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Minda Corporation Ltd
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Ladies and gentlemen, good day, and welcome to the Minda Corporation Limited Q1 FY '23 Earnings Conference Call hosted by Emkay Global Financial Services. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Raghunandhan N. L. from Emkay Global Financial Services. Thank you, and over to you, sir.
Thank you, Lisan. Good evening, ladies and gentlemen. On behalf of Emkay Global, we are pleased to invite you for Minda Corporation earnings call. We thank the management for providing us the opportunity.
From the management team, we are pleased to have Mr. Ashok Minda, Chairman and Group CEO; Mr. Neeraj Mahajan, Group President, Marketing; Mr. Vinod Raheja, Group CFO; and Mr. Anshul Saxena, Group Head, Strategy and M&A.
We will request the management for opening remarks, post which, we can open up the floor to question-and-answer session. Over to you, sir.
Thank you, Raghunandhan. Good evening, everyone, and welcome to the quarter 1 financial year '23 earnings conference call of Minda Corporation. I would like to thank you all for joining us on this conference call here today and hope you and your families are keeping safe and healthy.
Despite several challenges [Audio Gap] in the first quarter of financial year '23 was marked by industry growing across segment by more than 36% year-on-year, wherein commercial vehicles performed exceptionally well by growing more than 85% year-on-year, while 2-wheeler and 3-wheeler segment saw a growth of 37% year-on-year and EV grew by 33%. However, there we faced set of challenges, to begin with like inflationary pressure on fuel prices, rising raw material costs, semiconductor shortages, geopolitical tension, et cetera.
Despite this, I am pleased to report that Minda Corporation has continued to deliver strong performance with our constant focus on research and development, diversified product portfolio, strong business fundamentals and carefully called out growth strategies. During the quarter, Minda Corporation achieved its highest-ever quarterly revenue of INR 10,102 million with EBITDA of INR 1,066 million and EBITDA margin of 10.6%, registering a growth of 504 basis points year-on-year.
PAT margin stood at 5.2%, grown by 390 basis points year-on-year. Updating you on a key development during the quarter, the company has filed 3 new patents, taking the total number of patents filed and applied to more than 220, of which almost 40% of the patents were filed in the last 5 years.
Deeper penetration in EV, especially 2-wheeler, smart key and high-voltage wiring harvested and nonlegacy products like power distribution unit, integrated power module and junction box EV commercial vehicles. Our focus on new order book remained stedfast. And in quarter 1 financial year '23, also we have won businesses across all divisions with EV constituting more than 20% of the total order wins during the quarter.
The road map ahead would be to aggressively grow our share of business with the existing customers and onboarding new customers to focus on technological upgradation via R&D and global -- We are also working on further strengthening our operational excellence through cost leadership and digitalization of business processes.
We are continuing to work upon localization of connection systems to reduce dependency on imports and imports margins. We continue to drive strength from our robust balance sheet with 0 net debt, strong operating cash flow generation and continuous focus on the right capital allocation strategy.
The outlook for the automotive industry remains positive with the introduction of new technology [Technical Difficulty] to support the industry. The sector growth appears to be on right -- Indian automotive demand is expected to remain high due to increased penetration, rising income, significant jump in urban population and continued government support.
With this, I would now like to hand over the call to Mr. Anshul Saxena, our group Strategy Head, to discuss our financials and the operational performance of the company during the quarter. Over to you, Anshul.
Thank you. Thank you, Ashok ji. I will now take all of you to our earnings presentation, which will provide you a brief of the quarter 1 FY '23 performance of Minda Corporation.
I'm on Slide #3, wherein just a brief about Spark Minda group. As of FY '22, the group consolidated across all the [Technical Difficulty]. We employ more than...
Sorry to interrupt, sir. Your voice is breaking up.
Yes. And we also operate 7 partnerships, which are providing us technological advances in various product...
Sorry to interrupt. Sir, your voice is breaking up. So we are not able to hear what you're saying.
Okay. Am I audible now? Hello, Lisan. Hello, Lisan, am I audible now?
Yes, sir, you're audible now. Please proceed.
Okay. So I'll just -- for the sake of situation, I just was on Slide #3 right now, in which provided a brief of the Spark Minda group, and I'll just start again. As of FY 2022, the Spark Minda plus all its entities have total turnover of around INR 35,500 million, employing more than 16,000 people.
We have 33 manufacturing units and offices in India and across the world, and we operate 7 partnerships with various international companies, which are providing us technological advancements in various product divisions.
Moving on, Slide #4, which provides a brief of the highlights of quarter 1 for financial year 2023. We are continuing our path towards the growth momentum and we are very pleased to announce highest-ever quarterly revenue of INR 10,102 million.
The double-digit EBITDA margin for eighth straight quarter on a sequential basis is a testament towards our continuous efforts of operational performance. PAT margin stood at 5.2%, growing by 390 basis points year-on-year as compared to quarter 1 of last financial year.
In terms of R&D, our efforts are continuing with the same momentum, and we are pleased to announce that we have filed 3 more patents during the quarter. And with this, our total patent files are more than 220 plus.
In terms of order book and new order wins, our momentum is continuing. We have won significant businesses across all segments. And electric vehicle, EV, is now constituting 20% share of all the orders that we have won in quarter 1 FY '23.
Moving on, I'm now at Slide #5. In terms of revenues, as we mentioned, the revenue of INR 10,102 million for quarter 1 FY '23, which grew by 80% year-on-year basis. And moving on EBITDA. In this quarter, our EBITDA is at INR 1,066 million, which is basically in terms of absolute value, 246% higher year-on-year basis as compared to Q1 of last financial year.
Therein, we would like to mention that despite rising commodity prices, which have given also a numerator-denominator impact, which basically is the pass-through of the raw material prices increase, we have maintained double-digit EBITDA margin.
PAT, we are pleased to announce that margin of 5.2%, totaled INR 525 million of profit after tax, which have grown much more significantly close to sixfold from the last year quarter 1 on a year-on-year basis. Moving on. I'm at Slide #6. So in terms of key business verticals that we operate. We operate 5 business verticals: Mechatronics, which includes our security systems division; Information & Connected Systems, in which wiring harness is our key product; Interior Plastics, Aftermarket and Electronic Manufacturing Excellence, in which we provide all the new-age products to various OEMs.
Key customers. All I can say is that we are proud to -- we're proud to be associated with all the leading OEMs in India and across the world as our customers. And the green ones are the EV-related customers, wherein the key is that apart from the traditional OEMs, Minda Corporation is also associated with the new-age EV OEMs.
R&D capabilities. [Technical Difficulty] SMIT, Spark Minda Technical Centre, which has teams which specialize in R&D across various product divisions. Moving on, I'm now on Slide #7, it provides a breakup of the revenues. BY geography, in this quarter 1, in -- domestic sales constituted 85% of the sales; exports and overseas market constituted around 15%. By end market, 2-wheeler and 3-wheeler constituted close to 44% of sales. Commercial vehicles and tractors 30%. And passenger vehicles close to 15%.
The rest is coming from aftermarket. And by business verticals, Mechatronics and Aftermarket provided 58% of overall sales. And Information & Connected Systems, 42%.
Moving on. I'm now at Slide #8. To provide a brief of how the automotive -- Indian automotive industry performed. So the first chart is a year-on-year comparison of quarter 1 FY '23 versus quarter 1 of FY '22. Well, the last year, quarter 1 was a bad quarter, impacted by a second wave of COVID. Hence, all the segments, tractors, commercial vehicles, 3-wheelers, passenger vehicles, 2-wheelers grew significantly on a year-on-year basis.
And as you can see, overall auto industry grew close to 37% in quarter 1 as compared to last year quarter 1. On a quarter-on-quarter basis -- basically comparison with the last year quarter 4, almost all the segments, PV, CV, 3-wheeler were down, whereas tractors and 2-wheelers registered growth.
So overall, on a quarter-on-quarter basis, the domestic industry grew by 6.5%. What we believe is, and as it was mentioned by our Chairman, Mr. Ashok Minda also that we -- there are supply chain constraint is still persistent in this industry, long waiting period for semiconductors, rising commodity prices. But in spite of that, we are confident about the consumer demand, which continues to remain robust.
The entry-level automotive sales are under pressure due to rising commodity prices, but overall improvement across all the segments due to government steps to ease inflationary pressure, reducing the excise duty [indiscernible] and various other initiatives taken by the government, we are confident that the demand would continue to robust.
So while the industry is grappling with various challenges, we remain cautiously optimistic about the domestic demand. Moving on. I'm now at Slide #9, wherein we are providing the consolidated performance for quarter 1. As we mentioned earlier, the operating revenue for this quarter, INR 10,102 million, highest ever in the history of Minda Corporation on a quarterly basis. It grew significantly 81% year-on-year and around 6.6% from last year quarter 4.
EBITDA margin at 10.6%, INR 1,066 million, which grew significantly from last year quarter 1 year-on-year basis [Technical Difficulty]. Herein as compared to Q4, are -- there in the EBITDA margin of 11.4%, as I mentioned earlier. We are glad to maintain a double-digit EBITDA margin because this quarter also showed a rise in commodity prices which gave us a double impact of rise in RMC cost as well as giving a numerator-denominator impact, wherein the RM price was passed through reduced percentage.
So in spite of that, a 10.6% EBITDA margin is being reported. PBT at 7%. And profit after tax, INR 525 million at 5.2%, which is much higher than quarter 1 of last year, where it was -- 1.3%. The last year, quarter 4, Q4 included a one-timer of [ INR 220 million ]. So barring that also, the PAT margins are almost at the same level.
We are glad to announce that operations have outperformed, again, the industry production numbers, which is due to new businesses acquired and production during the quarter as well as gaining share of business. Our die-casting business led by EV and 2-wheeler segment along with exports, continue to give us a good impetus in the revenue increase. And EBITDA margin, we talked about, that though there was impact with commodity prices, that our sustained productivity and operational efficiency rises are going on, which are giving us a double-digit EBITDA margin on a continuous basis.
Moving on, I'm now at Slide #10, wherein a brief about the business vertical performance. The Mechatronics, Aftermarket and other business verticals registered a revenue of INR 4,920 million at 12.6% EBITDA margin. And Information & Connected Systems registered INR 3,620 million revenue at 7.1% EBITDA margin. Therein also as we saw in the last slide, across both the divisions, the EBITDA margin is -- better improved as compared to Q1 of last year, though from Q4 of FY '22, which was an exceptional quarter, due to rising commodity prices, the pressure is seen in terms of the EBITDA margin.
The key focus in Mechatronics remains EV segment apart from our traditional base of 2-wheeler and others into the share of business. Wherein wiring harness, we are taking the -- we are actually struggling with the semiconductor supply crunch issues, but we are still ensuring our productivity improvement trends.
I'll not talk about the future strategic aspects of the group. And with this, I move on to Slide #12 of the presentation, wherein in terms of future strategy, we very clearly identified 4 pillars on which our growth strategy is built upon. The first one, focus on enhancing the core, wherein continuously working to inculcate new technologies into our legacy products like security systems, wiring harness, instrument cluster, die-casting, which will give us an edge in terms of premiumization of our products and also ensuring that we remain in sync with the latest technological changes.
The second pillar is innovation and technology, wherein apart from in-house R&D which is at SMIT Pune and as well as across the business verticals, we are also always going to look out for partnership with global players for specific technological needs so that it can give us an edge in terms of better time to market.
Third pillar, electric vehicle growth opportunity. While we are -- we are -- we adapt to say that almost 95% of our revenue comes from products which are ICE to EV change agnostic, still having said that, we are keeping a very close eye on the way electrical market is developing.
We are constantly working towards introducing new products, which has increased in the content per vehicle. And the fourth pillar is strengthening passenger vehicle offerings. We are now at around 15% of our sales coming from passenger vehicles and through various products like control systems, sensors, interior plastics, we are ensuring that we grow with...
Moving on. I am now at Slide #13 of the presentation. This is just to give a glimpse of how we are targeting the electric vehicle market. So from a INR 4,000 to INR 5,000 content in an ICE 2-wheeler, which include the locksets, wiring harness cluster, mechanical clusters and others, through just premiumizing our own products, so basically, which means from a normal lockset to a keyless solution, from mechanical to a digital cluster, from a low-voltage wiring harness to a high-voltage wiring harness, we have been able to double our content per vehicle. So from 4,500, we are now at 8,000 to 9,000 content per vehicle for EV 2-wheeler.
And on top of this, we have introduced and developed various new products in the market, like DC-DC converters, battery chargers which are already being offered in the market and already the production has started, we have added another INR 8,000 to INR 10,000 content per vehicle.
So from a INR 4,000 to INR 5,000 content in an ICE 2-wheeler, we are now at INR 1,600 to INR 20,000 content in an EV 2-wheeler. The bottom part of the slide shows the EV customers. And here, again, the message is very clear that apart from traditional OEMs who are moving from ICE to EV, we are constantly working to be associated also with the new-age EV OEMs, like Ola Electric and Ather, so as to make sure that we are associated with all the key OEMs in this space.
Moving on. I'm now at Slide #14. The summary of our value proposition. And again, we are pleased to say that high-value technology and advanced products with global presence, cost leadership in manufacturing, combined with thought leadership in technology, offering advanced technology products in light weighting, safety, connected, electrification. And so basically, which are in sync with the technological change happening in the auto OEM industry, technological tie-ups with global players, well-diversified customer base, low leverage, which is providing us a significant flexibility in terms of financing for organic or inorganic growth, a good governance structure and a high focus on sustainability.
So these are the value propositions, which are driving our growth in the future. I'll now -- in my last section of the presentation, talk briefly about the ESG, the environmental and sustainable initiatives, CSR and the awards that we have received in this quarter.
I refer to Slide #16 of the presentation. This is our environmental social governance sustainability framework, in which the 5 key pillars of [indiscernible] growth, which is working with the communities; customer satisfaction; care for people; ethical business practices; sustainable operations, sustainable operations is now a very key focus area for us; and responsible value chain.
So we are working on -- and each of these pillars, we have very clearly identified that we plan, which is ensuring that we are intent with the way environment is changing. I refer to now Slide #17 of the presentation, the corporate social responsibility. As we have communicated always, corporate social responsibility plays a key role in the way we conduct our business because we strongly believe in giving back to the society. And continuing our efforts, there are various initiatives that we did in this quarter, like a pan-India CYCLE enrollment drive, medical distribution, plantation drive on the World Environment Day.
So these are some of the initiatives which we have taken in this endeavor of corporate social responsibility. I now refer to Slide #18 of my presentation, which is the last slide. We're pleased to announce that we have received 38 awards during the quarter 1, and these awards are divided across all business divisions and the details are in the slides. But a key thing to note is that we have received these awards from various prestigious forums like ACMA and CII, wherein these forums continue to appreciate the work that we are doing in various areas.
With this, now I come to the end of the presentation, and we can begin the question-answer session. Thank you.
[Operator Instructions] The first question is from the line of Mohit Khanna from Banyan Capital Advisors LLP.
Congratulations on a good set of numbers in a difficult environment. First of all, I'm just trying to point out the level of disclosures in the PPT has sort of gone down. So now if you could provide details on the order book composition...
Sorry to interrupt. Sir, we're not able to hear you clearly.
Hello. Am I audible now?
So can you use the handset mode while speaking?
I am on the handset? Am I audible now okay?
Sir, you're audible, but your audio is very soft.
Is it fine now?
Sir, slightly better, please proceed.
Yes. So I was just pointing out that there was a level of disclosures have actually sort of gone down in this presentation. So if you could just provide more color on the order book to begin with. And then when we speak about the EV order book that's now constituting almost 20%, can you point out with regards to the Slide #13, wherein which components are the maximum selling components for you in the EV side?
Mohit, thanks for the question. So yes, in terms of the order book details, yes, I mean, this -- from this quarter, we are not providing an overall number, and that is mainly because -- as we have mentioned in the past, we calculate our order book details based upon the projections given by the OEMs at the time of the business award.
And once it comes to the production, there is a lot of -- sometimes there is very much variation from that, and we also received the feedback that leads to confusion. But to answer the question, in this quarter, we have -- as we've mentioned, we have received order book -- a very healthy order book.
Overall, our order book is close to INR 25,000 million, lifetime. But again, this is as per the projections provided by the OEMs when we have won the order. Coming to your specific questions of EV order book, which is at around 20%.
So herein both the products have constituted, our legacy product also, which is, let's say, wiring harness, so high-voltage harness, as well as our new-age products like the battery chargers.
So we -- both the products have constituted our order book for EV. So basically a smart key, wiring harnesses, die-casting as well as a new-age in which battery chargers and DC-DC converters play a key role.
Fair enough. So if you could just provide a breakup of that? And my second and last question would be, could you just give us more details of how you are seeing the 2-wheeler market recovery? July data was up 9%. But then how are you seeing it with your orders on the projection side?
Okay. Yes, sure. We will provide the details to you later upon on this. And in terms of 2-wheelers, yes, we have seen the recovery in this quarter as compared to Q-on-Q basis as compared to last quarter.
We are -- as we mentioned, we continue to be cautiously optimistic about all the segments in the market in terms of the growth because we believe that the demand is robust. And hopefully, the challenges which are there in terms of supply chain [Audio Gap] to go down. And the overall industry across all the segments should continue to grow.
The next question is from the line of Jay Kale from Elara Capital.
Congrats on a decent set of numbers in a challenging environment. Sir, my first question was regarding your SMART Key solution product. I mean if you can just speak a little more about how are you in that journey in terms of new orders, the acceptability of this product in various new model launches that you are seeing given that it does come with a price? So not all OEMs will want to add that cost, but it also adds to the feature list of the product. So how are you seeing that response from the customers? If you can just throw some light on any new orders you've won on that particular product?
Yes. What you are saying is very right. With the big cost difference between the...
Sorry to interrupt. Sir, your audio is breaking up?
Yes. Am I audible now?
Yes, sir, a little better. Please proceed.
So you are -- yes, there is a cost difference between mechanical and smart key. As you know that we are -- we have started our development 3, 4 years back and now almost we have started getting the business award mainly from the EV vehicle, most of the EV vehicle is using this smart key and about 15 to 20...
Sorry to interrupt, sir. We lost your audio from the last few seconds.
Can you hear now?
Yes, sir.
So what Ashok ji was trying to explain.
That, yes, there is -- we all know that there is a significant cost difference in terms of the traditional lockset versus the keyless solution. So yes, Jay, your point is on it there. And the second point that Ashok ji mentioned that what we have seen that majority of the customers who are trying the keyless solution are EV-related customers, wherein this price increase can be absorbed in the overall manufacturing cost of the vehicle.
And we have around 14 to 15 different programs, which are under development in this solution. So the traction in the market is high when compared to the EV vehicles. And of course, in the ICE vehicles it will depend upon how the traction covers and how the ICE makers are able to absorb the overall cost increase from -- which comes from a traditional lockset to smart key. But we are confident that it will grow continuously in the years to come, much more -- at a much more higher pace.
Understood. And would your competition also have developed as earlier and you were the only one. You still have 100% share of business in this product? And also, just to add on in terms of your raw material cost numbers, we've seen the gross margins have contracted significantly on a sequential basis.
How do you see the raw material side going forward in Q2, Q3? Do you expect reduction from Q2 itself? Or you think that may spill over to 2H FY '23 when you start seeing meaningful reduction?
Regarding your first question of the competitor for the smart key, at the moment, the Indian competitor is not in our notice. In our notice, nobody having so far, but they are all dependent on the outside technology and outside development. The second one is the raw material, I will request Vinod Raheja...
Yes. Your observation is correct that in Q1, our raw material costs as a percentage of sales was higher than the sequential quarter. We should keep 2 things in mind. That number one, in Q4, we had, because of year-end, higher customer coverage. And also in Q1, the commodity prices continue to rise, particularly in first -- after mid-May, actually.
While we have back-to-back agreements with OEMs, but you don't get any margin. So far as commodity price increase is concerned, therefore, optically, our raw material cost as a percentage to sales goes up, whereas in absolute terms, our EBITDA remains the same. But, thankfully, now with commodity pricing easing actually -- while we are back-to-back agreements, this numerator-denominator impact should we know and we can sort of look at normalize EBITDA margin.
Understood. Understood. And just 1 last question, if I may squeeze in, a couple of more questions. So first is on your mix, if we see your CV, revenues from Q4 to Q1 has increased. And I'm talking sequentially, not Y-o-Y in terms of absolute revenues.
Is that correct? And if it is, then what would have led to that? Because normally in production wise, Q1 is a lower quarter than Q4 in terms of CV production. And the second is on your motor controller strategy, that from the EV product side, how do you see adding new products apart from the ones that is already under development? Do you see you doing it in-house or partnering with someone or inorganic expansion? How do you take this?
Okay. I will take the question number one, actually. If we really see in terms of the automotive production volumes, Q1 vis-a-vis Q4, that is the preceding quarter, industry volume grew by about 6%, actually. While our top line growth was also around 6%, but our OE business grew at about 10%, actually.
Our exports were slightly lower because of the geopolitical tension and 1 seasonal customer that we have. And also similarly, so far as our Aftermarket business is concerned, Q4 is already highest quarter because distributor do the heavy lifting to our annual incentives. Net-net, our OE business in Q1 grew by 10%, outperforming the industry production volume growth of 6%.
Yes. So far as your question number two is concerned.
Question number two is, yes, we have developed DC-DC converter for the EV segment, battery chargers. There are other products also we are working. And we have so many products in our basket, which we have introduced. Now the real work is that how to increase them vertically each product.
So we are also working for the EV products, some of the tie-ups like we have done in the -- we have invested in the EVQ about 2 quarters before. So this is a continuous journey we are regularly working on that and take vertically high to all the products which we have introduced.
The next question is from the line of Abhishek Jain from Dolat Capital.
Congrats for a strong set of performance. Sir, my first question is related with the wiring harness business. So what was the revenue base in terms of the 2-wheeler, passenger vehicle and CV. And as the copper prices have gone down quarter-on-quarter basis, how is the outlook for the margin in wiring harness business? Will it touch 10% around in the coming quarters?
Yes. I will take the second question first. So far as the copper prices are concerned, actually we have back-to-back arrangements so far as our customers and suppliers are concerned. And largely, we are insulated from the variation in the pricing of commodities, actually. So, so far as this part is concerned, we have [Audio Gap] that should not have...
Sorry to interrupt. Member of the management team, sir, you are breaking up. We're not able to hear you clearly.
Yes. So I would just repeat that we have back-to-back arrangements so far as our customers are concerned and similarly our vendors, basically, so far as procurement of copper is concerned, actually. So any variation in the price of commodity copper is unlikely to have any impact on our EBITDA margins, actually.
And as regards to the product mix of our wiring harness division, 2- and 3-wheelers contributed about 50% of the revenue and commercial vehicle at about 40%, actually. I hope this answers your questions.
So if you also say that this wiring harness business margin will be remained around 7.1% or 7.2% despite the strong revenue mix in this quarter, that is the CV contributed around 40%. So we can -- so just wanted to understand what would be the driver for the wiring harness business going ahead?
See, we have also explained earlier that we have to do -- we are doing a lot of localization, which the import content at the moment is quite heavy. And this is a process itself, the approval required a lot of time at the customer end.
So one is, as Vinod has mentioned about back-to-back arrangements, which secured us not to have any impact. Secondly is the localization of the component will really -- And third, which will impact is our improvement in the productivity, continuous improvement in the activity because you know the wiring harnesses is labor-intensive work. So that will -- quarter-on-quarter and year-on-year will improve the EBITDA margin of wiring harness.
So what is the current localization in the wiring harness business?
See, before BS-VI -- during the BS-IV, we were almost more than 90% was our localization. But now I think somewhere around 20% is localized, rest we are importing.
So 20% is localized, 80% we are importing from Japan, Europe and United States and so on.
Okay. And sir, there are a couple of tractions from the Mechatronics business. So we are seeing a strong traction in the die-casting business. So what was the revenue in the first quarter -- and what was the mix? I mean to say that 2-wheelers versus the 4-wheeler?
In die-casting 2-wheeler, we are not -- in 2-wheelers it's very insignificant, some of the products we are giving in 2-wheelers. Majority is our export and for the domestic customers for die-casting. Regarding the breakup of the die-casting. -- So total broadcasting revenue is about INR 152 crores in quarter 1 financial year '23.
So you are almost at a peak utilization level. So I just wanted to understand your CapEx plan for the future in the die-casting business?
See, as I mentioned in my speech, very, very clear, and the capital allocation is a very important area for us, where we're very -- and die-casting is a capital-intensive business. So we're always very careful and we always calculate our return by investing -- in die-casting machine or a die-casting investment. So it depends on each product to product, which product we have to capture, and then only we decide our investment.
Okay, sir. And my last question is related with your deleveraging plan, you still have around INR 400 crores kind of the date in this situation as the interest rate is going up. So just wanted to know your plan for the deleverage your balance sheet and what repayment planned for FY '23 and '24?
Well, if I've understood your question correctly, you're saying that we have debt of about INR 400 crores, actually. But this needs to be also seen in the context of the cash that we have in our balance sheet, which as at 31st of March, stood at about INR 335 crores, actually. So net-net, we have only a debt of about INR 60 crores on our books, basically, and in terms of our net debt-to-EBITDA is 0.05 only.
But if we see the numbers, especially the -- in interest cost, you are paying around INR 8 crores to INR 9 crores every quarter. And other income you are gaining around only the INR 4 crores. So arbitrage is not in favor of you. So are you not looking to pay the interest cost, pay the entire or partial rate and deleverage your balance sheet?
Well, First of all, I don't think that this would be the kind of differential that is being talked about. The spread that we are talking about is not more than 1, 1.5% differential the rate at which we deploy and that which we borrow, actually. So that is not material, but like we want to have sort of cash in our balance sheet so that we can use it at opportune time for any opportunity, actually.
The next question is from the line of Chirag Shah from Edelweiss.
One question I had -- rather 2 questions. One is in the revenue, is there any recovery of the earlier quarters that we received?
Well, like our top line due by about 6% in this quarter vis-a-vis the preceding quarter, actually. That includes about 2% actually on account of recoveries because of increase in the price of commodities actually. So we can say that our real growth in the quarter, overall business put together was about 4%. But like I mentioned earlier, our OE business grew by about 10%, which includes about 2%, 2.5% on account of recoveries. So the real growth in our OE business was about 7.5%, 8%, actually.
And sir, this recovery is pertained only to last quarter, it's a cumulative of...
What you would know that in terms of our contracts with customers, the prices are revised quarterly, and in few cases, on a half yearly basis. So effective say, 1st of April, the prices were revised based on the variation in commodity prices over the Q4 actually.
So these are regular phenomena, actually, that we have.
And would it be right to assume that for in Q2, this recovery number would be higher given that cost pressure, raw material cost has seen an upward trajectory in Q1 given the way your contracts were, so the recovery could be slightly higher?
Yes, please go ahead, Chirag. Sorry.
I was saying the way they are contracts are structured, would it be right to assume that this recovery number could be higher in Q2?
Okay. Like I mentioned, yes, the price of commodities, yes, have been easing since, I think, towards end of June and now. But as I mentioned earlier, that our contracts with our customers and suppliers are largely mirrored actually. Therefore, that sort of ensures that our EBITDA margin sort of remain in the range. However, as commodity prices goes up, that has optical impact on our EBITDA margin because we don't get any margin on increasing price of commodities.
Okay. The second question was if I look at your other expenditure, [indiscernible] amount has seen a reduction on sequential basis despite a better revenue as well as volume -- value as well as volume. Anything specific to note over there, either Q4 had any one-off item and one-off lumpy impact? Or is there anything to note?
Well, if I understood your question, you are saying that the other expenses is showing a declining trend actually.
Yes. So versus INR 101 crores of Q4, it's around INR 98 crores despite our revenue being higher Q-on-Q?
Yes. Yes, the numbers you are reading are correct. And it continues to be a focus area for us to control our admin selling -- general administration expenses and conversion costs. By your productivity improvement in these areas, innovative sort of thinking, yes, this is the main focus area through which we are able to drive value, particularly when commodity prices are on the rise, actually.
Okay. So there is nothing lumpy side, right? Certain expenditure has got postponed or something of that in subsequent quarter. Nothing of that.
[Operator Instructions] The next question is from the line of [ Pankaj ] from Affluent Assets.
I'm I audible?
Yes, sir.
Well, sir, taking ahead the question by earlier participant, wherein you had mentioned that the wire harness -- the margins for wire harness are low because of the high import content.
But I just wanted to compare with the market leader who is earning more than 12% margins and ours are 7%, 7.5%, the differential -- high differential between the 2 players. And I would request you to miss -- Is import content the only reason for that? And if it is, so I would like to understand what is the road map -- Is there is a road map, which you have had so that we -- which would guide us to narrow the margin differential in the industry and yours?
See, if you see in the past, when it was BS-IV, our margin was -- in wiring harness was double digit. And we have to bring back over a period. And one of the important, as I mentioned you, that this is a good percentage of this -- with imported components or imported connection system in wiring harness.
And this will definitely give -- bring us to that our earlier level. But quarter-on-quarter and year-on-year, there will be improvement. However, the productivity is also very, very important, as I mentioned you. So that will also give us a benefit in wiring harness margin.
So can you give any time line, say, maybe by next year or 2 years from here where we can have vision, when we can reach that, if not double digit, if not that coveted 12% or 12.5%, at least lower double digits or [ post ] 10%.
As I mentioned, you will see we are continuously doing the effort. We'll see at the end of the year, there will be a further improvement. And it is going to show you the higher improvement -- continuous improvement in the EBITDA margin for the wiring harness.
Sir, second question I would like to understand about the EVs. Sir, what is the current situation from the OEMs after this fire-related incidents from many of these OEMs and central government pushing some regulatory reforms in that. So what is the current condition? How is the demand scenario? How are they talking -- how are they interacting with you on ground? And what is the future order book which you have had, especially the EV OEMs?
First of all, this is my understanding, and this is my view that EV is going to be 20%, 25%, maybe after 5, 6, 7 years of the total population vehicle. And the 2-wheeler because the total production is increasing, the percentage of the EV and ICE will be of that ratio.
However, in 2-wheelers, which will happen very fast, and in 3-wheeler -- 2- and 3-wheelers will happen fast, 4-wheeler will be a bit later. And in the tractors and in the heavy commercials, it will take a very longer time.
So it is continuously to improve. And definitely, such type of hurdle is going to come like what you are mentioning such instance. And every OEMs is improving the product charging. OEMs is doing work for improving the product. And I don't think so that any market impact is going to happen because of such strategy.
No, I get your point. I just wanted to understand what is the current scenario at ground level. Actually, I -- myself had booked a 2-wheeler and I'm getting a delivery after 10-odd months. So the -- it seems that there is ample of bookings out there, but the production is not happening or there may be some reason for that.
So just wanted to understand, despite these hurdles, how are OEMs thinking and what is the order book shaping out for you?
So I will -- I will request Neeraj, as a marketing champion, to reply this question. Neeraj, over to you.
Sir, your voice is not audible.
Mr. Neeraj Mahajan, we are not able to hear you.
Can you hear me now?
No, sir, we still not able to hear you.
[indiscernible]
Sir, your voice is not clear.
Can you hear me now?
Yes, better.
Please proceed.
Yes. Sorry, can you please repeat the question? I was at a low-signal zone just now.
Sir, just wanted to understand quite, despite -- well the EV, especially the 2-wheeler industry is grappling with this fire-related incidents. Despite that, there has been a good demand, as I understand because I have myself have booked a vehicle, and I'm getting the delivery after 10 months of bookings.
So -- and even central government has come up with some regulations in that. Sir, just wanted to understand what is the ground reality? How are you -- how are the OEMs talking about their future road map and what are the order books for you in that connection?
Thank you very much for this question. A very intelligent and exciting opportunity for me to share this important aspect. I think the mature and established OEMs like, for example, global ones like Honda, Yamaha and Suzuki, they are still making their final plans to come into the EV journey. And some of them like Bajaj and TVS and Hero, they have already made their plans declared to the market.
But EV, say, for 2-wheeler is first disrupted by the, let's say, the new unicorns, which have come into the play like Ola, Ather and various others into this space. Now you have to agree with the one thing that the maturity of testing validation, which is there in the first 2 groups versus the unicorns is limited.
Now we are going through that process of, let's say, learning curve and we are hoping that this learning curve, including the strict regulations which government is putting off late are going to be completed in next 3 to 6 months' time.
So this is going to have a, let's say, cleaning up of -- there are -- to me, there are about 25 EV players those who are in the market. And as an organization, we have made a very clear strategy of only focusing on 5 players where we have made a very detailed study to understand who are going to possibly sustain or survive, and rest so we are not going to be there.
So in the next 3 to 6 months' time, you will see that these unicorns are going to be serving good numbers. We are already doing more than double-digit numbers, some are doing even double x or triple x numbers of what they were doing last year.
The next 2 or 3 months, possibly they will [indiscernible] the required technology transformation at place, and they'll be back on this stage. [indiscernible], the numbers which are likely to come from CV space, especially from unicorns and also from the established players, whether they are [indiscernible] by the global ones, are likely to occupy the largest replacement space in our opinion in next 3 years' time.
So we may see easily 2x or 3x numbers coming from EV space in year 2022-'23 and '23-'24 would be even larger volume. So [indiscernible] nothing more than that.
Sorry to interrupt. Sir, I'm sorry to interrupt, but there are participants waiting for their turn. The next question is from the line of Amarnath Bhakat, Ministry of Finance, Oman.
Mr. Minda, I just wanted to have a straightforward answer on a particular simple question...
Sorry to interrupt, sir. Your audio is sounding is very soft.
Can you hear me now?
Sir, it is the same.
Now?
Sir, much better. Please proceed.
Yes. So I just wanted to know the company is doing so much of things, activity, productivity, efficiency. But at the end of the thing, our EBITDA margin lies between 10% to 11%. We never able to cross that particular benchmark. Now whatever the is mix you are doing in the business, either in the Mechatronics side or the Information System side.
So how we look at this particular business on an overall global term that it will only give us the absolute EBITDA higher and the percentage will remain the same between 10%, 11%? Because as a result, if you see your return on capital employed is one of the lowest in the similar type of the content. Because if the only the revenue side is growing, the EBITDA margin somehow has not been growing. Whatever is the reason? I just need to understand what pricing power, what we have? Or what is the strategy of the management, including of this EV, to increase the EBITDA margin or we are happy with our EBITDA margin of 10%, 11%, and return on capital employed is below 15%? How I'm going to improve that?
A very good question. Maybe this question is day in, day out every time. We discussed, we see how to do that. One thing is very, very important that what are the product mix. You will see in different, different product mix, just now we were talking about the wiring harness is having 7.1% EBITDA margin. And there are other products, which is higher EBITDA margin and getting us at 10.6% EBITDA margin.
So 1 is we continuously should do the 80-20 analysis, that which are the productive high-margin products and which are the products we must get the maximum share of business or -- this is 1 area.
We have to continuously to improve the EBITDA margin through [ VAVE ]. We have to continuously improve the EBITDA margin for localization. We have to -- 1 is the variable cost under the EBITDA margin, another is the fixed cost. So we have to work on both the areas. So that is a very, very important depth and regular exercise, we must keep on doing for this improving EBITDA margin, from the variable cost as well as from the fixed cost perspective. Your return on capital, as I mentioned, there are some business, which is -- asset turnover ratio, again, is very high. There are some business which assets turnover ratio is low.
And wherever our asset turnover ratio is high or with the capital incentive intensive like die-casting, we have to be very, very careful where we have to -- what amount we have to invest.
Third, for the EBITDA improvement, the product premiumization is also very important. At the moment, we will absolute our own products and bring new technology with premiumization products, that will also give us a benefit of EBITDA margin improvement. It is -- overall, I would say, it is a continuous exercise, which we are doing and we have to do it continually and constantly.
Yes. Mr. Minda, I just wanted to know whatever you have explained so far, it is telling you that what is the reason of whatever is happening now. We, as a long-term investor, we just need to know this, whatever you have said has been doing -- going on in this company for the last many years. But as a result, we are not seeing any improvement in the EBITDA margin. I'm sure the company must have been doing whatever you are saying from the last many years. So just wanted to have an assurance that in future going forward, when this vehicle market is going up, electric vehicle is -- as you say, it is going to...
Hello, hello.
Yes, sir, please proceed.
Hello, can you hear me?
Yes, sir, just to -- whatever you said Mr. Minda is well understood. But whatever steps you said, it has been done in the company for many years, but we're still not seeing the improvement in the margin and improvement in the capital. So what assurance you can give to the investors that going forward that something will be improved, because we are not getting any guidance. It will be 12%, 13%.
What exactly are you going to do? Because theoretically, we understand whatever you say. But in numbers when we can see that?
If you see for the last 2 years, our EBITDA margin percentage versus for the last 4 quarter percentage, there is a significant improvement. So which are -- some of the products or some of the businesses, which were not giving us a result and we have come out from those products or those businesses. The main purpose of that was how to improve our EBITDA margin, simultaneously where we have to use our bandwidth, in which areas, to improve the country performance.
And that is what I said, we have to regularly improve this -- the purpose is to improve the EBITDA margin. And we are regularly -- improvement you must be seeing. But even though the market situation of the commodity price increase so heavily which should impact heavily on the EBITDA margin. But even in a tough situation, we consistently managing the EBITDA or improving EBITDA.
We'll move on to the next question. That is from the line of [ Vignesh Iyer ] from [ Sequent Investments ].
And sir, I just wanted to -- so I guess a small clarification. On the order book side, I just wanted to know what is the amount of orders that we got in quarter 1 FY '23? And also, what is the backlog value as [indiscernible], if you could clarify...
Yes. Anshul here. So as I mentioned at the start of the call, in terms of quarter 1 FY '23, the total lifetime order book 1, which is calculated based upon the projections provided by the OEMs, is close to INR 25,000 million. This is a lifetime order book. And of which around 20% comes from EV and EV-related vehicles. And it has a healthy mix of new and replacement business across all the product segments. So our endeavor towards order booking with current customers as well as new customer goes stedfast.
So if I'm right in understanding it, it is like INR 25,000 million is your cumulative order book as on quarter 1, right? If I can understand?
This is the orders won in quarter 1 of FY '23, but this is the lifetime order book. The lifetime order book is based upon that it is multiplied by the product life cycle. So as I said, and it is based upon the projections provided by the OEMs.
Ladies and gentlemen, we will be taking the last question that is from the line of [ Abhijit Kumar ] from [ Share Giants ].
I would like to get some -- seek some guidance on the kind of inorganic opportunities we are looking for further accelerating the growth path?
I have already mentioned earlier, that we have decided our certain norms. And we have also explained that although our cash available is -- in the company, this is INR 350 crores. But we -- unless and until our norms, whether the EBITDA margin or there are various norms, unless and until that will not be fulfilled, we are not going to look after any of these things which will impact, again, our EBITDA margin or other performance that we are looking very, very carefully.
However, we are continuously in the process to identify that. But any inorganic growth, we will be very careful to allocate the capital allocation in such a place where we can get a good return. There are -- we have so many products already available with us. And again, as I mentioned, you -- that we have to take those products also vertically. And we have to develop and invest in our existing products also.
So we are in the process of inorganic growth, but subject to our fulfillment of the norms.
Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Ashok Minda for his closing comments.
So thank you very much to all of you. And we are very confident that there will be a continuous and consistent performance of the company will happen. From all the investor side, we are regularly working on improving your company's performance. With this, I would like to thank to all of you, who have joined in this -- our earnings call conference quarter 1 financial year 2023. Thank you. Thank you very much to all.
Thank you. Ladies and gentlemen, on behalf of Emkay Global Financial Services, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.