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Sandhar Technologies Ltd
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Ladies and gentlemen, good day, and welcome to the Q1 FY '22 Earnings Conference Call of Sandhar Technologies Limited, hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Nikhil Kale from Axis Capital Limited. Thank you, and over to you, sir.
Thank you, Rituja. Good morning, everyone, and welcome to the results conference call of Sandhar Technologies. So from the management team today, we have with us Mr. Jayant Davar, Co-Chairman and Managing Director; Mr. Yashpal Jain, the CFO; Mr. Narender Dogra and other members from the finance team.I will now hand over the call to Mr. Davar for his opening remarks, post which we can have the Q&A. Over to you, sir.
All right. Good morning, everyone. Thanks for joining this meeting. As we sit today, of course, there are still concerns about where the COVID waves are going. But thankfully, when we compare ourselves to the rest of the world, I do believe that India is in a position like some states which seem to be on an improvement trend. And I think many of you who's in Maharashtra, with new announcements now, it just seems that normalization is getting back to as close as it was at one point of time.Coming back to Sandhar and our results so far. So first of all, there is some good news, and the good news is that quarter-on-quarter, and I must qualify this with the fact that the last quarter, we were closed for almost 60% -- or 40% of the time, and we were operational 60%. So end of April to beginning of June, we were kind of closed, so there were no operations. However, having said that, we have registered a growth of about 217% over the quarter of last year, where the industry, on an overall basis, has grown by 138%. So I think we have outperformed the industry per se. If you look at our EBITDA numbers, they are at INR 32.68 crores, which is up 371%. Cash profit is up 576%, and of course, there is cash EPS as well.So overall, keeping the fact that we could not operate for over 40% of the time, we seem to have done well. We obviously also tested our breakeven, and that was a good fundamental thing for us to actually judge in practical where we've been profitable in this period of time as well. So that's where we are.In terms of what our outlook looks like, I do believe that we are looking at a growth of something like 30% for this year over last year in terms of revenues and, of course, much higher numbers in terms of EBITDA and profit after tax. We expect this growth of CAGR to continue not only for this particular year, but with the readiness that we have and what we hear and see in the industries, along with the orders that we procure, we do believe that a 30% CAGR growth is definitely achievable, not only in this year, but subsequent years as well over the next 3 to 4 years.So I'm going to leave it there and then take questions and answers so that I can be specific about what everybody wants to know. Nikhil, is that okay?
Sure, sir.
Can we get to question and answers?
Sure, we can.
That will cover most of the stuff.
[Operator Instructions] The first question is from the line of Abhishek Jain from Dolat Capital.
And first of all, congrats for decent set of numbers in this tough time. Sir, my first question is related with this gross margin that had improved quarter-on-quarter, which is despite higher RM cost environment. So what is the reason for expansion of this gross margin? And will this margin be sustainable ahead?
Well, Abhishek, thank you for that question. I do believe that while you have all seen the rise in commodity prices throughout the system, in terms of the actual effect that has come to us, it's less than INR 1 crore. We've been able to manage this in terms of bringing in a lot of frugality in design concepts, in the way we've approached and the way we bought and hedged our raw materials.We do believe that there will be a definite benefit as soon as these commodity prices start to slow down or reverse in the next quarter where we will get benefits, which will be several times of what we have been impacted with even in this, and therefore, gross margin is definitely sustainable but even growable.
So during this quarter, gross margin has improved to the 44%. So going ahead, that range would be in the same like in a 44% to 45%...
I would expect that, Abhishek, to be like a benchmark for us now, and obviously, our efforts will be to improve that on a consolidated basis with some of the measures that we have taken, which should improve the overall scenario.
So in these conditions, sir, while we are looking at 200 to 300 bps of expansion in the gross margin, what is your guidance for the EBITDA margin for the coming quarters?
Well, EBITDA margin, you see, if I compare it, if you remember, we were a company that was doing 9%, 9.5% of margins throughout. We do believe that the margins that we had in the last quarter, not this quarter, but the quarter before that and the one before that, which were over -- where we'd expanded by almost 200 basis points, that is sustainable for us in the long run. So our efforts will be to retain margins of somewhere between 11% to 12.5% in terms of EBITDA margins.
Okay. Sir, despite hiccups, aluminium die casting business outperformed versus the industry growth in this quarter. So what are the key reasons for the outperformance?
Well, we -- I'm very happy to announce that the aluminum business has been growing, and the margins there have been improving on account of -- you're aware that we work with aluminium in our overseas operations where we do extremely precision and high engineering level of componentry, where the margins are definitely higher than our peers. We've been able to bring those technologies into India, and based on that, we have received new orders from TVS. We have received orders, and we've started supplying. So that's a big thing that has happened this quarter. Our supplies to Honda Motorcycle have started in the aluminium domain. And this is a business which is growing, and we do have this to be a continual growth arena, which has taken up from the investments that we have done in the past. So this will continue to grow.
Okay, sir. So this quarter, despite flat revenue quarter-on-quarter in the subsidiaries, margin has gone down by the 100 bps. So what is the reason? Is it because of the new plant in the Romania? Because what I'm looking that implied cost has gone up.
Are you talking about joint ventures? Are you -- which one?
I'm talking about the subsidiaries in Barcelona.
Yes. Within subsidiaries - in subsidiaries, if you see our margin has actually gone up, Abhishek. Our margin has actually gone up, and we do believe that going forward, this will be even growing further. Our margin, our EBITDA margin, if you look at the scenario, our budgeted numbers are almost 70 basis points higher than what we had in the last year. And there, our EBITDA margins are over 13% now.
Yes. That is 13%. Last quarter, it was 13.6%, and Q3 FY '21, it was around 14.3%.
That's right. So again, in the overseas markets, because we are on mature commodity levels and commodity prices, and you know that commodity business with aluminium, there, our costing happens with the customers once in 6 months. In India, we have it once in 3 months. There, we have it once in 6 months. So the impact of that comes a little later.But if you look at it from a perspective of our operations, our actual other costs are actually going down as a percentage of our operations. So we will definitely get this lag. A lag sometimes in the overseas, like I said, even our payment terms there, in many cases, are 180 days there. So the payment cycle and the lag cycle is what is pulling it down at this point of time.
Okay. Sir, my last question is related with this cabin fabrication business, which has seen a sharp degrowth in quarter-on-quarter basis despite that you have owned a Sandhar new business. So how is the revenue guidance, given you won the many new business last year?
You're talking about the fabrication business? What are you -- can you repeat the question again, Abhishek? Sorry.
During this quarter, revenue performance from cabin fabrication business was quite big, but you have won many new business in this space. So I just wanted to know how is the revenue guidance for FY '22 versus '21.
We are looking at a growth of anywhere between 15% to 20% growth in the cabin and fabrication business for the entire year and with an improvement of over 100 basis points in terms of our margins -- in terms of EBITDA margins.
So what is the current EBITDA margin in the cabin and fabrication?
In the cabin and fabrication, last year, we did a margin of 6.7%. We are looking at growing that by 100 to 150 basis points. So...
And is there any other headrooms for the margin expansion in this business with the benefit of the operating leverage?
Yes. There is operating leverage coming in. There are orders that we had taken, which we had shared with you. Those get become active right now. But you see, what has happened is because of the first quarter, taking away some of the sheen, this, again, is a business where we will ideally want to operate at levels of 10% and 11% EBITDA margins. We should go back that year as soon as we have a stable year. But in this year, definitely 100 to 150 basis points improvement over last year EBITDA margins is definitely on the cards.
[Operator Instructions] The next question is from the line of Nikhil Kale from Axis Capital.
Yes. So sir, I had a couple of questions. First was on the demand situation. So I think what we're seeing is that the 2-wheeler demand -- I mean, PV demand has been relatively stronger, whereas on the 2-wheeler side, there has been some weakness there. So just wanted to get your view on this. What are you hearing from your customers? How are they looking at it over the near term? And maybe heading into the festive season, how are they thinking about demand? What is the order book in future?
Well, the information that I have is, again, kind of mixed, Nikhil. While the orders now starting from the month of August onwards seem quite strong, now whether this is demand which is being facilitated on account of the festival season that's only a couple of months away, and people want to build stocks. But there is a mixed bag there. Let's look at the 2-wheeler industry. The exports are definitely an area which is of commendable rather at this time. They seem to be going up, not only for one, but typically for all, except Enfield . I think exports for everybody has grown and will continue to grow.The order book that we have now for the next 3 months seems quite strong, and we typically have our understanding only for the next 3 months. They seem kind of strong at this point of time, whether it be the TVS or whether it be Bajaj or whether it be Hero or whether it be Honda. We now started considering Honda because it is becoming one of our big customer players. Honda has grown, you've seen, by almost 20%. Some of the others have also grown, both TVS, Bajaj. Enfield has been slow.Hero has been a little slow, but Hero, the activity that I've seen, all the information that I get from the market today, the next 3 months look kind of solid. Where cars are concerned or PVs are concerned, as you put it, they have been impacted by the semiconductor shortage, and that is not abating as of now from the dealers. Again, it's a mixed bag. You've seen cars or some Toyotas and Hondas not doing that well. But Maruti started to pick up. Hyundai has started to pick up. Mahindra & Mahindra seem to be doing well. So it's going to be a mix and match for us to be able to see how things are. Tractors seem to -- while they've done well, the projections that I see are a growth of something like 4% to 5% only in this year as compared to what was anticipated at one point of time.So overall, I think it's a mixed bag. Obviously, compared to last year, there will be growth. But at one point, the industry was talking of a growth of close to 25%. I think that number is abating to 15%, 16%. We, on the other hand, are quite confident, like I said in the beginning, of doing over 30% growth over last year.
Okay. And sir, I mean, the 30% number is really acting to your -- I think you've also talked about the similar CAGR going forward. So I think in the past, you've talked about significant order wins. If you could just kind of help us get an understanding if you can give us some numbers around the same, especially on HMSI. What kind of orders you have won and what kind of revenues are you looking at over the next -- over this year and the next year?
Nikhil, thank you. Three areas that we've opened up with Honda Motorcycle. One is the area of die casting, as I have spoken to you earlier. This is a significant business, and I do see this business itself within the next 1 year to go up to a level of maybe INR 100 crores, so which is significant.We are looking at the same level of business with sheet metal, again, the orders that have been received only in the last week, and we expect supplies to begin somewhere in the month of September. We are also very close to signing off on the -- with exports going up, the design and the quality of their higher-end motorcycles need a different ball game in terms of their proprietary products, which, in our case, are locks and so on and so forth. So we expect that business.Between these 3 businesses, there will be significant businesses and add to our revenue. I would expect Honda Motorcycle to be at least a 10% business overall.
Over what timeframe, sir? In the next couple of years or...?
No, no, no. I'm looking -- yes, obviously, we are taking off now. There are some models which launch off only in the beginning of next calendar year. So in the next year, yes, that's the number that we will probably have in place. In the next 2 years, we will definitely have them at 10% of our revenue pie.
Okay. Great to hear that. And sir, I think in the presentation also, you have kind of outlined what is position of the products that you're doing for the EV OEMs. So if you can maybe just talk about that. What are the current products that you are supplying? What OEMs you're working with? And also in discussions, I think you've highlighted Ola so can you -- if you can just highlight the opportunities that you have in terms of kit value that you supply.
We -- I had -- even in the last meeting, I had said that we were very active with the EV industry and both for product lines that have been there for the previous generation of vehicles as well as the new aspects which are now erupting. If you look at what we've done, we have done a revenue of close to INR 12 crores in this quarter for the EV industry. Obviously, and then I also mentioned that this is typically we worked only for 60%, and 40%, we were kind of closed down.So it's easy for us to kind of capitulate it for the entire year. But if you were looking at what kind of componentry, it's being done both from our Indian operations as well as from overseas operations. Supplies have already started to Ather, to Ampere, to Micelio, to Kabira, Lectrix, TVS, for, let's say, ignition switching systems, hook and striker, latch systems, mirrors, wheel assembly. From our international scenarios, we are supplying to Joyson and Autoliv and TRW, which are seatbelt retractor components, wiper system components, electronic circuit housings and covers for gear for TRW, for Continental, for Bosch. So this is something which is already active as we speak today.What we are looking now to do where we have received the orders already but supplies have to begin and initiate, these are for companies like Simple, Strom Motors, NDS, BGauss, Gravton, Kusalava, again, for battery locking systems, for mirror vision systems, door handles, latch systems, ignition systems and so on. We have signed these binding NDAs for detailed technical discussions, which are happening with Okinawa, Polarity, Hero Electric, Ola, Ozotec. There is a lot of work that's been -- that is going on. And we do believe that electric vehicles and as and when they shape up in taking up a substantial percentage of the market, we will be amongst the top players supplying to them. Going forward, most of our joint ventures, you are aware, are doing a lot of work in electronification. This is whether it's supply of relays, or whether it is rearview cameras or ECUs or sensors, shark fin antenna, feeder cable. These are to Honda, to Mahindra, to SML Isuzu, to Hyundai. So -- and again, these continue with -- even electronification is happening even for consumer demand. So some portion has started going to a little non-auto stuff, and that is, again, building up as we speak.
Okay. And then just lastly, coming back to the revenue growth expectation that you talked about is around 30% kind of a CAGR. Now I think in the past, you have talked about that the CapEx will be limited to depreciation as you have sufficient capacity in place to maybe achieve 40% incremental revenue. But given that we are looking at such strong numbers maybe over the next 2 to 3 years, do you feel that -- what kind of CapEx would you be looking at? If you could just maybe talk about it.
Nikhil, I will reiterate again the same thing that our depreciation is to the levels of about INR 90 crores to INR 100 crores, and that is the CapEx limit that we have put on ourselves for spending. However, having said that, there are 2 elements which may not get covered in this, which are over and above this. It could be either inorganic growth, and inorganic growth could come in terms of some acquisitions or something like that, or it could be absolutely new product business which is a new project.For example, if a company were to approach us and say, "Well, this is a new kind of componentry, a new genre of parts, and this is what we are helping you do with technology available from somewhere under a CC," that is inorganic or let me say that is more brownfield than anything else. Those kind of investments we haven't taken into consideration at all.But again, why we haven't taken and what is the reason for doing that is those lead to a separate business trail on its own, which will get merged in the future. But for all the businesses that we've spoken about, the business that we are looking to do, we are very clear that we do not want to expand over the level of depreciation that we have during the year. And the 30% growth that you spoke about is not taking any inorganic platforms into it.
Okay. So that's completely of the existing products that you have.
That's right. It's existing product lines. I would not say existing products. I'm not saying, for example, if HMSI has given me business, which is aluminium casting, there could be expansion in terms of machines or so on and so forth, but they fall within this ambit of the depreciation plan.
[Operator Instructions] The next question is from the line of Abhishek Jain from Dolat Capital.
Sir, what is the reason for the underperformance of your core business, locking and the vision system in first quarter? And what would be the key growth drivers for this business in the next 9 months?
Well, where the -- what you're talking about is the automotive vertical, which is the vertical which is the one that supplies the locks and mirrors, right? That's what you're saying?
Yes, yes, yes. Yes, sir.
So if I can give you what our guidance is, going forward, we see this year to grow, like I said, at about 28-odd percent. The revenue is a little taxed in the last quarter largely because some customers were operational, some customers were not operational. So while we did close down for a period of entire May and some last portion of April and beginning portion of June, even then, some customers, like I said, operating in certain states were doing better. Tamil Nadu, for example, did much better than somebody who was in Maharashtra in terms of output.So there is a little disconnect there, and obviously, because we supply to specific customers in some sense in arena. We can look at an overall picture, like I spoke in the beginning, saying that we have grown a 271% over 138% of the industry. But this 271% is kind of imbalanced because some customers have probably done much more compared to some of the others. So in this particular case, automotive which is -- supplies largely to the customers which were in Maharashtra, for example, whether it is Tata Motors or some of the others, they did feel a larger pinch compared to some of the others in other states.
So sir, Honda Cars, which is one of the key customer of Sandhar, so just wanted to know that how much revenue and margin you are targeting for FY '22. As that FY '21, that was a weak number, sir, because of sharp fall in the Honda Cars volume. What is the outlook for this year?
Well, again, the way I look at it is that HSCI division business, as we call it or which is Honda business, will -- in terms of revenue should grow at about 35-odd percent. And the margins are going to be probably a little lower because of the fact that the models that they have in states are not the models which we have higher margins in. So I would expect this particular year to continue with low margins in that particular business, and the effect of everything changing happens in the new models which launch in the year 2022 calendar, which will effectively go in the year -- financial year '23. So Honda will continue to be an abated business even in this year even with the increased revenue.
Okay. My next question is related with our JVs. There are a number of products which are in high demand that is produced by the JVs. However, the company is not able to scale this business in the last couple of years. So what is the plan to scale JVs business and turn it profitable? And how much loss can we expect this year from these JVs?
See, the JVs have started to ramp up, but they are like little babies right now. And any impact of a slowdown does impact them more. So that the -- last quarter, obviously, they were affected much more than a stable business. Going forward, I do believe that out of the total number of JVs, 3 JVs will turn profitable this year. So -- and some of them will be in a stabilization. So our losses will definitely be lower than that of last year. However, in terms of the entire JV bandwidth, it will continue to be in loss.
So last year, the JV loss was around INR 11.2 crores. So how much...
Yes. So this year, we're looking at that number to be lower than that.
So it would be around low single digit or mid-single digit?
I would say it would be high-single digit.
It's high-single digits. Okay, sir. And sir, in the sheet metals business, you have added the Honda Motors. So just wanted to know that who are your key clients in sheet metals business, and what is your opportunity size in there?
Well, we are looking at sheet metal business to expand quite rapidly with -- this was a business in terms of -- so I'm not calculating cabins and fabrication and other business. This business was around INR 200 crores for us. But with new orders from Honda and with TVS, we are targeting a INR 500 crore revenue in the next 2 years.
And who is the key clients right now apart from the Honda and TVS?
Right now, it's Hero. Right now, Hero is the majority customer in our 2-wheeler sheet metal business. We do a little bit of Enfield, but both TVS and Honda will be the new customers -- are the new customers.
And what would be the incremental revenue from these 2 players in FY '22?
We would -- in FY '22?
Yes, sir.
FY '22 is we are now -- see supplies will start begin. So you're aware there are PPAPs, and there are pilot lot supplies and so on and so forth. So the impact on a large basis will come only in the last quarter of this year. But I would expect that the next full year, we will get the entire benefit from both Honda as well as from TVS. In the meantime, Hero is doing as well. So Hero has given us some new orders as well. So that business in itself should also grow, too.
Okay. And sir, you have won many new business from the Hyundai in a different segment. So can you throw some light on it?
Well, I can throw light on the perspective of where the growth is going to be. So we have a lot of joint ventures, and we see that this particular year, on a JV front, most of our JVs will have significant improvement on the volumes that are being looked at. So -- and Hyundai is one of the largest beneficiaries -- or we are the largest beneficiaries from the Hyundai joint venture -- our joint venture supply model. We see that while, like I said, in some cases, our growth is likely to be in more than hundreds of percent, the size of the business is still small.So on an overall basis for all the entire organization, JVs will -- while they will grow by about 3x of what -- or 4x of what it was last year, the overall pie in the revenues of Sandhar consolidated or put together will still be comparatively smaller.
Sorry to interrupt. May I request Mr. Abhishek Jain to please rejoin the queue, sir.The next question is from the line of Shashank Kanodia from ICICI Securities.
Sir -- yes, sir. So in the presentation, you categorically mentioned that you're looking for -- strongly looking for inorganic growth opportunities. So just wanted to understand, sir, have you already identified any target? And what are the characteristics that we look for it? Because we have run our business in a very capital efficient way in the past.
Yes. Well, you're talking about inorganic, right?
Yes, yes.
Yes. So we are, at this point of time, evaluating several opportunities, some of which could be called very close to closure, but unfortunately, in this call, I'm not at liberty to talk about them. Suffice to say that we have our war chest steady. The targets have been identified. But in my experience of inorganic growth, especially in terms of acquisitions, till the day we really take over the plant, there have been opportunities in the past where we've actually signed off, and the deal has not gone through its effectiveness.So suffice to say that, yes, we are ready. We are evaluating. These are exciting products. And the reason why we do acquisitions or any other kind of inorganic activity is largely to increase our wallet share to either our existing customers. So there could be products that we don't make today, but they add to our wallet share. Once they come into our wallet, then we can spread them around in all the customers that we have.In some cases, new products mean we add customers that we don't have today, in which case, not only then we continue to supply them with the acquired companies' components but also add our own product line to those customers. So either it is component acquisition or it is customer acquisition or it is new technology acquisition. So these are the [indiscernible] the basis on which these inorganic steps are typically taken.
Right. But so then, sir, what is the expected payback period that you're expecting or threshold that you would normally work while acquiring a particular company?
Well, now I think we are kind of mature in the way where we are, and we are very specific that anything that we do, we'd still have an asset turn of 2.5 to 3x. We should -- we are clear that our return on equity and return on capital employed should be between 20% to 25%. So these are fundamental bible rules that we follow whenever we are going in for something like this.
Okay. And sir, the quantum can be, what, something like 25% of the current top line, something to an excess of, what, INR 500-odd crores? Or any colors on that front.
Well, like I said, in terms of -- we are evaluating multiple such opportunities depending on which and what, but suffice to say that the numbers that you mentioned is in pipeline, either as one opportunity or a combination of a few.
Secondly, sir, you have a habit of outperforming the user industries, right? So last year, we just declined 3%, 4%, whereas the industry was declining to double digit. So this quarter, somehow, sir, [indiscernible] growth has been below par sequentially with what OEMs have done, right?
That's not true. That's not true. That's not true. I started this meeting by giving you that the industry has grown by 138%. Our revenue has grown by 217%.
Right. So sir, did that particular...
So that's a misconception.
Okay. So we do...
If you want, I can give you a breakups. If you want, I can give you breakups. We have -- in 2-wheelers, the 2-wheelers have grown by 117%. We have grown by 188%. In commercial vehicles, the market has grown by 243%. We have grown by 467%. In the construction business, they have grown by 106%. We have grown by 318%. It is only in the 4-wheeler segment where the segment has grown by 290%, and we've grown by 252%. But on an overall picture, we have grown by 217% with the industry growth of 138%. I hope that answers your question.
Right. So sir, in the 4-wheeler segment, anything which is negative for us in terms of...
Well, it is not negative. Let me just say, like you said, a question that I answered a little while ago was with Honda, Honda hasn't managed to grow, and that is probably the reason why it has been a slow mover amongst the other PV growth. And we are attached to them, so that has obviously affected us a bit.
Right, right. So sir, when you mentioned that you're supposed to grow 30% organically for the next 3 years, right? So then in '23, we are targeting revenues of something like INR 3,000 crores, right, and a PAT of maybe around about INR 200-odd crores?
Yes. I have given you a number. It's easy for you to calculate. Unfortunately, I can't give you numbers directly, but I'm giving you an outlook, and we are very confident of our 30% CAGR over the next few years.
And sir, lastly, at what stage are we with Ola Electric? And what components are we talking with them? And how confident are we to really get the orders?
Well, we are industry leaders, you are aware, in the 2-wheeler segment there. So there is not a 2-wheeler that we don't supply to it today. And going forward, obviously, these are -- or any new player has to have a pitstop with us.So what we are talking with Ola, with -- is obviously ignition systems. You're aware, we are the largest lock player in the world. We are the largest mirror player. And the latch systems, the USB chargers, some die casting components, these are what are being discussed right now.
The next question is from the line of Amar Kant Gaur from PhillipCapital.
Congratulations on decent numbers. What I wanted to know was regarding the shark fin antenna business. So there are a couple of developments there that Minda has formed a JV with INFAC, which is probably a supplier for Hyundai and Kia in Korea. Do you see that as a threat to our business with Hyundai in India? And if you could just discuss the overall business opportunity in this segment and what is our market share and how are we going to improve on it? That's my first question, sir.
Okay. Let me just explain this to you. So our joint venture partner is Winnercom, and Winnercom is the largest supplier of shark fin antenna to the Korean world and also is now advanced into the Japanese car market in a big way. So as we sit today, we are currently the sole supplier to all the new models that have been introduced by Hyundai over the last 6 months and continue to be the only supplier who's been shortlisted for all products at both Kia and Hyundai, are planning to launch in the next 12 months.So in fact, which is -- the company that you're talking about is -- has been in India in the past. But suffice to say, when I say that we are confident that Winnercom is with Hyundai and Kia in a big way established, we are the one who jointly developed the technologies for all these new ones and have been very well accepted in all the other OEMs who are under finalization stages of design with us for their models.So we continue to be the [ thought ] leader here. And therefore, there are 2 other players from Japan who have -- who are importing right now. We are probably the ones who are locally supplying, and our customers seemed to be very happy. I cannot tell you more about what the competition is doing, but I can only tell you that we have all the new models that are in the pipeline for launching of both Hyundai and Kia and are also now talking of exports out of India to some of the European OEMs.
That's great to hear, sir. If I can just add a little bit to my previous question. Could you please discuss the kind of penetration we have for shark fin antenna in India currently? And how do you see that developing? And if you can throw some light on your market share and how do you want to gain share in this particular segment.
Well, I may not have all the numbers because it is a radically changing scenario from having what used to be regular manual antenna to what were called pole antennas to what are now called shark fin antenna. And even within shark fin antenna, there are different kind of antennas. There are antennas that only give you FM, which is frequency modulation for your radio. There are some which are now carrying data, and then there are ones which are also induced towards what is called ADAS or automatic driving systems. Now Winnercom, which is our partner, and our company Winnercom-Sandhar, is very -- is the world leader in supplying these kind of antennas. So we are working -- each OEM today is working on the next generation. So a lot of them are now moving away. You are aware that the antennas that were used previously were you would typically pull them out or press a button, and the antenna would come out. Then you have these little pole antennas which were fitted to the top of your car hood. And now the shark fin, as the name suggests, they are in the name of the shark fin. So shark fin is the latest technology, and it would be some period of time for the entire industry to move over to that platform. I see that not too far away, perhaps only a couple of years, and in that, we need to be a market leader in India, and that is the way we are going forward. And the speed actually of changeover is happening faster than what we have projected.So when we reevaluated our business plan for this year, of course, this -- the quarter, one of the areas that has actually grown in numbers to our expectation is the shark fin antenna. Not only that, the budget that we had even before we stopped over, the antenna business is the one who has outperformed even in the quarter. So let me give you -- our budget was INR 6 crores. We've actually done INR 6.53 crores in this quarter.
Okay. Why I was asking the question, sir, was to just get a hang of what is the total business opportunity that we can address in this particular segment. So...
That is easy to calculate. If India is going to produce 4 million vehicles and the average price of an antenna is, let's say, INR 1,000, that gives you the size of the business.
Okay. My second question is on the...
But I also must tell you something that I haven't had. There are RF antennas which are now being put into motorcycles, and that is an added thing that we are latching on to, as we speak.
Okay. That's great, sir. And sir, if I can just add one more question to that. Do you -- could you share what kind of utilization are you expecting on this quarter -- during this quarter based on the client orders that you already have or the orders that you have received for the next couple of months from your clients?
See, that's a very difficult question because you would appreciate and understand that we are into hundreds of products and with part numbers in the [indiscernible]. And depending on the model in play, depending on the vehicle OEM in play, these could win. But suffice to say, if I was to look at the overall picture and give you a bandwidth, we are probably at somewhere around the range of 70% capacity utilization for this year.
The next question is from the line of Nikhil Kale from Axis Capital.
Yes, sir. So just one question from my side, which is more from a medium to longer-term perspective. So if I look at some of your peers in the 2-wheeler business who have flexibility, who have -- with dominant share in certain of the components, they have now kind of actively started to look at diversifying into PV segments. Now obviously, we are already doing it through the JVs where almost all of them are kind of focused on the PV side.But even in the main business, I think we have proven capabilities on, say, on the lockset side, whereas we have been suppliers to Honda or even aluminium die casting, which I think is kind of emerging as well as very good opportunity on the PV side. So how are you looking at it for the main business in terms of opportunity on the PV side? Or I mean, initially, does pricing and the profitability would not make sense for you or how are you looking at it?
Nikhil, honestly, I have said this in the past, we are very clear about one fundamental thing, that we don't actively chase 4-wheeler business or 2-wheeler business or commercial vehicle business or construction business or tractor business or anything like that. We want -- so for us, if I make a commodity, let's say, a die casting part, it really doesn't matter to me whether that fits into a piston of a motorcycle or of a car or here or there to fill in the block, for example. I'm just giving you an example. So a lot of it depends on opportunities. It is quite possible that with Honda Motorcycle now coming in, our share of 2-wheelers output of the revenue pie might grow.Tomorrow in case we get substantial business from a car OEM, it may grow. You're absolutely correct in what you're saying that we have proven our capabilities. So on one end, we supply to a Hero, to an Enfield. On the other end, we supply to a Mercedes-Benz and to an Audi and some of the others that I'm not allowed to name, but you know where I'm going.So we've proven ourselves. So depending on the range and/or the product that is put to us on the table, you will always see these movements that will go up and down. So I am not actively chasing saying that I'm only going to go for a 4-wheeler business. With the new ESL, electric start locks, that are coming in, they are of the highest categories that India has ever produced. And we will not only be exporting them. We would be making them for the Indian market for high-end cars. So people are aware that we do all of that, and everybody is aware. It's just a question of what fits in when and where.
The next question is from the line of Abhishek Jain from Dolat Capital.
Sir, there are a few bookkeeping questions. Sir, how is the product mix during this quarter in terms of the passenger vehicle, CVs, and 2-wheelers?
Well, 2-wheelers, as we sit today, is at 51%. 4-wheelers is 29%. OHV and tractors are 14%, and others are at 6%.
This is for the quarter 1?
Yes, this is for quarter 1. So this, like I said, could be distorted. This may not be a stable thing because, like I said, some OEMs are closed; some, not so, depending on the areas. But yes, definitely, in any category, 2-wheelers is typically more than 50% of our business.
Okay, sir. And sir, what is the current...
That's the indication.
Got it. Sir, what is the current gross and net debt of the company?
What is the what?
Gross and net debt of the company?
Well, I'm going to call upon Mr. Jain to answer those specific questions.
Yes, sure, sir. So currently we are having a total gross debt of INR 273 crores at a consol level, including our overseas operations, sir.
And net debt?
Pardon?
Net debt of the company.
If you say the net debt of the company, like -- the gross debt, I mean -- it's the gross debt that we are talking of. Net debt remains the same. Borrowing exposure is the same.
Okay. So I just wanted to ask that how much cash in the balance sheet right now?
We like -- we have generated positive cash flows in this quarter also. We have a -- like if you say the cash profit, there has been a cash profit of 39 -- just a moment. We have generated cash flow -- yes. So our cash profit has been INR 29 crores in this quarter.
Abhishek, to your question of debt, I think as Yashpal Ji said, most of the debt is in the form of working capital for our overseas operations, and this is because I spoke in the beginning that our payment terms there are 180 days, okay?So if you were to look at our debt, today, our debt is at 4% levels is the cost of debt, and a large part of that debt, in case you look at Indian operations and the working capital and whatever, the number is -- Yashpal Ji, can you throw out those numbers of our long-term debt in India and short-term debt?
Yes. So in India, we don't have any long-term debt. It's the working capital limits that we are enjoying. It's INR 81 crores as of June '21. And as far as overseas operation is concerned, we are having a long-term debt of INR 94 crores in our Barcelona operations, which takes care of our Romania expansion also.So for term loans, it's just INR 94 crores out of, what, INR 273 crores of debt. Roughly, you can say 1/3. Remaining is our working capital limit, which keep on fluctuating. Like in the month of March, in India, we're having a working capital limit of just INR 43 crores. But since in quarter 1 due to current lockdown in many states, so some of the customers says we should do the deliveries, due to which we have taken the inventory here. I mean the inventory came into the stock, but which has already been liquidated in this current quarter. So again, our borrowing levels in India will be roughly around INR 43 crores to INR 50 crores in between that too working capital limit with no long-term loans, unless there is an inorganic acquisition line.
So I hope that clears your question, Abhishek.
Yes, sir.
Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Nikhil Kale for closing comments.
Thank you. On behalf of Axis Capital, I would like to thank the Sandhar management team and all the participants for joining the call today. Mr. Davar, any closing comments from your side before we end the call?
Nikhil, thank you, and thanks, Rituja, for putting this together. I'm glad that we are able to give some clarifications on the questions that arise.Suffice to say, we are quite confident of this year and things going forward. Of course, fingers crossed, and may God bless everyone with good health, and we don't get attacked by the third and fourth waves, which cause havoc to life as well as to the economy.So with that, I would want to close it and thank you once again for everything and, of course, thank my own team for being there in this meeting.
Thank you, sir.
Thank you. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you.
Thank you.
Thank you, Rituja. Bye.