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Ladies and gentlemen, good day, and welcome to the Q1 FY 2020 Conference Call of Pricol Limited. [Operator Instructions] Please note that this conference is being recorded. At this time, I would like to hand the conference over to Mr. Anuj Sonpal from Valorem Advisors. Thank you, and over to you, sir.
Thank you. Good evening, everyone, and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the Investor Relations of Pricol Limited. On behalf of the company, I'd like to thank you all for participating in the company's earnings call for the first quarter of financial year 2024.
Before we begin, let me mention a short cautionary statement. Some of the statements made in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to management.
Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions.
The purpose of today's earnings call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review.
Now let me introduce you to the management participating with us in today's earnings call. I hand it over to them for opening remarks. We have with us Mr. Vikram Mohan, Managing Director; and Mr. P.M. Ganesh, Chief Executive Officer and Executive Director; Mr. Siddharth Manoharan, Director of Strategy; and Mr. Priyadarsi Bastia, Chief Financial Officer.
Without any further delay, I request Mr. Mohan to start with his opening remarks. Thank you, and over to you, sir.
A very good evening. On behalf of the management team at Pricol for the investor call for Q1 of financial year '24. My name is Vikram Mohan, the Managing Director of the company. Joining me on this call today is our CEO and Executive Director, Ganesh; our Director, Strategy and Project, Siddharth; and our CFO, Priyadarsi.
I'm sure all of you would have had a chance to see the presentation that has been uploaded. Some of the key financial highlights this quarter, we've had a revenue from operations of INR 532 crores or INR 5,221 million, an EBITDA of INR 66.5 crores or INR 665 million with an EBITDA margin of 12.74%. We have had a profit after tax of INR 319 million or INR 31.93 crores with a PAT margin of 6.2% and basic EPS for this quarter of INR 2.62 per share.
We have also dropped a cash profit of INR 50.97 crores, which is almost INR 51 crores for this quarter.
At a consolidated level, our long-term borrowings are 0 in this quarter as against INR 65 crores that we had in the same quarter of the last financial year.
At the debt equity level, we are almost debt-free company. Including our working capital, our debt equity stands at a very low number of 0.11.
Some of our key business highlights, a couple of important awards came our way. Suzuki Motorcycle India gave us the Best Supply Chain Management at their annual supplier conference held recently. We received an award from Ashok Leyland, the commercial vehicle manufacturer. A prestigious Supplier Samrat award, where we were judged #2 in the -- among their supplier base for proprietary parts. We also received from the World Manufacturing Congress a most iconic organization award.
We have started investing heavily in modernization to meet the growing needs of our customers and changing needs of the business, and we will continue to do so in the next few quarters, as mentioned by me in the last call.
Company is on a firm footing with a strong order book, and we look forward to good quarters in the coming year barring any external factors, which we do not anticipate.
I'd like to hand over the call to our dynamic CEO, Ganesh, to take it forward. Thank you. Ganesh, over to you.
Thank you, Vikram, for setting the context. Good evening, once again, to all of you. We have outperformed the market. I'll just give you some market information. When compared to the previous year same time, Q1. The market has marginally grown by about 2.64%. Against which, recall growth has been 19.54%.
Let me give you the context. In the export, we have grown by [ 41.72% ] when compared to the previous year quarter. As we explained during the previous investor call also, the value add of Pricol has been growing steadily. The same driver information system what we supplied 5 years back, transforming from mechanical to [indiscernible] the value addition is what is giving us to perform better than the market.
The quarter-on-quarter sales actually we have clocked INR 517.6 crores as against INR 501.13 crores during the last quarter due to the highest ever sales for Pricol during Q1.
And on the select products, you have seen the -- some of the new launches, whatever we have made. We have started a new business for the M&HCV, the new clusters, which has been launched by Tata Motors from Q1 of this year. And also on some new platforms for Tata Motors for the passenger vehicle as well for the CNG version.
Also, we have launched some new products for Force Motors. And Bajaj also has come out with their new 3-wheeler where I'm sure that you are able to read in the papers for that we have developed a new instrument cluster.
That's it for me from the business introduction side and then over -- back to you, Vikram, for the questions.
Gentlemen, would you like to begin the question-and-answer session?
Yes, please. [Operator Instructions]
[Operator Instructions] We have the first question from the line of [ Kaushal Kedia ] from Wolford PMS.
Am I audible?
Yes. You're very audible.
As the second largest manufacturer of [indiscernible] system in the world, so I do want to understand is it because -- is the monetary reason in a supply chain in place or we have some kind of patent or is it because we are -- our products as opted to other players is something that I'm trying understand.
[indiscernible] overnight achievement. Globally, the largest player in the container driven by older as being one of the largest 2-wheeler makers in the world and special globally. Having said that, Pricol has constantly been working on the vertical of 2-wheelers to develop the latest technologies and offer them to our customers.
And we supply over 20 2-wheeler makers in India and globally, which has given us the second largest position globally into wheeler driver information systems where we are able to offer the latest generation of products at optimal cost.
This has been driven by our continuous innovation. We have 440 engineers in our product development and process development team. So out of our total 900 employees, 440 are dedicated for product and process development, which gives us some edge over many of our core.
We will move to the next question. Before we move to the next question, we have just received feedback that your audio sounding distant. If you could come a bit closer to the instrument.
Is it okay now?
Yes, much better. We move to the next question from the line of Chirag Singhal from First Water Capital.
Sir, I just wanted to understand. On your FY '26 target production of INR 4,000-odd crores of revenues. So how much of the incremental sales will be coming from the product premiumization and how much of it will come from the increase in the volumes.
Chirag , if I understood you right, we have given a guidance of INR 4,000 crores for FY '26 of which INR 3,600 crores will come through organic means and INR 400 crores through inorganic means. We have assumed a certain conservative growth rate in the market from now until FY '26 in our product segments and confirmed LOIs that we have received, which is shown as a visibility for INR 3,600 crores.
There are 3 categories: one, there is certain phaseout of end of life cycle, which we will see revenues going out. And as my CEO mentioned, a large part of this growth is going to be driven by premiumization of the product for which we have already received and also the third category, new product launches or new business wins with customers or product segments that we have not entered into. So that's how it's going to be classified.
Now this would be a very long question if we start going into each category. If you can drive to us, we will be able to -- or set up a separate call, we will be able to go into more granular details.
Sure, sir. I'll do that. That was helpful. My second question is on.
Can I request the basic housekeeping route, but please come back into the queue for the second question so that others are given an opportunity to ask their questions, please.
[Operator Instructions] We have the next question from the line of [indiscernible] from Invest Analytics.
Sir, my question is on semiconductor. Basically, semiconductor story is building up in India. And PNS is also there for TFT display set companies like [indiscernible] had proposed the investment in this area.
Go a little till slower case. Your voice is garbled.
Okay. Right, right. So I was talking about the semiconductor story that is getting built up in India. So my point is what I believe is TFT is something for which Pricol is having in now technologies. Although right now, we are doing for auto sector. So in future, do we have any plans? Or is it possible that we can enter into display fabs or something like that supplying to the semiconductor industry? Are we having such capabilities? Or the 2 things are totally different from each other? How do you look at this sir. Kindly help me to understand?
We completely different. We are as different as chalk and cheese. We are an information system company, particularly a driver information systems company. We aspire to get also into industrial insulation systems by way of gauges through inorganic means if the right target comes by.
Semiconductor manufacturing in India for it to reach fruition and some degree of stability is, I think, at least 3 years away because it's massive investments, capacity building and stabilization. So that's not an area that we are looking at and it is completely a very, very different direction from -- in which we are -- have aspirations for growth.
Understood, sir. And can you put some color on the addressable market, which we are targeting in battery management services and through the growth? And in that market, what kind of share are we looking to gain.
With the growth, it is not in battery management systems, which we connect.
No, no. I was talking about both I'm talking about both BMS as well as whatever we are doing with the Sibros.
So that's because BMS is a different vertical. Pedro is a different vertical -- the proof of product is ready. In both the cases, we have just started the road shows for the customers. And I think in about 2 quarters from now, we will have much -- better visibility of what we are hoping to achieve.
Having said that, as I said in my earlier call, the revenue from these relationships, we are really expecting it to kick in only after FY '26. It's a very minimal number taken for even FY '26. So it's not going to be very material in the next few years for our guidance of INR 3,600 crores.
We have the next question from the line of Hemant, an Individual Investor.
Yes. Congratulations on a very good set of numbers, and thank you for providing the opportunity. Sir, when we are targeting to over our revenues to INR 4,000 crores by FY '26. So just wanted to understand like this INR 2,000 crores of incremental revenue, will it be evenly distributed over a period of 3 years or how will it be? How much growth we can expect in '24, '25 and '26?
As I mentioned, once again, out of the INR 3,000 to INR 4,000 crores, we are expecting a INR 3,600 crores top line through organic means with whatever NOIs we have and what market growth projections and the new businesses that we intend to enter where we are already engaging with customers like displays, et cetera. And we expect it to be fairly evenly spread over this period, plus or minus 5%.
So you mean to say, sir, if we have done INR 2,000 crores of revenue, so ideally, it should be a 30% kind of growth year-on-year, right?
It's not going to be a 50% because there is an inorganic element to it. And we have 3 years to go from the last year's number to the number of INR 3,600. And organic will happen when the right asset comes at the right value if it is going to be value accrue. So the organic is going to be INR 3,600 crores.
Even if it will be evenly distributed, inorganically when the opportunity comes, right?
Exactly.
We have the next question from the line of Kaushal Kedia from Wofford PMS.
Sir, you have mentioned about the e-cockpit. So can you just explain what this is? Is it like an infotainment system would you put in the passenger ways I will require.
I'm going to ask our CEO, Ganesh, to answer this question Yes.
E-cockpit is a material which is coming in today's new generation cars, where you have one side, you have the driver information system; the other side, you have the entertainment. Both are like very seamlessly integrated something we call as a silver box design. It is nothing but you have the electronics common for both and it drives both.
And you have the screens different. What we call at the complete solution, whatever you see in the dash both on the infotainment and also on the driver information system with the TFT and touchscreens, we call the whole system, I think, e-cockpit.
So have we started supplying this already to any OE.
It is currently under development with certain OEMs. And we will be launching it maybe in the next 3 to 4 quarters from that.
We have the next question from the line of Shashank Kanodia from ICIC Securities.
Just wanted to check how is the semiconductor situation right now? And if the supply situation has eased. Did it have any cost benefits for us in this quarter?
As I have mentioned in my previous calls, we always believe that by September 2023 the situation will completely ease or come back to normalcy and which is exactly what we are seeing today. And the price advantages from this is also starting to have an impact on our EBITDA and cash flows and cash profits that you can see, which is only going to get better in debt.
Right. So sir, we had some 250 basis per gross on expansion, right? So this kind of trend is sustainable for us in terms of RM to sales?
Can you please repeat?
Sir, this quarter, we had something like 250 basis points gross margin expansion quarter-on-quarter, right, from Q4 to Q1. So this kind of run rate in terms of RM2 sales, is this strength sustainable going forward?
I always maintain that long-term sustainable EBITDA for our product and our customer mix is somewhere in the region of 13.5% to 14%, which is where we are hoping to achieve in the next couple of quarters and then sustain thereafter because if you are familiar with the automotive industry, we launched a product at a fairly high EBITDA when it reaches optimum production and then it starts reaching end of life where the margins start eroding because there's a year-on-year discount that you need to offer during the life cycle of the product.
And so there will be products with high margins, the new products with stable margins and then in the stage house there will be lowering margins. So we anticipate that 13.5% to 14% is a sustainable EBITDA over a long-term period for our current product mix and customer mix and which over the next few quarters we will reach them and stabilize at that level. What we are really driven by is our cash profit and free cash flow, which I think is pivotal to the growth of the company and providing capital for the growth of the company.
We have the next question from the line of [indiscernible] from EquityMaster.
I missed the initial comments, so please excuse me if I'm asking a repeat question. I just wanted to know, has there been any increase in contribution from passenger vehicle segments, if there have been more contracts or business development with them? And going forward, when we are giving a guidance of INR 36 billion, what is the mix expected between [indiscernible].
I will answer your second question first. DI CDS is expected to be between 60% to 65% and ACS is expected to be between 35% to 40%. This is the guidance that I've maintained in my last 2 calls and continue to maintain because that's the forecast for the next 3 years for us based on the business pipeline.
In terms of it has been increased revenue from 4-wheeler or passenger vehicle segment over the last quarter, it has just delivered the growth of the company and there has been no extra growth coming from this segment. We are working with certain phone wheeler versus passenger vehicle manufacturers on value-added products like Tata Motors and a few others. We pursue passenger vehicle manufacturers. The incremental revenue growth other than market growth is going to come after a couple of quarters and not right now.
IWe have the next question from the line of Vipul Kumar Shah from Sumangal Investments.
So can you break the revenue between -- from 2-wheelers and 4-wheelers, sir? And what is the contribution in this quarter of actuation control and food management systems?
The AC SMS division, as we call actuators, controllers and [indiscernible] system contributes about 35% of our revenue. Two-wheelers contributes about 60% of our revenue. About 35% of our revenue comes from 30% to 35% comes from commercial vehicles and also vehicles and the balance for 4-wheeler passengers personal passenger vehicle, which is the cost segment.
Two-wheeler is 35% for you, is it correct?
It's 60%. 30%, 35% is from commercial and off-road vehicles.
And 60% is 2-wheeler, 35% commercial vehicle and...
It's commercial and off-road vehicle.
That becomes 95%, then actuation is 35%.
Vipul, can I just enter and explain. I think we are mixing the segment and what I call product mix between the AMS and the driver information system, as Vikram explained, it is like 65% and 35%, okay? 65% has come from the driver information system and about 35% [indiscernible] . I'm just giving you an overall view.
And if you go into the product segment or what I call vehicle segment, the 2-wheeler, 3-wheeler is 35%. The bunch comes from, which when I say 60%, it includes the CMS and driver information system in the 2-wheeler, okay? And the 35% is coming from the remaining segments like you have the commercial vehicles and you have the tractor segment and you have the off- vehicle, which again consists of both the driver information system and the [indiscernible], okay?
So [indiscernible] . The remaining 5% is coming from passenger vehicle. This is the overall broad [indiscernible].
Yes. So just for clarification. So actuation control and [indiscernible] management is inclusive in both when you get 2-wheeler and commercial vehicle percentages, right?
All product segments, both the revisions, BIS and ACS, all of the product segments of vehicles.
Okay. Okay. I'll rejoin the queue, sir. I am still not satisfied anyway. Yes.
We have the next question from the line of Anisha Mahawar from Envision Capital.
So firstly, just wanted to understand, exports were supposed to pay a big part in us reaching the INR 3,600 crores of organic revenues by FY '26. What is the number for the current quarter that are we on track for that to be 20% plus of our revenues.
And also the split that you had just given between DIS and the other products and the 2-wheeler.
I mean, alluding to your exports, our vision and desire is to get to 20% of revenue being export driven. And even the earlier calls, I had mentioned that is one area where we have failed. And we feel we are lagging and we are only at around 10% today. And we are looking at being the balance inorganically. That has been mentioned by me in a few other calls previously also. If there has been one strategic failure vis-a-vis our vision, this is one area.
[indiscernible] impact of INR 3,600 crores because 20% was part of the INR 3,600 crores. And also, do we export only DIS?
We expect both -- we export both segments, DIS and ACFMS. In fact, ACFMS is a bit more geared towards exports and more, it does not affect the INR 3,600 crores target. The INR 3,600 crore target has been taken into account with the current LOIs that we have received and market growth and anticipated LOS and new product launches; which are on the [indiscernible].
We have the next question from the line of Hari from Sundara [indiscernible].
I just wanted to understand what are the CapEx spend that has been done in the quarter and how do you -- or how much do you budget to be done in this year and to achieve the INR 3,600 crore targets?
As I mentioned in earlier calls, we have anticipated a CapEx of about INR 600 crores almost entirely funded by internal accruals over a 2-month period, of which already 3 quarters last INR 400 crores of this CapEx is for organic growth to take us to INR 3,600 crores and INR 200 crores of CapEx to cater for the inorganic growth.
Understood sir. Is there any CapEx spend that has been made in the current quarter?
Every quarter. the 400 has been split over quarter 3 quarters from already a lot on see more quarters ago. So this INR 400 crores will be spent over every quarter is approximately spent about INR 35 crores of CapEx this quarter.
We have the next question from the line of Nishant Park, an investor.
This is regarding [indiscernible] what 15.7%. Send a notice to further increase the stake to 23% or 24% odd to CCI. And post that, we filed a repetition Manati court. And now a few -- I mean, a few couple of weeks back, one of the additional dismissed, allowing CCI to take on the matter put by.
Minda. So now what measures are we contemplating to sort of protect the minority shareholders and sort of help prevent us from Minda coming on board with later stake.
I'll give you a 2-pronged answer to that. One, the risk has not been discussed by the [indiscernible] information. So the injunction has been lifted with there is continuing to be a head and a further hearing date post would asking with the Medico revert with their obsolete. So that's one.
The company has taken all measures to ensure that legally we are protected and the current management who may represent have also taken all measures to ensure that we stand in control of the company. and who the matter is subdued. I will not be able to disclose anything more at this point.
We have the next question from the line of [indiscernible] from Invest Analytics.
Just a clarification on what is our target in terms of R&D spending as a percentage of revenue for FY '24?
We continue to spend between 4% to 4.4% of our revenue on R&D. When I we divided into 2 product development and process divestment because we, as a company, only believe need to have best-in-class product and in-class processes to table those products at the best quality level or optimal price to the customers. We continue to spend between 4% to 4.4% of our revenue on product and process development and emphasize that we will continue to spend this sort of number in the coming years to give us a lead over competition and continuing to keep ahead of the technology curve.
We have the next question from the line of Vijay Sukan, an investor.
So just wanted to check on the R&D spend that the company is doing. So we are spending almost 4% to 4.5% in the revenue. So can you give us some insights in terms of what are the new products that that the company is entering into? And what is the market size of it, if you're able to give some insights on that.
This is a very long answer, which will probably warrant a half an hour of discussion. I think if you can set up a call with our CEO, he would be happy to take you through some of this. Some of it is sensitive because it's IT related, which we will not be able to talk about. But I think we can talk this and take it for another call. You can write to our Investor Relations department and set up a call with our CEO or visitors, and we'll be able to take you through this.
We have the next question from the line of Kishan Nahar from Electrum BMS.
So my question was regarding this labor-related case that is going on. So I think as per the annual -- as per the latest annual report, the amount has increased around INR 47 crores. So I just want -- could you give an update on that? I think it has been increasing since the past 3 years, so just to know about that.
First, can you repeat again, you were not very clear. I could only hear the number INR 47 crores.
So my question was regarding the labor-related case that is going on. So it has been increasing since the past 3 years. So I just wanted an update because I think 2 years back, it was around INR 27 crores, which has increased to INR 47 crores.
I will request our CFO, Priyadarsi, to answer this question, please.
This provision is increasing because number of shares have increased in pro. It is for the number of years we are tending to pay them. So we are making provision in the books [indiscernible] number of years, which is getting extended.
Okay. So our judgment is that there wouldn't be any liability, if I'm right?
Can you speak a little slowly, please? Hello? Are you on the line?
Am I audible now?
Yes. Please go ahead. No, you asked the second question, which is not clear to any of us.
So my question was that -- just a follow-up on that. So as per management estimated, there won't be any material effect on the financial statement, right?
We believe there will not be, but this is the consequence of the 2009, '10 labor issues, which have been subdued for now almost 12, 13 years. So on the right side of the now, we keep making the provision, but -- and it's a long-standing provision.
Having said that, 16 cases, which was a large chunk of cases have been settled out of court and settled and see an expense in the last financial year also. And we expect the same thing to happen over the next couple of financial years and close.
We have the next question from the line of Kaushal Kedia from Wofort BMS.
Sir, one thing guys a disconnect for me to understand, since we spend 4% on R&D, why are we afraid of making more than 13% margins on EBITDA if we are spending so much of innovation. And last time you had mentioned that the DI system that we make are in between build-to-spec and build to print do we rank able to make more because other companies that are just a cross-sell companies are making autoantigen '18 [indiscernible] .
The reason is obsolescence in electronics is extremely high. So consistently, we need to keep developing on the new generations of chips. Gone are the days when you started working on a chip and had a life cycle of 5, 6 years for that chipset. Today, chipsets and processing power usually every year changes. So constantly to keep pace with technology and display systems, we need to keep spending that money.
Someone else in another fintech was asking me, when software companies are making 25% EBITDA why a company like recall where software is really a subset you can only make 13% and 14%. That's the nature of the automotive industry where we are not able to make a hell a lot more than what our customers are making because entries and the customers come back on price resin and the competitive landscape.
We have the next question from the line of [indiscernible] from Equitymaster.
My question is related to non-auto industrial clusters. Is this something that we can think of developing internally? Or will we need an acquisition to enter that area? That is first.
Second, if I may, what is the share of EV as of now and. ..
Please, as I mentioned, let's restrict to 1 question at a time. Can we enter the nonautomotive information systems space, the answer is yes because we have all the technologies required to enter that space. In fact, that space works for technology that that is 5 to 10 years behind where we are. But while we need to go for an acquisition is because these kind of selling is completely different completely. It's all about the distribution, scale and warehouses and reach globally, which is not something we call it used to because we are an OEM company with a bunch of customers very large volume. That is very small volume, thousands of customers with large-scale distributorships, dealership, warehousing globally. That's the reason we are going to acquire that market size and not for the technology.
We have the next question from the line of Vipul Kumar Shah from Sumangal Investments.
Sir, what is the contribution of products newly introduced during the last 2 years in our turnover.
It's approximately 25%. It varies between 20% to 30% per annum, but averaging about 35% per annum.
We have the next question from the line of Anisha Mahawar from Envision Capital.
Sir, we said a large part of our growth will be driven based on the LOIs we have in hand. Is it possible to provide some color on it, what is the LOIs you have in hand? Are they starting in '24 or '25? Or the mix maybe are they higher -- are they skewed higher towards EV. Any color like that?
I do not talk about this because a lot of the LOIs are confidential along with the customers. So I would not like to comment about this much. But it is based on LOIs that we are building our capacities and building our capabilities. And as far as the driver information system is concerned, whether it's EV or I think it's of low consequence. A lot of people have been asking me these questions because I said it's information being provided to the driver of [indiscernible] so whether it's me, I see fuel cell, hydrogen, it's propulsion-agnostic our business. So we are not worried about what form of proportionate.
No, I didn't mean that it's ICE or EV or 2-wheeler or so that breakup. Is that changing? And if you can't comment on the quantum of the LOI, maybe you can say is it substantial part of it expected to start, say, H2 of this year, early next year? Just to get some indication.
25%, like I mentioned, would be new product growth year-on-year, which is what we achieved last year, and we will achieve in the next couple of years. As much as -- and we are working with multiple players. We believe that the barring [indiscernible] for strategic reasons, we have decided not to work with one, as I mentioned previous from.
So as the penetration of EV happens, our growth in that area also will happen because we are working with a whole host of EV players, both convention OEMS and the new OEMs that are arched.
We have the next question from the line of Hemant, an investor.
Sir, did you say INR 3,600 crores organically, it means 80%. And the second is.
Yes, INR 3,600 crores organically with the NOI new product introductions that we have anticipated and with reasonable market growth.
It is basically 80% of the current run rate.
Pardon me?
80, right?
What are you talking of?
So basically.
Slower and clearer, we cannot hear you.
Since we clocked INR 2,000 crores of revenue in FY '23. So it is basically INR 1,600 crores of incremental revenue.
Over the next 3 years. Yes.
Yes. And sir, what is the current status on the PCI case.
Sorry, I would not like to comment about it.
Can you come again, sir?
The matter is up to this, and I would not like to comment about it.
We will move to the next question from the line of [indiscernible], an investor.
I did wanted some color on the opportunity size for your products in the electric vehicle space. And 5 to 7 years from now, how much percent of your revenues would come from the EV space.
As I mentioned earlier in the call today, we will -- whatever is going to be the penetration of EV in the Indian market, we will be maintaining the same rate of growth in the EV because we are in a propulsion-agnostic automotive systems business. And we are engaging with almost all the EV players of the cut and scale and size our.
We have the next question from the line of Akash Tamaya from -- an investor.
Thank you for the opportunity. Like you mentioned, most of your growth is going to come from premiumization. So does that mean that your capacity utilization volume-wise will remain pretty much in the same level from now until FY '26.
No, I think [indiscernible], I think there are 3 crores that's going to come. One, because the existing products will reach the end of their life cycle and new products to replace them. One will be on premierization of existing product. Third is launch of new products like discretes, et cetera. So we are creating capacity for new products. We are creating capacity for premiumization and we are eliminating capacities in mechanical and other products that is not -- that will go out of [indiscernible] crores of CapEx is to meet the needs of 3 buckets to INR 3,600 crores, but we are creating a capacity for about INR 4,000 crores, not just INR 3,600 crores.
Okay. So the CapEx will be spent on creating more capacity and kind of switching current capacities to the changing needs of the business as we move from a mechanical to electromechanical to an electronic company, the same machine cannot be used for the same product. This bag, for example, a new vertical needs a completely new manufacturing ecosystem. -- existing plants have to be done to make it more efficient. -- modernization of some parts of the plant to deliver the recessive quality level.
So it's a combination of everything. Okay.
And when you say INR 3,600 crores, would you -- do you mean that in FY '26, you'll be operating at optimum utilization?
No. I mentioned that we are creating capacity for INR 4,000 crores to INR 4,200 crores and INR 3,600 crores is what we are anticipating in FY '20.
No. Actually, I'm trying to understand that when you tell us your INR 3,600 to INR 4,000 target, are you considering that you will be operating at optimum capacity utilization and optimum premium products -- or will there be scope for more volume.
And capacity utilization for someone would be an 85% capacity utilization. We are creating capacity for a broad product mix of INR 4,200 crores, of which we are expecting about INR 3,600 crores to get utilized and delivered revenues in FY '20.
Okay. And can I squeeze in one more related question, if possible?
Maybe you can come back on to the Q3 because that's the housekeeping growth we've been following the rest of the part of the [indiscernible]
We have the next question from the line of Vipul Kumar Shah from Sumangal Investment.
So all these joint ventures or technical collaborations like Sibros, BMS, all those are exclusive or they can tie up with some other manufacturers also? So some color on this will be really helpful.
A, they are not joint ventures. They are only technical collaboration and their exclusive to for India.
So in India, they will not enter with any other manufacturer, right?
No.
We have the next question from the line of [indiscernible], an investor.
Regarding the asset turns, if safe 5 years from now, 50% of our revenues from EV. Do you think our added turns will basically increase over time.
If you repeat your question, you were not very clear. I assume that 50% of your revenue comes from EV, a, I don't think so because I don't think EV filtration in India is going to be 50% in the next 5 years. That's the fundamental proviso I believe in or may be wrong.
Access sales, I don't think are going to have any impact on whether it is EV or non-EV. It is just one more form of propulsion after which is going to be hydrogen after which it's going to be fuel cell. I don't think it has any link with the asset terms of the company.
I think we have answered a fair bit of questions covering the entire gamut. We thank you very much for your participation and asking a whole host of questions. And we look forward to connecting with all of you in the next call when we are done with the Q2 and H2 of FY '24.
Thank you very much for your participation, and we look forward to seeing you all soon. Good evening.
Thank you, members of the management. Ladies and gentlemen, on behalf of Pricol Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.