JTEKT India Ltd
NSE:JTEKTINDIA
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JTEKT India Ltd
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Ladies and gentlemen, good day, and welcome to the Q2 FY '25 Earnings Conference Call of JTEKT India Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to the management of JTEKT India Limited. Thank you, and over to you, sir.
Good afternoon, everyone. I would like to introduce the team here from JTEKT side, and then I will hand it over to Mr. Mogi for the inaugural speech.
We have Mr. Hitoshi Mogi. He's our Chairman and Managing Director. Second person is Mr. Minuru Hatanaka. He is the Holding Director of this company. Myself, Rajiv Chanana, I'm Director and CFO. We have Mr. Adi Rao, Advisor, MD Office; Kawano-san, he's our Head of Sales and Marketing Department; and Shyam Sundar, who is Deputy Head of Sales & Marketing Department.
I now hand it over to Mr. Hitoshi Mogi for the opening remarks. Thank you.
Okay. So good afternoon, everyone. I'm Mr. Mogi, and welcome to the JTEKT India Limited quarterly earnings call. I'd like to thank all participant for joining this call and [indiscernible]. There were series of the unforeseen events in May, June and September, which advisory impacted the momentum in all sectors.
We have observed events like the election, heatwaves and heavy rains in Southern region. All these events have contributed to this flat growth of automotive sector. However, festival season sales in early October has shown promising signs, 30% to 35% increase in the big registration compared to September. We will hope for rebound in the second half of the year.
What I would point to note is that the event which contribute to slow growth in the year do not sign any strategy for long-term changes in the growth prospectives. Several support factors such as rising per capita income, demographic profile, [indiscernible] and the favorable policy environment, including the infrastructure agreement and the expected to help in the growth of auto sector demand at the [indiscernible] phase.
Some of our investigation company expects the industry to 4.5 to 6.5 CAGR between fiscal year 2024 to fiscal year 2029 period of time. We have been closely watching the growth trend and announcements for capacity expansion made by our OEMs, including our largest customer, Maruti Suziki, has announced a new facility in Gujarat with 1 million capacity and the Toyota Motor has announced a facility in Maharastra.
Also in the expansion of production capacity in Western region, it shall be difficult to cater to the requirement for those. Accordingly, we have announced on October 7, 2024, about setting up a new facility in the state of Gujarat. We expect the completion in 2027, 2028. At the present, the activity of [indiscernible] out running is in progress.
At this point of time, we have committed investment of INR 2,500 million for this project. We will keep reporting to you about the progress of this project as we achieve various milestones. Now I would like to discuss with you the company's financial results.
The financial results for quarter 2 and the first half for this fiscal year are now available with you. During the first half of current fiscal year 2024, '25, JTEKT achieved sales growth of 9% compared to passenger vehicle market growth over 2% during this period.
EBITDA margins improved to 8.2% in quarter 2 from 6.8% in quarter 1 during current fiscal year. However, the margins are down from 9.5% achieved last year. So as I expect, the sales growth has contributed to this declining margins as we could not absorb the increase in fixed costs, mainly employee costs, which as a percent of sales increased by 3.5%.
In addition, the company has made additional provision to the warranty of INR 50 million, which impacted the profitability for quarter 2 by 0.8%. If we remove the extra EBITDA level for quarter 2 for this fiscal year is 9%, which is quite close to an EBITDA level of 9.5% achieved last year.
With this, I would like to thank you for your participation and open the conference for questions.
[Operator Instructions] The first question is from the line of Praneet, who is an individual investor.
So I had questions about the product mix, basically. I think we are -- so in 2024, we had a better product mix compared to 2025. CEPS has contributed 50% this H1, whereas last week, it's like 46.5%, which shows a better product mix. What has caused the reduction in overall increase with CEPS? Or has the overall revenue from other segments reduced? So can you give me some numbers and let back on how this changed?
Sure. So when we look at the product mix CEPS, which was 48% in last year, full year, CEPS has gone up as a percentage of total revenue, which has gone up to 51%. Similarly, MS Gear, which is part of the sharing system, that was 23%. It has gone up to 24% in value terms. So there has been a change.
And you're right, there has been some change in the product mix, where certain other products like HPS, which is hydraulic power steering, the percentage of that has gone down by about 1% from 8% last year to 7% in the current financial year. One more change, which I would like to report on the negative side is that exports, which was 4%, has gone down 2%, 3% during this period. So these have been the major changes.
However, when we look at the profitability part. CEPS, the profitability is at bag with other products. HPS, yes, it was contributing slightly higher profitability in the past period. And the mix has given a small change in the overall margin levels, value addition level, but that's not significant. This change of 1% is not significant to account for any big impact on the margin side.
Understood. So more curious, you told the HPS margin is slightly better than CEPS, right, the products. So can you give me a basic margin profile of what -- which contributes most to the EBITDA? Because right now, every data has a different margin profile, which contributed EBITDA, right? So which provides the highest and like can you -- can you run down the top 5 categories? Because going forward, depending on product mix for us to forecast the revenues or the product mix, it will give us a better idea.
So if we look at overall EBITDA profit levels of, say, 10% -- 9.5%, 10%. CEPS will be contributing slightly higher side. MSG will be maybe the gap may be around anything between 1% to 2%. Not very, very significant between the 2 products because these are all automotive products and the pricing decisions are almost on the same levels.
The way the ISVs are ranged and the way the costing is built and where the prices are settled, there is no big difference in the pricing. But having said that, CEPS is an advanced product and involves huge technological developments are happening in that product, and we are able to supply a better quality products over a period of time.
The profitability margins are slightly better in CCS category when compared to MSG category. However, if you have understood it clearly, the steering system involves 1 column, which is electric column; and 1 gear, which is manual gear. So that's a combination of the 2 products becomes a steering system.
So in certain cases, we are supplying both manual gear as well as electric column to our customers, which means that then when you decide the profitability, it is decided at a steering level rather than at a product level in many, many cases. For example, when we are supplying to fund a total [indiscernible], it's a complete steering system, which is being supplied. Only in case of Maruti Suzuki, there are some products where we are supplying maybe see the electric colum and we are not supplying MS gear, or we are supplying MS gear and we are not supplying electric column.
So with this, I would like to close my comment is that the margins are not very, very different from product to product level because the deciding factor and costing another decision criteria of critical ECM.
Understood. So the margin profile is the same. So -- and in the previous earnings call, you mentioned that you mentioned that you would like to increase the overall like surprising in of the entire -- pricing of the entire audit rate. So you've given 3,000 figures to 6,000. You're expecting to double for a few segments and all of that. So how is that going at this point of time?
And we also wanted to increase the number of parts we cater to a particular CAR ride. So how are we going with that? So what percentage do you already suspect? Let's say, what is the highest percentage of the products you supply to a car? And to which brand and which OEM is it? And what is the lower common profile?
Sure. So when you look at the profit improvement, it's not only restricted to pricing. There are many factors which help us to improve our profit margins. Better negotiation with customers is 1 area, yes, definitely, which you rightly said. Yes, that's a focus area for us as we go along how we are able to set presenter the future model that will determine the overall profitability.
So negotiation is definitely 1 of the area, which are -- which is being looked at. Second is the expansion of exports. I think we have made an announcement some time back to the stock exchange about our getting an export order from our entity in Brazil, our group entity in Brazil. So expansion of exports of this particular order will add 2% of our revenues from increase of our revenues from exports by 2% of the overall sale. So that is 1 area where we expect the profitability will improve over a period of time.
Localization is another area. The VAV actions and localization of ours is an area which will help us to improve profitability. We maybe mentioned in the last conference call the mid shop localization for our new products, CVG. So that has been -- I'm happy to inform that we were able to localize our mid shop.
And it's a big change. It gives us about INR 375 per unit impact on profitability, which if I look at -- compared to the [indiscernible] material of CV, that accounts for 6% to 7% So tthis change has happened. So localization continues, and various areas continue to be a focus for us to improve profitability.
We have done a merger of our subsidiary company in Japan. There's a big opportunity available for us for manufacturing cash line, so that activity is going on, whereby we are doing a lot of manufacturing rationalization, bringing all the production under 1 shed. So that will help us to improve on inventory management as well as the logistic cost.
Last item is cost optimization. You have seen the control over the fixed cost. [indiscernible] used to be 13.4% in 2019, '20, is down to about 10%. This half year, it was 10.6% because of volumes were less. But however, we have now reached to a level of 10% in managing our [indiscernible] whatever cost optimization we have achieved so far, we should sustain that. So these are many, many areas where the company is working not only on price, but many, many areas which are directed towards improving our profit margins. Coming to your second question on content per car, I think that's what you're trying to ask.
So the range of CEPS is passed from INR 10,000 for smaller retails and goes up to 19,000 vehicles for the larger vehicles like high pro. CBA, which is a new introduced product, the product price can be anything between INR 6,000 to INR 7,500. So what we are trying to say is that if we take average of CEPS of INR 12,000 and average of CV of 6,000. We have practically improved our content by 50%.
We hope that CVJ is a new product. Currently, we are supplying only for 1 model. And you must have noted our exchange reporting that we are now to almost double the CVJ capacity. So we have -- we are very optimistic about this product. It's 2 CVJ are required by every vehicle, which is benefited in India. So every car requires that. And we are very, very optimistic that this product will start. We'll keep getting more volumes of that. So is there anything else you asked? Or have I answered your question?
No. If you don't mind, I have a few more questions on the specific margin side. So 1 thing you told localization has been supporting a lot of our margin expansion there. So what percentage at this point of time, it's localized and what percentage is not? And going forward with the investment in capacity, the new capacity, how are the plans changing that localization, how is the planning on changing? Like how do you want to take it?
And on the export, I understand, we are doing -- we have a partnership or an agreement with 1 of our other fellow like associates somewhere like in Brazil. So why -- like how can we take it looking forward of this particular entity? And are we also planning on like increasing our customer base apart from this particular entity? Like are you talking other for exports also?
And if you are in other exports, where do you want to see this export contribution moving forward in the next 3 years.
?
Okay. So coming to your question on localization, if you have seen our financial results, the total import content of the total metal cost is just about 10%. So the product will differ. But on an aggregate basis, we are now almost down to about 10% of content in our production, and this is gradually reducing.
As I told you, for example, when you introduce a new product like CVJ, usually, it will be higher. But as you keep on putting more efforts towards localization, the content will start -- will keep on reducing.
Overall basis, as I said, it's about 10%. So -- and we -- that's the target area. There are certain products where, unfortunately, localization cannot be run like there are certain ECU parts, et cetera, electronic parts, which are -- currently, we do not have capability to produce in India, yes. But so these will continue to be imported for some more time. Maybe the PLI scheme, which the government launch could change our game for our Indian manufacturers and maybe more and more products will be locally available. And we in on monitoring that and keep on further reducing our localization.
Coming to our export. This is our first order, which we have got. It's a strategy. We have been -- we've been working on this particular thing. One of the major requirements for increasing your exposure is to have a very, very strong supply chain unless you have a strong supply chain, and you're because not only you have to sustain, you have to ensure that you supply the best quality prudence.
Any quality defects [indiscernible] new export models can be a big game changer for you on the negative side. So having a very strong supply chain is a prerequisite for increasing exports from India. And that's what we have been working for the last few years. And after we are very satisfied, this is the first order, which we have our OEM in Brazil, JTEKT OEM in Brazil. This is a PSC product, and it's a global market. And we expect that even though the start point will be around 1 lakh units, which will be -- we'll start with that. But this will keep on increasing.
The initial value will be around, say, INR 50 crores kind of a thing. But it -- over the life, we are expecting this will be around INR 200 crores kind of an effort. So once established, this can be -- they can be repeat orders of a similar type because the product is more on that same. So we'll keep on finding more such opportunities for us. We'll keep on working from 1 model to another model, just like we work with our OEMs in India.
We can continue to work with our Brazil company for the next model as well. So I cannot put a number on it. Yes, we are looking at exports increasing by 2% immediately once this order is put into place, I think the April 2026 maybe 1 or 2 months here and there, we'll start supplying this product to Brazil. And we expect that next year, our volumes will increase by 2%.
And we keep on looking at further increasing the exports from India. It's a profitable product. The profitability is far better compared to the local domestic sales. So our efforts will be to continue looking. I cannot like to put any number on this at this point of time.
The next question is from the line of Aman Agarwal from Canon Capital.
A few questions from my side. The first was on the CapEx, which we have announced for INR 250 crores. So like earlier, we had announced expansion on both Mavenir as well as CEPS. So this CapEx is basically to align our capacity along with the investments announced that OEM? Or like how to think about this given we are already expanding for manual gear and safe gear?
So I'll give you the complete picture. For the first half year of current financial year, the total capital expenditure, which have incurred is around INR 120 crores. Now this includes part of the total expenditure, which is involved for installation of 1 new CEPS line at our existing Bauer location. We are installing 2 gear lines, 1 at Tarveda facility and 1 at Chennai facility. Chennai is for export, which I just explained some [indiscernible].
Then we are -- in the backward integration, we are setting up. We are buying 1 more PTC machine of 850 tonnes. Plus, there is a maintenance and new product development expenditures. So this is the area where we are currently expanding in the current financial year. So these projects are in pipeline. These are partially complete, and we expect that during the current financial year, we will total capital expenditure will be around INR 250 crores or slightly more.
So when we look at the current capacity function, the third EPS level, which we are working, will increase our capacity from 10 lakhs to 15 lakh units. And then the fifth manual gear line, which we are working at [indiscernible] area, will increase our capacity from 24 lakhs to 29 lakhs. So that's the capacity expansion, which is going to happen, and this will happen sometime in April '25, July '25 period.
So another thing which you must have noticed, stock exchange reporting on in December and February, we decided to set up 2 additional lines of manual gear. First will be a 6th manual gear line at our [indiscernible] facility. And second will be in line at -- which will be the fourth manual gear line at our Chennai facility. So this will increase our overall capacity from 29 lakhs to 36 lakhs. So that's our current capacity expansion, which we are looking at.
Coming to other products, CBD, that also we announced sometime in February, where we are increasing our capacity by about redoubling our capacity from, say, around 3.7 lakhs or 4 lakhs to maybe double to about 4, 8 lakh units. No, how we are funding this? I think that's important to explain to our investors. For the current year, for the first half, we had a cash generation of around INR 75 crores. And then we had some cash available from the previous year generations. So this was enough to meet our capital expenditure of INR 120 crores, and we were able to reduce our volume by INR 23 crores during this period. So that's how we are managing the capital expenditure till this point of time.
Now this announcement, which we just spoke about, about expanding into Gujarat. This is primarily, we do not have any facility in Western region. We are mostly concentrated in North and in South and as Mogi-san mentioned in his opening remarks, we have seen the increase in activity in the restaurant reason. Markus has already announced a new plant, maybe with a capacity of INR 1 million, which will be a significant change in the Western region.
So currently, we are supplying to Suzuki in Gujarat through our current facilities at Dharuhera and Bawal. However, that is not the right way. It's a safety product, and we are worried about quality issues when the product has to travel a long as. Apart from that, the cost part, the huge logistics transportation cost as well as maintaining a warehouse in Gujarat. So those are -- these are very expensive things.
And as product, as our requirement will keep on increasing, we have no option but to expand in Western region. So that's how we have announced a factory, new factory to be set up in at our land, which we have bought about a few years back. We got a land parcel of around 30 acres, which is very near to Suzuki factory. This places [indiscernible] just about 7 kilometers from the existing Suzuki plant. So we'll be using this plant, and we'll be setting up a new plant. And we have currently allocated INR 250 crores for this project.
But this will be a long gestation projects, maybe involve 3 to 4 years' time before we actually start manufacturing from that location. It will take some time, but we have allocated INR 250 crores for this project at this point of time. So this is overall on the CapEx side. If you have any further explanation required on CapEx, I can explain.
So just 1 follow-up question on that. Sir, this INR 250 crores, like with all products we're planning to manufacture there. And like this will include a civil inference as well as the investment for machining rate like increasing the capacity.
So we will keep on announcing it. Like at this point of time, this plan is not decided because once we decide about the production part, we need to report to stock exchange also. So that will keep on reporting we would like to have a composite plant, maybe producing all sort of products, manual gears, EPS, et cetera, maybe CVJ and bearing also.
But we will keep on announcing that. At this point of time, we have not made any announcement for that. Yes, but we would like to have a composite plant, where we're producing all sort of staying system and driveline system, which we are producing at [indiscernible].
Right. So just 1 follow-up on that. Like this bearing is an unlisted business, right? It is not part of the listed entity. So like since we might be thinking of manufacturing in that facility, like you indicated. So are we also planning to bring the current Indian bearing business to the last entity? Like how would that work? Like any idea on that, sir?
So you're right, getting bearing is a separate group entity in India. And they are manufacturing for automotive sector also, we call it hub bearings. There can be a plan in Gujarat through manufacturing as well. So there can be different mechanism, which can be followed.
One is that out of the land parcel, we can sublease part of the land and that can be used by getting bearing for setting up their individual facility, that can be 1 way. They can be -- the second method can be contract manufacturing, where JTEKT will start manufacturing on behalf of JBL. They can be third basis where we just had a bearing as part of our own product line. We have not decided that it will -- what will the legal structure of that, et cetera. We'll decide later and we'll report maybe at the subsequent investor calls. At this point of time, the legal structure has not been decided.
So we are not planning to merge that entities [indiscernible] almost?
Not at this point of time, yes. We are not planning any merger of these 2 entities. In fact, we have just completed [indiscernible] Fuji company merger, and there are a lot of activities which need to be done, as I was mentioning, about the manufacturing rationalization. It's a long activity, how you -- the product which was being manufactured by [indiscernible], jacket assembly, which is a main part -- component of CEPS, electric power sharing system. How we manufacture the 2 products at 1 location, et cetera, et cetera. And so that we are improved over rationalization.
That activity is currently going on. It takes time. So give us some time to complete rent rationalization activity, which are in progress. Maybe later, we may decide. But at this point of time, there is no decision about merging JVN operation and Guojin operations.
Understood, sir. Sir, 1 question related to CapEx on like how much would the maintaining CapEx on an annual basis, like on a referring basis?
It will be around INR 20 crores to INR 30 crores. That's a normal bench ballpark number.
Understood, sir. Sir, earlier in the call, you were indicating on localization for CVG right, like you have localized the met shop for CVG. How is the profitability currently looking at CVG? Is it near to company-level profitability? Or like after this localization, we have reached that level like how to think about profitability in CVG?
There are 2 important things, which will improve the profitability of CVG. The first part is localization, which I just mentioned that we have already completed. So the total benefit, which has come is around INR 375. And when we look at the sale price of this particular, this is as high as 6% and other things.
The second important thing is the total capacity utilization. So we mentioned is that in the April or May, we will be getting 1 more product for which we will start supplying CVJ. And this will help us to increase our capacity utilization from 60% to about 100%, more than 100%. That will take us very near to our current level of profitability for other products, maybe slightly better than profitability for our other products.
Understood, sir. And like with the second line coming in, the profitability would improve, even [indiscernible].
I'm sorry. Say again?
So we are planning another line of CJV, right? So will that also, we might see some improvement in profitability?
Absolutely. Absolutely. Not only as a volume -- this is an opportunity to increase your cash generation also, more profits in terms of value, not as a percentage. Percentage is okay, like you may I think you -- I know that investors are very watchful about the percentage. But for us, JTEKT, more cash generation, more profit in terms of value is also important. So we'd like to get growth business of CVG in the coming future and would like to expand in that area.
Understood. Sir, 1 strategic question, basically, like since we are setting up all these capacities and you are basically pointing out that we now have the supply chain to some export orders. So with all this capacity available, would we be in a better position to go and like aggressively go for export orders to grow our business like since that is very small right now, it's like only 3%, 4% of our overall top line. So maybe like targeting like 10%, 15% of top line. Can that be an opportunity for us in the next 3 to 5 years, sir?
Yes, you are right. Yes. There are opportunities available. We just need to prove ourselves by meeting the quality standards for the current export order, and we are very hopeful that there will be repeat orders for that.
We'll have many, many opportunities coming forward coming in front of us, and we hope that we should be able to crystalize those opportunities for us.
Understood. Just 1 question before I join back the queue. So like when we are doing such CapEx or any internal IRR benchmark, we have to go ahead with this CapEx. Like any internal returns we look at like on this project basis?
So many, many things need to be considered. One is the current profitability levels. Once we are sure that we are able to, with our capacity expansion, we have orders available, which will help us to maintain our profitability and do our profitability, we go ahead with that.
So the current profitability benchmark and how -- and our future targets are the basis for our CapEx decisions.
The next question is from the line of Tushar from Wealth.
Sir, my first question is regarding the suberin that you just mentioned. So may I know like where will this be -- there is just deployed in an automotive vehicle. And what could be the price range for this product? And then how big is this opportunity for us? So this is my first question.
So gearing is used for automotive use, and we are supplying to OEMs from our gearing company. [indiscernible], are you aware what the price, half price. We -- sorry, we -- this is relating to my group entity, and we may not be having the right numbers available with me.
But yes, our product is being supplied to OEMs for automotives.
Okay. I mean this is also part of the steering components or maybe some other application of a vehicle?
This is a driveline product.
Okay. Okay. And my second question is, sir, regarding this in August, there was a recall of around 2,500 oil to [indiscernible] units because of a steering malfunction. So I just want to understand if -- are we also supplying those steering solutions to [indiscernible]? And if yes, and in some way, did it impact our profitability for this quarter?
Yes. Seki, we are sorry that there was a quality effect, this 1 which was noticed in our manual steering gen, which we are open to make Suzuki for to [indiscernible]. And this was noted in some time in June '24.
So upon investigation, we noticed certain abnormalities in the manufacturing process parameters for a short period of time. So based on the joint analysis, which we did with JTEKT NRT, it was concluded that the effect in the sharing -- no, in a rare case, it may affect the details of steer-ability. And accordingly, Maruti Suzuki showed a notice on Stempter 2025 -- 2024 to record some 2,555 [indiscernible] 10 meters. These affected vehicle owners, we have already contacted through the Maruti Suzuki authorized dealer workshops for inspection and replacement of parts prefers.
So upon discovery of this defect, JTEKT immediately took outer measures for containment due to presence of very strong traceability system. JTEKT was able to identify the suspected quantity. And in consideration with Maruti Suzuki, we plan to replace our entire lot of suspective sharing system to ensure safety of end customers. The replacement job is almost complete on and over the last few months, it has made a provision of INR 50 million books on the ground to meet the cost of replacement coming part costs, cable costs and other incidental expenses.
We have a product liability insurance policy with us and which cover this kind of and we have already launched our insurance claim. However, until the time the insurance claim is settled, we cannot make any provision positive provision. The negative provision of INR 50 million has been done. We have not done any positive provisioning towards recovery from insurance company in our financials.
JTEKT quality and production departments are committed to maintain highest quality standards for our products and to ensure the safety of oyr customers. This exceptional provision of INR 50 million towards warranty costs, this has impacted our quarter 2 financials by 0.8%.
So if we remove this exceptional cost, EBITDA margin for quarter 2 actually improves from 8.2% to 9.1%, and that is very quite close to EBITDA margin of 9.5%, which we achieved last year. And just to tell you this kind of a problem, we never faced for the past many, many years, and it's unfortunate, and we are sorry for facing this kind of a quality defect in our product.
Our -- we are committed that we should not have a similar situation in the future. We have covered this particular financial impact in our books of accounts for the quarter 2. The entire provisioning has been done.
My next question is regarding this Reno and return, they are going to be launching new dusters early next year. So I just want to understand, are we also supplying for this new vehicle? And if yes, in which components are we supplying to them? And as well about this Maruti and Toyota in the coming up with the new EV vehicle early next year. So which components are we going to apply to those vehicles, electric vehicles?
So we are not supplying for Duster. And we will let the product be launched, as you said, [indiscernible] will be another. We will be reporting at that point of time.
Next question is from the line of Manoj from Carmelian Capital.
I have 2, 3 questions. First question is to Mr. Hitoshi. Since Mr. Hitoshi, you had a vast exposure, vast experience working with JTEKT. I just wanted to understand what are the product adjacencies or what are the products which you aspire to bring to India from JTEKT global portfolio to India, like CVJ is 1 of the products which we have successfully done so. So what will be the product pipeline going forward?
And secondly, what will be your aspiration towards exports? So I have a few more questions. But first, I will like to pause and seek your response on this question, please.
Okay. Thank you very much for your questions. So also the -- it's a kind of a genetic globally, India is 1 of the most important footprint. And we utilize this competitive footprint to the global markets, that's a kind of a global strategy. So we have not decided the concrete item, but we are going to expand our export business as well as the component to shift to our global entities. And according with the -- we are going to introduce a new product that we are understanding.
Okay. So new products, see, I'm not asking whether you have decided or not. My question was like, what is the possibility for new product introduction, whether that is there on cars because JTEKT Global may be having some products which are not there in India. And looking at the world drive of manufactured in India and shipped to India, whether that kind of aspiration is there on cars for JTEKT India. And if that is there, whether any ground level working is happening or not?
So on the steering side, we are a system supplier. We got all types of staring systems, which are possibly produce around the world, including the high-end electric power steering system. The driveline category, we are large system supplier. There are products there could be a possibility of they're expanding our line of business. But give us some time, we are not ready to answer this question in detail at this point of time.
But look at the way that CVJ is progressing and the way we are trying to capture the market, and we have aspirations in terms of getting more and more share of the Indian market. Within a 1 year, 1.5 years of setting our first line, we have announced the second line setup. We are very -- and this is possible only by bringing a best quality product. Otherwise, you cannot expect to get market share at such a fast pace.
We are able to, with JTEKT's support, we are able to drill a product, which is quality, high-quality level. Give us some breathing. We will be -- we are listening at various things, and we'll announce as we go on.
Okay. And my second part on export aspirations. I think, Rajiv, you had mentioned in your initial comment that definitely, export is going to be much, much bigger. But can you put a number that how much percentage of our revenue can be exports over the next 3 to 5 years?
Futuristic, a little doubtful as to maybe give some time. This success of this particular project is actually pave the way for our future discussions at a global level. Even we are -- aspiration is okay. I may aspire to have my 10% portfolio from it. Those aspirations are okay. But I like to be realistic in terms of understanding the total potential, which we have. And I think we are moving in the right direction.
The exports will now start, as I said, very shortly, we'll start exporting. And we'll slightly catch up with that total requirement. I think this will set up the tone for the next order and maybe next to next order. So I think as we go on, I think we will be in a better position to answer this question as we go along.
So at this point of time, putting a number aspirational is okay. But put a realistic number is a little difficult.
No, I'm not asking that is a realistic number. I just want to see that what kind of aspirations in terms of new product introductions, growth aspirations, things won't happen. So what kind of aspirations are there for new product introduction from the global portfolio as well as what kind of aspiration we have on the export side.
Right. So as we go along, I think we'll have more clarity, and we'll keep on reporting that. And there are opportunities available. I think we mentioned that in our previous investor calls also. And even before the CVJ was introduced, I think we discussed this point, that there are opportunities available. And that followed with the introduction of CVJ into the Indian market.
So yes, there are opportunities available. But till the time we have analyzed that in terms of acceptability in the case and many, many -- and the visibility of that in terms of putting more money, we already have many capital expansion projects in our hand, which we like to complete in the next 2, 3 years' time.
So there is -- our hands are full at this point of time in terms of expanding our capacities, expanding into the restaurants. So many, many things are going on at the same time, plus the manufacturing rationalization, which I just told you. So many things are in fiber. Give us time. I think once we have our strategy ready and once we have our discussion with our parent companies as well, we'll keep reporting that.
The next question is from the line of...
I think that time is up. And I think the management has brought a very important call with JTEKT parent company. So maybe 1 question we can take. But after that, we have to close the meeting.
The next question is from the line of Himanshu Singh from Baroda BNP Paribas.
And actually, I just want to know why our manufacturing cost has gone up by 10% Y-o-Y compared to revenues and the administrative costs have come down by 5%, whereas the revenues have increased by 4%. So just on that.
So fixed costs are under check. Like even when you look at the employee cost and you look at the increment part, we have actually once we add that, and we will -- we actually see improvement in that. So even though as a percentage one-off. But in terms of actual value, we have actually improved on all the 3 cost elements: employee costs, administration costs and depreciation. Everything has contributed, on a value terms, it has contributed to the better profitability in H1 of this year compared to last year.
Coming to manufacturing costs, yes, there is a slight increase. This is an impact of the various changes, which have happened. The power cost has gone up. Even the state prices have gone up. So those impacts are visible, mainly the inflationary impacts are there. Plus, the new product that we launched, the cooling cost is slightly higher.
So CVJ is a new product which has been launched. So there's a tooling cost, which is slightly higher. [indiscernible] is a product mix impact, but that's not very significant. The inflationary impact is 1 which is reflecting in the slightly increase in the manufacturing cost at this point of time. We have opportunities of various ideas in the cost reduction, whereby we can improve the life of the tool as well as we can -- we are looking at various alternate suppliers base for improving the light as well as reducing the cost of our tooling.
There's a major exercise going on at this point of time. We are being benchmarking with our global entities and trying to reduce the cost of cooling. Plus, we are also looking at various other areas. One last thing, which I would like to mention, which I just explained also, the rationalization activity is a big activity, which is currently going on after the merger of JP with us. So manufacturing rationalization activity require a lot of expenditure on the repair side, which is part of the manufacturing cost.
So this is onetime activity, which is going on. I think within 1 year's time, once this activity is complete, this expenditure will come out of the overall structure and you will find our manufacturing cost will be similar to what we had last year.
Ladies and gentlemen, we will take that as the last question. I would now like to hand the conference over to the management for closing comments.
Yes, I would like to thank everyone for joining on this call. I hope we have been able to respond to most of the questions are [indiscernible].
We are really positive about the growth in automotive sector and to continue with our effort to expand to meet the industry's requirement. Thank you very much. Stay safe. Stay happy, and thank you once again for joining us. Thank you.
On behalf of JTEKT India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.