Samvardhana Motherson International Ltd
NSE:MOTHERSON
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Estee Lauder Companies Inc
NYSE:EL
|
Consumer products
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Church & Dwight Co Inc
NYSE:CHD
|
Consumer products
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
American Express Co
NYSE:AXP
|
Financial Services
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Target Corp
NYSE:TGT
|
Retail
|
| US |
|
Walt Disney Co
NYSE:DIS
|
Media
|
| US |
|
Mueller Industries Inc
NYSE:MLI
|
Machinery
|
| US |
|
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
87.5
214.56
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Estee Lauder Companies Inc
NYSE:EL
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Church & Dwight Co Inc
NYSE:CHD
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
American Express Co
NYSE:AXP
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Target Corp
NYSE:TGT
|
US |
|
|
Walt Disney Co
NYSE:DIS
|
US |
|
|
Mueller Industries Inc
NYSE:MLI
|
US |
|
|
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
Samvardhana Motherson International Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the Q1 FY '25 Results Conference Call of Samvardhana Motherson International Limited. [Operator Instructions]
I now hand the conference over to Mr. Laksh Vaaman Sehgal. Thank you, and over to you, sir.
Ladies and gentlemen, good day. And welcome to Samvardhana Motherson International Limited Earnings Call for Quarter 1 FY 2025. The company reported quarterly revenues of approximately INR 28,900 crores, which is up 29%; EBITDA of INR 2,785 crores, which is up 44% and PAT of INR 994 crores, which is up 65% compared to the same quarter last year. Being a ROCE-focused company, we monitor this metric diligently, and I would like to report that the consolidated ROCE on the last 12 months basis is now sitting at 18%. While we have a bit to go towards 40%, we'll surely make more progress on this number in coming quarters. Both organic businesses and acquired assets have demonstrated strong performance in this quarter. While on one hand, the organic businesses continue to improve absolute profitability and provide growth over the market. On the other hand, acquired assets continue to contribute to our enhanced size and scale.
All the M&As announced over the past many quarters have been successfully closed in SAMIL, and SAMIL is now a more diversified and robust platform of growth for all stakeholders. It is important to highlight that all acquired assets together have been margin accretive and as synergies start to unfold, things should improve even further. These results are to be viewed against an external environment where on the macro side, certain pockets of challenges still remain, such as commodities like copper remain inflated during the quarter and is now showing signs of softening. The logistic costs creeped up significantly due to the Red Sea crisis and congestion at the Asian ports, which resulted in longer lead times and hence, higher inventories. You can see more on this on Slide #6.
On the vehicle production side, I want to highlight that the light vehicle production remained largely flat on a year-on-year basis. Significant amounts of growth coming out of India and China is being offset by softness of demand in the developed markets, especially Europe. Some of the industry forecasts are projecting light vehicle production to be flat or even slightly degrow in fiscal 2025 as compared to fiscal 2024. This is being attributed to the evolving platform mix due to sluggishness in EV pickup. Motherson, however, is a powertrain-neutral company, which positions us well in the medium term. Further, the automotive trends of premiumization and SUV still hold forth and continue to drive content per vehicle growth, which again augurs well for us as well. Please refer to Slide 7 and 8 in the presentation for more information on this.
The diversification towards the nonautomotive business, which we set out in our 5-year plan is now gaining traction. On the aerospace side, during the quarter, we closed the acquisition of AD Industries, which brings in capabilities of soft and hard metal machining, which is critical for engine components and setting our footprint right next to the customer. In India, we are setting up 2 plants to support new product lines and vertical integration and are expected to come on stream in the second half of FY '25. Another key non-auto business being developed is the consumer electronics. It is truly a testament of engineering and manufacturing capabilities we have at SAMIL. This new vertical, we envisage that will require investments of around INR 2,600 crores over a period of time.
We are setting up state-of-the-art facilities with an estimated area of more than 130,000 square meters for this project. We expect start of production around September, October with subsequent ramp-up in production over the next year. Our CapEx for the quarter was INR 1,078 crores. As announced earlier, we are setting up new plants to support growth coming out of emerging markets. Out of the 18 greenfields we have announced earlier, 2 have been operationalized and commenced production in India and China, respectively. Additionally, we are adding 1 new plant in Mexico. I would like to highlight that 7 greenfield plants are being set up in the non-automotive space in line with our diversification aspirations. For further details on this, please refer to Slide #12.
Our CapEx guidance remains the same at INR 5,000 crores, plus/minus 10% However, with all the acquisitions closed and in light of the increased business parameter that we have with these new businesses, we are reassessing this and businesses such as Yachiyo, Lumen and ADI have all come in. During the quarter, net debt increased by INR 3,000 crores. This is primarily attributed to the M&A closures and increased working capital requirements due to the Red Sea crisis and volatility in customer schedules. The increased working capital is expected to normalize in the second half of FY 2025. Despite the increased net debt and CapEx for growth, the net leverage ratio at the end of the quarter remained at 1.5x. This reflects a strong focus on our financial prudence. The net leverage ratio is well within our management targets and our comfort and our focus is to constantly delever. Our disciplined financial track record is demonstrated by multiple rating upgrades by esteemed agencies. Please refer to Slide 11 for details.
On capital market actions, I would like to provide an update on the following. During the quarter, we also issued our first dual investment-grade bonds of USD 350 million, being a debt-neutral transaction for us. We are comfortable with our debt maturity profile and have access to a well-diversified set of capital resources with $1.4 billion available from committed and undrawn facilities and also unrestricted cash and cash equivalents. Please refer to the debt and liquidity profile on Slide 13. Our equity continues to be very dear to us. If we were to consider raising fresh capital, it will be for the growth of the company. Over the past 18 months, we have closed a record number of M&As, and we continue to see more opportunities in the developed markets.
On the organic side, we are continuing to invest in growth CapEx in the emerging markets for both automotive and nonautomotive businesses. As we evaluate these opportunities, we want to proactively develop our capital structure that will position us well to be able to undertake some of these opportunities. We hence thought it is prudent for us to take an enabling resolution for potential capital raise in the future.
I would like to thank the team for delivering great results. And with this, I would like to conclude my remarks and open the floor for your questions. Thank you.
[Operator Instructions]
Our first question is from the line of Jinesh Gandhi from AMBIT Capital.
Congrats on great results. A few questions from my side. One is, if I look at the organic growth, excluding acquired assets, the number which we have provided, organic growth had been largely flat on Y-o-Y basis. Do you expect this trend to continue given the commentary of muted vehicle production growth? Or we should be continuing to grow ahead of the industry based on the greenfield plants which are coming?
Jinesh, which number are you referring to?
I'm primarily deducting INR 6,000-odd crores from the revenues and looking at the organic growth.
Right. So look, I think definitely, there is quarter-on-quarter variance that happens, okay, Q4 versus Q1 and Q1 over what we had last year. We're also obviously adding in a lot of the new businesses that are coming in. Sometimes in quarters, depending on the launches and as they are taking, you could see some differences that happen on a quarter basis. But overall, we are seeing growth because of the macro factors of premiumization and the SUV trends that are happening and our growth in content. So over a longer period of time, we are seeing definite growth that is happening, not just in the -- because of the acquisition, but also on the organic side. But like I said, there could be small variations that happen on quarters depending on launches.
Right, right. No content obviously is one of the key drivers for us that's understandable. And second question is on the consumer electronic component business where we are looking to invest about INR 2,600 crores. So is this entirely for JV with BIEL Crystal or this is beyond that?
So this was particularly for the investments that we are making for that JV and for our businesses that we are gearing up for that consumer electronics business. So one is obviously on the glass side for the JV that we are making, but one is also for assembly of further electronics that we believe that we will have a good chance for winning a lot of business from customers.
Okay. Okay. And by when we would be -- I mean, what will be the time line for this investment of INR 2,600 crores by when it should be up and running?
So we will already see some of that business start towards the second half of this year, and it will ramp up next year. And this investment will continue for over a period of time, so a couple of years as well. So we are putting that information out upfront. But as the facility comes up and the business picks up, this will be over a period of time.
Got it. Got it. And the 18 greenfield plants, which we are investing for, would they be largely operational by end of this financial year and ramp up by second half FY '26? Is that the right way to look at it?
We just mentioned that some of them have already been operationalized with 2 of them that have come on. The rest of them are in varying stages. So yes, some will come on latter half of this year and some will obviously push into the next year as well.
Okay. Okay. And any sense on what kind of -- what would be the revenue potential of these greenfields?
It's because it's automotive and nonautomotive. I think we want to stay focused on our FY '25 number. This will add significantly to the organic side. But definitely, a lot more will come as these businesses ramp up in coming years. So I cannot give you the number exactly on that. But definitely, there's a lot of growth to come from the organic investments that we are making.
Got it. Got it. And last question on this enabling resolution. So this will be only if we get any good inorganic opportunity or this would also be to manage our organic opportunities in some of our debt covenants.
We are very comfortable with the organic opportunities and the debt covenants. As we said, we are at 1.5x net debt to EBITDA. So we're very far away from our covenants. We will continue to delever on the organic side. This is definitely enabling for what more comes in the future and if a large inorganic opportunity comes. We have a clear target for FY '25, which is to be $36 billion with a 40% ROCE. So that's just preparing us because we see a lot of challenges that are still there in the European market and the amount of focus that we are getting as being a superior engineering company in India and the further opportunities that we will get. So this is only for what we don't have on our hand right now. Everything that we do have, we are fairly comfortable with our debt profile and how the businesses are delevering with the continued performance that they are giving. This was really a very spectacular quarter for us to have these kind of numbers on the first quarter.
The next question is from the line of Mumuksh Mandlesha from Anand Rathi Institutional Equities.
Congratulations on the good results, sir. Sir, firstly, on consumer electronics business, can you talk about what kind of business opportunity size is there with this investment? And also, I mean, what kind of customers we are -- we have with us for this business?
Look, these are all highly engineered products. Again, we are working with a joint venture of BIEL Crystal. So we want to get into more of the glass side of products. They are varied customers, all consumer electronics customers could be relevant customers for this. And I believe that as the push is coming in India to manufacture more and more electronics, this augurs well and gives us the capability, and we will build a lot of customers in this field. At this point, this is all that we are able to say.
Got it, sir. On this overall non-auto picture for us, sir, what kind of growth we see over the medium term? Or what kind of revenue share we see for this non-auto side, sir?
So the target was always to be 25% business to come from nonautomotive. So of course, as you can see that not just the consumer electronics, even the aerospace and the defense businesses, these are also growing quite nicely. We also have a medical facility that is coming up in Chennai, which is helping us to diversify in that field. So these are some of the segments that we have identified. We are building businesses. And I believe a large flavor of this will come in the next 5-year plans as these businesses take scale.
Got it, sir. And sir, in the last previous question, you mentioned about this electronic assembly, sir. Can you share what kind of this product are there, sir?
Sorry, what kind of?
On the electronic assembly you mentioned in the previous question, sir. I just want to understand what is the kind of product basically you're talking about?
These are glass -- the JV is specifically for glass products that go on a lot of electronic instruments.
The next question is from the line of Raghunandhan from Nuvama Research.
Congrats on stellar performance. Sir, firstly, in consolidated numbers, the raw material cost to revenue has significantly reduced by 290 bps Y-o-Y. What would be the main factors leading to this reduction? I mean, the copper prices have gone up 15%. Can you also indicate on the input commodity side, which would be the main commodities apart from copper and plastic for us?
Kunal, can you help with this question?
Yes. Raghu, I think the way to think about it is 2, 3 things are embedded. One, obviously, the mix of businesses has changed. In quarter 1, as an example, you did not have the integrated assemblies part of the business, which traditionally does carry a lower amount of, let's say, raw material in comparison to some of our other businesses. Two, needless to say, if you think about last year, this time, you were seeing a fair amount of headwinds, a fair amount of unknown like electricity cost, et cetera, et cetera, which were all getting floated up. And hence, there was a pain period for which we had told you that we are working with the customers to reprice our products. And hence, what you are seeing in this quarter is how that repriced situation is looking like from our cost of raw materials perspective.
Three, as part of some of the commodity conversations, which had gone already again last year around similar time zones. Some of them were constructed with a pass-through element. And that, again, is what you are seeing now in terms of the raw material percentage.
Got it, sir. So integrated assemblies with higher margin repricing from customers and commodity pass-through would be the main elements. When I come to the stand-alone business, again, here, if I look at raw material cost to revenue, it has reduced Y-o-Y and on a Q-o-Q basis. In presentation, you have also referred to in-sourcing activities leading to support for margins. If you can elaborate on the same, please?
Look, the answers here also are somewhat similar. There's a whole host of new businesses which also got assimilated in this time zone. Some of our existing businesses were merged into SAMIL. So really, the 2 numbers are really not comparable again.
Got it, sir. On the Aerospace business, the revenue during the quarter was over INR 300 crores. In one of the earlier press releases, the order book was indicated as the $1.3 billion. How much would be the current order book? And over what period is it expected to be executed?
Yes, I can take this. Yes, Kunal, go ahead.
Go ahead Vaaman.
Look, the order book of the aerospace is much longer than automotive. We have not come up with independent numbers for the individual verticals. We will consider that and come back to you. But of course, there is a significant ramp-up that will happen in later years as we have put up significant CapEx for building up new facilities for the aerospace orders that we have won. So you will see further growth that happens in this business. Also, we know that there is some slowdown that is coming in aerospace on the international side, but India still continues to be a buoyant market where we see a lot of growth opportunities. So we will come back to you with more on that number. But this order book is a firm order book, which spans more than 10 years.
In one of the slides, you have mentioned about delaying launches in EVs, which has some impact on vision system integrated assemblies. How much would be the share of EV in these segments? And in overall revenue, how much would EV programs contribute?
We can look at that number on the SMRPBV numbers that we disclosed.
Vaaman, I'll help on this. EVs is currently a 9% odd share.
And this will be EV plus hybrid or pure EV?
This is just pure EV.
Just so that I can add some more to what Kunal said. I think what's important for you to understand is, again, we are engine -- sorry, powertrain agnostic. So where there are delays on the EV side, we are seeing extensions of the ICE programs, which we are also on. So thanks to Papa's direction. We've always maintained that EVs will take some time to come on board. We cannot compress time. So we always had a balanced approach and made sure that we were winning orders, both on the ICE side and on the EV side. So that if there is a slowdown, which is happening and it's taking longer for the EVs to pick up, we are still very much growing still with the content that we have on our ICE programs. So that augurs really well for us as we are still seeing growth where there might be pockets of slowdown for others.
So ICE and hybrid will both help our growth. I remember that EV was 20% of order book. What would be the share of hybrid, if you remember offhand?
I don't remember that number offhand, I'm sorry. But again, hybrids are getting a lot more traction now, but we will look at that number and come back to you.
The next question is from the line of Jinesh Gandhi from AMBIT Capital.
My question is on the inorganic growth side. So in the past, we had been staying away from powertrain-related components. Do we still maintain that strategy or now we are open to both ICE and EV-related powertrain companies?
Thanks for that question. I don't think we ever said we will stay away or stay close. I think our vision has always been to follow the customer. So wherever the customer wants us, we will definitely be there. I think we always want to have a balanced approach. You know that we have also taken over the business of Yachiyo, where portion of that business is coming from fuel tanks. And we believe that the market is big enough for all sorts of different technologies to coexist and have opportunities for Motherson to grow.
And for example, even in the future, if hydrogen is to come, then again, fuel tanks will be necessary. So we are staying very close to what the customer wants and also our acquisitions are only at the customer's behest. So we really don't decide which way we go. We are just supporting our customers' ambitions. And in that, we will always maintain a balanced approach and look at both ICE and hybrid and, of course, any other electric opportunities that also come.
The next question is from the line of Kapil Singh from Nomura.
Congrats on a great performance. I wanted to check, we've done these acquisitions recently. Where are we in the synergy journey for these? How much of it according to you has been explored up till now? Or is it very early days and there's a lot of ground to cover?
Yes. Thank you for that question. Motherson always believes that we take our time with the acquisitions to understand them deeply and integrate them and make sure that we take the right step forward. So definitely, it is early days. I think the journey has just begun with these acquisitions. So please keep watching the space. We will definitely come back with a lot more on this. But definitely, when we acquire the companies, we set ourselves with a plan, and we've just started to execute that. Until 1 year, we are also very deeply understanding the functioning of that company and understanding what the customer requirements are also. So we are still in very early days and definitely more synergies will come as we go down this path.
Sure. And on the Consumer Electronics division, I wanted to understand, is this currently the INR 2,600 crore CapEx, is this one line of CapEx with the JV that we are doing? Or is there -- because you referred something to assembly as well. So I just want to be clear whether these are 2 separate lines of businesses or currently, we are looking at just one opportunity.
Look, there are multiple opportunities and the INR 2,600 crores investment encapsulates all of them. So of course, we -- as you know, we are a highly engineering-focused company. So we're not just going to be doing manufacturing. We will also be doing assembly and any post operations that, that will require. We want to be the complete solution for our customers. So obviously, that starts with the more basic assembly. But then as you keep building on that, you will get into more highly engineered parts, which we are building for already as well. So there is a INR 2,600 crores is for the entire CapEx for this entire project for all the businesses that we envisage that we need to build to make sure that we are delivering the solution to our customers.
Okay. So some of these will be outside the JV as well. Is that the right way to understand?
That's right.
Okay. And in terms of the return profile, because it's a new division for us, so if you could give some color, are we following the same guidelines, which are 40% ROCE? And how -- we've seen sometimes the greenfields when they come up in automotive business, they are loss-making initially and then it takes some time to stabilize and improve the margins. So just if you could give some qualitative color on return profile, asset turns and expected time to turn around or breakeven?
Sure. Sure. Look, these are new businesses that we are getting into. So definitely, we're also learning as we go along. But our focus has always remained at that 40% ROCE. We do envisage that since these are businesses that move much faster, as you know, automotive program takes almost 2 years to develop and last for 5 to 7 years. But on the consumer electronics side, the cycle is much, much shorter. Newer products come out every single year. So definitely, the margin profiles and the investments correspondingly are different for these businesses. And we will continue to give you the color as we continue to perform and deliver to our customer expectations. So definitely, the 40% ROCE target is maintained. And definitely, we strive to be much faster in our development as required by the industry and also turn the asset turns and deliver more profit as required for achieving those 40% ROCE targets.
And if you could just refresh us on the CapEx plan for this year? And in light of this investment, is that included already? Or is there any change?
Yes. Kunal can add on that. But like I said in my opening comments, we are still maintaining that INR 5,000 crores for all the businesses that we envisage right now. Of course, because the number of acquisitions is high and as we are getting deeper in, we are looking at those numbers constantly. But we still hope to cover around that INR 5,000 crore mark plus/minus 10%. If there is some change or some significant new order wins as we have entered these businesses that comes, we will come back to you on that. But this entire CapEx is covering all the new facilities that we want to build in the automotive and nonautomotive side.
That is right. We will come back next quarter if we have to change this around using the revised business parameter. But right now, we are still on the belief that it should lie within INR 5,000 crores plus/minus 10%.
Sure. And just if you could share some -- what kind of visibility you have on doing further acquisitions? How is the pipeline looking like? That would be my final question.
Look, the market continues to be a challenging one. I think you've seen that the pace has really increased. We continue to see more opportunities that are there in the pipeline and are hopeful to hit our 2025 targets. But again, we will be extremely picky, and we will only go after where the customer wants us to be. But that being said, there definitely are still challenges that exist. And again, we are hopeful that we will find good targets that will help us achieve our 2025 vision.
The next question is from the line of Amit Shah from Shine Capital.
I just want to congratulate the company for crossing the INR 1 lakh crore revenue mark. It's probably one of the very few companies in India, which have crossed this milestone. So congratulations for that. Coming back to the quarter, Q1 FY '25, you had reported a super revenue growth of 29%. So just wanted to have a better clarity what the numbers would look like for FY '25 and probably FY '26 because this year is going to be a year where you're going to see a ramp-up of a lot of the acquisitions and the revenues coming into picture. And a lot of these acquisitions actually have EBITDA where the margins are actually better than our company level margins. So according to you, what would be the revenue and the PAT estimate for FY '25 because some of the brokerages that I was seeing in India, some of the brokers who are looking at INR 5,000 crore PAT number or another broker was looking at a INR 4,000 crore PAT number. So you think this number is a reasonable number according to you? Or this number can be a little more aggressive going ahead. So what is your sense on that?
Thank you for the kind words at the start of your comments, but I'll request Kunal to comment on this, please.
So Amit, as you're aware, we really do not guide on how the top line or the bottom line is going to play out. What we can certainly say is we are right now at 18% annualized ROCE for this quarter. Our target is 40%, as you know, in our 5-year plan. This is the last year of our 5-year plan. And we plan to traverse the maximum that we can between 18% to 40%. We do believe we should improve significantly from where we are right now as we head towards the end of the year. There are multiple levers for the same. Part of it, you rightly alluded to the fact that you are yet to see some of the synergy benefits from the M&A come into play.
You're also yet to see some of the efficiency parameters that should help in reducing some of the capital efficiencies or capital that is blocked right now in working capital, which should get released in the latter part of the year. As the $83.4 billion order book that we had announced last year as that comes into SOPs, you should see some of the equipment getting sold to the customer for which we are currently carrying it on our books and hence should again lighten the capital at our end. And we continuously work on building efficiencies on the supply chain side to be able to again optimize our capital deployment there. So hence, multiple levers by which we do believe that overall, the ROCE should be trending upwards as we head with [indiscernible].
Got it. So this is probably the last year of this 5-year plan. So what do you aspire for the next 5-year plan? Is it going to be in terms of profitability? Is it going to be in terms of revenue? Because in terms of ROCE, we're still at around 18% and our targets are close to 40%. Probably this year, we may probably inch up 300 to 400 basis points in terms of ROCE. But do you see in the next 5-year plan, are you all targeting a $1 billion kind of a profit in your next 5-year plan? Is that a possibility that you are thinking when you are looking out for acquisitions? Is there a thing where you can build it in your organic business as well, $1 billion profitability maybe in the next 5-year plan? Is that a number that you will be okay to work with.
Thank you for those comments. Look, we will come back to you with our 5-year plan. We usually kick that off around September, October with our internal teams. So honestly, we don't even know where that 5-year plan will take us. We are really very much focused right now on delivering this 5-year plan. I think you have to take all our targets with what is really going on in the world as well. All these targets were set before we knew that COVID was around the corner in 2020. And you can understand all the different events that have happened since that time. I think in view of all the events that have happened in the world, I think you would see that Motherson has really outperformed by any means on all the parameters of global growth and what has really taken -- what has really happened in terms of circumstances in this world. That being said, we don't change our targets or just because COVID came or the Ukraine crisis or energy crisis or inflation or whatever you want to say that has happened, we do not deter from our preferred -- from our targets.
So we have maintained it. We still believe that we have a very good shot of hitting them. But I think even in the ROCE targets, you have to understand that ROCE doesn't happen overnight. It's something that takes time. We are a growth company. As you invest, of course, the -- you invest for growth, the ROCE goes the other way. But as those businesses then start to prosper and the businesses play out and the production ramp up, the ROCE numbers also comes. So if you take those targets with all the businesses that we have had at 2020 when we were deciding these targets, you will see that there has been a steady growth in the ROCE delivery. And of course, the ROCE always comes under pressure when we do the new acquisitions and growth as that will only come in the future. So if you look at it like that, you will see that we have trended extremely well.
The company has definitely outperformed our targets on the organic side. And as these new organic businesses spend 5 to 7 years' time with us when we clean out the old issues with the company, start building new pipelines and start delivering on the new orders, the ROCE starts to inch up as well. The target of 40% is as a group. Multiple verticals have already achieved that 40% target with their organic business. And of course, no business is available at that 40% target when we start. It's a buildup process by a lot of hard work of the teams. So we are extremely pleased with the efforts of the teams, what we have been able to achieve. And definitely, we will push everything we've got for this last couple of quarters till the end of 2025.
And then we will also come back to you with the next target. But rest assured, it's going to be a big number, and it will definitely not be diluted on our ROCE targets. And definitely, we will push the teams to deliver to the best. But you'll have to be patient. I can't let any cats out of the bags because there really is no cat to be let out as we ourselves will decide that target in these coming months, and we will disclose it to the market. I hope I was able to answer your question.
Just one last question. I was just referring to your Slide #7, where you have given the production volumes for global light vehicles and global commercial vehicles. So the Q2 numbers, estimated numbers are on the lower end as per the slide. So how do you -- how are you seeing the Q2 numbers? Are they representative of these numbers for the company? Or will be doing a lot different than what was given earlier?
No. Look, Q2 globally for the automotive side is always weaker because it has a large number of holidays in August. So that is a natural phenomenon that happens every single year. I think, again, the best comparison would be to compare our performance Q2 over Q2 of last year. And as the teams, again, like I said, continue to perform better, the volumes continue to happen due to the new launches. And of course, some impact will come because of the holiday season. But we do envisage that the next few quarters, we will continue to perform as all our plans of resilience and our customer focus and driving up of efficiencies continues to take shape. So we are again very hopeful and positive and continue to deliver on all our programs that are running. And hopefully, we'll be much better than where we were. Of course, I cannot take any guarantees of what happens in the market. But this is generally what happens in Q2 because of the holiday season, you see a slight dip, but that catches up in Q3 and Q4.
The next question is from the line of Gunjan from Bank of America.
I just had a few clarifications. Firstly, on the acquisitions that have been concluded, is there anything pending to be paid out still for those transactions?
Kunal, I don't think there's anything left that is there.
Sir, the line for Kunal sir is dropped. I'm just reconnecting his line.
So while maybe Kunal join back, maybe I can go to the other question, if that's okay?
Yes, please go ahead.
Okay. So the other question was on this non-auto -- the emerging business, as you call it. You all had laid out this aspiration to get to 25% and we're roughly now at about 9% or so. Now that you have visibility on at least 2 or 3 of these businesses like, right, Electronics and Aerospace with the AD Industries transaction, could you be -- could you just give us a sense on how should we think about this 25% now? Is it in the next 2, 3 years, this seems like a very viable outcome? I'm just trying to think about how to build this extremely new segment in Motherson, where now there is a better handle. I mean, completely, the electronics business sounds quite optimistic. Aerospace with AD Industries sounds quite exciting. So how should we think about the revenue growth over the next 3, 4 years?
Yes. Thanks, Gunjan. I think, again, we'll come back with a 5-year plan on these diversified businesses as we get a much better handle on all of them. As you can imagine, they were a lot more imagination when we set them out in 2020 with, of course, plans in place to go after these businesses, but they have shaped up much better than what we envisaged with all of these taking grip at the right time. I think we will come back to you with more color on that. But definitely, the idea of 25% of group revenue will only be there and perhaps even grow in the next 5 years. But at the same time, it's not that we want to lose focus of the automotive business. That's always been our main business, and that too will continue to grow. So the pie will continue to grow.
And these businesses will obviously grow tremendously because they're at a much lower base than where we are with the automotive business. But yes, a very exciting future is definitely on the cards. I think you are seeing the traction that we are receiving is probably one of the highest levels that we have seen in these new areas of business. We're building the right partnerships. We're getting the right customers. And I think it's a very exciting future. And then what's the tailwind of what's happening on the India market, I think we are very well positioned to take advantage of these and grow very rapidly in the next few years. But please give us some time. We will give you a lot more clarity on the next 5-year vision plan for all these new businesses.
Okay. Got it. And if I can just get the confirmation on that no pending payment.
Kunal sir's line is reconnected Ma'am. You can please go ahead with your question once again, if possible.
Yes. I just wanted to check, Kunal, if there is any pending payment for the acquisitions concluded?
No, Gunjan, that should be nothing significant. There will be some payouts, which will -- which have been withheld on account of how the contracted arrangements are, but nothing of any significance going ahead.
So it's fair to assume that if there were to be nothing -- not assessing any incremental acquisitions, but in the next 2, 3 quarters, the debt should significantly come down because of the reversal of working capital and the cash flow generation in the business?
That is right. We should be looking at a deleveraging path going ahead. And we had anyway guided in the earlier part of the year as well that end of the year should be looking 1 or better in terms of net debt to EBITDA. and that's the trajectory that we still see. The only part from an M&A perspective, you may want to keep in mind, we've announced a new one in this quarter, which is our joint venture with Sojitz, where we have bought Sojitz's stake. That payout will happen in the Q2.
How much is that, Kunal?
Around about INR 230 crores, INR 240 crores.
Okay. And just last on from a capital perspective that this enabling resolution that we have, is this keeping in mind that we don't want to really breach 1.5 net debt to EBITDA when we come across a large transaction? Should we keep 1.5 as a threshold in mind?
Look, our financial policy is 2.5. I think Vaaman alluded to the fact that this is for growth opportunities, and we are proactively looking at different opportunities. As you can imagine, there's a lot of pain in the western world given how the inflation has played out, given how excess capacity resides and hence, M&A is an active space for us. And we're only trying to proactively manage our capital structure for any future opportunities that might come our way. 1.5 is not really the guidance. It's our comfort level. Our financial policy remains 2.5x net debt to EBITDA.
The next question is from the line of Joseph George from IIFL.
Just a couple of questions and one clarification. The first one is, when I look at your depreciation line, despite the addition of 3 acquisitions in the June quarter, sequentially, the depreciation amount has come down. So is this a good starting point for upcoming quarters? Or is there any one-off in the quarter?
Maybe I can take that. Look, both depreciation and amortization for the last quarter, that is 31st March '24 had certain items that had to be recalibrated at the end, specifically in regards to the release pieces, given these were newly acquired assets that were still getting assimilated then. As of now, with what we know, what you're seeing in the current quarter is more reflective of what you should be seeing going ahead. Having said so, ADI Industries, Yachiyo as well as Lumen Industries, it's there for part of the quarter only. Yachiyo is for full ADI and Lumen is for part of the quarter. So there might be some changes as we look through the full quarter piece as we move ahead. But these numbers are possibly more reflective. Also, there are PPA adjustments, as you know, which will happen as more data around this topic is picked up by our auditors. We booked goodwill of around about INR 600 crores in this quarter, but the PPA is yet to be finalized. And hence, there might be some variations, but should not be very significantly different to what you are seeing right now, give or take.
Understood. The second question was for the accounting with respect to the JV with BIEL. Will it be a line-by-line consolidation? Or will it be accounted for a share of profits because we call it a JV, SAMIL insurer.
Line-by-line consolidation.
Perfect. And the last question was with respect to the commencement of the operations. So just a clarification there. I thought you mentioned that the manufacturing in the JV with BIEL will start in September, October. Did I hear you right?
That's correct.
Okay. And lastly, the assembly operation, when is that expected to start?
That's already started.
The next question is from the line of Avish Bhansali from Chanakya Capital Services Private Limited.
Congratulations on good set of numbers. Can you just a little bit talk about the slowdown that is currently going in Europe and America and also the slow adoption of EVs, how you see this impacting us in near term?
Thanks for that question. I think -- look, the thing that Motherson has always focused on is 3CX10, no customer, no country, no component to be more than 10% of our business. I think, obviously, for the country side, India is the largest one that crosses that threshold. But otherwise, most of the other customers and the countries that we are present in is much below that threshold. So even though there is a slowdown in the market, sometimes when it comes to like EVs that we are talking about or flattish growth, Motherson is still able to grow because of our diversification and customer profile in our products. And of course, that our products are constantly evolving and are growing in content as the new program develops. So there's a lot more feature-rich content as we are doing interiors, exteriors, a lot of the attributes inside are constantly growing in product value for us. So that's how we overcome some of these situations in the market when there may be dips in different product lines of the customer and our diversification really helps us to overcome these patches.
So we are very cognizant of it. We track each and every unit of ours. We are seeing where the program launches are happening on time or are getting delayed or -- and we use those facilities to, of course, be able to do diversified business. So if one customer or one product line is not doing well, hopefully, the other customer product lines have a nice mix and there's uptake on the others. That's how we try to overcome and balance the effects that happen. And as you can see, Motherson has constantly beaten the market based on these principles. So there would always be pockets of these kind of times. And definitely, our diversification strategy and the presence that we have built now over in 44 countries, I think that's what really helps us to grow even in times where there may be, like I said, some slower offtakes of customers on certain product lines.
Ladies and gentlemen, we would take that as our last question for today. I would now like to hand the conference over to Mr. Laksh Vaaman Sehgal for closing comments.
Yes. Thank you. Thanks to everybody for being on the call and for asking all the questions. As you can see, Motherson is providing a lot of information on all our results, and all of these have already been posted on the website. If there's any, of course, any follow-on questions or any clarifications, we are very happy to take them. The Board congratulated the team on a very successful quarter 1. And as you would all agree, with the tough background, we have really done our best here and provided the best result possible with all the efforts of the teams. So thank you for your faith and confidence in us, and we continue to execute, and we look forward to talking to you all in the next quarter. Thank you so much. All the best.
Thank you. On behalf of Samvardhana Motherson International Limited, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.