not happening. And also what is happening with scooters going in the EV way in Hero MotoCorp, we are also having a review whether to invest time and money on this or not, to be honest. As far as the ABS do, that will go very fast. In fact, it is our customer, Bajaj is asking us -- I mean the other one's in a hurry to be honest. So the ABS will happen fast. Like I mentioned, we want to start by quarter 2 of this financial year, supplies to the dual channel. That's our target.

CVT, we are still evaluating whether to invest that time and money because there are a lot of other projects we are doing. So that's the question coming up. But it's not that -- we are still continuing with the process with HMCL.

[Aashin Modi, analyst]

Okay. And then my second question is on the EV side. So where we have seen -- we have got good traction in the E-two-wheeler space. So could it be replicated in E-three-wheeler space as well? And what sort of a content difference can we see -- for us in ICE three-wheeler versus a EV three-wheeler?

[Anurang Jain, executive]

I see -- whenI just mentioned that, I told you about castings...

[Aashin Modi, analyst]

I'm talking about three-wheeler. .

[Anurang Jain, executive]

Yes. So three-wheeler, in fact, I mentioned that there are 11 parts versus 7 parts. The 11 parts are 1.5kgs lower, i'm talking about castings now with a much higher value add, what I'm saying.

So similarly for brakes, we're already supplying to Mahindra Electric and this month, we are starting with Bajaj Auto for the three-wheeler EV brake system. And we in touch with others, whoever is getting to three-wheelers, we are in touch to take new business. Right now, it's Mahindra and it's Bajaj, which is where we are going forward on the 3 wheelers. It's for castings and it's for brakes and of course, of front-fork shocker also. I would say front shocker and rear shocker, there is no fron-fork in a three-wheeler, what we are supplying.

[Operator]

Ladies and gentlemen, this would be the last question for today, which is from the line of Aditya Jhawar from Investec.

[Aditya Jhawar, analyst]

My first question is to Akhil. So in case we are working with a construct where the OEM designs are the battery and Endurance provides the battery management system. So in this construct, how should we think about the warranty liabilities? Will OEM except the warranty claim in the sense, any issues where the BMS is designed completely?

[Akhil Aryan, executive]

Yes. So like I said, there are typically clear handovers between the BMS and the battery. So when we say the battery is designed our OEM, it is essentially the electromechanical assembly whenever. Whenever let's assume that there is a warranty claim, you have to be able to do a root cause analysis and figure out whether the failure was due to a design defect on the electromechanical assembly or whether it was a failure of an electronic board not able say, open or close a Mosfet, for example, in a specific case. Now on our side, we -- at least before we supply all of our BMS's, we do very significant and complete testing of all functionality on every single board.

So because we want to be extra careful and we want to protect, of course, our reputation as well as Maxwell, we've been able to supply hundreds of thousands of units without having any significant failures on road so far, which is, of course, one of the big pieces by OEM structure. So before we ship out our BMS's, we actually do functional tests of every single feature before we ship it out. And we also provide our customers with [ wrist benches ] on their side where they retest all of these features along with the battery after battery integration before they installed inside of vehicle. So they test the safety critical functionality before they put it inside and that's basically where the handover happened. But if for whatever reason, that is a field issue, then there is a very detailed process and procedure to identify the RCA or the root cause analysis of the issue. And it has to be attributed either to a design defect on the battery integration, battery design or design defect on the hardware or software of the BMS. So where these hard line, which will allow you to segregate whose warranty climate will be, so to say.

[Aditya Jhawar, analyst]

Okay. That was quite helpful. My final question is to Anurang. So in the presentation, you had given a target of aftermarket reaching 10% by '26. Similarly, can you give some sense that how should we think about four-wheeler contribution in India revenue, which is now about 7.5% by '26, where can we reach?

[Anurang Jain, executive]

See, we are -- see, right, India, the major business is aluminum castings where 4-wheeler is about 7.5%, which is only aluminum castings. What we are looking at is opportunities for inorganic growth in the 4-wheeler segment and technical collaboration in the four-wheeler segment. Because if I have to do brakes, clutches or any other proprietary product in future, definitely, we need a good technology, good technology partner. So this is what we are actively pursuing to really take the share of business up, because it has even the two-wheeler growth because of these value-add products is really going up and supplying all our products to on our OEMs, all our core products to all the OEMs and even BMS becomes a large focus for growth, we won't look for us.

So four-wheeler, what we are looking at is to answer your question is inorganic opportunity as well as collaboration in terms of JB's or collaboration agreements to enter the year is what we are looking at right now.

[Operator]

Ladies and gentlemen, as that was the last question for today. I would now like to turn hand the conference over to the management for closing comments. Over to you.

[Anurang Jain, executive]

So I have no further comments, I'd just like to thank everybody on the call. Thank you.

[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. Thank you.