Sandhar Technologies Ltd
NSE:SANDHAR
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Sandhar Technologies Ltd
Earnings Call Analysis
Summary
Q1-2025
Sandhar Technologies reported a 10% increase in total income for Q1 FY '25, despite industry slowdowns. EBITDA improved by 75 basis points to 9.85%. The company anticipates 10% growth in two-wheelers and 6-8% in passenger vehicles this year. Construction equipment looks promising due to infrastructure focus. Joint ventures and overseas operations are performing well, with the Barcelona and Mexico operations achieving a 12.66% EBITDA. Key expansions in Pune will start producing by September '24, significantly boosting EV product lines. The company aims to enhance operational efficiency and maintain a robust cash flow, with a planned debt reduction of INR 100 crores this year.
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Ladies and gentlemen, good day, and welcome to Sandhar Technologies Q1 FY '25 Earnings Conference Call hosted by Dolat Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Shailly Jain from Dolat Capital. Thank you, and over to you.
Yes. Thanks, Aditya. Good morning, everyone. On behalf of Dolat Capital, I welcome you all to the Q1 FY '25 earnings call of Sandhar Technologies. I thank the management for providing us the opportunity to host the call.
From the management team, we have with us today Mr. Jayant Davar, Chairman and Managing Director; and Mr. Yashpal Jain, Chief Executive Officer, Chief Financial Officer and Company Secretary (sic) [ Mr. Jayant Davar, Chairman, Managing Director, Chief Executive Officer; and Mr. Yashpal Jain, Chief Financial Officer and Company Secretary ] of the company. So as we do [ all-brief ], we will start the call with brief opening remarks from management team followed by a question-and-answer session.
So with that, over to you, Jayant, sir.
Okay. Good morning, everyone. Thank you all for joining this investor call. I'm very happy and pleased to announce that Sandhar, your company, has continued its progress through the first quarter.
All of you are aware that in our industry, the first quarter is typically the slowest quarter and the weakest quarter of the year. But I'm glad to say that Sandhar, despite the headwinds that were there, continued its progress.
And our total income grew by 10% versus the corresponding period of last year. We have -- in terms of PAT, we -- our EBITDA registered a growth of 75 basis points on a year-to-year basis. It now stands at 9.85% in the current quarter versus 9.1% in quarter 1, 2024.
You are aware that the automotive industry, while it is doing well, we, as a company, see that going forward in this particular year, while 2-wheelers will probably reach and cross to some level the 2019, 2020 numbers, the growth is typically going to be in the range of about 10% or so.
Passenger vehicles, we believe, will grow anywhere between 6% to 8%. The commercial vehicles also will grow low single digits Tractors is a pain area right now. So we will have to see whether we will be able to match last year's number. Construction equipment on account of focus on infrastructure continues to grow, and we do see a healthy...
[Technical Difficulty] Sorry to interrupt, sir. Line from the management has been disconnected.Line from the management has been connected.
Yes. Hi, Shailly, and hi, others once again. I don't know where I got disconnected. Can somebody just remind me where I was?
Sir, you were briefing us about the industry, some construction equipment.
Yes. So construction equipment, with government's focus on construction equipment, we expect that segment to do well. I'm also very happy to announce that all our joint ventures have become positive at the EBT level. This will mean that our stress of the last 2 years in terms of joint ventures, especially after COVID, is now out of the window. And these will now start adding to our bottom line as we go forward.
On our overseas business, the overseas business registered satisfactory performance with Barcelona and Mexico operations totally registering an overall EBITDA of 12.66%. The Romania plant is ramping up production facilities and will soon move to large-scale production.
The company's expansion project in Pune for cabins and fabrication and die casting are in final stage of commissioning, and we expect to start commercial production by September '24.
I'm -- in terms of EV products, I'm thrilled to announce that a big milestone in the electric vehicle segment with us inaugurating and commissioning of our manufacturing facility, which is Sandhar Auto Electric Systems Private Limited. This is located in Behrampur, Haryana.
We believe that this is poised to revolutionize the EV product line with this exceptional range of motor controllers, battery chargers and DC/DC converters. We have started commercial production. Our battery chargers and the other 2 products, namely motor controller and DC/DC converters, will follow suite, probably end of this month or early next month.
This new facility is a part of our ongoing expansion efforts to enhance production capabilities and meet growing demands of the EV sector. It obviously aligns with our long-term growth plans and is expected to significantly contribute to our operational efficiency and business development.
Those are my opening remarks. I'm very happy to take questions. With me today is Mr. Yashpal Jain, the Chief Financial Officer, and he will be able to answer most of your queries in terms of numbers. And in case there's anything strategic that you would want me to respond to, I'm available as well.
With that, thank you once again very much. You can start the question, answers.
[Operator Instructions] Our first question is from the line of Saurabh Jain from Sunidhi Securities.
Congratulations for the wonderful set of numbers. You have been a consistent performer for the last several quarters now. Sir, I have a couple of questions. My first question is, we saw in presentation various new product -- projects where mass production readiness status shows beginning in subsequent quarters of this fiscal only.
So could you please throw some light in the orders in hand for these projects? And what kind of addition do we see in this fiscal and next fiscal?
[indiscernible] Our new expansion products, we currently have -- hello, can I be heard?
Yes, sir. You're audible.
Okay. So one of the company's expansion products is in Pune for cabins and fabrication business. I did mention in the beginning that this business was growing quite rapidly. And as we were running out of capacity, what we did was we had once...
[Technical Difficulty] Sorry to interrupt. The management line got again disconnected. Line from management has been connected.
Yes. I'm sorry, this line is getting connected -- disconnected for some reason. I was talking about the new expansion products -- projects. I did mention that cabins and fabrication is an organic growth. As we had run out of capacity in Pune, our customers continue to grow volumes.
And the plan for cabins and fabrication, as I mentioned in the beginning, for the year at more than a double -- mid-double digit kind of number. And to make sure that we deliver to the customers, we believe that this new facility will help us in meeting those numbers as well as allow for further expansions in the next years.
The second facility in Pune is for die casting. Again, we have new customers. We did not have a facility of die casting, but several of our customers in other regions wanted us to set up a facility.
We believe that this facility, in turn, will also give us depth to grow our business in Pune for die casting to a range of anywhere between INR 200 crores to INR 300 crores in the medium term. We do expect this facility to start in September of 2024. So these are 2 immediate facilities that we are looking at.
The third facility that we are citing to start construction on is in Halol in Gujarat, where you're aware that Hero has a large facility. We have set up a small facility there to cater to their export demand. This export demand is now likely to grow, and we are now setting up another facility in Halol to take advantage of the business that is being offered to us. I hope that answers your question.
Yes, sir. And then on the EV readiness side, could you throw some light, now we are getting ready for the mass production. So any orders in hand or some kind of color to the top line growth, which these products can add this fiscal and next fiscal?
Yes. So this fiscal, we haven't taken any business or any turnover in our business plan. However, we have started commercial production already. Right now, we are catering to 4 customers. We are now in active talks with several others.
While our internal calculation says that we will do a business anywhere between INR 5 crores to INR 7 crores in this year, it is insignificant more in terms of [ pilot loss ]. So it is only in the next financial year that we will be able to take any substantial numbers of this business.
Suffice to say, whatever we have produced and sold has got a good feedback -- brought good feedback to us. And we are -- like I said, we started with the battery chargers, where dispatches have already begun. And for motor controllers and DC/DC converters, we expect to roll that out quickly within the next few weeks.
So can it be like INR 100 crores, INR 150 crores next year, sir?
I will be able to speak more once our complete basket of these components is ready, and supplies begin. So I might be able to give some indication maybe in the call after the [indiscernible].
Okay. And that's helpful, sir. Sir, my last question, any light on the recent industry data from FADA, which shows some slowdown on a month-to-month basis in the recent months. Also, the inventory levels at the dealer level are quite high now. So how do you see this trend in the auto industry in the coming quarters?
Well, it is a mixed bag. You are aware that in the month of June, sales had dropped. But July again, sales picked up. So we've seen some very positive numbers in July.
You're absolutely correct that the inventory levels in the dealerships have gone up. In the case of passenger vehicles, it's gone up beyond its normal state. I think it lies close to 65 to 70 days. However, the situation in 2-wheelers is markedly -- can you hear me, guys?
Yes, sir.
Okay. Two-wheelers are satisfactory so far. The uptick in the 2-wheeler industry is certainly there. And like I said, we do expect a number higher than 10% in the market for wheelers...
[Technical Difficulty] Line from the management has been disconnected.
Yes. So I was telling you about the inventory in the market. The passenger vehicle is -- market inventory is definitely higher than it should be, but I think the 2-wheeler inventory in the market is kind of satisfactory.
We do expect that with the festival season now about to begin, that should bring much more prudence in the market and with what we've seen in July, where sales have gone up. June, everybody spoke about how the market was kind of getting weak. But I think July is showing that despite rains and monsoon, every segment has done well.
So I would expect that the weakness, anticipation and worry should be out of the window. And we should be back on track to the kind of growth that I had spoken in the beginning.
[Operator Instructions] Our next question is from the line of Aditya from Complete Circle.
Just 2 questions. Number one, in the last con call, we had said that we will pay around INR 100 crores of debt. So I just wanted to ask is that on track?
And number two, any conversations or any tie-ups for smart locks? I mean just wanted to get a sense on how the industry is thinking about smart locks.
Well, I will let Mr. Yashpal Jain answer your question on debt. To my understanding, our debt levels have gone down despite CapEx, which has been done. So I think Mr. Yashpal Jain will comment later. On your second question, you said what was the question?
Just some color on how the industry is thinking about smart locks, like have you had anything...
Well, smart locks, like I said, I'm endorsing the same thing. We will be the first one to go in for mass adoption of locks. We expect our first batch to start end of October, early November for 2 of the largest customers that there are in the market.
We are all ready. The validations have all been done. These models are going to be launched October, November. So you will see that revenue from that particular segment for us will start growing from thereon. On the first question, Yashpalji, do you want to comment and talk about the right level?
So Aditya, if you can see like at the end of March, we were at a net debt of INR 592 crores, while for this quarter, we have shown at a debt of INR 549 crores, production by INR 42 crores. We are very well on our target to reduce our debt level by INR 100 crores, the -- in keeping into the CapEx plans and the completion of the existing projects, which our MD has just -- I mean in the beginning of the call he has stated out.
Our next question is from the line of Pritesh Chheda from Lucky Investments.
One question on the revenue growth for this quarter, which is at about 10%. So if you look at your key clients where there was a market share gain possibility in terms of wallet share and all, that client has grown about 14% in volume. So I'm just wondering which part of our business has grown slow -- slower to understand this 10% revenue growth that you reported for the quarter?
Yes, a very good question. See, 3 things. The wallet share if that particular customer has grown 14%, we've probably grown higher. It is several other areas. For example, construction equipment, like I said, this is the slowest period because of monsoons and so on and so forth.
That particular segment goes down and is likely to pick up in the second half of the year. It has started growing a little bit already, but you will see all of that drop in the value addition come in the second half of the year.
Whatever we had said is on track. And if I actually -- if you look at it, I think we had released a chart in the investor presentation on comparatively -- comparative financial performance year-on-year for the last 4 years.
Quarter 1 financial year '22, we were at INR 410 crores. At '23, we were INR 675 crores. At quarter 1 '24, we were INR 830 crores. And quarter 1 '25, we are at INR 913 crores. You would see that many of our peers have actually dropped in terms of revenue, but we've continuously grown.
And this 10% has largely come from areas other or -- than our organic business, which is basically the increase of wallet share. I hope that answers your question.
All right. So just to further the conversation, the 3 clients would have grown what number for us?
It's not about 3 clients. I mean TVS, for example, is now at, I think, 30% of our revenue. I don't have it, Mr. Yashpal Jain will probably be able to give you a snapshot. But our dependence, for example, on Hero used to be much larger. While we continue the same business, but that customer for us has now dropped to almost 18% to 19% levels.
Okay. So can you tell us 2-wheeler as a segment for us has grown at what rate? So my guess is it's to do with Hero where the growth would have come off.
No I'm saying that while whatever segment that you see, even in 2-wheelers, we have grown if not at far higher than particular segment. If you look at the overall industry, if you look at the overall industry during this particular period, the entire industry, including the ones that all the segments that we operate out of, including construction equipment, has probably grown a little over half of how much we've grown.
So you're saying that 2-wheelers has grown for you 50% more than the industry volume growth, is what you're referring to?
Last year, we were double of the industry growth. Effectively, we do hope that by the end of the year, we will be double of the industry growth.
Okay. So just from a mix perspective, if you could tell us 2-wheeler, what has grown and the other subsegments, let's say, tractor or the construction equipment, what have they grown in the quarter on a Y-o-Y basis to just close the loop of an analysis?
Total -- out of our total revenue, 2-wheelers stands at 61% in this quarter. Normally, 2-wheelers used to be 55% of our total revenue.
So what is the growth, sir?
Growth in terms of figures you are asking or how you're...
Yes, just the growth, sir. What is 2-wheeler for you? What is the mix number that you're trying to give, which is there in your presentation. I wanted to know the growth. So what this segment for you has grown what, 2-wheeler has grown how much? [ pass-car ] has grown how much? Construction equipment has grown how much on a Y-o-Y basis?
When we have said -- I've been telling us overall growth of 10% and out of which we are saying that 4-wheelers and construction equipment have not registered that much of growth. Obviously, [indiscernible] 10% for us in this quarter.
Yes, I can understand that. But if you could just quantify it, then it would be helpful.
Well, it's about 10%. That's what I can say because we are not comparing it with a -- the volumes with the corresponding quarter, sir. We have compared the annual figures, how the volume has changed for a 2-wheeler. But in my opinion, it will be higher than 15% for this quarter in case of 2-wheeler.
And [ pass-car ] and construction equipment?
They are a little bit down because in the first quarter, the [indiscernible] passenger car, sir 2%, 2.5% in the similar case with the construction equipment in terms of our revenue mix also.
And that has been compensated by the 2-wheeler segment. So that's the reason our revenue has gone [indiscernible].
So you're saying 2-wheeler has grown 15% and [ pass-car ] has 2% and construction equipment has declined on Y-o-Y basis?
Our growth -- passenger car is down by 2% and the same, that degrowth in terms of construction equipment. And that has been compensated by 2-wheelers, sir. That's the reason...
Let me just comment and add one particular aspect of this. See, the sales that you see in a quarter of the OEM is actually a lag over the supplies that the component industry does. So it is never a like-for-like. I hope you understand that, right?
I mean the work we are building today is likely to be sold in probably the next quarter in many cases. So it's never a like-to-like question that we can answer. It is a question, again, on the value and the volume.
While you are calculating the volumes of the industry, we are looking at the value that is being delivered in terms of the sales. I hope you understand what I'm saying.
Understood, sir. So basically, considering the market share gain possibility with TVS, is it fair to assume that we will be growing higher double-digit in revenue growth as we move towards the future quarter?
Yes, I would expect so.
Right, you will expect. And on the margin side, on the Q-o-Q margin side, there is a 50 basis point shrinkage on gross margin, and some shrinkage is coming from employee cost. So anything to read there because we were talking about a percentage-odd increase in margins every year as you move forward.
Yes.
Any change there on that comment?
No, no, no. There is no change. If you look at our EBITDA numbers, we have a 75 basis point growth over the corresponding quarter of last year. So this depends on the weakness of the quarter. And like I said, typically quarter 1 is always the weakest.
However, if you look at it again in the last 4 years in terms of our operating profit, from '22, quarter 1 of '22, we were at INR 9 crores. Quarter 1 '23, we were INR 29 crores. Quarter 1 of '24, we were INR 41 crores. Quarter 1 of '25, we are at INR 50 crores. So the growth is continuous, not only in the value numbers but also in the margins.
Okay. And lastly, what is the capital expenditure number for this year?
Mr. Yashpal Jain would be able to answer that question. But in quarter 1, I think you spent around INR 40-odd crores. Yashpalji, please tell them.
Quarter 1, we have spent INR 44 crores, and we have kept a plan of around INR 250 crores -- within INR 250 crores range this year, which is [indiscernible]
What plants are going to start when?
Two of the plants, as MD has said, in Pune will commence by September '24. One is related to die casting business, another related to cabins and fabrication. Both are expansion because our existing facilities are short of space. And EV in terms of one product has already started and [indiscernible] will also start by [indiscernible].
Okay. And lastly, sir, the Mysore facility, what is the progress there?
It's going good as per our plan, sir. And this year will be the full year of its operations because last year, part of the year, it was operational. So it's going as per the plan and generating a good revenue for us, good business for us.
[Operator Instructions] Our next question is from the line of Arjun Khanna from Kotak Mahindra Asset Management.
Sir, the first question, just to continue on the CapEx side. So while you say INR 250 crores this year, do we have a, sense what we are looking for FY '26? Because if I remember, we are coming closer to the end of our announced CapEx schedule. So if you could clarify on that?
Yes. Basically, INR 250 crores, we had cash because we have last year spillover cash also in terms of cash outflows. But as [indiscernible] the extension plan by September '24.
So in terms of major CapEx in terms of creating of facility, that would be over. But yes, as you know, there is always a time lag between the incurrence of CapEx and payment of CapEx to the vendor. So I think in the coming '26, we will have a routine maintenance CapEx. But in any case, we have kept a target that to be equal to depreciation, and [indiscernible].
Sure. Very helpful. So just to understand, generally, when we have high targets for growth, and we have never been in such a situation. So any thoughts in terms of M&A activity or next growth drivers for us?
This is a question which is very difficult to answer, Arjun, largely because these opportunities when they fall on the table is when you can take a call. We are open to looking at something which is a strategic fit for us.
However, there is nothing on the plate right now as we speak. As and when that happens, we want to be a healthy balance sheet to be able to support or whatever comes our way.
Sure. Sir, when we talk of 100 bps margin improvement, are we looking at domestic business or on a consol level? Because if one sees Europe, margins have actually been in a range over the last period of time, and it's around 12%, 13% of top line. So in a sense, how do we look at profitability going forward?
I look at it from both angles. You are aware that our Romania facility, when it was new because of the Ukraine war, it had a little bit of a setback where we were running losses. We expect that facility now to start producing more in the second half of the year.
So you will see a distinct improvement in the margins there as well as margins because of consolidation in India are likely to improve. So you will see an overall holistic improvement in margins that would bring the wholesome hybrid margin of the entire company to the upward movement that we've spoken about.
So the guidance you've given of, say, 100 bps last year, we did 9.7. So essentially, you're saying 10.7 on a consol level is what our goal is, aspiration is at this point in time?
Yes. Yashpalji, what have we given, please?
Yes. So if you remember, we have given a 50 bps improvement in EBITDA margin for this fiscal and 50 bps for the next fiscal.
Right. So I meant FY '26, sorry. You're right sir.
Yes. So we have kept -- I mean we closed at 9.95% in last financial year. So accordingly for this, it is a target of around 10.45, which a range of 10.45. And next year by '26, we would be very close to 11%.
Sure. And sir, in terms of our JV associates, any new tie-ups on the annual? It's been a period since we actually announced. I think it was many years back. Some have actually matured also. So any new projects essentially been with these JV partners in terms of newer technology and newer products?
Again, Arjun, it is very difficult to say today, and you saw a slew of JVs being signed by Sandhar. It was towards its movement towards electronification. And while those are now established, we are continuously looking to upgrade.
There are several technologies available with our current JV partners, which will throw out products for growth in the Indian case scenario in the coming years. But again, we continue to look at opportunities. As and when that opportunity matures, we will keep you in the loop, and we will announce whatever is necessary.
Sure. Sir, my final question, if one looks at the new EV products, I understand a large part of it would be assembly. So while they would have very high ROCE, return on capital, they would be margin dilutive. Is that the right way of understanding these products?
No, not at all. The difference between several others and us is that most of what we are doing is not just assembly. We are -- we localize a lot of the BOM within these parts that we are making, which is different from several of our peers.
And therefore, we would imagine that the margins, of course, in the beginning because of high setup costs and low volumes are likely to be lower. But on a maturity basis, I would probably expect margins to be maybe -- if not the same, maybe even higher.
Our next question is from the line of Gaurav [indiscernible].
Yes, sir, could you please tell the key features of your smart lock, which you are going to roll out?
Well, if you understand smart locks, it -- we have -- so smart locks can carry many features. At the ultimate end, it can allow for 13-odd features, but it depends on the customers. Smart lock with 13 features would cost close to INR 10,000.
But what we are launching in the market right now is probably half the number of functions. And with those functions, we expect the cost of these to be anywhere between INR 4,000 and INR 5,000 to begin with.
Of course, as volumes grow in the future years and mass adoption happens across the industry, the prices of these are likely to come down. But that is the broad scenario where smart locks are concerned.
And could you tell me about the functions which you are offering in the INR 3,000, INR 4,000 range?
Well, it is a mass, I don't know if everybody around the call would be interested in technicals, but suffice to say that whether it is the start, whether it is the locking scenarios, whether it is the ignition scenarios, all of them get covered in the smart locks.
Okay. And sir, could you tell the volume of the mechanical locks which we sold in the FY '24?
I don't know if I have that number right away. We concentrate -- that will be -- while it would be available in the system, I may not have it front end.
But again, if you were to calculate the volume of the industry or the output and the fact that we do close to 70% plus in the 2-wheeler space, then you will be able to get that number. Assuming that we have done something in the region of 4.5 million 2-wheelers that have been sold in the industry in the quarter, you would be able to calculate what that number is. I think it would be close to 3 million or so on and so forth.
Okay. Okay, sir, so we will be rolling out in FY '25 the smart locks. In FY '26, what percentage do you think the mechanical locks will be converted into smart locks of our sales, which we did?
Well, I would -- see, the volumes are going to be small this year. We would expect that in the market, the volume is likely to be in the region of 2% to 3%. But in effect, in the next year, the number could go up from that small percentage to double digits.
Next question is from the line of Hemesh Desai from Dolat Capital.
Hello. Am I audible? Hello. Am I audible?
Yes, you are, Hemesh.
Just couple of questions on my end. Could you elaborate on the performance of the JVs and subsidiaries individually?
Yes, I can. So if you look at the JVs, there is Sandhar Amkin, which is the one that produces the helmets, where our quarter 1 sales are INR 16 crores. Our EBITDA is INR 2.5 crores, and our PAT is INR 1.13 crores.
And Winnercom, where we make Shark fin antenna, this is INR 14.51 crores with a PAT of INR 0.66 crores.
Sandhar Han Shin, INR 6.3 crores, correspondingly 0.71; Sandhar Han Sung Technologies, INR 14.52 crores and INR 0.62 crores; Sandhar Whetron, INR 3.74 crores and INR 0.15 crores; Jinyoung Sandhar, INR 13.11 crores, INR 0.42 crores; Kwangsung Sandhar, INR 14.44 crores and a PAT of INR 0.44 crores.
In all, on our share, the revenue is INR 82.72 crores, an EBITDA of INR 9.85 crores. I think that gives you a number of 12%, 13% or around 12%, and PAT of INR 4.13 crores, which is about 5% odd.
Okay. And my next question was how was the overall performance been across different geographies? And are there any specific markets which are giving stronger growth or that you are planning on focusing?
Come again? I didn't understand the question.
How has the performance been across different geographies? And are there any specific markets which have been performing better than the others?
Well, it is difficult for me to talk to you about different markets. Suffice to say, our overseas business with the influx of new orders, which start deliveries in the second half of the year, the business in our Mexico, Barcelona and Romania is likely to get a big fillip.
In India, if you look at it, we expect the construction equipment to start improving and be much better again in the second half of the business. That's the sentiment that the business carries in every particular year.
Of course, the festival season is extremely important for everyone. And therefore, we do see that the schedules that we have received from our existing customers is up starting from next month to the tune of about 20% from the schedules that we have in the previous months. So overall, I think the movement towards growth and the trigger is already in place.
Our next question is from the line of Jyoti Singh from Arihant Capital Markets Limited.
Yes. Sir, my question on the market share side. If you can just tell us the Sandharian locking system for 2-wheelers, how much market share [indiscernible]?
Yashpalji, do you want to comment? This is OEM, right? You're talking of OEMs?
Yes, 2-wheeler.
2-wheelers, you want the market share in locking?
Yes.
We operate at about 70% of market share in India's locking market.
[Operator Instructions] Our next question is from the line of Samir, an individual investor.
My question is related to smart locks. So let's say after 2 to 3 years, this business is evolved into mass production. Since this is a premium product, what kind of a margin this product will generate?
Samir, right now, volumes are low, and margins are high. So therefore, the contribution of this segment will probably be lesser. As we go forward, there is expectancy that the prices will moderate a little bit as large volumes come into play. But the impact on the bottom lines will become much larger in terms of volume of profit per unit to the company.
Our next question is from the line of Hemesh Desai from Dolat Capital.
Yes. So what are your thoughts currently about the commodity prices? And how would they be affecting our margins going forward?
Hemesh, it's a question that's asked almost in every call. You are aware that commodities have been volatile for the last few years. There was some kind of stability that one has seen in the last quarter, but I see that volatility is coming again.
There have been weeks where we see the trend to go up and then trends going down. But as a company, all I can say is that as is a part and parcel of our business, this volatility in our pricing will continue.
And what we expect is that besides the lag that happens with our costing with the customers, the costing of this or the price of this in our overall scenario is a pass-through. So whether it is aluminum or sheet metal or zinc or plastics, this is a pass-through, which is passed through to our customers.
But of course, this is done at the end of each quarter. And sometimes the prices have gone up. We do have to suffer the lag for that period of time.
Okay. And just another question. Could you just help me with the customer-wise revenue breakup? And who are our top customers across different segments?
Yes. Yashpalji, do you have the list?
Yes, absolutely. So TVS revenues were, the largest customers, we have a share of over 32% with TVS. Total of our revenue -- 32% of our total revenue comes from TVS. Close to 19% is coming from Hero, and 8% is coming from JCB. These are 3 major customers for us. And then we have a list of overseas customers, which includes Bosch, Autoliv, TRW, altogether gives us a revenue of around 9% to 9.5%, yes. Honda Motorcycle is close to 4%. So these are the major customer for us.
Okay. And just a follow-up on this question. Out of these customers that you just mentioned, which of these customers' orders we'll be catering to from the Pune plant?
Pune, like JCB is one of the customers for the [indiscernible] business. And the die casting business is concerned, these are -- they are a new set of customers, which will be reflected in coming period of time.
Our next question is from the line of Subhed Banerjee (sic) [ Basudeb Banerjee ] from ICICI Securities.
A very basic question, might be repetitive also, but just for my understanding, as you said, almost 70% market share in the 2-wheeler lock system. How much is the smart key penetration within 2-wheeler currently? And where do you see your market share in that segment as your history?
Well, Basudeb, let me answer this question. You will see mass adoption begin from October, November with 2 of the largest customers, and both of these being supplied by us.
Okay. And so just trying to understand that mass adoption, by that you mean what? More than 50% from current...
When I say mass adoption, I mean the initiation of smart locks in the Indian context of the market, which is not -- which is to say there could be small players today who started EVs and stuff and some of them put in smart locks, but those are insignificant volumes.
So volumetric-wise, if let's say you reach a level of maybe 20,000, 30,000, 50,000 a month, that according to me is mass adoption. That happens in premium vehicles. And as you are aware, as soon as you have something in premium vehicles, it is done very, very quickly to their regular models and to even their low-cost models in a few years. So that journey is beginning now in October, November.
Sure. And similar to the mechanical lock, you expect to be the market leader post this mass adoption?
Yes.
If you can broadly take me through the pricing differentiation and per unit profitability differentiation?
Well, in terms of pricing differentiation, [Foreign Language] pricing differentiation right now is large. Mechanical locks typically is anywhere between INR 300 to INR 500. A mechanical -- a smart lock is anywhere between INR 4,000 to INR 5,000. Over a period of time, the next few years, we expect smart locks to drop down to a level of about INR 3,000-odd vis-a-vis mechanical locks, which because of low volumes, the prices are likely to go up is what my understanding is.
In terms of margins, you are aware that our lock business typically operates -- the mechanical locks operate at anywhere between 12- to 15-, 16-odd percent. We expect that the smart lock business will also contribute a similar scenario as we go forward.
Sure sir. And last question, if one looks at the OEMs today, even the -- especially the EV-based OEMs who are grappling to make margins or face the subsidy reduction or face shifting disc brake to rim brakes to reduce cost, so where this INR 400, INR 500 moving up to INR 2,500, INR 3,000, so what marginal benefit the user will be getting to justify that INR 2,000, INR 2,500 excess cost if you can highlight that?
Well, you see technology has to keep up. If you look at 2-wheelers, Basudeb, you would appreciate that the same 2-wheelers that is sold at a INR 100,000 or INR 80,000 was being sold at anywhere between INR 45,000 to INR 50,000 4 years ago.
But the changes in technologies, the changes mandated by comfort, by regulation and so on and so forth have increased prices. So the expectation is that a typical customer would be -- could easily afford to move up to that value chart.
And the upgradation and whatever is happening around the world becomes typically in every country, including in India. And India, you're aware is the largest producer of 2-wheelers in the world anyway. So it takes time for some of these new product lines to make way for themselves. But once they do, they are adopted very quickly by the entire ecosystem.
[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to Mr. Jayant Davar for closing comments.
Well, thank you, Dolat Capital, for putting this together. As always, thank you, all the participants today, for their patience. I hope that the company has been able to answer some of your questions or most of your questions. In case there is any other question, you can feel free to write to us for any answers, and we'd be happy to respond to you in even greater detail.
In closing, all I want to say is that the company keeps to have -- to keep its direction in the focus area it's chosen, which is generation of more free cash flows, deleveraging of the balance sheet, improvement in return on capital employed, improving operational efficiency and reduction of costs, control on new CapEx and maximum utilization of CapEx, which has already been incurred, integration of our manufacturing plants, diversification of product portfolio, expanding customer base, increasing content per vehicle.
And we also concentrate hard now on working towards the ESG and SDGs, which is sustainable development goals, to attain carbon neutrality in the coming years. So with that focus, we are very, very hopeful and excited to be on this new journey that we put together after the trigger of what the automotive industry is offering us.
With that, thank you all once again and look forward to speaking again after the next quarter results. Thank you very much.
Thank you. On behalf of Dolat Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.