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Minda Corporation Ltd
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Ladies and gentlemen, good day, and welcome to the 3Q FY '23 Minda Corporation Limited Conference Call hosted by Nirmal Bang Institutional Equities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Varun Baxi from Nirmal Bang Equities. Thank you, and over to you, sir.
On behalf of Nirmal Bang Institutional Equities, I thank you all for joining this call. I also thank management for providing us the opportunity to host this call. I now hand over the call to Mr. Pushpa Mani for introducing the management and take it from there. Over to you, Pushpa.
Hi. Good afternoon, everybody. This is Aakash Minda, [ at this time ]. I would request our Group Chairman, Mr. Ashok Minda, to give us the opening remarks. Thank you.
Thank you, Aakash. Good evening, everyone, and welcome to the quarter 3 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 all are keeping safe and healthy. The auto industry saw steady growth on year-on-year basis in the third quarter of financial year '23, and that growth is visible across vehicle segments. Supply side constraint seems to be easing out with better semiconductor situation, but uncertainty and long lead times still continues, which is likely to persist until the end of financial year '23. Export saw an improving trend, but situation yet to be normalized on the back of certain macroeconomic sectors. Among the headwinds and the tailwinds, I am pleased to report that Minda Corporation has continued its growth momentum with revenue growth faster than the industry and double-digit EBITDA margin for 10th straight quarters.The company's revenue from operations stood at INR 1,068 crores, registering a growth of 45% year-on-year and 22% on like-to-like basis, excluding Minda Instrument. With EBITDA margin of 10.7%, PAT for the quarter stood at INR 52 crores with PAT margin of 4.9%. The growth was driven by better revenue visibility in both business verticals, improving product mix, increasing content per vehicle and increasing in share of business.In line with our philosophy to reward our shareholders, the Board of Directors have declared an interim dividend of 20% on the face value, which is INR 0.40 per equity share.Now I would like to take you all through the key development during the quarter. The company entered into technology license agreement with LocoNav for Telematics Software for both web and Android IoS platforms. Minda Corporation is already providing telematic hardware kit. And with the addition of software capabilities, we have become a complete system solution provider in telematics. The company has filed 5 patents during the quarter in various business verticals, taking the total number of patent to 249.We have inaugurated one of more state-of-the-art wiring harness plant in Chakan, Pune. This plant is spread across 190,000 square feet and the factory is equipped with advanced machine backed by cutting-edge technology.Successful EV launches by key OEMs like Tata, Hyundai, Mahindra, Bajaj, Honda, et cetera, were clear sign of EV transformation on the ground. And we at Minda Corporation are all set to capture the fast-growing EV space with products like smart key, DC-DC converter, battery chargers, IPS and telematics. 9-month financial year '23, EV order constitutes 24% of the total order book by Minda Corporation. We are focused to solidify our market leadership by providing high-quality, innovative products and securing new business in our core products, including locksets, wiring harness, instrument clusters and sensors. Moreover, all our products are undergoing premiumization, resulting in increased content value.Moving forward, our strategy will be to continue to strengthen our core products and extend our customer base by onboarding new customers and increasing share of business with existing customers. We would be targeting this through in-house R&D, implementing technological upgrades and forming strategic partnership globally. It is important to emphasize that Minda Corporation remains dedicated to understanding customer needs and integrating advanced technology into its products for quality and sustainability purposes.With this, I would like to hand over to Mr. Aakash Minda for a brief overview of the earnings presentation. Over to you, Aakash.
Thank you, sir. I would request all of you to refer to the slides posted online for the earnings presentation, quarter 3. I thank Mr. Baxi from Nirmal Bang for organizing this call. I refer to Page 3 to share about the organization. Minda Corporation is about a INR 3,500 crores company with 16,000 people and 34 plants having 9 partnerships across various products and technologies.Moving on to the next slide. We have, again, 34 plants and primarily the focus is the operations in India and Asian countries.I move to Slide 5, which is showing the highlights of quarter 3 and 9 months performance. Continued growth momentum with revenue growing faster than the market growth, double-digit EBITDA margin for the 10th straight quarter on sequential basis. PAT stood at INR 52 crores with a PAT margin of 5% in quarter 3, secured marquee orders of wiring harness for EV platform of a Southeast Asian OEM. Order wins across various segments with EV constituting to about 24% of the orders received in the first 9 months. TLA with LocoNav for Telematics Solutions -- Software Solutions becoming a complete system provider in telematics.I now move to the next slide, where we show the consistent and sustainable market beating performance, profitable growth by Minda Corporation. As a revenue in quarter 3, Minda Corporation has earned INR 1,068 crores, which is year-on-year 45% growth, which is consistent and sustainable market-beating growth. The EBITDA stood at 10.7% at INR 114 crores, which is again 45% growth from last year. PAT at about 4.9% at INR 52 crores.Moving to the next slide. This is a snapshot about the Minda Corporation Limited, which shows all the products, the key customers, the green customers are EV customers, manufacturing facilities and R&D capabilities. On the right, it shows about the number of shareholders and other shareholdings.Moving to the next slide, sharing about the Indian automotive industry performance. If I compare 9-month year-on-year growth, the industry grew by about 16.3%, wherein 2-wheelers grew by 13%, passengers -- passenger vehicle by 30%, tractors by 5% and CV by about 40%. If I talk about the year-on-year growth about quarter 3, the industry grew by about 4.6%, where 2-wheeler growth was pretty much flat. And the passenger vehicle grew by 21% and tractors grew by about 6%.On a quarter-on-quarter basis, the industry de-grew by about 17%. 2-wheeler de-grew by about 18%, passenger vehicle by 10.5%. Commercial vehicles by 6% and tractor by a large number of 26%. Quarter 3, FY '23 saw strong demand in PV segment with new launches. The weakness in rural demand continues on the back of uneven monsoon, tepid rural sentiments and increased financial costs.Moving forward, the industry growth to be led by continued spend on infrastructure, improved fleet utilization and profitability, a strong order book aided by a slew of new launches. The premiumization trend in the 2-wheeler and other segments is anticipated to continue in the near growth -- near term. Overall, industry growth in quarter 3 is 4.6% compared to last year. We remain cautiously optimistic on the industry on the back of strong cues in demand from domestic markets while export remains challenging on the back of ongoing global headwinds.I move to the next slide, which is a revenue breakup for Minda Corporation by geography, industry continues to be about 45% by end market. Two-wheeler continues to be about 45% of the group revenue, where commercial vehicle is about 30%, passenger vehicle is about 15% and aftermarket is about 12%. By business vertical, Mechatronics and aftermarket are about 47%. Information and connecting system, which is primarily wiring harness, is about 37%. And Minda Instruments Limited, which is the cluster and sensors division is about 16%.Moving to the next slide, which is a division-wide revenue. If I look at the left pie chart, the lockset or security divisions contribute about 28% of their top line. Wiring harness is about 28%. Cluster is about 10%. And Die Casting about 16%. And Others contributed about 17%. Minda Corporation is the market leader in 2-wheeler locking systems and wiring harness businesses. We are a pioneer in keyless entry solutions for 2-wheeler, better control over quality in lockset with our own die casting division. Moving from mechanic substrate to incorporated latest TFT digital cluster. The company is one of the key players in the 2-wheeler and CV segments, and of late entering in the PV segment. In die casting division, we focus on niche products with more exports.Moving to the next slide on the consolidated performance of quarter 3 and 9 months. On quarter 3, we did an operating revenue of INR 1,068 crores, which is 45% increase year-on-year basis. If I include Minda Instruments such as assets, we grew by 22%. EBITDA margin stood at 10.7% at INR 114 crores, which is 45% higher than last year. PBT stood at INR 72 crores, which is a growth of 44% year-on-year and PAT margin stood at INR 52 crores, a year-on-year 41% increase.On a 9-month level, we have grown from INR 2,020 crores to INR 3,226 crores. At EBITDA level, we have moved from 9.2% to 10.7%, which is from INR 187 crores to INR 345 crores in 9-month EBITDA. PBT has grown from by 100% from INR 111 crores to INR 222 crores and profit -- PAT has grown by about again, 195% from INR 83 crores to INR 163 crores.On the domestic front, new business across segments further aided by new product launches and increasing share of business with existing customers. Exports are showing signs of revival while remaining cautiously optimistic on the same, going forward.On the EBITDA front, we delivered double-digit margin on the back of various cost control initiatives and increased efficiencies. Semiconductor supplies have eased out but long time -- long lead times still continues. Commodity prices after are softening and are almost stable on a quarter-to-quarter basis, but on a year-on-year basis they are increased.Moving on to the next slide, which is Slide 12, on the business vertical-wise performance. I first focus on the Mechatronics and Mechatronics division. The top line is INR 547 crores with 13.8% margin. This is in the same line, which is about 14%. The growth in revenue was supported by strong demand in domestic market, increase in business with key customers and new launches. Exports have risen on quarter-on-quarter and year-on-year basis on the back of new orders.The EBITDA margin increased by 80 basis points on the back of higher sales. On the information and correction systems, now this includes Wiring Harness and Minda Instruments Limited. The EBITDA margin stood at 7.4%. We understand and we acknowledge that the Wiring Harness division continues to perform below its potential. The growth in revenue was supported by strong demand in domestic market. Export is focused for the Wiring Harness division, and EBITDA margin is also increased on the Wiring Harness division on a quarter-to-quarter basis.Moving on to the next slide of partnership with LocoNav. Minda Corporation used to offer hardware solutions and now with LocoNav we will -- which will give us the software solutions. We'll now offer a complete system solution as in our business plan to offer system solutions to all our customers.On the next slide, we show our plants, our growing facilities and also consolidating multiple plants into large facilities to get better economies of scale and to become close to the customer.Moving to the next slide, which is the strategic pillars of growth. So our first strategic pillars of growth are focused on and enhancing on the core innovation technology, growing EV opportunity and strengthening passenger vehicle OEMs. We want to transform and become a complete solution provider and partner of choice, cost leadership in manufacturing and thought leadership position in technology. There's a premiumization happening in the market, which Minda Corporation is acquiring. And all product innovation in all business segments will drive this content per vehicle from Minda Corporation. We want to deliver the better results than the industry and continue to outperform the market.On the next slide, we just show how the technology and the products from Minda Corporation are moving. So vertical access, if you see the traditional lock and key are moving to smart and intelligent vehicle access, which includes passive entry, passive start, flush door handles, powered lift gate systems, cybersecurity. In the Wiring Harness, the Wiring Harness will continue more into the vehicle architecture of power distribution unit, battery distribution unit, high-voltage wiring harnesses, smart junction boxes, et cetera. In the Clusters and Sensors division, which is a driver information system, the analog clusters are now moving toward digital clusters, which are all TFTs as explained before with integrated telematics and ADAS systems.In the EV area, we're looking at more lightweighting as well as offering more electronic content to our internal and collaborative approach of partnership and offering new products in areas of motor and motor controller, power electronics.Moving to the next slide. This is a kit-value offering on the 2-wheeler EV content. Minda Corporation offers about 16,000 to 20,000 potential EV kit value. Our current kit value offering in the legacy or IC is about 4,000 to 5,000. With the premiumization of all the products, Minda Corporation will almost double its content. And additional products in the EV product lines like the DC-DC converters, battery charger and other power electronics, will get us more uptake value of INR 8,000 to INR 10,000.Last, not the least, value propositions. Minda Corporation would like to grow ahead of the market and deliver the customer the best of the solutions.Last, not the least, I will move on to the ESG, CSR and awards. Minda Corporation values ESG as paramount, and this is directed and even governed by our Board of Directors and monitored on a regular basis. More details can be looked on our website.On the corporate social responsibility in quarter 3, we have set up various camps all across India and overseas for focusing on education, women hygiene and people with disability. In quarter 3, the company has received many customer awards, which shows confidence that the customers bestow on Minda Corporation Limited. We total -- we were awarded a total of 57 external awards in the quarter 3 across various forums.With this, I would like to conclude my presentation and invite everybody for questions. Thank you.
[Operator Instructions] We have the first question from the line of [ Vishal from Svan Investments ].
And congrats on decent set of numbers. Sir, there are actually 2, 3 questions from my side. Sir, if you see last 2, 3 quarters, your employee cost trajectory has gone up. So it was last year around INR 115 to INR 120-odd crores, which has gone up now to INR 145 crores to INR 150 crores, INR 157 crores. So is there something you want to highlight here?
Yes. Vishal, thank you for your question. Of course, there are some of the minimum wages of various states that have been increased, leading to higher wages in the southern states per se. And of course -- yes. So last year, Minda Instruments Limited was also not there in these numbers. So Minda Corporation -- Minda Instruments Limited has also now been added, which has a higher manpower as well.
Sir, also, can you give me the number of total debt broken into long-term and short-term debt for this -- as of December ending?
Yes. The total debt is about INR 413 crores, out of which long term is about INR 95 crores and short-term loan is about INR 322 crores. Over the last quarter, this has come down by about INR 35 crores.
And was there any improvement in the working capital cycle this quarter?
Yes. There have been marginal improvements in this quarter based on our various initiatives that we've taken on working capital.
Sir, I don't know I've missed this part. What is the outlook regarding your understanding on the 2-wheeler business, going forward, for the next quarter and for next year? That is my last question, sir.
So the question is on the outlook of the industry. Definitely, quarter 4 historically is usually a better quarter than others. But overall, the past trend in the last few quarters of 2-wheelers have not been that encouraging. So we expect around a flattish growth for the 2-wheeler industry, particularly going forward.
And sir, just one more question to add on. Sir, our information and connected Services business has seen a drop quarter-on-quarter from INR 616-odd crores to INR 522 crores. So is it because of the softness in the 2-wheeler demand quarter-on-quarter? Is my understanding right?
No. So there are 2 key factors on this. One, in the last quarter in the Minda Instruments Limited, there was a premium purchase of about INR 30-odd crores. So this quarter, that is not there. So hence, that INR 2-odd crores has come down, #1. #2, the INR 65-odd crores has come down due to the -- or rather in line with the 2-wheeler industry also coming down with the same percentage. So our numbers have also come down, our top line has come down in the same ratio that the 2-wheeler industry has performed.
[Operator Instructions] We have the next question from the line of [ Anil Kumar ] from Jefferies Securities.
Congratulations for a wonderful performance. And I have a couple of questions. The first question is regarding your plans for your future product portfolio as EV scale up happens? And do you have any plans for any inorganic growth.
So see, Mr. Anil, all of our product lines are EV agnostic. When the EV or even IC is happening, there's a premiumization in the market happening, which is what Minda Corporation is acquiring and playing on. All of our product lines, like you see the keyless solutions are going to go through premiumization. Lock and key will go to keyless. The analog clusters will go to with -- to TFT clusters. Wiring harness will have with regulations and EV have more content. Of course, in the electronic EV space, there is a focus of power electronics, such as the DC-DC converters, battery chargers and other PDU, BDU as I've explained, are going to be part of the portfolio. So we have a clear strategy of [indiscernible] in our EV product area on where -- which segments we would like to target, what product lines we are looking at and what are the expertise we would like to build, both organically and through partnerships.
And the next question is on -- what are your plans regarding leverage in China Plus trend that we are seeing in the manufacturing sector? Are you building anything significant? Or do you have any specific plans?
So we do continue to explore the opportunities. Definitely, we can see a shift from the export order sites. So the customers who have been rather exporting or rather importing from China are moving on to India, and which is where we are capturing some of the opportunity. As you can see, our exports have also grown year-on-year and quarter-on-quarter across all divisions, and this is where the biggest opportunity lies.
That's all from my side. Congratulations and all the best.
Thank you, Anil.
We have the next question from the line of [ Arihant Sharma from Infinity Capital ].
My first question is related to which key geographies are you exporting to any of this delta?
Yes. Our major -- or most of our exports are to Europe.
And any other regions?
Yes, we are also exporting to America. We're also exporting to Latin America and Southeast Asian countries also.
And my second question is, how has the competitive intensity in the quarter 3 in the key business verticals of Mechatronics and Wiring Harness.
Sir, can you repeat the question, please?
How is the competitive intensity in this quarter related to the key business verticals?
You mean by competition or you mean something else?
Yes, competition, yes.
So definitely, the competition is not there when it comes to the keyless solutions, as I've already explained before. We are the only company offering the keyless solutions. Of course, competition will follow. But all the RFQs of 100% RFQs are being won for the keyless solutions on the premiumization. On the clusters and sensors, there are of course various competition. It's a cutthroat competition, very honestly, yes, but we are winning orders all across, whether it's EV and IC and across all segments; also gaining share of business as well as cross-selling and increasing penetration over new customers as well.
[Operator Instructions] We have the next question from the line of [ Sachin ] from UTI.
Sir, just 1 or 2 questions from my side. Maybe your comments on wiring harness. I know you commented on this competitive intensity, but especially post BS VI, is there any loss of market share for us? If you can give some color there? And second question is also related to this, which is to do with the indigenization of components and how much margin improvement do you see over the next couple of quarters.
Yes. Sachin, thank you for the question. Yes, firstly, we acknowledge that the wiring harness division continues to perform below our expectations and below the potential that it has. We are working on it on multiple fronts. If I first to share with you that from BS-IV to BS-VI, there has been a content increase. And going forward, there will be also further content increase in tractors from stage 4, to stage 5 and also electric vehicle mobility. We are doing various actions and initiatives focusing on internal. If you see a few quarters back, there was a concern in terms of the raw material fluctuations. So we have addressed that issue and permanently taken care of it with various strategies that we have taken from front end and back end. Secondly, on the component localization, as I've also explained before that this is a long lead time item and issue. Currently, we are out of the all components, we are sourcing about 10% to 12% internally. And going forward, in the midterm to long term, this is going to go upward of 50%. And of course, the major concern or the roadblock is the lead time taken for the customer approval as we have to put in our connection systems and this takes approval of the complete validation of a new vehicle mobility. So these are some of the areas that we are doing. Of course, as I mentioned, we're consolidating our plants and also opening new plants to get the best infrastructure, to offer the latest lines, as well as the operational excellence for the wiring harness. Our current facilities are not that equipped or not that advanced, if I may say that, what they should be and what they need to be. So we are some of the areas that we are focusing on in order to increase productivity and improve profitability.
[technical difficulty] by when do you think it should come through. And if at all it happens, what's the level of improvement you think in the numbers would come through?
It will be taking about 6 to 8 quarters, just in putting primarily because of the lead time and time to develop. And we will see at the group level, about 50 to 60 or maybe 50 to 100 basis points over the next quarter once this starts improving.
And what kind of investments do we need to put in place to modernize our facilities for this specific issue?
See, wiring harness typically is a labor-intensive product. And -- but now we are working across various plants and various technologies in order to automate this, which is, again, not done in the world, and we're exploring such advanced manufacturing excellence and production excellence activities. So I will not be able to give you a number, but yes, it needs significant investment in terms of upgrading our facilities and plants.
I'm just trying to understand, maybe for a 100 basis point improvement, is there any ballpark number or any IRR that -- will that be asset dilutive? Does it make sense for us to completely modernize? Any number, CapEx number that you can share us…
All I can say is there has to be a [indiscernible] or cautious approach. So a vehicle or a 4-wheeler advanced passenger vehicle wiring harness needs to be built in a particular plant or an EV wiring harness needs to be built in a particular plant versus a tractor wiring harness. So each plant is different based on the product mix, the customers and the location. Hence, we are having various strategies to commonize them, to clock them, also be close to the customer and judiciously doing capital allocation on the requirement of the new technology and products winning that we are doing.
Maybe one more question from my side. On the new product range that we just spoke about or we are endeavored to get into, which are, let's say, more to do with the EV or, let's say, a keyless entry that products that we're talking about. What's the progress from our side? I know you've been sharing some order inflow numbers, but if you can share more color in terms of maybe the revenue numbers that we would have achieved till date at the product level and maybe client level approvals? If you can share more color there.
So our order intake across all the products is very healthy. As I mentioned in the first 9 months of this year, out of the INR 6,000 crores of order intake, about 20% is coming from the EV customers. So far in the quarter 3, we have done about INR 45 crores of sales with the EV customers. So in the first 9 months is about INR 90-odd crores will translate to about 2% to 3%. And this is across various segments, various customers, including startups as well as well as large OEMs in a lot of segments, also including exports.
We have the next question from the line of Abhishek from Dolat Capital.
And congrats to decent set of number this time. Sir, my -- few questions from the information and connecting system. The company has secured large orders for the TFT cluster amount of INR 2,000 crores in the passenger vehicle. So how much revenue can we expect in FY '24? And what would be the EBITDA margin?
So I will not be able to share the profitability statements. But of course, the order intakes usually take about 2 years to develop, especially our advanced product like a TFT cluster. So the SOP should start in the midyear, mid financial year '25 or next calendar year. And of course, the order intake is a -- we can on a thumb rule state why therefore, that comes to an annual number.
And sir, how was the revenue performance of Minda Instruments for the 9 months basis on the top line and EBITDA?
Yes. One second, for the Minda Instruments, we have done on the 9 months about INR 530 crores with an EBITDA margin of about 11%.
And what is your target for the next year?
Sorry. W
What is your target for the net year?
Our target is to grow higher than the industry. This is primarily catering to the 2-wheeler segment. So definitely getting more and more business from the electric vehicle, mobility, other segments and do this higher than industry numbers.
And sir, in the wiring harness business, how is the mix for 2-wheeler CVs and the passenger vehicles?
So primarily about 50% comes from the 2-wheeler space, about 30-odd percent comes from the -- sorry, commercial vehicle aspects and the remaining comes from the 4-wheeler and tractors.
So sir, despite a strong mix in the wiring harness business, your margin is still at 7.4% or 8%. And as you mentioned that semiconductor prices is cooling down. So -- and the noncash prices has also gone down. So what is the key concern for the margin expansion?
Abhishek, this explains the concerns and the way forward for the wiring harness division and the previous question asked. I'm happy to repeat the same that we are doing multiple activities and actions. We have reduced the raw material fluctuation impact on the group with various internal and external strategies. And that result, I think, can be seen over the last few quarters. On the internal front, one of the most challenging and most opportunity that we have is on the localization of the components, which takes a lot of time in terms of at least 2 years for the component validation from the customers. Currently, we are using about 10% to 12% of our localized in-house made components, which is expected to go to 50% in about 6 to 8 quarters, which will [indiscernible] 100 basis points.
But you have already started the PCB manufacturing in-house, plus that cost has gone down in this quarter despite we are not looking any improvement on a quarter-on-quarter basis in this segment.
Sorry, I didn't understand the question. PCB is not anything to related with the wiring harness.
And my last question on this -- how much is the current net debt of the company, sir?
Sorry.
Current net debt.
We are almost cash -- net debt free. So we have net debt of about INR 56 crores.
But if we see the differences on the interest cost plus other income that is huge, we are seeing this huge interest cost every quarter. So why we are sitting on the cash and we are not paying the debt. Even that the interest cost has gone up significantly.
So your voice is not clear, Abhishek. Can you repeat the question, please?
Sir, if we see that interest cost has gone up significantly, and this is much higher than the other income. And -- so why don't we pay the -- why we are sitting on the cash despite -- given that increase in the huge interest cost?
So yes, I'll ask Mr. Vinod to take up this question, please.
Yes. So this needs to be seen from 2, 3 different perspectives. One that we talked about the net debt position, actually. And we need to look at the cash position in our [indiscernible] Asian business then in Minda Instrument and then in Minda Corporation. While yes, we have a sort of cash and bank balances, I can see a level that is a stand-alone level also with the corresponding debt. But we want to keep the cash ready for any opportunity that may come in our way, actually.
So it will be the difference.
On the percentage point interest rate differential, we are okay with that.
But every quarter, we are paying INR 6 crores to INR 7 crores arbitrage as the interest cost. And so the annual cost could be around INR 28 crores, INR 29 crores. As you said that net debt is only INR 50 crores, INR 60 crores. So in a net debt of INR 50 crores, INR 60 crores we are saying that INR 25 crores to INR 28 crores kind of the interest cost. Is it the right decision of the management? It is very difficult to digest at this point when the interest cost is quite high.
No. Like I mentioned that the position of cash needs to be seen at company level, like a [ tension ] level in our overseas subsidiaries, we have a cash balance of about INR 50 crores or so. And we know that, that needs to be repatriated efficiently. Similarly, in Minda Investment also, we have cash balance, which needs to be deployed. And therefore, the position as stand-alone Minda Corporation needs to be seen separately.
We have the next question from the line of Mohit Khanna from Banyan Capital Advisors.
I have a question regarding the EV business. So you did mention that your revenues from EV from -- for 9 months is INR 90 crores. Could you also please talk about the profitability of this INR 90 crores of the EV business? That would be first and I'll come back to the second.
So Mohit, the profitability varies. Of course, the products which are under the premiumization, for example, keyless solutions have a higher profitability. Also, there may be low profitability in some of the products because still they are on the start-up phase and the volume have to still get -- have to still pick up. So the economies of scale have to get come in place to see. So that yes, overall, our intent for that every product that we win or every project that even needs to be much higher than the current profitability.
So is it fair to say that this INR 90 crores of revenue is earning more than the operating EBITDA margin of 10.7% that we are generating at the consolidated level?
I can't give a direct answer to that, but yes, they are in line.
And also, you did mention regarding the modernization of the wiring harness facility. I'm not sure if I missed that. So how many such facilities you need to upgrade? I think in total, you have around 34 facilities, and that's all company by total. So how many of them is wiring harness and how much of them needs to be upgraded? And do you foresee any sort of loss of business while you are upgrading the facility?
No. So there are 8 facilities of wiring harness across India. And every facility has a different capacity utilization and different level of modernization, standardization and advanced electronics and advanced production systems. We are doing 2 fronts. One, we are doing consolidation. For example, there are 4 plants in the north. We are -- and we may decide that we may do it in 2 plants or continue to do 3 plants, depending on the customer requirements as well as what strategy fits best. And similarly in the south, we have other plants as well, which we are deciding to maybe open new plants, give more credit to the customer and have advanced because maybe there the capacity is running at about 85%, 90%. Hence, it is not possible to close down the lines and shift to new production facility. So there is a multiple and mixed bag strategy that we have to apply in order to open new facilities, consolidate new facilities and expand new facilities depending on the customer requirements and the lead times.
So when can we expect a little bit more firm answer on the consolidation of the facilities and upgrading. So regarding the CapEx cycle or I would say, a CapEx plan from the company.
We already started a new facility in Pune for Wiring Harness division, which is again for the west customers. We already have existing 2 facilities in Pune already. And now we will slowly maybe transfer the businesses. Not all, it's not possible. The additional new businesses of electric vehicle, mobility, passenger vehicles or advanced technologies will be coming in from this position, this facility, sorry. And also, we may duplicate some lines. So of course, we are adapting various strategies, whether it should be our own land or our own building versus it could be leased or OpEx or whatever. So it's a different model, and I will not be able to comment on each facility as of now.
The last one from my side. Just coming to the growth aspect. So for the fourth quarter, I believe you mentioned that you expect a flat industry growth. So what does that mean for Minda Corp? And how do we see growth 2, 3 quarters down the line? Do you expect next few quarters to be INR 100 crores for the industry and Minda outperforming by how much percentage points?
So Mohit, again, I can't comment on industry, but the 2-wheeler aspect was about a flattish growth. Typically, quarter 4 is one of the better quarters in the entire year. As far as Minda Corporation is concerned, our single most objective is to grow higher than the industry. So if the industry is going flat, we would like to grow by 10% to 12% higher than the industry with all respects. So we continue to focus on that. And I think we have been delivering that for last 10 quarters consistently and sustainably. And we wish to do that with all the initiatives going forward as well.
We have the next question from the line of Jay Kale from Elara Securities.
So my first question is regarding your smart key solution. So we understand that you've done a INR 90 crores revenue from the EV business, how much of that would be smart keys. And are you seeing adoption of smart keys incrementally for ICE 2-wheelers as well, at least on the premium side? That is one. And secondly, within the EV 2-wheelers that are sold today of the high-speed scooters, approximately how much percentage would have adopted smart key solutions and this also entails the cost angle to it?
So out of the, let's say, quarter 3 numbers, I would say about 60% or 50% to 60% comes from the security systems because that's one of the first products which is taken early. Out of this, many of them is in the exports segment also. We've been exporting keyless solutions for the last 2 years, irrespective of IC and EV. Going forward, of course, there is more penetration in the IC or EV where the more premiumization is happening across all 2-wheeler segments. Definitely, the higher segments will see the adaptability first and the EV segment will see adaptability first compared to the commuter segment. If I speak about the future per se, typically -- again, as I mentioned, INR 4,000 to INR 5,000 is the keyless product, sort of a 1 lakh scooter, about 4% to 5% is typically the cost of for the complete keyless solution.
And what I meant to say is that out of the, say, 60,000 to 70,000-odd EVs, 2-wheelers, high-speed scooters that are selling per month 60,000, 70,000, how much percent would have adopted the EV solution it's not all high-speed scooters would want to get that additional cost.
See, we will answer it little differently, Jay. The likes of the top 5 customers that are there in the EV space, such as Ola, Bajaj, TVS, Hero Electric and all. I would say about 40% to 50%. Again, that also, if you look at, for example, in the bikes like Hero Electric, they are high speed but yet low cost. But if you look at Ola, they are high speed and high cost. So again, the value chain is the same that it first penetrates in the higher segments to the likes of Ola and Vida and others. And then you will eventually probably or should see them in the likes of Hero Electric.
Then my next question is on the wiring harness side. Just dwelling on the localization part. So you understand that right now, you'd be going ahead with localization for the ICE wiring harness of the low-voltage wiring harness. Going forward with EVs coming in and which will also require some bit of high-voltage wire harness, where are we in the curve in terms of localizing them from the start itself because that will be a key metric to get orders for EV wiring harness as well since high-voltage wiring harness will entail a lot of cost and unless you localize it, it might be difficult to get orders over there.
Yes. Good question, Jay. It's the same funda. Of course, because the volumes are low, hence, the industry continues to import the high-voltage connection systems just because they are available at an accepted quality and accepted technology overseas. What Minda Corporation is doing both fronts. We are looking at tie-ups with the EV high-voltage connectors for all segments globally as well as we have set up our in-house shop and design center for EV component manufacturing and designing.
We have the next question from the line of Vignesh Iyer from Sequent Investments.
Sir, I would like to know what is the capacity utilization for quarter 3 and 9 months FY '23 for all the division specifically like security solution, wiring harness, die casting etcetera.
So again, various facilities or various segments have different capacity utilizations. If I speak about Security Systems division, it's about 65%. Wiring Harness is about 75% to 80%. Die casting division are about 85% and other electronics are low, which are about 35% to 40%.
So this is for the quarter 3, at present right?
Yes, it's pretty much the same throughout the year.
So the 9 months number, would it change much?
Not really. It will be almost in the same line.
We have the next question from the line of [ Rajesh Kumar ] from [ Share Giant ].
My first question is, how is your EV portfolio panning out? And which all products are under development in EV segment?
So if you see the slide that we've already posted consistently on our presentation, which is Slide #18, our kit value for the current products are about INR 4,000 to INR 5,000. The product -- the current offering is going to go to about INR 10,000 with the current product offerings and additional INR 8,000 to INR 10,000 for the new power electronic products that we are doing. If you look at the sheet -- starting from the top right, with connected clusters, instrument keyless entry solutions, telematics, die casting, sensors, wiring harness. These products are already in our portfolio and supplying. Also if you look at the left side, such as the DC-DC converters, battery chargers and other PDU, BDUs are also being supplied to the customers already in mass production. And under development are about other 3 to 4 product lines, which we are working on organically and with new partners.
My next question is on your PV segment sales has been in the range of 13% to 14%. Is there a plan to grow your PV sales?
Yes. We would like to definitely grow our PV sales as for all the right reasons. We are adding consistently new product lines as well as making breakthrough in our products to the 4-wheeler OEMs, for example, instrument casters. We've now got -- in the last 2 quarters ago, we got a big breakthrough in the 4-wheeler passenger vehicle cluster space. All our sensors, for example, are now being focusing on cross-selling as well as offering different customers. We have added new product lines such as the [indiscernible] with our joint venture. We are offering new product lines with ADAS solutions with our partner from Korea. Minda Vast continues to focus on the order book solutions for the vehicle access product lines in the 4-wheeler vehicle access space. Having said all of this, definitely, this jump of 14% to about 30%, 40% will not happen tomorrow. This will happen over a long-term period.
What kind of impact raw material prices are on the Q3 FY '23 performance of the company. And how has been the key commodity prices behaved in the last quarter? And what Minda as a company is going to negate the effect of fluctuating raw material prices?
So I'll give you an answer one by one in terms of copper, zinc, tin, lead, aluminum, nickel, if you want, but I'll focus on the products that impact us the most. If you look at copper, which impacts us a lot on year-on-year, they have gone down by 17%. But on year-on-year, they have increased by 3%. Aluminum has gone down year-on-year by 16% and quarter-on-quarter by 1%. So if you look at the graph, which is to be published by [ LME ] and other websites, year-on-year, they have increased, but they are still higher than the -- compared to last year. And quarter-on-quarter, they've started stabilizing. So there are various initiatives that we do from the front end and back end. From the front-end side, of course, there are -- from the customers, we have arrangements on all our -- or most of our products, commodities for the back-to-back arrangements which are paid over 3 to 6 months. And from the external side as well, for the suppliers, we have created some strategic alliances on how we can mitigate these ups and downs.
We will like to the next question from the line of [ Bismith Naik ] from RW Advisors.
One question from my side. This premiumization that we talk about. Can you give us -- can you quantify it in any way as to what percentage of revenue used to come in FY '21, '22 and 9 months FY '23?
See, typically, our kit value has been increasing by 20% to 30% year-on-year due to the premiumization. So let's say in 2-wheeler if we used to offer a INR 100 product, it is now about INR 120. Then the year after, that's about INR 140 or INR 150. So this is typically about between 1.2 to 1.3x with typically of all our product lines that go year-on-year.
And if I heard it correctly, 20% to 30% of our components are indigenous. This is pertaining to wiring harness only, right?
Yes, it is about 10% to 12%, not 20% to 30%.
10% to 12%, on a group level, you're talking about or wiring harness?
We are primarily talking about wiring harness division because that is the significant material in-house manufacturing.
So this is supposed to go to what percentage in the next 6 to 8 quarters?
As I mentioned, it is supposed to go to about 40% to 50% in the next 6 to 8 quarters, depending on various initiatives and approval from the customers.
We will move to the next question from the line of [ Hari Shah ] from [ HS Investments ].
Just wanted to know the division-wise capacity utilization about the company, how are our CapEx plans lined up? And if you can share the cost of debt and the control level for the current quarter?
Sorry, there are multiple questions. I'll go one by one. I already answered the question on the capacity utilization. They are different across different segments in different plants and divisions. Security division is about 65%. Wiring Harness is about 75%. Diecasting is about 85% to 90%, and electronics are about 35%.
These are for current quarters or the 9 months?
They are for the current quarter and largely, they remain the same over the 9 months.
And how about the CapEx plans?
So typically, CapEx is about 4% to 5% of our top line, about 2% to 3% goes in our technology and R&D. About 1.5% to 2% goes in future investments and future technologies and future CapExes for growth, and about 1% to 1.5% is on the regular maintenance CapEx.
And my last question is what would be the cost of debt at the console level during the current quarter?
So I'll ask our CFO, Vinod, to answer this.
Yes. So at console level, the cost of debt would be in the range of about 7%, 7.5% for the quarter.
We have the next question from the line of Navin Matta from Mahindra Manulife.
A couple of questions. One was, if I look at our CV segment revenues this quarter and compare it to the second quarter, there is a slight decline. Whilst we've seen improvement in production growth for CVs, I was just trying to understand why would that be the case?
No, Navin the quarter 3 is almost same at about 29.2%.
I'm talking about the absolute revenue that is down and let's say, production growth for LCVs and MHCVs is up by 10%. So just trying to understand if it is a specific model or a specific customer where we would have.
Quarter-on-quarter, the industry has gone down by 6%, and our segment-wise revenue is almost the same. So we…
You would be including LCV in this?
No, this is only purely CVs.
MHCV.
Correct. All CVs.
Including tractors.
Including tractors. And secondly, sir, if I just kind of normalize that impact of INR 30 crores in the second quarter. I'm just trying to understand if your margins, if you compare to 2Q, ideally, it would be lower this quarter by almost 30, 40 basis points if I kind of make that adjustment. So have we kind of seen a mix effect or it's commodity in this quarter?
So I'll ask Vinod to answer this question, please, Vinod?
Yes. First of all, see, we need to see the margins till the time those are moving in a rather narrow range of 30 basis points here or there [indiscernible] this won't be cause of concern. There are many moving parts actually so far as auto and business is concerned. One is the impact of commodity prices, which we passed to [indiscernible]. Many a time, there are delays in receipt of revised sizes from customers. So to this extent, there are sort of variations. But those need to be within a time, which should not sort of impact the overall trend actually. Beyond this, there is nothing.
Sir, I'm trying to understand this in the context of ideally, you should have seen some benefit of lower commodity cost and also pass through. So in that context, ideally, we should have seen a margin expansion, but we've seen a contraction. So some of it is understood by the operating negative leverage, but I was just trying to understand directionally, is it commodity or is it purely mix in small ways.
Yes. If we really closely look at the commodity prices, actually in Q3, there was a slight upward vis-a-vis Q2. While, of course, if I compare it with, say, Q1 or Q4 of last year, there, of course, has been decline. So it needs to be seen in that perspective.
And just to kind of understand whether all the commodity benefit, the fall that we've seen in the last couple of quarters, is that well reflected in this quarter? Or you would assume that some more pass-through should come about?
No, no. It has completely been sort of incorporated actually.
It is incorporated.
I don’t think that on account of pass-throughs, it should have any sort of adverse impact on our margins at all.
No, sorry, I was actually asking whether it should have a positive effect, if we have passed through and commodity costs have also come down, should we see a benefit on account of that on our gross margins?
Yes. So Navin, yes, again, primarily, as I mentioned, quarter-on-quarter, either they have gone up or gone down by 0.1% or 1% or 2% there's not much of a difference in the commodity lag per se. Of course, exports do take some time in terms of the payment terms and all that. So that is a little positive side that we may see in the future. But again, it depends on the large sale that happens.
Thank you. Ladies and gentlemen, we will now close the question queue. And that was the last question. I would like to hand the conference over to Mr. Aakash Minda for closing comments. Please go ahead.
Thank you so much, everybody, for joining once again. Again, our focus is to deliver consistently and sustainably, and we've been doing for the last 10 quarters. And I would like to reiterate that we have done a closing of -- a revenue of about INR 1,068 crores with a 10.7% EBITDA. One of the important factors going forward are electric vehicle mobility, more products per customer, more customers for our products, focusing on technology as well as operational excellence, going forward. These are our core areas of focus going forward. Thank you very much.
Thank you, members of the management. Ladies and gentlemen, on behalf of Nirmal Bang Institutional Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.