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Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY '25 Conference Call of Pricol Limited. [Operator Instructions] Please note that this conference is being recorded. At this time, I would like to hand over the conference to Ms. Purvangi Jain from Valorem Advisors. Thank you, and over to you.
Good evening, everyone, and a warm welcome to you all. My name is Purvangi Jain from Valorem Advisors. We represent the Investor Relations of Pricol Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings call for the second quarter and the first half of the financial year 2025.
Before we begin, let me mention a short cautionary statement. Some of the statements made in today's con 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 belief as well as assumptions made by and information currently available to the 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. Let me now introduce you to the management participating with us in today's earnings call and hand it over to them for opening remarks.
We have with us Mr. Vikram Mohan, Managing Director; 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 delay, I request Mr. Vikram Mohan to start with his opening remarks, followed by financial and operational highlights of the company. Thank you, and over to you, sir.
Good evening to all participating in this call today to go over the H1 financial performance of our company. We thank you for your presence. The presentation has already been uploaded, and I hope all of you have had a chance to look at the presentation. In terms of questions at the end of the presentation, to give everyone a fair hearing and a chance to ask questions, we ask you to restrict yourself to one question at a time and rejoin the question queue please.
I'm pleased to announce that we have had higher than market growth for the quarter 2 of financial year 2025 quarter ending 30th September. Our revenue from operations stands at INR 6,500 million with an EBITDA of INR 871 million, resulting in an EBITDA margin of 13.4%, with a PAT of about INR 450 million and a PAT margin of 6.93%, resulting in a basic EPS of INR 3.70 per equity share. This is on a consolidated basis. For the half year ending 30th September for Q1 and Q2 put together, we have had sales of close to INR 12,530 million, EBITDA of INR 1,677 million, an EBITDA margin of 13.39%, profit after tax of INR 906 million. profit after tax margin of 7.23% and a basic EPS earnings per share of equity share of INR 7.44.
I'm also happy to inform you that at a consolidated level, our long-term borrowings are nil, and we have comfortable cash reserves in the company as of 30th September.
Next, please. Our revenue from operations on a quarter-to-quarter basis between FY '24 and FY '25, we have grown at around 15.54% in spite of having muted sales in the automotive industry in Q2. Our EBITDA has grown by 24.7% for the same period. And for the half yearly results, we have grown pretty similarly at 15.51% and EBITDA has grown at 23%.
Since all the other details of the financial performance are loaded on the website, we will go straight away to the question-and-answer session.
Once again, I remind everyone to ask one question and rejoin the question queue as there are many peopple who have already posted questions. Thank you.
[Operator Instructions] We take our first question from the line of Omkar [indiscernible] Private Limited.
My first question is with the increase in India defense budget and growing demand for defense equipment, how does company plan to capitalize on opportunities in defense equipment division? Are there any specific planned initiatives to benefit from focus on domestic defense production?
Mr. [indiscernible], while the company currently has no business in the defense segment, as a management, we are exploring some inorganic opportunities to enter into the railway and defense segment in India, which will give us higher margins and impetus for growth. It's very early stages right now. But rest assured, we are evaluating opportunities. And hopefully, in the coming quarters, we may have some good news for the company.
We'll take our next question from the line of M. N. Kumar, an individual investor.
Sir, it looks like the working capital trade receivables have gone higher this year, this 6 months. Is there -- can you explain the reason what is happening there?
I'll request Priyadarsi Bastia, our CFO, to answer that, please.
See, the receivables have gone up marginally because the sales have gone up, 15% growth in sales is there. And last quarter, when you compare it with March, the amount of factoring which we have used is higher than comparing to September. So receivable is looking higher.
So that 46 to 55 days, 46 is a little lower and remain [indiscernible].
Yes, number of days is maintained.
No. March end, it was 46 and September, it appears to be 55 days.
Yes, like Mr. Bastia, Priyal explained, a, we had higher factoring in March. We have reduced our factoring because of our financial position, good financial position. So obviously, the receivable shows marginally higher. And please also see that the sales has increased by 15%. So this represents the same. So the number of days of receivables is well under control.
Okay. Okay. Typically, what is the receivable days? Is it 55 or 50 days, which is that approximately?
We operate with all domestic customers 30 to 45 days, which extends up to 60 days in terms of exports.
[Operator Instructions] Next question is from the line of Khush Nahar from Electrum PMS.
The question was regarding the new products.
I'm sorry, you're sounding muffled now.
Can you be clear we are not able to hear you clearly at all.
Sir, I just wanted an update on the new products, which are the [indiscernible] telematics and the business. So at what stages they are in and if from when they can start contributing some revenue?
Revenue at least 18 to 24 months away. The product has been completely got ready and has also been submitted to customers for testing.
And there -- and we are on track with the target of INR 3,200 [indiscernible] of revenue in FY '26 as a guidance.
Are we?
Are we on track on achieving INR 3,200 crores of revenue as guided before in FY '26?
We are pretty much on track to meet our numbers. As a combination of organic and inorganic, we are very much on track to meet our numbers.
We'll take our next question from the line of Vijay Pandey from Nuvama.
So I wanted to check if you can give some light on the margin profile of the business, like between the products. So like my thinking was that the PMS margin profile will be somewhat margin dilutive if I might be wrong here, but just wanted to check if you can.
Margins for which would be diluted, sorry, you were not very clear.
The battery managed meant BMS and brakes.
Okay. Okay. Battery management system, we have still not made a commercial foray. It is still under testing with the customers. So we have not made a foray. So whatever numbers represented here do not represent any BMS revenue whatsoever.
Okay. Okay. And anything about the disc brakes?
Disc brakes has already started commercial production, and we have started supplies to about 6 manufacturers. And next financial year will be the ramp-up phase when volumes will reach some degree of maturity.
Okay. Next financial year, FY '26?
That's right because we've just gone into production.
We'll take our next question from the line of [indiscernible] from Growth Spear Ventures.
Sir, just wanted to confirm about the industry. So there were figures that the inventory pile up has begun at the dealership network and the inventory were 80, 85 days last month. This month was pretty good for 2-wheelers due to festivities. How do you see the demand for 2-wheelers shaping up, say, for a year or -- from a year now?
Demand is very muted in the industry. My industry peers also tell me that their performance is also very muted. And as usual, the Q3 quarter, which traditionally is a very -- the lowest quarter in the automotive industry will remain very muted, but a little more muted than normal. In terms of exports, because of the elections in the U.S. and the policies of the Republican government that has come in, exports have been extremely muted for us, much, much lower than demand that was initially projected by our customers. We are hoping in the next quarter or two, exports demand will go back to normal levels, which will also help us in terms of top line and bottom line. But domestic demand will continue to remain muted and Q3 is expected to be a very weak quarter for the industry.
We'll take our next question from the line of Madhav Agarwal from SG Investments.
My question was already answered.
We'll take our next question from the line of M. N. Kumar, an individual investor.
Sir, this is related to the balance sheet. When you look at ROE and ROCE related aspects, one line item that comes is intangible assets of almost INR 54 crores. Looks everything is related to software. Is there any way in which we can expense them out rather than capitalize it and then after that write-off as the product matures or otherwise?
I'll request our CFO, Mr. Priyan, to answer that.
See, this intangible asset was capitalized in the year '17, '18 and [indiscernible] doesn't allow us to charge it off to P&L. So it will be there in the balance sheet.
Okay. So similarly, this deferred tax liability would also be staying like that only because the seems to be permanent in nature?
No, no. Deferred tax liability is like it is only recognition of the tax, which you are coming. It is just a timing difference. So the treatment of that is different and for the intangible assets is different.
Yes. When I look at the annual report, it talks about the permanent and temporary. If it is a timing difference, it should be temporary, right? But substantial part of it seems to be permanent.
Exactly. So permanent difference is -- it is coming. Only timing difference means you are creating a deferred tax liability, which when the time arrives, the original tax liability comes, you reverse that tax liability and deferred tax liability and the actual provision you make in your books.
What I mean to say is that the magnitude of the ones which are permanent in nature seems to be much higher than the temporary. That's what I was asking.
No, no, I understand that. In our case, it is this way only.
It's only timing difference only.
Yes.
[Operator Instructions] Next question is from the line of Jaimin Desai from Emkay Global.
Sir, my question was related to the margin performance in the quarter. It seems that there has been some softening at the gross margin level when I compare Q2 versus Q1 for consolidated operations. Can you call out a reason for the same? Was it due to some commodity impact or maybe mix impact?
Mr. Desai, this was just based on product mix. This marginal difference in margins, which you will keep seeing from quarter-to-quarter. Plus from the 1st of July, there has been a wage increase for our permanent workers and also for the staff, which has seen some impact on the margins, which will come back to normal with the productivity phenomenon that we see.
Understood, sir. And if you could also provide an outlook on margins going forward?
It will be pretty similar to where we are. I've always maintained in many quarters that our 13% to 13.5% EBITDA is what we intend to maintain and what looks reasonable for our set of products. Margins will be a little better when exports resume. Exports, this was probably the weakest quarter in many quarters. So when exports resume or comes back, margins will go up about 50 basis points.
We'll take our next question from the line of Sahil Sanghvi from Monarch Networth Capital.
Congratulations for beating the industry. Just one follow-up question from the previous participant. In terms of product mix, can you give some bit more details as how the adverse product mix affected the margins? And the second question would be on the CapEx. I think we have deployed something like INR 100 crores in the first half. So full year, what we'll deploy and next year? And what will be the numbers?
In terms of margin mix, it's very, very difficult to explain because when a mechanical cluster suddenly demand goes up by a couple of 10,000 units, the margin gets muted because the margins in a mechanical cluster is low. In an electronic cluster, the margin is much higher, the rupee profit. So it's very difficult because we are a diverse product company, even in the driver information system. Our export margins are higher, significantly higher than domestic margins. So when exports become muted, the margins go for a toss, anywhere between about 50 to 80 basis points.
Coming to the CapEx, I've always maintained that we are looking at around INR 600 crores of CapEx over 3 years, and we are on track on that INR 600 crores of CapEx, and we are continuing to maintain the same outlook. And we will -- this year would again be about INR 200 crores. Correct me if I'm wrong, I'm requesting my CFO to correct my statement. And next year will be about INR 150 crores to INR 180 crores.
Where all, sir, will this be deployed, if you can give some details?
I suggest that you can get in touch with our CFO, who can throw light on this. I can give it to you, but many times, I've repeated in many of our calls because we are creating a new plant in Pune. We are expanding our plant in Manesar. We are buying land to create 2 new plants for the future. We are upgrading our lines to the tune of about INR 150 crores. We are investing in new plastic [indiscernible] shop. We are upgrading our [indiscernible]. We are buying 14 new PCB lines to make PCBs. So it's a whole host of things. So if I just bring out the whole list, it will not make sense on a call.
[Operator Instructions] Next question is from the line of Chandra Gupta, an individual investor.
So just one question. You mentioned about inorganic opportunities in railway and defense equipment sector. And in the past also, you have mentioned about an acquisition. So just wanted to know roughly what size this acquisition will be in the ballpark figure that you have in mind and how it will be funded?
It will be a 2-digit figure. We are a debt-free company. We have cash reserves. But depending on the size of the acquisition, we are not only looking at this. We are looking at other inorganic play also, safe inorganic play in allied areas. And as I maintained in my earlier calls, up to about INR 300 crores of debt, we are looking at property raising based on the kind of acquisition.
Okay. INR 300 crores is the maximum that you will [indiscernible].
We are anticipating it. It's still -- when we're evaluating opportunities, we are looking at about 4, 5 different opportunities. And 1 or 2 of them are moving very fast. So it could be somewhere around INR 300 crores that we are looking at debt for an acquisition, not necessarily in the defense and railway space, but in the auto space.
We'll take our next question from the line of Sahil Sanghvi from Monarch Networth Capital.
Just wanted to understand what was the proportion of exports in our revenue this quarter and versus same quarter last year?
Can I request you to be a little louder, Mr. Sanghvi. You were not very clear this time around.
Yes. I wanted to understand the proportion of exports in our revenue this quarter versus same quarter last year?
Same quarter last year was about 9% and this year it's about 6.5%.
We'll take our next question from the line of Madhav Agarwal from SG Investments.
Just wanted to understand how do we see the EV market playing out for us? How big of an opportunity do we see there?
We really don't -- we are not affected by EV, number one, because we are -- our products are agnostic to propulsion, as I maintained in many earlier calls. And we are working with almost 20 EV players for our product. But the EV adoption, I've always maintained it's going to be slow and think and other people have been saying it's going to be very fast. And I think -- I'm not a [indiscernible], but my prophecy of very slow adoption is what is happening today. And it is going to take until 2030 to reach certain maturity and size before it's probably 50% of the market. And we are propulsion agnostic. So whether it's an ICE vehicle or an EV vehicle, it's of no consequence to us.
Okay. Can I ask another question, if I'm allowed?
Maybe you can just join the queue again because there are a few other people in the queue.
[Operator Instructions] We'll take our next question from the line of Vignesh from [indiscernible] Wealth.
Sir, just want to understand the opportunity size for our BMS products.
I would not like to comment on it because it's so fragmented the market. Everyone is jumping into it. The vehicle makers are not very clear what they intend to do with it. So BMS is something that even I'm not very, very bullish about. And all our projections are taken into account without a significant amount of BMS revenue.
Okay, sir. Any other products apart from disc brakes we are planning to enter into?
So the smart cockpits and the connected vehicle solutions, which already we are starting to see traction and growth. This is itself a very large opportunity is what I'm talking about.
We'll take our next question from the line of Smit Shah from Monarch Networth Capital Limited.
Sir, my question is regarding the split of mechanical digital and GFT for the quarter and some bit of color on the premiumization trend. How much has it played out according to you? And what is the outlook ahead?
For the quarter, it's very difficult because it keeps changing the product mix. But approximately -- are you asking by volume or value, Mr. Shah?
Value, sir.
By value, mechanical would be about 30% and TFT would be about 30% and the rest would be somewhere in between.
Okay. Sir, what is your outlook in terms of the new launches that are happening?
So mechanical is going to stop slowly paid out, moving into LCDs. And whatever is LCD will move towards TFT. That's the way the market is growing. And I mentioned in earlier calls that we saw our average product value move from INR 300, 10 to 12 years ago to INR 1,200, and we see it jumping to about INR 2,500 in the next 2 to 3 years for a two-wheeler.
Okay. Okay. Sir, and what was our contribution from the PV clusters this time?
From which clusters?
PV side, PV.
About 9% to 10%.
That was the last question for today.
Thank you very much. Since there are no more questions, I'd like to take this opportunity for your active participation in today's call. As is a practice in our company, the Managing Director participates in H1 and H2 calls and the CEO handles Q3 and Q1 calls. So I look forward to connecting with all of you at the end of the financial year. Thank you very much. Have a good evening. Jai Hind.
Thank you, sir. On behalf of Pricol Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.