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Minda Corporation Ltd
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Ladies and gentlemen, good day, and welcome to Q3 FY '21 Earnings Conference Call for Minda Corporation hosted by Sunidhi Securities and Finance Limited. [Operator Instructions] Please note now that this conference is being recorded. I now hand the conference over to Mr. Dhananjay Mishra from Sunidhi Securities and Finance. Thank you, and over to you, Mr. Mishra.
Thank you, Nirav. On behalf of Sunidhi Securities, I welcome you all for Q3 FY '21 Earnings Conference Call of Minda Corporation Limited. From the management side, we have Mr. Ashok Minda, Chairman and Group CEO; Mr. Aakash Minda, Executive Director and CEO of Business Vertical - III; Mr. Neeraj Mahajan, Group Marketing Officer; Mr. Sanjay Gupta, Deputy Group CFO; and Mr. Bikash Dugar, Lead Investor Relations.Now I hand over the call to Mr. Ashok Minda to give his initial remarks on results, and then we will have a Q&A session. Over to you, sir.
Thank you, Dhananjay. Thank you. Good evening, ladies and gentlemen. I welcome you all to the third quarter of financial year '21 earnings conference call of Minda Corporation. I would like to thank you all for joining us on this call and hope all of you are doing well.The auto industry in third quarter of financial year '21 saw both year-on-year and sequential growth in overall demand. The sharp demand in auto industry had its challenges of ramping up the production by the OEMs, but Minda Corporation supported all its customers in the best way. In light of these circumstances, I'm pleased to report that Minda Corporation delivered strong consolidated revenue of INR 740 crores. The growth in revenue is around 36% as compared to the industry volume growth of 17% year-on-year for the quarter.The higher growth was due to 55% growth in Aftermarket division and also export from India increased by more than 25%. The content increase in 2-wheeler wiring harness due to transition to BS VI also helped us. With higher operating efficiencies and cost control measures, company was able to deliver once again improved double-digit EBITDA margin of 11.1%. In this quarter, we have made highest ever profit after tax of INR 49.5 crores.Our endeavor remains to continuously reward our shareholders. And thus in accordance with our dividend policy, we have also announced interim dividend of 15% on the face value of INR 0.30 per share. Going ahead, the company is going to give greater focus towards ESG. The company will be giving greater focus in electric vehicle space by strengthening the team and division to conceptualize, design, develop new and unseen products, components and systems.Minda Corporation is poised to leverage its leadership position to grow through its customer connect as it works on the philosophy of more customer per product and more product per customer. We remain committed to our customer to provide best-in-class leading quality of products of advanced technology through innovation. The healthy order book which is being built quarter-on-quarter is testimony of the same. This will explain more by our Group Chief Marketing Officer, Mr. Neeraj Mahajan. In this quarter, we also started the production of intelligent transport system, which is another system solution designed by us for our customers.Now I would like to hand over the call to Mr. Sanjay Gupta, Deputy CFO, to discuss financial and operational performance of the company for the quarter. Mr. Sanjay Gupta is responsible for group-level strategic finance, budgeting, accounting and MIS, and creating an ecosystem of a strong compliance-driven finance function. Over to you, Mr. Sanjay.
Thank you, Ashokji, for introducing me to the investor community. I also would like to thank Sunidhi Securities for hosting our Q3 FY '21 Earnings Call. Good evening to all ladies and gentlemen who have joined us on this call. During my presentation, I will be referring to the quarterly investor presentation, which has already been uploaded in our website. For the ease of presenting, I will refer to the page number. Now I will go straight to the Slide #3.On the Slide #3, on the left-hand side of the slide, it gives a quick snapshot of our company. We are the India's leading automotive component company with over 6 decades of experience. Our company is well diversified in terms of product offering. Our company is presenting all verticals, like Mechatronics Information & Connected Systems, Plastic & Interiors and Aftermarket. We are also presenting all the segments of the industry.All the major OEMs are our customers, and no customer contribute more than 15% of our group revenue. We have 30 manufacturing facilities, which are strategically located to support our customers. We also have dedicated and advanced technological R&D center in Pune, that is SMIT. As on date, our market capitalization is INR 2,314 crore.The right side of our slide shows the revenue breakdown of 9 months current year by geography, end market and business verticals as compared to the previous year. The outer ring is for 9 months of the current year, FY '21, whereas the inner ring is for 9 months of the last year. Please note that here, both 9 months figure of FY '21 and as well as FY '20 breakup of revenue are without KTSN for apple-to-apple comparison.By geography, we have not seen much of the change, and India constitutes around 85% to 87% of our revenues, whereas South Asia and Europe and North America constitute about 5% to 6% and 8% to 9% of revenue, respectively. By end market, our share of revenue from 2 and 3-wheelers has increased from 51.7% to 53.7%. Due to increase in the wiring harness content, the share of revenue in Aftermarket has also grown from 13.4% to 16.8%.Passenger vehicle contributed around 10% of the revenue, whereas CV share of revenue has fallen from 25% to 20%. By business vertical, Information & Connected Systems consist of 42% of the revenue, whereas the rest comes from Mechatronics, Aftermarket and other is remaining 58%.Now I will move to the Slide #4. Slide #4, which shows the major highlights of the -- our current quarter of quarter 3 of FY '21. Revenue has been grown and is continued to grow better than the industry, as already mentioned by Mr. Minda also in his speech.Second consecutive quarter of improved double-digit EBITDA margin, we have improved from 10.1% to 11.1%, 100 basis point improvement. Highest ever quarterly profit after tax by the company. Fourth is the start of the production of another system solution, Intelligent Transport System. And the fifth is the greater focus in the areas related to ESG, which strengthened the design and development of the new products and technologies in the electric vehicle ecosystems. Thus so we can say that quarter 3 FY '20 (sic) [ FY '21 ] reflects consistent and sustainable results, with focus on the -- with right risk-adjusted capital allocation.Now I will move to the Slide #5. We show the industry performance for 9 months and quarter 3. In 9 months, all the segments has been degrown other than tractor, which has grown by 14.6%. This has resulted in industry fall by 24.2%. In quarter 3 of FY '21, all the segments has grown other than 3-wheeler. This has resulted in growth of 17.2% for the industry. We saw the quarter-on-quarter improvement in the automotive production as economic activity picks up on sequential basis.Positive attraction comes into the segment due to the unlocking of the economy, preference for the personnel transport by people, restocking of BS VI inventory, agriculture sector is growing. But yes, the volume is still impacted by lower consumer sentiment. And certain segments like bus and 3-wheeler is still impacted by the social distancing norms.Now I will move to the Slide #6, which gives a snapshot of our quarter 3 and 9 months performance. In quarter 3, our revenue was INR 740 crores, which is higher as compared to the last quarter as well as last year's similar quarter. Our absolute EBITDA came to INR 82 crores from Q3 of FY '21, which is again higher as compared to the last quarter as well as the last year's similar quarter.EBITDA margin came at 11.1%, which is higher by 100 basis points compared to the Q2 of FY '21. This is the second consecutive quarter of improved double-digit EBITDA margin, which again reflects our commitment for the consistent and sustainable growth. Profit before tax came at INR 63 crores in the quarter, which is higher, both in absolute and percentage terms as compared to the last quarter as well as the same quarter of the previous year. PAT of INR 49.5 crore is the highest ever profit from operation in any quarter made by the company, which is higher by 91.5% on Q-on-Q basis.I'm not going into the detail of 9-month figures, frankly, because these figures are not comparable due to the first quarter is bad due to lockdown. Looking at through the performance of the company, as Mr. Minda has also explained, the Board has declared the interim dividend of 15% on the face value of INR 2, which comes INR 0.30 per share.Now I will move to the Slide #7, which gives the commentary for the quarter 3 of FY '21. Overall, revenue for the quarter is INR 740 crore, shows the growth of 36.1%, which has outperformed the industry growth of 17%. This growth has come from the transition from BS IV to BS VI, led by the increased wiring harness content in the 2-wheeler category as well as increase in the aftermarket sales and our exports. Aftermarket in Q3 has grown by 55%, and export from India has grown by 25%.EBITDA margin is 11.1% in Q3, which is 100 basis point improvement as compared to the quarter 2 of current year. EBITDA is positively impacted due to the various cost control measures taken by the company like reduction in the fixed cost. But yes, there is some adverse impact also due to the lack of the raw material indexation, product mix, labor productivity and transition to the BS VI.Net profit of the company is -- for the quarter is INR 49.5 crore, as this is the highest ever profit from the operation in any quarter. As compared to the last year's similar quarter, it has increased partly due to the share of the -- our profit in JV has also improved to INR 5.7 crore and against INR 4.8 crore. And further, the KTSN, which is giving to the loss to the company has also stopped during the year as well as the quarter.Now I will move to the Slide #8. We show the revenue and EBITDA for our business verticals. On the Mechatronics and Aftermarket verticals, the growth in the revenue was supported by the higher aftermarket and export sales. It has grown by 32% year-on-year and 18.4% quarter-on-quarter. EBITDA margin is at 13.8% due to the favorable impact of the higher aftermarket export sales as well as the various cost-cutting measures taken by the company across the divisions. But yes, EBITDA margin is also adversely impacted by the raw material indexation and higher cost of operation due to the COVID-19 and some of the dividend mix.On the other side, Information & Connected Systems division, the growth in the revenue was supported by the higher content increase in the 2-wheelers due to BS VI. It has grown 42% year-on-year to 5.5% quarter-on-quarter. EBITDA margin at 7.1%. It is adversely impacted, as I said, lack of the raw material indexation, some of the unfavorable product mix, still at some of the plants labor profitability is the problem and higher cost of operation due to the COVID-19, but positively impacted by some of the cost-cutting measures taken by the company. It is worth noting that EBITDA margin improvement seen on quarter-on-quarter basis for all the verticals. I endure -- our endure will remain to show consistent and sustainable results in coming quarters and years to come.Now I will request to -- our Group Chief Marketing Officer, Mr. Neeraj Mahajan, to present the slide of the order book, awards and CSR activity. Thank you.
Thank you very much, Sanjay. Good evening, ladies and gentlemen. My name is Neeraj Mahajan. We have interacted a few times already now. So I think on the back of good results across the board, organization has registered a good number, and I would like to thank investors on continued confidence in Minda Corporation. Let me share some details about order book.This quarter has been one of the very healthy quarters in terms of our order book. For numbers, YTD, as of now, we have booked close to INR 5,480 crore worth of orders from the start of the year. And for the quarter, particularly, if I look at, we are at INR 1,649 crores, which is very healthy. Of that, if I break that down between the new and the replacement orders, sure, the majority of chunk is for replacement, almost about 60%, is INR 11,520 million or INR 1,150-odd crores is replacement business, lifetime orders. At the same time, close to INR 500 crores is for the new order, which is new programs completely.Now for the bifurcation, if I look at it from our 4 verticals, which is Mechatronics, the lifetime order is -- in this is 42% replacement and 58% new business. So I think this should give confidence to the investors that our focus on the new businesses is coming handy. The value for the lifetime order book is close to about INR 500 crores, INR 487 crore precisely. In that, we have good order book across both from securities division, our ASEAN business has started to be stable and improving now. Our die cast business is very healthy, though it is CapEx oriented, and we are taking certain balancing measures on that. And of course, other -- our door handle division from our joint venture partnership of Minda VAST.Information & Connected Systems has also recorded INR 1,116 crore of orders of lifetime, of which 86% are replacement and 14 are new. This is one area where we are focusing upon now to strengthen our order book for new businesses going forward. In this, we have close to about INR 885 crore coming in on wire harness. And for our joint venture business, we have, for Minda Stoneridge, INR 230 crore of businesses, which are being booked between the 2 entities.Plastics & Interiors has also started to show positive growth in terms of new businesses because the base is small as far as India operation is concerned. We have booked INR 31 crore lifetime orders so far, and they are coming at good profitability. In terms of our other businesses, which we are talking about of electronic product development, the order book situation is on a rise, and we have done about INR 15 crore lifetime orders in this case. And some of them in this has been from very prominent OEMs, where Mr. Minda mentioned about our focus on the EV side. That's going to be our main focus going forward.Among them, just to give you comfort about how we are focusing on the export in particular, the order book which we spoke about, for example, for INR 16,490 million, almost -- out of that INR 2,241 million is for exports itself. So that shows that activity on account of export is strengthening, and we are focusing on this. With the strengthening of team, we have also taken certain decisions of also considering office in Europe for engineering and marketing, which will come into effect next year. That will strengthen our relationship with our specialty customers in North America and Europe.Just to give you some glimpse of what all businesses we have won in terms of security systems, which is the lock sets, for example, close to about INR 119 crore lifetime order is for our replacement business for our 2-wheeler. The #2, the very leading 2-wheeler maker we have received.Most importantly, in this case, our global growth with one of very, very important customer, which is giving us good traction in India and other locations also in DCD, we have booked INR 100 crore lifetime order with them now. That's for our compressor housing, and this is very, very important for us because we are seeing we becoming a very important player in globe for compressor housing businesses among major suppliers, those who are in this space. And our services in this regard are covering all major makers like Audi, VW, Porsche. So we are seeing our success of this product in that region.Indian automaker has also shown confidence with the new order coming in from for about INR 33 crores as lifetime order being booked already. And as I mentioned about improved situation for our ASEAN operation. We have a good lock set business coming in for about close to INR 50 crore lifetime order on this issue. So these are some of the very interesting orders which have come into play. Nevertheless, for the new wire harness businesses for 2 major 2-wheeler makers in India, we have booked INR 145 crores lifetime order. So these are some orders which I thought you should know, and we feel the team is doing excellent job.Now on the back of new budget, which is being announced, there are a few reflections, which are very clearly coming into play, and we should see that reflecting in our books in subsequent quarters and years later is one is PLI. But I would also like to caution that semiconductor supply situation is already showing on to both 2-wheeler, 3-wheeler -- 2-wheeler, 4-wheeler and commercial vehicle space because supplies of semiconductor is one of the most serious concern in the market today. And I'm seeing some softening of indent from some of the vehicle makers on this account. 2-wheeler is also softening a bit, but we are confident that numbers will pick up more towards March at this point of time.One important activity which we are focusing upon right now is to improve our cross-selling and new technology introduction in our customer, and we will discuss more about that in coming quarters how we are going to expand in our product portfolio, which we are investing a lot through SMIT and also the new facilities we are establishing.That's all from my side. And post our conclusion, I'll be happy to take your questions. Thank you very much. Good evening.
We will now begin the question-and-answer session. [Operator Instructions]
This is Neeraj once again. And I just wanted to share a small bit of information on what we are doing on the group side because I think it is very close to the promoters, the key shareholders family heart as well we feel that commitment to the society.So on my -- on the last sheet, which is Page 11, if you may see, we have started to not only strengthen our CSR initiative as a commitment, giving back to society, but as an organization, we have started to be present in the right forums, like ACMA, SIAM, various industry magazines and communication, where either Mr. Minda himself, our technology chiefs, our business verticals, our finance leaders and myself, we are all communicating gradually inside about providing the key information how industry is moving, what businesses we are thinking about so that investor also gets an impression about what is organization thinking, which we can not only hear during investor calls, but also through these reliable bodies and activities, which are happening on a periodical basis.So thank you very much once again. We have done our bit, a bit on COVID, where group has distributed 20,000-plus masks around. We have gone ahead about doing various ration kit and blanket distribution activity through CSR, and we feel that we -- this is a very small way for Minda Corporation to give back to society. Sorry for just jumping in, in between, but these were some of the glimpse I wanted to share apart from the blood donation camps, safety drives and various other initiatives which group has strengthened its position into.Thank you very much, once again. Back to you.
First question is from the line of Pritesh Chheda from Lucky Investment Managers.
Sir, I have 3 questions. One, based on the growth rates that we have shared for the quarter in terms of the various vehicle and our businesses. If I'm just trying to figure out what is the content led growth on account of the BS VI in the wiring harness and the absolute value based on the back of the envelope calculation, I am trying to understand that the content addition, which we thought earlier or which we communicated earlier on BS VI for 2-wheeler hasn't materialized so far.So -- and my reference to context is, we were about INR 350 crore to INR 400 crore of 2-wheeler wiring harness business, which was close to double, which means we had incremental INR 100 crores. But when I'm looking at the numbers, it seems that we have only added about INR 50 crores. First, I wanted to understand whether these calculations are right. And if they are right, then why is the content addition so lower?
Pritesh, [indiscernible] on the call. The content...
Sir, sorry to interrupt. Pritesh, may I request you to -- sir, sorry to interrupt you. Pritesh, may I request to [indiscernible] line? Please go ahead.
Yes. So the content increase, which we have communicated earlier that in BS IV to BS VI will be 2x for 2-wheelers. That we are absolutely seeing in our supply, which we are doing as such. So -- and that's why if you look at year-on-year, there is a jump of 42%, but not entire wiring harness content 2-wheeler.We have commercial vehicle also. In commercial vehicle also, we supply 4-wheel, and we also supply in tractors, and that has not seen any content increase, much content increase, tractor 0 and commercial vehicle hardly 15% to 20%. And commercial vehicle has degrown as compared to 2-wheeler. That's why the jump is only 42%.
Sir, I did the calculation. What I come to a figure is about INR 45 crores to INR 50 crores for the quarter. So even if you look at your presentation on Slide 8, which shows the Information & Connected Systems, where most likely, I think that's where you guys must be booking the wiring harness piece. If you look at the jump in revenue on a Y-o-Y basis, it's about INR 80 crores, INR 90 crores. And when you try to strip that for the volume-led growth, then the content increase would be about INR 60 crores odd number. So then that doesn't add the math. Ideally, it should be about INR 100 crores. So my reference was these numbers.
So not the industry has moved to BS IV to BS VI, but the export, which is happening from India, that still continues to be biggest because people like -- OEMs like Bajaj Auto, TVS, they are exporting into African countries, where they are still selling BS IV. So nearly 80% of the industry or 78% of the industry has moved to BS VI in terms of production and 22% still continues to be BS IV. So we'll get back to you on the calculation.
My second question is, sir, on the new order wins, which we have put in, in a slide. And I think that totals at about something like INR 450 crores to INR 500 crores. Rest, you classify it also as replacement business. So this INR 450 crores to INR 500 crores, how much of it is executable in year 1 and year 2 from FY '21 for us to understand what will be the incremental revenue growth that Minda Corp. would generate over and above the natural volume-led growth on account of the OEM? So is it a couple of percent, it's more?
Generally, the order book, which we get right now, that starts getting executed around from 15 to 18 months from now. So most of the orders which we have received -- most of the orders which we are executing today we might have received those order books maybe 15 months earlier or 18 months earlier. I'll ask Mr. Neeraj Mahajan to throw more light on this.
I think -- thank you very much for throwing this question. This is a very constant question in every investor call I have come across. And my answer to this is wire harness is the shortest lead time we normally produce with, is about 9 months' time. So there could be a small incremental revenue improvement for the orders which are booked in this quarter. We can come back to you about the exact number.As far as DCD or the die cast or the security division is concerned, as my colleague has just mentioned, typically between 15 to 18 months is the cycle. So to put it very candidly, the majority of revenue impact is going to be in subsequent year financial books.
Actually, what I did was, you have mentioned about INR 5,500 crores of order, 1 year-to-date FY '21, in which about INR 450 crore to INR 500 crore are new business. The residual is the replacement cycle orders, which you get. This INR 450 crore to INR 500 crore, this new business will drive your incremental extra revenue growth, right, because the balance order is replacement order of your existing order.
You're right.
Right. So the INR 500 crore new business, is it that something like INR 40 crore, INR 50 crores might slow in next year. And on a base of INR 2,400 crore of our top line, it means extra 2% revenue. So I was looking from that calculation angle.
It is possible. You are right to say that, but this -- which you are saying INR 500 crores, I have to break it down exactly to share that what is going to be executed next year itself because this is only for this quarter, which is being booked. So I think your assumption is not wrong.
No problem. And my last question is, sir, on the depreciation side. Before the Minda KSTN was sold, there was a certain depreciation number. And at the time of transaction, we were communicated that the depreciation number will be lower by about INR 35 crore to INR 40 crore.Now what I see as reported for 9 months is not that much lower versus last year when the Minda KTSN was there. Is there any reval of any certain asset or any CapEx, which have been done because of which the depreciation number has not come down to the earlier communicated number? Or is there any other communication which you would want to give on this?
Pritesh, again, when you are looking at the one pager, this is apple-to-apple comparison. So in the last year, we have restated the numbers, and the restated numbers doesn't include KTSN. So last year, when KTSN was there, the depreciation was around INR 30 crores. And now when -- this year, when KTSN is not there, our depreciation had come down to INR 24 crores for the quarter. And yes...
Yes, Bikash, so I'm referring to that, which means it's INR 6 crore per quarter, which means about INR 24 crore lower number. The number which was guided at the time of Minda KTSN transaction was a INR 40 crore lower number. So this INR 16 crore differential, is it because of any asset that you've added or we have certain assets, which are reval or any other thing? Or that INR 40 crore number communicated itself was not the number which eventually panned out?
No, no. We are adding CapEx every quarter as such. So I'll [indiscernible] to explain we're adding CapEx on DCD, we are adding CapEx on [indiscernible] division in India.
So what is the CapEx spend for FY '21? That would be helpful.
So far, we have spent around INR 92 crores.
INR 92 crores?
Yes, in the 9 months.
The next question is from the line of Ronak Sarda from Systematix Group.
Congrats on decent set of numbers. This is Ronak Sarda. The first question on the capacity utilization across different segments, which you're operating now especially CV. How has that changed? And so what was the number in Q3?
So Aakash this side. So across different products and segments, we have different capacity utilizations. For example, our die casting division, we were running about 85% capacity utilization. For locking systems for 2-wheelers, it's more of about 75% to 80%. And wiring harness for 2-wheelers and tractors have different capacity utilization, about 80%, 85%.Now it's difficult for us to share on quarter-on-quarter capacity utilization. But all I can say is that the way the revenue growth has been in our plants, of course, the higher capacity utilization has been there. For example, in tractors, where one of the highest growth is there, we are now consuming about towards 100% of our capacity utilization.
Okay. Did you mention commercial vehicles, Aakash? How would that change be? Because that's coming up from a very low base. So more actually interested in how the utilization levels have changed there?
Commercial vehicle annually would be close to about 60% at this point of time, I guess. Because both 3-wheeler and commercial vehicle is still on a slow lane. While they are on the recovery path and the way budgets have been announced, we will see lot of traction. So we are ready to cater to that demand, which we have started to see through improved indents now, in Q4 also.
Sure. Perfect. So Aakash, a question here. I mean, how does the profitability change with improvement in PV because we are market leader there in both the products which we supply. So is that some -- is that also a lever for margin expansion going into Q4 and then FY '22?
This is Neeraj. You have answered the question yourself. We are very happy to see the improvement in the CV segment. 3-wheeler is not as profitable as CV segment is, comparatively. But we are very hopeful that number should look better moment CV starts to pick up on consistent basis.
Okay. Perfect. Neeraj, a question for you then. On the new order base, the INR 500-odd crores in the quarter, even for -- so I think the big orders are in the security division. So which are the products which we talk about or the customers which we talk about when we talk -- when we discuss the new orders in, which are over and above the replacement orders? And are this more product driven or is it more new customer driven?
Yes. I will not get into specific customers at this point of time because of confidentiality. But I would say that our -- what -- and this is, I think, which is a very consistent approach we are trying to bring in on board. Mr. Minda has been extremely, if I may say, vocal about this message to build stronger relationship.In these difficult times, we have seen that the new customer orders, which may take next 2 or 3 years' time, is going to be more painful because profitability is there, the volumes there are questionable. So our strategy at this point of time is to sustain and improve our relationships with our existing customer.Some of them have gone through some tough periods. But I would say safely that everyone has come out of it right now. And my order book from the security and DCD side is for both exports in case of 4-wheelers, it is increase of 2-wheelers, all majors for lock sets. And also, in case of starter motors, we also have global orders. So I would say that we are in a healthy situation there when we talk about new orders.
And Ronak, that -- we are not looking only the revenue part. But very important is that growth should also always value assertive and implying and revenue growth should be -- should be -- drive more our higher EBITDA margin and ROC growth. This is very important.
Right. Right. And the final question is on -- I mean, now still early days, but productions have now stabilized. So if you can help us understand on the wiring harness division, so what are our localization plans as BS VI initially was margin dilutive. So any progress there? When can we go back to the old profitability, if you can share some details on that.
No. As you know, this localization of the wiring harness, we mentioned the last year also that this is one of the area which will reduce our cost, which will increase our EBITDA margin. And we have so many projects to localize this. A special team is working for localizing the terminals and connectors, mainly in the wiring harness for BS VI. So although it is not a good process because a lot of approval from the customer is required for them. So our team is working for that, Ronak, continuously. And this is one of the most important focus area to improve our EBITDA margin.
I'll just add to that what Mr. Minda mentioned. I think, Ronak, you know well that copper is going to be a dampener for all of us in this quarter and next quarter also because the prices are still climbing. And customer indexations are not going to help us much on that subject, and we possibly will have some challenges.It is very evident also from our recent -- especially in F '19, F '20 learnings of wire harness order gain or loss that unless we are going to focus on value engineering, value addition and localization, Minda Corporation wire harness division is not going to exhibit the results what we expect to. And today also, if you see the number, wire harness surely is a challenge.So please, we, as Mr. Minda just mentioned, our localization and our value engineering, value addition activity is the primary driver, which is going to bring profitability. But I would put that as Q3 of next year, where we will start to see more results of its improvement.
And we are very confident and very sure that you have seen in the last quarter versus this quarter the improvement in wiring harness. And it is very clear how we will -- continuously, we will improve month by month, quarter-by-quarter, we are continuously going to improve.
The next question is from the line of Raghunandhan from Emkay Global.
Congratulations on good numbers. My first question was on order book. If you can indicate the share of new business orders? Or in other words, in absolute terms, if you can provide what is the pending new business orders, which is there currently? I mean to say, for the quarter, you have got about INR 500 crores worth of new business orders. If you can indicate, of the pending order book, how much would be the new business orders?
In YTD condition, you mean?
YTD and even relating to the earlier period, I just want to understand like what would be the total pending new business order book, which is remaining. And just to get a sense by how much company can outpace the industry in the coming year?
So yes. So Raghu, Bikash this side. We have been outperforming the industry. And that has been driven by our aftermarket growth. That has been driven by our export. That is driven by increasing our share of business and also adding new products. And this order book, which you can see in this quarter, which we have booked, in which INR 500 crores is additional new business. That means either we have gained market share or we have introduced new products. So that will always drive our growth better than the industry.
I understand that. For this YTD number of INR 5,500-odd crores, would you have the breakup between new and replacement?
No, no. This INR 500 crore is new business completely. So let me reconfirm. INR 1,152 crore is replacement, lifetime order book, and INR 497 crore is absolute new business, which is not a replacement business. This is for this quarter.
That I understand, sir. I was requesting out of that INR 5,500 crore YTD order won -- wins, would you have the same breakup?
That, I'll provide you, Raghu. We don't have right now readily with us. We will share that with you.
Sure, sir. My second question was you alluded to PLI, like if you can broadly indicate are the areas of investments being explored, how large can be the investments, how much benefits are likely. I mean just some bird's eye view on how you think this particular scheme coincides with your strategy? And how can the opportunities or benefits be in the future?
Sure. Raghu, Aakash this side. Yes, absolutely. PLI scheme is something that we all welcome as the automotive industry as well as the auto components industry focusing on the AatmaNirbhar Bharat. Of course, we, as an organization, are qualifying all the minimum requirements that the government has set for PLI scheme.So currently, till that scheme is not rolled out completely with details, we will not be able to exactly quantify. We have done some workings, but it will be wrong on our part to share any numbers with you right now. But what I can say is we qualify. We are doing internal workings. As soon as the complete report comes out, we'll be applying for the same.
I think we should be able to answer this question better in next quarter. That's I think would be safe to say that because by then in next 3 months, we will have not only working available with us, but also the programs on which we are going to work with on this budget. But we are qualifying ourselves for this is our clear intent. And surely, there is going to be a benefit to the organization as well as push for [indiscernible], both ways.
Understood and awaiting those details. In terms of CapEx, could you remind like target for FY '21 and '22 and also areas where that investments will go?
So Aakash this side, Raghu. Some of the -- again, as Bikash mentioned, we've invested about INR 90 crores in this year as CapEx. Some of this CapEx is on our brownfield expansion towards expanding our capacities. We are again coming up with the facility in Gujarat. Remaining CapEx is for maintenance and more towards R&D and for expanding and growing our competency.Going ahead, we will be doing about 4% to 6% of our revenue as CapEx, what we've traditionally been doing. And the focus of the organization is to sweat all the assets more and more as most of our existing facilities are flexible in nature. So this is our endeavor going forward.
The next question is from the line of Prateek Poddar from Nippon India Mutual Fund.
Sir, could you just talk a bit or help me understand the Information & Connected Systems business? How much of the margins were impacted because of lag in RM?
So lag of RM has impacted our EBITDA margin by 100 basis points.
Okay. Got it. And will that now straight away flow through in the next quarter? Because obviously, it's a lag, I understand. But at least some part of it, you will be able to recoup. Is that a fair understanding in the next quarter? And maybe after 2 quarters, entire bit of RM inflation will get covered as you pass it on to the OEMs?
Yes. The thing is that once the commodity price stabilize, since the commodity benefits are not stabilizing in Q3 and start of Q4 also we are seeing increase. So whatever increase has happened in Q3, we will get that from the OEMs. Still, the commodity prices are rising. So we think that there might be some more impact, which we might feel in Q2.
And just to explain that, we have the back-to-back arrangement with most of the customers, but we are seeing that how to modify that if it is -- in some of the customers, it is on the higher side. So we reduced that period. So the impact will be less. And then we are also working and talking to our supplier that instead of monthly indexation with them, can we have more quarterly indexation so that it gives a natural hedging and overall without any impact.
That's great. That's great to hear, sir. Sir, last question. What is the sustainable margins of this business, if you could just help me understand? On the Information & Connected Systems, like you talked about in quarter 3 next year, we will see some localization benefit. I'm just trying to understand where do you see sustainable margins for this business -- this vertical, sorry, not business.
We have shown our EBITDA 7.1%. There is improvement. But if you see the BS IV time, with the BS IV in the last year, so our margin was higher than this. So we -- first, our target is to reach that margin, which we used to do it in BS IV. And then subsequently, there is a lot of good potential for localization, what I have mentioned over and above of that, the localization is going to have import -- reduction in import will give further benefits in the EBITDA margin.
Got it. So sir, last year, same time, you had closer to 9% margins, as I can see in your presentation, which you might -- okay. So you will read that by quarter 3 F '22, which is 1 year from now. And post that, you will start or localization efforts will come into bearing into fruits, and we will see further margin expansion, right? That is the takeaway from this.
Quarter-by-quarter, you will see the improvement in the margin. As I mentioned, there are 2 major important item. One is the copper or the commodity pricing is the one impact. Second is the localization is the second impact, which will continuously working and we are very much sure that every quarter. And the third measure is the productivity from the RM side.And the second area is the productivity because the BS VI after the COVID, a lot of inefficiencies are there so that we are also continuously improving month by month. Both will give a good result, and we will improve month-by-month and quarter-by-quarter, the EBITDA margin of the connecting system.
I will only add -- this is Neeraj here. I will only add to this point. More than anyone, we are very eager to improve this. But unfortunately, there are certain circumstances which are, at this point of time, taking a bit of time to come back to that. But we are very, very committed for improving this subject.
Great. That's reassuring, Neeraj. And lastly, sir, one question is on -- you have continuously mentioned higher cost of operations due to COVID-19 pandemic. I didn't understand in quarter 3, I think there were a lot of relaxations by government. So where did we incur these higher cost of operations? Or what is this really?
So cost of operation, we are still plying our buses with 50% capacity. So that is one thing from bus transport because we need to carry our casual workers from their home to our factories. So that also has impacted. So there are certain factors which are still impacted. But nonetheless, the team is working on reducing other fixed costs so that the EBITDA margins improve quarter-on-quarter.
Premium freight is another...
Premium freight because the demand from the OEM also ramped up drastically to support them, we have to do this premium freight.
The next question is from the line of Sachin Kasera from Svan Investment Managers.
Congrats for very good set of numbers, happening to see getting back on numbers, right? I had 2, 3 questions. One was just, again, a follow-up on some of the various cushions that have been asked on the margins. From what I understand, there are certain one-off costs that we are incurring, whether it is lower [indiscernible] right now in wiring harness or some of the costed related to raw material or COVID.And secondly, I think we are working a lot in terms of improving efficiencies. So as things normalize, is it fair that we can aspire to be 13.5%, 14% EBITDA margin company over the next 2, 3 years, sir?
We all want this. If we compare this with our other vertical, there we are showing nearly what is your expectation. But definitely, there is a good potential of the improvement. And our first target is how to convert this EBITDA margin to the double digit. And then subsequently, we will improve regularly.
Sure, sir. Great. Second question was in terms of the relationship that we just had last quarter, bringing in a financial investor, and you had a separate call for that. And you indicated there are quite a few areas where they could add value to us. So it's been close to, I think, around some 3 months.So if you could just update us how that partnership is going. Any key visible benefits we have seen? Or are they helping us in terms of getting some good acquisition target? That would be really helpful.
Yes. As I mentioned to you in the last discussion that I mentioned about the reasoning of this that they will help us or they will support, they will align us for the right -- the EV strategy and to support the company for enhancing the environmental and ESG in the -- from the technology perspective, all now is -- the acquisition has already started. And the brainstorming is done, and we are very much in progress with them, and you will see the result in the near future.
Can you give us some update on acquisition because now we are sitting on cash for some time. And also with really this spending coming, I believe there were some correction in terms of expectations. So are we starting to see some attractive acquisition opportunities now? Or we are still not finding something very attractive?
First of all, the whole year, the full year was nothing as a move for that. However, as I always mentioned that the most important is the norm has to be fulfilled, whether the norm from the technology perspective or the norm from the financial perspective. And we are continuously working on restoring our inorganic opportunities in 2, 3 areas. And this inorganic opportunities does not mean only the merger and acquisition but also the TA and JV. All this will be done in the adjacent area where we always think that to support or to -- from the customer alignment in terms of technology and so on. So we are very judicially seeing the allocation of the capital for the inorganic opportunity to create the value of all the stakeholders.
The next question is from the line of [ Yash ] from Mandawewala Enterprises Limited.
Most of my questions have been answered. Just a couple more. So one is on the Aftermarket sales. So what has led to the strong growth there? And do these numbers look sustainable on the Aftermarket side?
Yes. Aakash, this side. So of course, in the quarter 3, the aftermarket industry has grown by about 15% to 20%, but our growth has been more than around 50%. There are a couple of factors which has helped us grow better. And some of them are focused approach at target market for demand generation, working on minimizing regional disparity of sales, maximizing sales at potential cities and part line, maintain good connect with the overall market, customer-friendly policies and, of course, adding new markets in terms of exports. Of course, going forward, we may not really see 50%, but definitely, it will be on the north of about 20% and above.
Sure. That's good to hear. And the margins on the Aftermarket side, they are slightly superior to the overall business margins. Is that correct?
Yes, absolutely. And more importantly, the aftermarket business gives more profitability to our business verticals as somewhere about 100 to 200 basis points is what they support in our overall EBITDA perspective.
Got it. And just lastly, there was -- in the presentation, it mentioned, there's the launch of the Intelligent Transport System. Can you just elaborate a bit more on this, what exactly is this?
Sure. Intelligent Transportation System is majorly for the public transport. In true terms, if I can say the boards, the deduction boards and the bus stop boards that you basically see. So it's what we call Intelligent Transportation System.So it's one-stop solution where we are ordering -- sorry, where we are offering a complete system solution from the mobile app to PC connectivity to video surveillance and other topics. So this is how where we started with a couple of bus manufacturers, and this is in SOP this quarter.
The next question is from the line of Abhishek Jain from Dolat Capital.
Sir, during this quarter, Aftermarket jumped 55%. So have you added some new products in your portfolio, which is yielding better results? And just wanted to know how's the export and domestic mix in Aftermarket.
Sure. We are continuously adding more and more products in our Aftermarket. Of course, the industry and India will also get to know our offerings as and when they are launched. Again, primarily, it is the Indian market as of now. We've expanded into Asian markets last year. And we are growing towards the rest of the world in terms of Latin America and Africa as well for the adding on the new markets. But of course, this, we will see year-on-year basis.
But there is no -- for the last quarter, there is no product addition in Aftermarket. But as Aakash explained other areas, the penetration and all that has increased substantially.
So how is the export and domestic mix in Aftermarket?
Right now, nearly 98% is domestic only, 98%, 90% is domestic, only 1 or 2 percentage export. But going ahead, we are also targeting export markets, mainly Latin America, Africa and Southeast Asia.
We have started giving focus in this area of aftermarket export.
Okay. Sir, in the last 9 months, how much growth in die casting business Y-on-Y? And what is your near to medium-term target for revenue and margin, both for this business?
Die casting growth on year-on-year for quarter basis is around 28%. And as compared to the sequential quarter also, we grew by 10%.
So I'm talking about the last 9 months growth, YTD FY '21?
This is not a comparable number, frankly speaking, to that because that first quarter is impacted by the COVID.
Despite that fact, what is the growth or degrowth?
Despite of that, only we have degrew by 6%. We did it somewhere INR 300 crores, INR 293 crore in FY '20. And we did it INR 275 crores.
And what is your near to medium-term targets for revenue and margin, both for this business?
So die casting business, we are getting good attraction not only from export market, but also from the domestic players. As Neeraj Mahajanji also said that in this quarter, we got additional business of lifetime business of INR 100 crores from our existing customer. So export like aftermarket is also value-accretive and it's more -- gives more EBITDA, so that is helping us. So die casting business, as it grows, it will drive our profitability higher.
And his specific question is that if we forget this 9 months to 9 months and we have grow -- we will grow die casting the year-on-year above 20%, that is what is we are planning.
And as the order book is around INR 100 crores, most probably the next year growth would be around 25% to 30% for FY '22?
You are talking about die casting?
Yes.
As I mentioned that in the past, we have grown about 20% to 25%. We feel we'll continue to do it in the same manner.
Okay. Sir, my last question is related with the share of profit from the JV. That has increased in the last 9 months. So can you throw some light on it that how much profit from the different JVs?
On the EBITDA side, that in the current quarter, our Minda Stoneridge -- on the PAT side, the Minda Stoneridge has given the PAT of around 8.1%. And Minda VAST has given the PAT of 0.3%, and Furukawa has drastically improved as compared to the sequential quarter to 1.5%. In the second quarter, we -- Furukawa was negative of 24.7%.
Ladies and gentlemen, due to time constraint, that will be the last question for today. I will now hand the conference over to Mr. Ashok Minda for closing comments.
Yes. Thanks for participating in the call. And looking ahead, we are cautiously optimistic that in the new year ahead. I once again like to reiterate that the cost control measures taken and focus on allocating the capital in right project will not only help us in bringing cost-effective technological advanced solution for our customers, but will also result in increasing the well-being of all stakeholders, plus the efforts what we are doing to continuous improvement in the EBITDA margin and the sustainable growth and sustainable achievement in future and in quarters to come. Thank you. Thank you to everybody for joining once again.
Thank you very much. On behalf of Sunidhi Securities and Finance Limited, that concludes this conference. Thank you for joining. You may now disconnect your lines. Thank you.