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Gabriel India Ltd
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Ladies and gentlemen, greetings, and welcome to the Gabriel India Limited Q1 FY '24 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.
[Operator Instructions] As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Mr. Manoj Kolhatkar, Managing Director from Gabriel India Limited. Please go ahead, sir.
Thank you. So good afternoon, everybody. This is Manoj Kolhatkar, and along with me, Rishi Luharuka, our CFO; and Nilesh Jain, our Company Secretary; as well as our advisers, SGA, joining on this call. So I hope you're all doing well, and you have had a chance to go through the results that we published on our Board meeting [indiscernible] 14 of August. And I'll just give a brief overview of the company's operation and take you along the slides and presentation.
So starting with Slide #5, which is the financial highlights. As we read the [indiscernible] -- this is financial highlights for the first quarter, April to June 2023. We had a revenue of INR 805 crores, which is the highest ever in the quarter that we reported. This was, of course, on the back of some good -- overall [indiscernible] out of the industry volumes. And also glad to share that we did an EBITDA of 8.6%. We'll come to that later. But again, we have taken the EBITDA upwards as we have been discussing on several calls in the past. And obviously, the PBT is the same impact of improved EBITDA. So the quarter-over-quarter -- but year-on-year, if you see the revenue grew by 11%, and EBITDA grew by [ over 50% ], that is the kind of -- the cost control that we have been able to do mainly through -- as we had [indiscernible] a year [through our] Core 90 program, which is a cost structure might be this program.
[indiscernible] just to talk on different segments. The [passenger car] segment witnessed a 9% year-on-year increase in wholesale during the first quarter. The quarters continues to see strong order book and inquiries, improvements due to obviously seen in the [indiscernible] as well, though not entirely one of it, but there's a clear improvement. So that's why the volumes are more predictable as well in the passenger car segment and of course, the introduction of many new models that we are seeing. Further give you a favorable [monsoon] conditions in so far, I understand that this last we have been a little low in terms of [consoles], but there's still time to go. But overall, this has increased the farm income in rural demand for PBT sales has also increased noticeably.
Coming to commercial vehicles segment, sales in commercial vehicles actually sell [indiscernible] in the quarter. This could be attributed to many people doing a prebuy because in the month of April, we all know that we had to implement the [BS-2] Phase regulations and the mobility -- so both the 2-wheelers and the passenger cars to a smaller extent because they're already kind of geared up for OBD 2, Onboard Diagnostics 2. But commercially little did it have an impact. So there was a kind of prebuy that happened in the previous quarter. That's why we are seeing a little bit dip in this quarter. But despite this, the commercial vehicle remains optimistic with both expected to continue. This is bolstered by the ongoing development in the country and robust economic activity. Further advances in lifestyle connectivity and improved e-commerce are expected to strengthen the commercial vehicle supporting future demand. So this -- we are clearly seeing more demand in the higher tonnage vehicles. And on the other side, the smaller commercial vehicles due to mainly [indiscernible] e-commerce [indiscernible].
Our 2-wheeler sales increased by 11% in Q1 compared to the same quarter last year. So that is some good news, of course. Although the sales are nowhere near what we did in '18, '19 or let's say, the best year -- but there are indications of resurgence of rural demand aided by the liability of more addressable financing offers, interruption of new vehicles and also all these price increases having been to some extent, digested by the market. And we are also seeing a very good growth, particularly with [ PM ] category and also a robust replacement demand. The key catalyst driving a decent momentum in EV was a [plain] subsidy. [indiscernible] good surge for the year to the month of May. And in June, we saw the subsidy being taken away. So obviously, in terms of e-wheelers or electric 2-wheelers, this definitely did impact the industry. And the volumes went down the -- of course, again, we are again May was a prebuy [story]. So people did buy over a lack of 2 years. But in June and July, the volumes have gone up to almost 50,000. So you'll never see how this stands out -- but yes, the OEMs are definitely taking this challenge and introducing newer models, which are more cost efficient. We have seen some of those launches already.
The 3-wheelers have increased tremendously with the opening up of the entire economy, in the country, if you're asking opening up in our own minds to share public transport. So we have seen 89% increase in it. In Q1, this segment has its third highest sales. This is again mainly the short distance [indiscernible], you all know. And Realistic Mobility in this space, again, has seen a great traction, and that continues to continue to grow as was seen during last year. With the new launches planned, we are seeing strong growth in [indiscernible] segment definitely. There's a lot of talk on EV rightfully so, but even there are some good ice products being introduced and it [indiscernible] to meet the rising demand for all these products. Our R&D investment prioritizes new products and portfolio expansion. We are committed to increase market shares, gain new customers. We'll definitely be sharing in the couple of slides.
Customer satisfaction and adaptability continue to drive our own performance in our industry. Having said, given this brief backdrop of the industry, I'll get back to the presentation to Slide #6, [Tied] to financial highlights. The revenue, I already mentioned, grew by 11.8% year-on-year. And even on the quarter-to-quarter, it grew by almost 10%, and EBITDA grew by 35.7%, almost 36%, on a year-on-year basis. And if you see on a quarter-to-quarter, we do a [indiscernible]. The balance sheet position is also [indiscernible] we have net cash of INR 3.3 crores and CapEx, which we incurred was almost INR 14 crores, mainly towards R&D investments and some capacity increases. I mean with this [is the] main CapEx [indiscernible], also for some technology improvements that we did in our process like installing or increasing our robotization in one of our plants.
Turning to Slide 7, which is -- again, the track record is pretty much the same figure in different format so I will not spend time on that. Slide #8 is the quarterly performance trend. So you can see the margin uptick in the last Q1 data point. And ROCE also on an annualized basis is looking at [40%] currently.
Coming to Slide 9. Again, it's the P&L statement. So we've already discussed that. I'll move to the trend charts on Slide #10, which are key ratios despite 10 is again 10 and 11 are key ratios. So I'll take that as well. But on the slide #12 which shows the revenue mix but clearly, we have seen improvement with the passenger cars portfolio. So it has gone to 24%, [indiscernible] at 61% and optimize at 13% which is good news as the balance of portfolio is a bit better. This is mainly due to many of our passenger car launches now seeing in production. So like you've seen in the [indiscernible], we've seen up earlier [indiscernible] than we have seen also the [ Mahindra models ] is doing very well and it is really getting us [indiscernible] as we speak. So this has really helped us improve our [car] share in the [port] mix.
In terms of channel mix, it's -- I mean, of course, [the OE] is 83%. Aftermarket did improve. I think we have been pushing continuously both the core products as well as we have tried to put some energy into pushing our [indiscernible] sales, which are mainly 2-wheeler, 3-wheeler segment. That is also the [indiscernible] and exports continue at 4%.
Currently slide, the 13 and 14 is mainly around on cash flows. We already discussed that. Now I'll skip the earlier slides. I'll come to Slide #20. Our mission -- I mean, the vision is the same of being the global top [file]. Coming to Slide 20, which talks about the performance segment [indiscernible]. So the first segment, I'll brief you about the 2-wheeler and 3-wheeler segment. So here, we have seen a 61% -- it is 61% total sale, 32% market share is what we [command] now. So again, many new launches, and we continue to get a good [ healthy] business pipeline going forward. EV, I'll come to that later. But you saw the latest launch is made by Ola. So all -- I'm happy to share that all the models shown, including the motorcycle [indiscernible].
So if you could come to Slide 21, which is the story on EV, I think 73% share of business in EVs 2-wheelers and 3-wheelers approach. We will also -- we continue to supply to the top leaders in the segment, Mahindra, Bajaj and [indiscernible] and in 2-wheelers, we are aware of Ola, Ather, Ampere [indiscernible] and this -- while we have seen a couple of months which are low. Our Ola volumes are strong, and we continue to see good pull where it is worth and in these new models, we decided [indiscernible] model being one less than 80,000, we are seeing a lot of product portion [indiscernible] in a one of coming from the customer on this.
Slide 22, is on the new products that we introduced. This is a [indiscernible] this is the current for e-bicycles, which are a huge trend in particularly Europe because they're, I'd say, highly enormously conscious. And this also actually offers a very good transport from [indiscernible] infrastructure is safe and good, which is what we see in Europe. So there is a [indiscernible] demand of this segment. So we had exported our first. This is done along with [hero-cycles] under the name of Spur. So they had exported the first 1,000 pieces, and the feedback has been good. Performance feedback has been good. There is a little feedback on some wage reduction that we have to do, which we're working on. And we will probably look at, again, pushing this and trying to get more customers in at least get some orders in the next quarter. We also [indiscernible] with some Indian key bicycle manufacturers while this is mainly export focus, but we're also looking at -- to induce our business within or at least have Indian customers also buy these products from us, now that we make this product.
Coming to Slide 23, which [indiscernible] regards, I already shared that 24% market share is what we have [gained] now. So Maruti Suzuki, Jimny, which again [getting] a good response -- and now we're happy to share with you also [a key]. We already one of the key [indiscernible] of Mahindra, which did not do very well, but we are now at Stellantis, Electric Citroen C3, this is the second electric patent that we have got for P&L. And in terms of future developments, we have the new platform of [indiscernible]. Currently, it's what we are seeing is Volkswagen versus Kushaq, [indiscernible] and Skoda [indiscernible] so these [indiscernible] are now being very well and the entire business is with Gabriel. And we also already got the business for the new platform to the [indiscernible] 2.5.
Now coming to the Slide 24, you can see the pictures of all the SUVs -- that Gabriel is supplying to -- and actually, it is the growth story, as you all know, over 50% sales in the passenger car segment is actually SUVs and we are [indiscernible], you can see the Volkswagen, Skoda, Toyota Hyryder and the Suzuki Grand Vitara with Suzuki Brezza, Mahindra Thar [indiscernible], Jimny and of course, the, what [indiscernible] the old horse Mahindra Bolero. So this all continue to be the portfolio from service [by Gabriel]. So it is definitely a strong study. [indiscernible] commercial vehicle, [indiscernible] market share continues to be on almost 90%, business back and also put our story with [indiscernible] on exports is extremely well, as I said shared last time, I'm not sure has shared actually, but we got the quality award second year in a row. They have a 10 KPM award [indiscernible] world and we have been recognized for that. So that is opening us new goals for us for sure in the [car] world. But it's been a very good success story as far as that is concerned. And now we are working on some -- as the Indian EV makers also move or evolve hold those [indiscernible] vehicles is better comfort.
We are also seeing a new requirement for high [damper] post samples, which were always supplying to that from [ Tata Motors ] as well, and we are currently in advanced efficiency [indiscernible] to close this business order as well.
Slide 26 is on Railways. Seats is a very small portion. But again, we're proud that we are the only Indian supplier, which has been approved for 1 day but -- we also added electric locomotive to our portfolio. So we are there on every product that [indiscernible] has from LSV process to Shatabdi, Vande Bharat [indiscernible] and the Locomotives. There on [indiscernible] and we are also exploring up as we seek some opportunities for exports. Well, we'll have to see how this pans out, but we definitely are putting in focused efforts towards exploring markets overseas for railways.
Slide 27 is aftermarket, which has seen an inching up in terms of the overall size, we are at 15% of the total sales for this quarter. So we have been pushing this in BNC plus count. We are adding new products, as I said, specific push was put on the tires. Our tires and teams, which is doing well. And we are also looking at opening up some of the new geographies in -- particularly in the LatAm region, Latin America region. And let's see how that goes, but aftermarket continues to be a strong pillar of our overall sales.
Slide 29 is on our new company, [indiscernible] which we started with GA as we did mention last time after for the [sun roofs]. It will help us on [indiscernible] when it come to the picture, but plant is almost ready. The demand is very strong for the customers. We have already met -- I already shared that we've got the order for Hyundai and [indiscernible] -- but we already met Mahindra, Tata, Maruti Suzuki, Renault and [indiscernible] to all the customers, and there's a very, very high level of interest. We had [tech shows] in Mahindra and Maruti recently at the group level, where we have demonstrated this product as well. So a lot of interest that we are seeing from customers on this Sunroof because obviously, the demand for Sunroof's in every SUV is almost nearing the 70%, 80%.
In some models, in fact, I mean, they have been saying that customers are wanting 100% sunroof so -- so really a very, very good product to be. And now we are focusing on getting the plant started. The machines will start arriving in this -- in the month of September, they've already been dispatched -- so we'll see the plant actually filling up in the next month and starting of the trial also should happen from the MSIL [indiscernible] the line. And some production, we see [indiscernible] a total production of in the month of [indiscernible] itself.
Just the pictures of the plant. You can see it's a 170,000 square feet facility in the [indiscernible] area of [indiscernible], which is close to [indiscernible]. So we can be practically ready. And I'm ready to receive the machine, the SME line and the machines that were coming at the end of -- or during the beginning of -- end of this month and beginning of next month.
Also, one more important event that milestone that we had was opening up of the Gabriel European Engineering Center. This we have been working for some time now. As you know, we have already inducted the CTO [indiscernible] was from Belgium and export and expansion, especially in active expansion for over 30 years. [indiscernible] And we have been working with them to open up a European tech center because [indiscernible] competence exists in this region. And also in Europe overall because the customers are demanding these kind of products more and more in that basin. So we have opened this up in near [Brussels].
The city is [indiscernible] where there was very close to the earlier port plant. In fact, it is very close to port too. So that also helps us in building our trials very quickly. You can see the pictures of -- this is the office that you see on the center left is the picture of the active office that we have currently entered and we'll be moving to a workshop in the same building, and this is the actual picture of the building, not rented, this is the actual picture. With the blue circle, you can see, that is where we'll have the factories. I mean, not factories. It's a workshop. It's for manufacturing [indiscernible], but it's not a factory. It's going to be a workshop. So it will be [house,] our office, our engineers and also our [indiscernible] equipment has really forced to live the power and pick our [indiscernible] as a company.
This -- from here, we intend to clearly go for the best product in the suspension, so not only in active, but also -- I mean, selected suspension, also in battery suspension, we are working on light-generation evolving technology in close collaboration with global exports in India. So in India it will kind of an appropriation of this new generation modeling technology that helps from the best in the field.
This is the picture of our Tech Center in [indiscernible], which is fully functioned, [indiscernible] state-of-the-art of tech center and happy to share that this has been rated platinum as far as the Green building is concerned. So we have [indiscernible] everything about a building we ensure that this meets the platinum requirements of a Green Building company. And this is the way -- going forward, we have already mentioned at our [indiscernible] all our new plants [indiscernible] that will come up, we have decided that we will go for a Green building certification. [indiscernible] plant is already at so to the brownfield plant, which we got a [indiscernible] and here, we've got a platinum rating. So this is our focus on ESG, as we all know, is a very, very important part of Gabriel and as well as [indiscernible].
We have a formal mission to the carbon and water neutral [indiscernible] by 2025, with zero waste to landfill and I'm happy to share again that 5 of 4 locations in out of 7 are already zero waste to landfill, and we are doing well on the carbon and water mortality as well with the renewable energy being almost 20% of our total energy consumption.
In this annual report, we, of course, have the [ BRSR report ], which will be -- which we already published. I'm sure you must have had a chance to go through our annual report as well as the [ BRSR report ]. So that's very quickly what I have to share as far as our presentation is concerned. And now I would definitely be keen to hear from all of you on the questions and [the hint and] inputs. So [indiscernible], thank you.
[Operator Instructions] Our first question comes from the line of Jay Kale with Elara Securities.
Congratulations team for a very good margin performance. My first question is regarding the -- on the margin side itself, as we see both Y-o-Y and Q-o-Q, a large part of your margin delta has come in from gross margin expansion. So would you just throw some light on what has led to how much of it comes from commodities, how much from mix change? Because if I see a mix change on a Y-o-Y basis, you have your passenger vehicle contribution going up. But on a Q-o-Q basis, your 2-wheeler contribution has moved up. So just trying to get some flavor how much of it is because of mix change versus commodities. That would be my first question.
Thanks for asking that question. So the gross margin expansion is on twofold. One is on the raw material side [and as well as on] the price recovery side. [indiscernible] question about the commodities. The net impact as compared to Q4 on the commodity side, including the denominator is that -- the price is not playing policy in our case [indiscernible] PDC commodity cycle is roughly [ 1.5% ]. On the mix side, it's in the range of 0.5% to 0.7%. And the remaining part of that is either through a better realization or through some of the settlements with the customer for price changes.
Okay. Understood. My follow-up question is on the railway side. What is your outlook over there in terms of railways, given that -- recently, there has been also a news flow of some bit of [indiscernible] have been talked about for railway components. What is the import content in your type of product currently in railways? Any scope of expanding? And you mentioned that you are also looking at exports currently. But wouldn't the domestic opportunity be big enough for you to kind of utilize your capacities? Or you're seeing some competition also coming in on the railway side in your particular products?
On railways, like we always mentioned, it's end of this business, if you have -- if you get some entries as always, somebody who develops the product, it's a catch -- the only thing is we have moved fast. We have been the first supplier to be onboarded for [indiscernible]. And railways, again, the pace is very slow. So the numbers are very small. So it's not going to -- we can change in a big rate -- win rate even though [ PLI ] is announced or whatever by the time it sees the [indiscernible] in terms of the actual business, it takes a lot of time. But a good part is now we are there on everything that railway has to offer. So we'll definitely see some improvements. But again, repeating the -- the top line is a very small fraction of ours as we keep on going. The rest of the industry is growing as we know in the last year, [indiscernible] grew at 22%, [indiscernible] at 40%. So these numbers are -- railways are different -- totally different story.
Understood. Understood. My next question is on the Sunroof side. I mean you did have -- you've mentioned about the Sunroof penetration of Panoramic Sunroof versus [indiscernible] normal Sunroof systems. What part of -- how much is this of imported Sunroof today? And what is the kind of price value proposition you all get by localizing the entire Sunroof in India? Is it 10%, 20% cheaper than the imported Sunroof? That is one. And second, between the normal Sunroofs and Panoramic Sunroof, what is the kind of price difference? Is it again -- Panoramic Sunroof are double the price of normal Sunroof? Or how does that equation go?
Yes. So Panoramic Sunroof, actually the normal Sunroof, what is the [indiscernible] all the [ TBS ], the small Sunroof, that's what you mean, right?
Correct, correct, [ TBS ] models.
[ TBS, ] there is one [indiscernible] slide and the bigger is the Panoramic Sunroof. So we are -- typically you get it right. It's almost a figure of double. The size also is double and the price also is almost actually double. That's with regard to the last part of the question. And the first part, you said it was -- in terms of localization benefits and how many of it right now is important. So right now, many of Sunroofs are still important. So as you know, [indiscernible] has already set up facility. So still many of the Sunroofs continue to get imported. So in fact, [indiscernible] almost -- there a few [indiscernible], the smaller Sunroof models it's all imported, which is where we are doing a localizing.
The localizing benefits right now is still small, because the supplier base or the supply ecosystem for it is yet to mature. This is the first time like there are certain setups to setting up our setup, and we are setting up. So now obviously, the supplier ecosystem will also start getting more mature and evolved in setup. So the localization percentage for the [indiscernible] content of the Sunroof is still going up, will go on and continue to increase. Right now, [ glass ] has been localized largely, plus some other components, but I would say it's still a long way to go in terms of more localization to happen in the Sunroof category, but yes, right now, it's -- the import would be to the tune of, I would say, almost 50% to 60% there.
Understood. Just last question. It's heartening to see our share of business being higher in the UV side at around 35% versus 24% on blended market share. But in terms of your new products, you mentioned, we're seeing a lot of EV launches coming in from the UV players. How are we positioned in terms of, say, Maruti, Mahindra, Tata, EV products coming in? How are our orders based on that? Because probably in the next 3 years, there will be a whole host of EV products launched. And you mentioned in your slide that M&M, you have one product over there. So is it an ICE product or a EV platform of [indiscernible].
Yes. [indiscernible], which actually is [indiscernible] small product. And in April, it was [indiscernible] that too. But that is not a big runner. The key -- I mean the key thing would be to get on board for the new EV assuming products, mainly. So what we are looking at is this tech center that we have put up for in [indiscernible] as well as in Europe. Exactly is to develop the latest technologies in terms of the [indiscernible] suspension.
So our first model -- working prototype -- fully functional prototype model we test drove in [indiscernible] customer, and the feedback has been very good. So we intend to start getting into manufacturing phase somewhere in the [indiscernible] in the end of '24 that will [indiscernible] as well as a financial requirement is [indiscernible]. But as I said that, there's a lot of passive suspension requirement as well. So we are there on EC3, which is [indiscernible] of EV. And we are in advanced positions for all the Tata models coming up, which will be actually the [indiscernible] EV. And in addition, you saw the new part, yes, we launched EV -- not launched, what you call a picture or the model was showcased in [indiscernible]. So we'll be also discussing on that with Mahindra.
Our next question comes from the line of Mumuksh Mandlesha with Anand Rathi.
Congrats on the good results, sir and market share gain in the EV segment this quarter and also the interest shown by new customers for the Sunroof, sir. Can you indicate overall at the group level, what are the broader sort of areas where you're seeing the opportunities, where the global [ NCs ] are looking for partners like Anand Group to localize the product in India?
Well, Mumuksh, yes, there are definitely not -- decisions we've been on many OEMs with [indiscernible] new products. So as you know, in terms of Sunroof, you already got Sunroofs. And then there are several other product portfolio, which our partners, do have as far as Anand concerned is not give, but our partners do have a wide product of introducing them to other countries that shows happened recently, we did display them and even an auto expo. So we are continuously looking and starting for new opportunities to the product portfolio offered by our customers yearly. So that's continuous. I don't know if I answered your question, but...
So my perspective was like [indiscernible] also looking at the sector [ domestic ] areas. So I just want to understand where you are seeing the opportunities, broader areas of where you're seeing the -- and global entry looking for partners.
Yes. So that's the lens that we're looking at in terms of agnostic areas. So there are quite a few areas right now, obviously, we cannot [indiscernible] and domestic areas which are in high growth and particularly [indiscernible]. So we are scanning for that. Right now, I think we have one of this Sunroof now in our city. And the important thing is to see that this starts off well and its product line as well. So our energies are focused towards it as of now. Having said that, we are definitely looking at scouting for more opportunities as well.
Right, sir. Coming to Sunroof, sir. I mean there only two Sunroof suppliers who set up the plant in India, wouldn't it be best to [indiscernible] capture both of the opportunity as the Sunroofs are localized? And can you broadly indicate who are the other players who are importing the Sunroof in Indian market?
Okay. Okay. So right now, many of the [indiscernible] import, Mahindra's does import, [indiscernible] as well. Maruti is introduced only in the new models that is localized. These are the main players who are -- I mean, offering a Sunroof in their product. So that's the overall scenario of where the import stands today. And as far as the market is concerned, I already mentioned, there have three players today, and that's [indiscernible], CIE and [indiscernible] market. And yes, that's definitely a huge scope for the [indiscernible].
Right, sir. Also, what has been the CapEx done for the Sunroof deal now? And in the [ content ] of the Sunroof, what could be the value addition? And on the -- what's the status of JV formation and what would be the valuation for the [indiscernible] acquiring the stake in the JV?
Currently, we are on the national stage. The amount of the [indiscernible] industry, [indiscernible] June is fairly small. It's in the range of INR 9 crores. A large part of that is still lying as cash in their books.
Right, sir. Also, what has been the CapEx done for the Sunroof deal now? And in the content of the Sunroof, what could be our value addition? And on the -- what is the status of JV formation and what would be the value chain for the Inalfa acquiring those stake in the JV?
Okay. So currently, we are in the initial stage. The amount that has been invested on 30 June is fairly small. It's in the range of INR 9 crores. Large part of that is still lying as cash in their books. Total commitment that was [indiscernible] capital earlier also is INR 16 crores, which will be shared by the [indiscernible] partners. The remaining part of the vehicle will be handled through the funding, [indiscernible] need to develop in itself.
In total, the in alpha we're going to own 51% and we will going to own [ 9% ]. The status of the application called [ Renod ]application [indiscernible], we've already [indiscernible] has we believe already applied for that. And it's currently with authorities, and they are being the same. There has been some development on that but fairly small.
Right, sir. Just on the last question. I mean, we continue to be a single sole supplier for Ola electric, sir?
Ola what?
Ola Electric.
Yes.
For the new model, sir?
Yes, we are. All the 4 models we display yesterday and the motorcycling model, we are seeing sort [indiscernible].
Okay. And just on the new [indiscernible] products launched by the client and the [ Hali ]. Have we got any traction for those models, sir?
No. We are not on -- we don't not have any business so far. So if you obviously not with [ Triumph ] also we do not have that lease that part of the business. However, we are working on some a few platforms with [ TVs ] for an advanced subscription.
Our next question comes from the line of Viraj with SIMPL.
Yes. Am I audible?
Yes, Viraj.
Just 2 questions. First is on the EV part, what you said for 4-wheelers that we have back for [indiscernible] and then for [ Harrier ] EV variant. But just to get a [indiscernible] to say in 2-wheeler and 3-wheeler we got quite a head start, vis-a-vis the competition in terms of getting a higher share of the EV start-ups and maybe some incumbents. When we look at the passenger we say EV, what is your sense in terms of the -- our overall play in the pipeline? So any perspective you can give in terms of -- in terms of share, what we would probably be looking at is said, the currently rise [indiscernible]?
Yes. So we are actually not -- it's like that the, current lever the stories in 2-wheeler and EV patents are totally [indiscernible], right? In EV, [ Basilica ], still the [indiscernible]. So we have won that big shift in [ dannit's ] all the challenges, as we call them, who are leading the pack.
So what happens is in [ passenger ] now almost 80% of market share is next one, the next one will be, right? Now next one really classically, it's a [ outpeform ] -- so that's how was not with us, that's on the competition. Now when the [ dotcom ] will go to the existing current provider of suspension and not change only [ redone ] the substation because entirely [indiscernible]. So that's why, obviously, we are not -- we are not there on the EV as we speak today. But going forward, as I said, it's [ Sariaya ], we are in advanced discussions. Similarly, it as in decisions for [indiscernible].
Having said that, again, the EV penetration in India in terms of patent [indiscernible] is not going to be even [indiscernible] 1%, we're optimistic estimate, you would know better [ M200 ] for a passenger car and such to 20%, which is also -- looks like we [indiscernible]. So yes, in terms of volumes, it was not impact on. But however, definitely we need to have a larger play in EV and we are focusing our energies to ensure that we get more EV platforms, both in India as well as overseas. Coming to overseas, we are in discussions with, I would say, at least 2 mobile players, which is a platform we just shared for EV as well as I think [indiscernible] -- so how that will be [ resi ], but we are in discussion with them.
Okay. Second question is largely in terms of the new opportunities, which we have. So the [indiscernible] bank you talked about us probably looking at new orders in the coming quarter. Can you just give more perspective into the size of the business, this can be in the next 2, 3 years? And similarly, on the railway export part, how big the market opportunity is?
So coming to the first question, which is on the [indiscernible] very interesting product. It's a very good value proposition as well. And we are looking at it mainly from mainly [ suite ] exports because this market development will take a lot of time. So the market is huge. The market [indiscernible] being projected. These are areas for [indiscernible] in Europe is almost particularly in -- by 2020. And the growth rate is almost 20-plus percentage. And more and more push [indiscernible] coming on climate change and more [ inventions ], more [indiscernible] getting into people [indiscernible] in Europe, which will only increase. So we are seeing a very good possibility. That's why we addressed this.
We had a long time [indiscernible] about 8 years that we had ventured into the normal [ biopic dispension ], it is more of ignition concise, but that did not have a great value proposition for us. But this surely seen very exciting both in terms of value and in terms of technology. And we -- as I mentioned last time, we definitely would want to take it through at least in the range at least close to INR 100 crores [indiscernible].
Okay. And on the export piece, you talked about future development that you saw, Japan [indiscernible].
[Indiscernible] To answer on the railway part, we talk about exports. So there, again, we have done some exports in the past [indiscernible]. So we are looking -- now we have formally engaged a consultant to help us find new markets, particularly in Russia, in Turkey and in some Eastern European countries and also for the gas infancies. Again, the size will not be very comparable for exports and hope that it [indiscernible].
Your second question you asked, I couldn't get it if you can repeat that.
Sir, Viraj has left the question queue. I move on to our next question which is from the line of Harshil Shethia with Aum Fund Advisers.
Sir, so I want to understand what kind of size of businesses do you expect in the [ Sandro ] JV? And going ahead in terms of railways also, what kind of the size of business do you expect to ramp up in the next 3 to 5 years as possible?
So in terms of [ Sandro ], we did mention or an estimate by 2030, clearly, the market potential is going by, let's say, to take I would say a modest estimate of 35% penetration. The market size of total [ Sandro ] would be almost [ INR 4,500 ] crores. That is the estimate that we have done. In fact, the market in SUV is even higher. So -- and it can even go higher than this.
Okay. And what kind of markets are you expecting to capture in this INR 4,500 crore market?
Definitely, the current line we didn't because we have put up [indiscernible] putting 2 lines and go for the ad detail add more. So we have to get hitting within 4 to 5 years, almost INR 1,000 crores. And by 2020, which we will be in terms of market share, yes, I mean [ 40% ].
Okay. Sir, with the current 2 lines, how much CapEx has been put up to set up the [ Chennai ] plant for some new businesses? And what is the [ Magnat ] kind of asset turnover do you envisage from the same?
So roughly, the terminal will be 4.5, 5x. And the current CapEx including building and long-term lease rate in progress. And of course, by investment cost to first year condition would be a [indiscernible].
And what be the same margin as it is with the existing shock absorber business or the margins would be higher?
No, that would be higher margins.
Okay, sir. And secondly, you said that there is a strong order inquiry in the railways business. So can you just quantify what kind of order inquiries are we participating in? And what kind of business ramp-up do you see in the next 2 to 3 years in the railway then?
[ Hasan ], we mentioned the railway revenue size is not much, so we exactly currently looking at a very small number and that average in the region of in terms of our total sales is not [indiscernible] it's just about 1%. A little more than 1%. So even if it grows, it won't make big change in terms of top line.
Okay. Sir, my last would be on the exports. And you said it is currently 4% of sales as of today. Where do you plan to take it up to in the next 3 to 5 years in terms of percentage of sales or an absolute number if you can give? And what kind of margins do we see in the export business compared to our domestic businesses?
Yes. So our clear target has been to get to double digits in exports. So we have mentioned that we want to -- it is in the first 10%, we're shaping well, but you all know some quality issues that happened like other exports in Russia, we were completely [indiscernible] for ongoing country. So our exports would have been much better. But our target remains 10% in, let's say, 5 years because [indiscernible].
Ladies and gentlemen, we have lost the line of the management. Please stay connected. [Technical Difficulty]
Ladies and gentlemen, we have the management connected with us. We move on to our next question, which is from the line of Amit Hiranandani with SMIFS Limited.
Thanks, team, for the opportunity and congrats on the good operational performance and new order wins, Sir. First on the gross margin side, basically, I wanted to understand how do you see input cost for balance part of the year and facility of the current EBITDA margin in this fiscal?
[ Formalin ] the previous discussion also in the quarter we had mentioned that we are taking measures in terms of improving our margins. So our [ indices ] would be to sort of either continue year or further on improve.
And sir, can you give the CapEx outlook for FY '24 and '25, including Inalfa?
In promoting Inalfa, it should be in the range of INR 160 crores roughly.
This is for FY '24?
'23, '24, yes.
Okay. And sir, next is basically, how is the traction of FSD, any new model addition for this...
Sorry, got dropped off for some time. But yes, coming to FSD, a very good traction of locally to cost model, [ X7 ] is being appreciated very well right. Clearly, is different and much more comfortable. So we already have 2 other OEMs where we are demonstrating this product to them on their models. Well, we'll have to see how it goes from there. But certainly, a good traction, yes.
Also, sir, Gabriel now started derisking and diversifying from shock [indiscernible]. So directionally, which new product the company is planning to enter and how many more new products we can expect in the next 5, 7 years now?
Okay. That's a good question. As I did mention, we have done the first one. So we'll continue on this agnostic team or any product which we see very strong demand because it's not that I seen is going away completely in India is going to pose this for a long, long time. And for the Globe India is very likely going to be the last man standing when it comes to [indiscernible]. So we're not completely closed on that. But yes, the key plank will be agnostic products. We have scanned those. And so we might -- I mean, our plan -- at least our plan is to come up with one more in the coming fiscal, one more acquisition. And 5 to 7 years, well, we can definitely see at least 1 or 2 more.
Okay. Sir, just last question. Can you like share the average realization of your segments like 2-wheeler passenger, commercial?
Sorry, no, we cannot.
Thank you. [Operator Instructions] We move on to our next question, which is from the line of Devang Patel with Sameeksha capital.
Sir, our share in 2-wheelers is down from 80% in Q4 to 73%. And you said earlier, will not sustain that market share, but any reason you could ascribe for this drop Q-o-Q. Is it because subsidy was ended?
No, it's some of the players, let's say, Okinawa, which we are supplying our volumes have come down significantly. So there's a little bit of change in arithmetic mainly. And like we said 73%, it would, in fact, be a little higher if we comprise that number sometimes, if you get the exact number [indiscernible]. But no, it's not that we are not sustained. We certainly are sustaining what we have got, and we continue the business with all OEMs. It's nothing that we have lost, right? So it's only an IBM mix of the overall price.
Okay. Sir, secondly, in the presentation, CapEx of INR 13.6 crores as mentioned for Q1, what is the stand-alone CapEx? And does this include in Alpha. And if you can just repeat those numbers again for the full year, what is our CapEx for [ Santos ] and what is the CapEx in standalone?
Yes. So the one that you mentioned is for standalone only. The CapEx for Alpha is INR 10 crores. It's not CapEx it actually a share capital reduction, now coming to the overall outlook, we are looking at INR 160 crores, INR 280 crores of cash outflow, including in Alpha.
So already a lot of shared work and, et cetera, is done. So there must be some CapEx already done for in Alpha in Q1?
Today, we are in August, the numbers I'm talking to you is of 30th June. So yes, you're right. And Devang, it's a leased facility.
Our next question comes from the line of Jayesh Gandhi with Harshad Gandhi Securities.
So congratulations for a good set numbers. My question is relating to [indiscernible]. Can you just provide me with the -- since we already presentation to Mahindra, Maruti, Tata motors. If you have any feedback [indiscernible] or what kind of that [indiscernible] have you received from them? And the other question is since we are looking at [indiscernible] vision is [indiscernible], we said 40% of market share in some growth, which is like closer to according to you, INR 4,500 crores. And asset turnover is at [indiscernible]. So we think I mean, I think we should have a [indiscernible] INR 500 crores and currently, we are sitting on some cash, which again, we think is I think we are going to require acquisition.
So from the current fixed effects or gross loss of sales of INR 420 crores, are we thinking of moving to somewhere closer to [ INR 500 ] crores, INR 600 crores in the next 7 years? [indiscernible].
Okay. Now coming to the first part, you asked about [ Minacs ]. So I think we launched new JV on May 9, right? That's, let's say, 3 months back in 3 months back maybe. Within that, we have already -- after meeting this, we have got 1 RFQ, which we have responded. We have got -- you already done 2 RFIs records for information and the [indiscernible] NPL will sign with 2 customers. So that's at least good initial moment within a short time of a couple of months. So I would say lead at.
That. Of course, for the business translation, it will take some time. But yes, at least there's been -- compared to our other experience on other products, the trial is really positive. This turnaround in terms of getting RFPs getting RFI. It's really fast. So obviously, there will be -- obviously, there'll be good conversion of this request for information at [indiscernible] oppose.
Your second part Yes, we are -- right now, we are going to put INR 170 crores and then in this JV. And obviously, we are very clear that we'll have to augment the lines for [indiscernible] in the geography as well to meet customer demand based on the huge interest that we are seeing. So yes, surely, we'll be looking at adding at least other does in terms of investment to augment capacities for [ Sunrun going ] forward.
So yes, if I got your data points correctly, in terms of [indiscernible] what you say is making, is it correct. But let's remember that it's a JV. So a 51% stake is yet to come in the country. Once the P&C approval comes. The capital investment from share capital perspective will be co-shared and entity is profitable as well as a good cash generator from its first year of operations. So our plan is not to invest too much of share capital, but to actually leverage the entity assets itself for its operations. So broadly INR 60 crores to INR 100 crores, maybe [ INR 120 ] crores, INR 50 crores is what [ Cochapata ] production from both the parties is envisaged. Remaining will be dead.
One last question, since we are thinking of deploying this cash. I think 1 or 2 more products in next 5 to 6 years. What is under our thinking all we choose the right meeting our CEO [indiscernible], Is it going to bounce lines or you don't mind diluting on margins? Or can you just.
It's an important aspect of any capital investment that we are looking at. There are a few hurdle rates. So payback, IRR, these are the standard ones. In terms of ROS as well, it should be margin accretive to what Gabriel is correctly. Now when it comes to the return on investment on a long-term basis, it should be in the range of 20-plus percent is what we essentially look at. But it all depends upon what kind of synergy that the target and can have with us and where we can take the entity once we have acquired the stake. So while we have our hurdle rates, we also evaluate each case-to-case basis.
Our next question comes from the line of Viraj with SIMPL.
Am I able now?
Yes Viraj.
Yes. I just have 2, 3 questions. First on the export piece. We talked about [ FUSO ], Japan as a new customer for future development. So just to kind of hear the perspective in terms of the size of the business, so if you have to compare sales to the [ Macao ] or that, what will be the opportunity here for us. And with regards to the [ Parka ] group or [indiscernible], what will be your share now based on the orders we already have?
So just to clarify, Viraj you said FUSO, right, Japan?
Yes.
Okay. Well, FUSOs [indiscernible] with us I mean, I mean, the size is not too big, but what we are [indiscernible] our exposure is this is more on one big passenger car order coming through because it's volumes are much higher. And in terms of debt, we are only on the cabin numbers, but we have now got that [indiscernible] for our RFP as well, so that the strategy is playing out right? We have demonstrated a good quality and consistent supply to them to having one award, twice in a row. Now the extent to the other damper and so -- and also expect [indiscernible] business to Brazil, they're expanding RFPs to [ Paka ] world as well.
So clearly, in terms of the share, it is increasing, well, I do not have a number to share because of what is our exact market share in them. But yes, [indiscernible] reward on that separating. FUSO is still early stages, and it will FUSO [indiscernible] for the matter [ Daimler ] also we are speaking to. And with this China plus one getting more and more real, we see a lot of [ stopes ] now that the pricing of China has really cut out.
Okay. Second question is on the margin front. If I look at last year 2023, and if you look at the annual report, we had a negative impact of around INR 51 crores from the price change. So I understand we seen an expansion in gross margin. But for this particular aspect, do we see bulk of that benefit flowing to us in 2024, given that RM prices are now trending downwards?
You need to clarify this INR 51 crores where you have been and how we have been completed.
So in the [ Anacortes ] you see there's a revenue as per contract and other than the discount part, there's a price change gain to customers, so...
No, no, that's not, that is not the case. These are -- the 51 is what basically is the unbilled part of it. So it's only a reflection on the year and what is outstanding. So in the previous year to give you a perspective, we've had almost close to 95% recovery in terms of all commodity. What impacted us was the denominator effect. And the aftermarket piece, which obviously it cannot be increased in line of the market. But now with the downward cycle, for example, in this quarter, we've already seen a 0.1% denominator positive effect as well as the commodity effect of 0.1%. So currently, with the downward cycle, we will be facing -- will be seeing benefits coming out of that. But given that we have a proper approval mechanism in books, none of the benefits or the losses of previous year, if any, are expected to be recovered in this year other than commodities of the market.
Just a further question on this, if we have already provided for the unbilled part in '23 was maybe for the '24, if I got it this side. Then in '24, the margin expansion should be even better, right? Because the provision has already been made.
No. So commodity is a quarterly settlement, for example. So whatever is the movement on account of commodity multiplied by the commodity multiply quantity in that particular quarter. That is only accrued. The future never get accrued either case, right? It's not to hear whatever is going to be the movement. We are going to flow in that movement, either upward or downward cycle as the case study.
Okay. And just one more question was on the [ Sandro ] part. I think when we were starting out, we were looking at initially setting up on. And what we understand that we are now looking at 2 lines. So what is driving this change? Is it that the volume expectation from existing to customers itself is more and that is what driving an expansion. So any perspective [indiscernible]?
Yes. So I mean, we had always mentioned that our plan is for 2 lines, and we begin with 1 line and the expectations from the 2 customers is [indiscernible] towards with these 2 lines itself.
Okay. So the total capacity from 2 lines will be close to 4 lakh , right?
Little less than that, but around that number.
Okay. And the investment of INR 170 crores, which we talked about. So if I would look at '24, that bulk of that investment, so the equity part of INR 60 crores, INR 100 crores, INR 120 crores, that purely would be initially from JV and the rest will be funded?
The INR 60 crores is the share capital in the [indiscernible] you mentioned. This is still we get the BL3 approval. Obviously, because there is a lot at authority involved here, we have no certainty as to when it can happen. So assuming that it happens in Q4 the capital investment from the JV partner will come in, and our stake also will get diluted.
Okay. Sir, total CapEx stand-alone would be INR 160 crores in this year. In addition, we would have another 260 to 120 [indiscernible].
Standalone is INR 120 crores.
Okay. So when you say INR 160 is already included the one part?
If that is what the question was.
Our next question comes from the line of Ravi Purohit with Securities Investment Management.
Most of my questions have been answered. Just wanted to know the -- I think on the balance sheet, we have this 2% management fee that is charged every year. Has there been a change in that in this quarter or this year, that continues to be remaining at 2% in future.
No, there's been no change in that, it continues for the same year.
So there is no numerical value that there is a where you have to kind of go back to shareholders to get a clear, it's just like a formula 2%, whatever the revenue we [indiscernible].
Yes, is, we just tested out on an arms basis, and we have done benchmarking. All the studies we have shared. So it continues to be [indiscernible].
Ladies and gentlemen, that was the last question. I would now hand the conference over to the management for their closing comments.
Thank you, thank you. Thanks all for your approach and your complement as well. We -- as I mentioned, we will continue to focus on sustaining the margins and in fact we are improving them. The next quarter, definitely is looking good. It's a festive quarter. So the best part of for the entire industry, we hope that we will be able to meet all the demands of all the customers. And while doing that also ensure that we maintain our efficiencies. And yes, I mean our focus clearly remains, as I had mentioned, sustain the EV tubular market share and also make some inroads in EV passenger cars, but it is still a small part of the whole overall business.
And yes, one more clear focus area this quarter, we'll be getting those machines unloaded and commissioned in our Sunroof venture in China. So that's a very key activity that we are really focusing on this coming quarter. So with that, I wish everybody a very, very happy [indiscernible] you see them. And because we're meeting only [indiscernible], actually after the past 2 seasons over in November, so thank you, and all the best to everybody.
Thank you. The conference of Gabriel India Limited has now concluded. Thank you for your participation. You may now disconnect your lines.
Thank you.