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Good afternoon, ladies and gentlemen. I am Lizanne, your moderator for this conference. Welcome to the conference call of Pricol Limited, arranged by Concept Investor Relations, to discuss its Q4 and FY '22 results.
We have with us today, Mr. Vikram Mohan, Managing Director; Mr. P.M. Ganesh, Chief Executive Officer and Executive Director; Mr. Siddharth Manoharan, Chief Strategy Officer; Mr. Krishnamoorthy Pattabiraman, Chief Financial Officer; Mr. Priyadarsi Bastia, General Manager, Finance.
[Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vikram Mohan, Managing Director. Thank you, and over to you, sir.
Thank you, ma'am, and I welcome all shareholders and investors to our FY '22 and Q4 FY '22 earnings call. Very good afternoon to all of you. On behalf of my colleague, Ganesh, our CEO; Krish, our CFO; Siddharth, our Chief Strategy Officer; and Priyan, our Financial Controller and General Manager, Finance, I welcome you all to this call.
Some of the key financial highlights for the year that has gone by. On a stand-alone basis, our revenue has been about INR 1,431 crores. And on a consolidated basis, INR 1,500 crores. Our EBITDA on a consolidated basis has been close to INR 190 crores, with a PBT of INR 80.28 crores, and a return on capital employed of INR 13.52 crores (sic) [ 13.52% ] on a consolidated basis.
On a consolidated basis, our free cash flow has been about INR 112 crores with cash reserves of INR 50 crores and overall current debt of INR 128 crores, which includes working capital debt. This has been achieved in spite of very severe headwinds faced by the automotive industry, especially for companies like Pricol that are very dependent on ICs and electronic raw materials as its core raw materials, where we face extreme supply chain constraints and freight disruptions. We could have at least performed 20% higher in terms of top line and about 30% higher in terms of bottom line, if not for these constraints that we are facing since 7, 8 months now, which is expected to continue for the next few quarters as well.
We have generated cash of about INR 162 crores from our operations as against INR 75 crores in the prior year. A key achievement has been reducing our long-term borrowings from INR 245 crores to INR 77.58 crores. Considering our cash reserves, our net debt is well below INR 30 crores.
On a stand-alone basis, our revenue from operations have grown by about 7.13% in spite of degrowth of the overall automotive market. This is because we have increased our share of business and market share. Our return on capital employed has grown from about 10.69% to 12.24% and our PBT has grown from INR 46.52 crores to INR 68.76 crores. And our free cash flow, on a stand-alone basis, has grown considerably by about 281% from INR 25.7 crores to INR 98 crores.
I'd like to hand over to our CEO and Executive Director, who helps our operations, to give you some more operational highlights for the year gone by and forecasts for the current financial year. Thank you. Over to Ganesh.
Thank you, Vikram. Coming to the Q4 highlights. Our total income has been INR 415.80 crores quarter ended FY '22. And EBITDA during this period has been INR 52.41 crores.
The headwinds have been quite strong during the last 2 quarters, primarily because of shortage of semiconductors. Despite the strong headwinds, by very good operational efficiency, we are able to outbid the market by showing a positive growth on the top line. We had a 7% growth when compared to the previous financial year despite a marginal degrowth in the overall industry. Any segment, like 2-wheeler, personal passenger vehicle, commercial vehicle, tractors, we have bettered the market.
Customer-wise, our strategic customers, we have grown more than the strategic customers in terms of our revenue. The major reason is we have increased our market share in all our product verticals like driver information system and also on the sensors and also on the powertrain products. Our export has grown by 9% when compared to the previous year.
Over to you, Vikram, again.
Thank you, Ganesh. I will now request our Chief Strategy Officer, Siddharth, to talk about some of the strategic initiatives that we have undertaken in FY '22 and the proposed strategic initiatives in FY '23 and some of the new product launches that we are working on.
We are slowly moving from being an auto component company to an automotive technology company, and we continue to invest very heavily in both product and process technology. We are investing anywhere between 4.5% to 5% of our turnover in product and process engineering, which is helping us stay ahead of the game and offering customers technical solutions rather than products, which is being welcomed by our customers. And this will keep helping us grow our market share and establish our numero uno position in the marketplace for our products and services.
We have a total of about 850 white collar employees, of which 380 employees are in product and process development and about 60% of our white collar wage bill is spent on engineering and R&D. This, we believe, as a management team, will help us remain at the forefront of technology combined with our technology alliances that we are entering into with specific majors in different parts of the world will help us offer cutting-edge solutions to our customers across India and the globe.
Over to you, Siddharth.
Thank you. So one of the major achievements we have done in the last financial year, especially the last quarter, is our partnership with a Silicon Valley-based firm called Sibros to strengthen our connected vehicle solutions.
As a company, we have a product portfolio in telematics. We offer the hardware and the firmware part of it. To further strengthen the end-to-end solution along with software, cloud connectivity and cybersecurity, we entered into the partnership -- a strategic technology partnership with Sibros, founded by 2 ex-Tesla members. And the company has been invested by Google and Qualcomm in a major way, and they're one of the upcoming technology companies to be looked after into. And with them, we will be integrating our telematics and their software and offering end-to-end solution as an official product to OEMs. So that has already kickstarted with all our OEMs, and we've seen good traction.
The next piece of information I would like to share is that we've been selected and given approval by the Ministry of Heavy Industries for the PLI, production-linked incentive, scheme. And we are one of 75 champion OEMs that have been selected by the Ministry and the process has begun as of now.
The next initiative I would like to talk about is, we will be launching a center of excellence for motors and actuators in this week and the communication with reputed education institution in South of India. And we will be announcing it very soon and sending the media note to that effect.
And in the next 2 quarters, we are also working on strategic partnerships to strengthen our sensors portfolio of products as well as select product group for electrification. I would not be in a position to divulge information due to NDA nature, but those announcements will follow in the next 2 quarters. These are some of the highlights that we would like to inform you guys.
In the last quarter, we have launched some marquee products, especially for TVS on their iQube, the electric vehicle, a 7-inch TFT, first of its kind, has been done by Pricol and launched in the market. And also, we have worked on a hybrid TFT plus LCD instrument cluster, which was launched in the refresh model of Ntorq by TVS and also the newly launched vehicle, the Raider bike, has LCD -- negative LCD type display done by Pricol to the -- giving the effect of a TFT solution.
Also, we have launched upgraded instrument cluster for the Nexon and Tigor EV from Tata Motors. And one-of-a-kind cluster for TAFE Motors and Tractors Limited, the TMTL, tractors. These are all select new launches that we've done in the last quarter.
I will now request Ganesh to give a forecast for the year, more from not a number perspective, but from what the industry is expected to perform.
Thank you, Vikram. For the current year FY '23, the headwinds are expected to continue and the semiconductor shortages are expected to continue for at least another 3 to 4 quarters, due to which we expect a flat or a marginal degrowth in the industry.
Pricol would continue to better the industry because of the strong order books, our new product launches, whatever we have got for the next 4 quarters. So we expect the same growth momentum to happen both with the domestic OEM and also the export. We've already spoken about a major project that we are going to launch for the export market, Caterpillar. So we are nearing the start of production, and it is bound to start from Q2 of this year.
Similarly, we have got a number of products like what Siddharth explained on the EV front. So we would be launching a number of driver information system and other EV-related products during this year.
Thank you, Vikram, once again.
As Ganesh mentioned, the industry is going to see -- continue to see disruptions, mainly because of the impact of COVID in China and mass closures of child part factories in China. This is expected to continue for most part of this year as per industry experts and they say normalcy for the automotive industry and normalcy of supply chain to the automotive industry is expected to happen only to the last quarter of this year or next financial year.
So these are headwinds that we continue to face, and our fortunes are tied to the fortunes of our key OEMS, but we will continue to grow and partner with them to develop cutting-edge products. And we continue to invest in technology, both by way of partnerships and homegrown technology, which will help us keep ahead of the competition.
Thank you very much for your time, and we are open for questions right now. [Operator Instructions].
[Operator Instructions] The first question is from the line of Jackson Matthew, an individual investor.
My first question is regarding your target of achieving INR 4,000 crores total revenue and the export revenue of 20% contribution by '25-'26 financial year. So are we in line with the plan or are we facing any setbacks on reaching this target?
Mr. Matthew, the 20% is for both exports and teamed exports through the IPOs in India. And we are still working towards the same. The total headwinds in the industry may have set back the entire industry by 12 to 18 months. So this was with the prediction that supply chains would come back to normal. This was what we had anticipated last year.
But with this delay, there could be a derailment of the entire program or these numbers by maybe a year is what my anticipation is. But these are quite uncertain times, and that is why we are not able to give a very, very firm projection. Our order books are very strong. Our order pipeline is very strong. Our RFQ pipeline is very strong, which is still leading us to that top line number.
And what are the top products or segments that is going to help you in -- to achieve these targets?
It is primarily going to be the driver information systems. And as I had mentioned in many of the earlier calls, our average value for driver information system, because of the software content, the hardware content and moving from a mechanical and electromechanical product to an electronic product, is increasing the value per unit very sharply. So if it is going to be a very flat situation or a minor growth, our growth is going to be much higher top line growth because of the value addition and value per product.
The next question is from the line of Vipul Shah from Sumangal Investments.
So can you give the details of your tie-up with Sibros? Means how we are going to pay them? Means what is the commercial terms of this agreement?
Mr. Shah, we will not be able to share the commercial terms of the agreement because -- but it is a technology partnership, it is not a joint venture, where they will work on the software and the cloud part, and we will work on the hardware part. And jointly, we will work on the integration and offer as a combined solution to the customer. It is not a joint venture where there is equity investment. It is a strategic technology partnership.
Okay. So we will not be paying anything to Sibros?
There is no royalty payment to Sibros, and there is no payment to Sibros for the same. We will integrate our solutions to offer -- because until now in the automotive telematics and the vehicle information system, software is provided by someone, cloud is provided by someone, the analytics and the hardware is provided by Pricol. Now by the strategic partnership, as a complete solution, we will be able to offer to the customer. And this is the first of its kind in India.
And sir, regarding our participation in PLI scheme, so what sort of investment we'll be making?
I will hand it over to Siddharth to take that question.
Mr. Shah, over the 5-year term period, the minimum criteria as per the scheme is we need to invest about INR 250 crores. So we have projected basis our strategic road map to meet the criteria of the scheme. So that's the projection we have done in our application process. But we've got the qualification and the approval letter from the Ministry, but the final details are yet to be received from the Ministry.
[Operator Instructions] The next question is from the line of Nitin Deveriya from Augmen Catalyst.
Sir, I just had a basic question. I wanted to know who are -- if you could share who are your top 5 customers and how much do they contribute in revenue? If you could share this.
Yes. I will request Ganesh to answer that question as to who our top 5 customers are by value and what percentage of our sales do they contribute to. Ganesh, over to you.
The top 5 customers would be TVS Motor Company, Hero MotoCorp, Bajaj, Tata Motors and JCB. These 5 customers put together would contribute to 65% of our revenue -- of the total domestic revenue.
Okay. And sir, do we expect this run rate to continue?
We expect the trend to continue, yes. There could be some percentage difference between them going forward. But however, on the overall pie, about 65% would be contributed by these 5 customers.
And about 12 strategic customers contributing to about 85%-plus of our sales, and we continue to grow with all these 12 customers. And our primary sales are driven by these 12 customers, comprising of 2-wheelers primarily followed by commercial vehicles and then pass cars.
The next question is from the line of [ Darshan Jhaveri ] from [ Crown ] Capital.
Hello? Am I audible?
Yes, Mr. [ Jhaveri ], please go ahead.
Yes. Actually, sorry, I'm new to the company. So I don't know if some participant asked a question about our growth plan in the future. Could that be quantified to me, if possible? What are we planning in the next 2, 3 years in terms of revenue and margin?
I would request -- see, on a margin basis, Mr. [ Jhaveri ], we've been talking about it for -- over the last 2 years. We've achieved a consistent EBITDA of about 15%, and that is what is par for the growth for our company. But the EBITDA has been understretched by at least about 300 to 350 basis points because of the steep increase in electronic chip cost and supply chain cost, part of which has been passed on to the customers and part of which we have absorbed, which is why our resultant EBITDA has come down from about 15% to about 11.5% to 12%.
And till the headwinds continue in the industry, which is expected for another 4 quarters, our EBITDA will be at similar levels. In fact, this quarter, things are actually a little worse in China, and it's expected totally with the COVID closures and supply chain disruption.
In terms of top line growth, we will better the industry by at least 10% year-on-year with our share of business increase and market growth, at least by 10%. And in the coming years, we are hoping to do at least about 15% higher than industry growth because of introduction of certain new products. What is industry growth going to be is a million-dollar question because most industry experts and economists had predicted that COVID is firmly behind us and all supply chains would come back to normal in November 2021, whereas on the contrary, things have worsened and now the COVID impact in China is only worsening things and the Russian-Ukraine war is not helping matters.
While we are indexed on crude oil and other commodity prices like steel and ForEx, which comes to us in a delayed manner, we are able to collect from our customers, sudden cost increases due to supply chain disruptions and premium prices being paid to buy electronic parts is not indexed. And on a case-to-case basis, we are collecting it from our customers and absorbing part of it, which is resulting in the partial EBITDA loss of about 3% to 3.5%. I hope that gives you some degree of perspective.
Yes, yes. If I may squeeze in 1 more question, can I ask that?
Yes. Please go ahead, Mr. [ Jhaveri ].
Yes. So I would just like to know if you could share the order book that we have or something, if possible?
That's competitive information Mr. [ Jhaveri ], and I would not like to share our order books and share of business with each of our customers.
The next question is from the line of Vipul Shah from Sumangal Investments.
So what percentage of our turnover comes from 2-wheelers, passenger vehicles and commercial vehicles, sir? And do we have any aftermarket presence?
We do have an aftermarket presence, which is growing, but we are not in a wear-and-tear product like a tire or a battery or a light or a disc or break. We are in an electronic part where the wear and tear invariably our part outlives the life of the vehicle. So the requirement for aftermarket for Pricol's range of products is fairly low compared to certain other companies in the automotive competitor space. Nevertheless, we are present in the aftermarket. Ganesh will give you the exact figures of what contribution to the top line aftermarket does.
Two-wheeler continues to be our main focus area. About 65% of our overall sales comes from 2-wheelers. Pass cars is a growing area because we were not present in pass cars till recently because of noncompetes with our erstwhile joint venture partners.
Commercial vehicles and off-road vehicles continue to be a growth area and a thrust area for us. And I have mentioned this in earlier calls, but just to refresh the memory of our investors, we are the world's second largest manufacturer of driver information systems for the 2-wheelers, and we want to continue to maintain this pole position.
In commercial vehicles and off-road vehicles, we are among the fourth largest in the world, and our aspiration is to get into the top 3. And in the passenger car, we are an early entrant. Today, with Tata Motors, we entered into 1 platform. And this year, nearly 80% of Tata Motor vehicles are with Pricol, and we've entered into certain other strategic customers as well, but we will not be among the top 3 or a market leader in the passenger car in the foreseeable future because of various market and technology dynamics.
On the aftermarket front, 5% of our total aftermarket sales contributes to the overall sales, about 5% of the aftermarket revenue.
So 55% comes from 2-wheelers, 5% comes from aftermarket. So rest 40%, if you can split, is it possible, sir?
Sure. I'll give you a broader perspective. On the total domestic sales, 65%, it's not 55%. Managing Director mentioned that 65% comes from the 2-wheeler, 15% comes from the commercial vehicle, about 7% comes from the off-road and tractor segment and another 6% to 7% comes from the personal passenger vehicle, which is just a growing segment. This is on the domestic OEM, and 5% contributes to the aftermarket overall. And then as we speak, during this year, 10% comes, of the total revenue, from the exports.
[Operator Instructions] The next question is from the line of Jackson Matthew, an individual investor.
My first question is, has there been any additional loss of clients this quarter or this previous year?
Mr. Matthew, can I just request you to repeat your question? You were -- we were not able to hear you clearly. Can you just repeat it, please?
Sure. So my question is, has there been any addition or loss of clients this last quarter or last year?
We have not lost any client. In terms of new clients added, we have added in exports, Caterpillar, which started off on a small base, which is going to grow significantly in the coming years with a very strong order book for exports. PSA has been another customer that we have entered and are going to be growing.
The main addition has been a whole host of EV customers. Our strategy and belief is to work with almost all the EV players in the market today. Today, we are either engaged in development or start-up business with nearly 28 EV players in India.
Your question will be why are you engaging with so many players? Our belief as a management is there will be a lot of consolidation over the next 5 to 7 years in the EV space and about 5 of these 28 players will emerge as victors. So we would like to be present with every player in the market, and that is how we've engaged with 28 EV players who have come into the Indian market today.
Sure. And any loss of clients, like any clients, have they left us?
We have not lost a single client either this year or in the last financial year.
All right. So my second question is what was the total R&D expense in terms of value and what percentage of revenue does it contribute to?
I already mentioned in my introduction. R&D, both product and process technology, out of our 850 total employees -- white collar employees, I'm not talking of workmen, 380 are in R&D. And 60% of our white collar wage bill is spent on R&D. In any given year, between 4.5% to 5% of our sales are invested in both product and process technology.
All right. And this is going to be the percentage going forward also?
Yes. I don't see it coming down at least until the year 2025 because we are looking at, as I mentioned in my introduction, of being a technology and a solutions provider rather than a component maker in the automotive industry, which is how we are being perceived by our customers.
[Operator Instructions] The next question is from the line of Vipul Shah from Sumangal Investments.
Sir, so for Caterpillar, we have started any pilot projects or our products have been approved? And when is the relationship likely to be ramped up? So can you give some color? That will be very helpful, sir.
I'll request Ganesh to talk about our current run rate with Caterpillar and our growth projections and increased business with Caterpillar. Ganesh?
Caterpillar products, actually, first time we would be supplying water pump to Caterpillar. Those are very large water pumps. The weight of those are between 70 kilogram to 100 kilogram, very specialized product, whatever we have developed for Caterpillar.
Two years after rapid development and product testing, Caterpillar has approved all of our products. So we are in the stage of mass production. The custom mass production would start from July this year. And going forward, we expect at least the Caterpillar growth to be 20% to 30% year-on-year.
Okay. But right now, there is no business from Caterpillar, right, sir?
Yes. We are starting the mass production from July onwards. So there have been certain opportunities in the last 6 months for us to supply for their Reman application. So we have already started supplies to their Reman, certain parts in the water pump. But as a fully finished water pump, we will start mass production for the Caterpillar direct online from July onwards.
In terms of approvals, all approvals, feedbacks, everything is done. Start of mass production is in July with a steep growth rate in the next couple of years, as our business gets -- the volumes mature on the product.
So in the first...
Sorry to interrupt, Mr. Shah...
No, no, this is just a follow-up on that, if you allow, yes.
Yes. Go ahead, Mr. Shah.
Yes. So in the first year, what type of revenue contribution we can expect from Caterpillar business, sir?
That would be difficult for us to mention at this point of time because it is a little confidential. Because customer-wise breakup, it would be difficult, sir, for me to disclose.
The next question is from the line of Shashank Kanodia from ICICI Securities.
Yes. Just want to get a sense of what should be the CapEx spend for this fiscal year? And when are we starting with our longer CapEx of INR 600 crores?
Mr. Kanodia, there's a lot of background noise. Can you be a little clearer, please?
Yes. Sir, I was just asking what should be the CapEx spend for this fiscal year? And when are we embarking about the long-term INR 600 crores of CapEx spend?
Our CapEx this year is expected to be about INR 60 crore. We are also starting work on a technology center towards the fag end of this year, a lot of the expenses will come next year. From a cash flow generation, expecting the markets to remain flat. And with headwinds continuing to exist for the entire year, we will still generate a healthy amount of free cash this year, much like last year. And our aim is to be long-term debt free over the next 2 quarters with our current rate of cash generation and still have a healthy free cash flow in spite of CapEx.
True. And sir, you also guided in a couple of calls before about INR 600 crores of CapEx over a long-term period basis, right? So which will take us to INR 4,000 crore [indiscernible] top line. So when do we start spending on that front [indiscernible] if you can specify?
We were supposed to start spending in FY '23. I'm now expecting that spend will start from FY '24. In fact, the INR 60 crore spent this year, the INR 60 crores that we've spent last year also, about INR 55 crores, all form part of that pie of INR 600 crores. But a larger amount, which I'm expecting somewhere in the region of INR 150 crores, will come in next year.
Okay. And sir, one last thing, sir. You mentioned about venturing into motors and actuators. Sir, are these motors are the ones which are [indiscernible] as well?
Pardon me, Mr. Kanodia, your -- we're finding it very difficult to follow your question.
Yes. Apologies for it. Just wanting to check in your initial remarks, you mentioned about venturing into motors, right? So does this mode of...
We were venturing into motors and actuators, we were venturing into new sensors and newer technologies and driver information systems, and into other areas in EV vehicles and we have identified certain areas, which Siddharth had mentioned, we will be announcing in the next quarter or 2 our exact product that we are going to be entering and our ramp-up plans for the same.
The next question is from the line of [ Raghavendra Goyal ] from ICICI Securities.
My question has been already answered.
[Operator Instructions] The next question is from the line of [ Vallipuram Eswaran ], an individual investor.
My question is, if I look at your trade receivables, it has gone up from INR 182 crores to INR 222 crores, even though the sales haven't gone up that much...
Sorry to interrupt, Mr. [ Eswaran ]. Sir, your audio is sounding very soft. Can you speak a bit louder?
Okay. My question is, there is a big increase in trade receivables from INR 182 crores to INR 222 crores. So any particular reason why such huge increase in trade receivables?
Mr. [ Eswaran ], this is Krishnamoorthy, CFO. I'll answer that question. Last year, we had our bills discounted by periods through their own funds. And we did not have any recourse for that funding. Therefore, it was netted off trade receivables. This year, we replaced that with our own [indiscernible] arrangement with the banks at a much lower interest cost, where we have a recourse and it is shown as part of our acceptances.
And therefore, the receivables if you see in the current year is grossed up and the bills which are discounted and are factored are shown as part of our liabilities as acceptances. That is why there is a decrease in the value of receivables. But in net, in terms of cash flow, there's no negative impact. Close to INR 50 crores is what we have disclosed. If you take the discount from the netted off trade receivables, the receivables have not gone up at all.
Okay. Then my question is, in terms of trade receivables income by number of days, has it improved or it is the same?
It has come down, Mr. [ Eswaran ]. In fact, our working capital management has been good. And you would notice that we are on a sale of about INR 1,500 crores. Our total working capital utilization is sub INR 50 crores.
Yes. Sub INR 50 crores and also the net working capital number of days, it has come down to less than 30 days, if you take that discounting [indiscernible].
[Operator Instructions] Ladies and gentlemen, as there was -- this was the last question, I now hand the conference over to Mr. Vikram Mohan, Managing Director, for his closing comments.
Dear investors and shareholders, I'd like to thank you for your support to our company. Compared to where we were 2 years ago, where we were highly leveraged and having a difficult time, I think the company has seen a great turnaround. And in the next 2 quarters, we will be a debt-free company with a strong order pipeline and healthy margins. And we look forward to growing equitably and along with our customers, our shareholders, employees and our suppliers.
And thank you for your support and look forward to connecting with you in our next call post Q1 of this financial year. Thank you. Good evening.
Thank you. Ladies and gentlemen, on behalf of Concept Investor Relations, that concludes this conference. We thank you for joining this conference call. If you have any further queries, please send an e-mail to cs@pricol.com or gaurav.g@conceptpr.com. Ladies and gentlemen, you can now disconnect your lines. Thank you.