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Sandhar Technologies Ltd
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Ladies and gentlemen, good day, and welcome to the Q2 FY '23 Earnings Conference Call of Sandhar Technologies hosted by Dolat Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Jain from Dolat Capital. Thank you, and over to you, sir.
Thanks, Rutuja. Good morning, everyone. On behalf of Dolat Capital, I welcome you all in the second quarter FY '23 conference call of Sandhar Technologies. From the management side, we have give us Mr. Jayant Davar Co-Chairman and Managing Director; and Mr. Yashpal Jain, CFO of the company. We thank the management for providing us the opportunity to host the call.
Now I hand over the call to the management for their opening remarks followed by the question-and-answer session. Over to you, Jayant, sir.
Thank you, Abhishek. Thank you, [ Ratnadeep ], for putting this together. Good morning, everyone. As we sit today at this time of the year where the automotive industry is concerned, I think the fear and the theme of COVID is no longer being discussed. And as you're all aware, the industry seems to be on a very, very solid footing. Let me break this up in a segment-wise understanding.
The cars or passenger vehicles as we call them, you are all aware, have a long waiting. In fact, the last month has been extremely good, and the traction seems to continue into the future. In the last couple of months, we have broken the all-time record of the pre-COVID year as well. So I think there's good news all around. The only pressure now is to build more vehicles, and there is a lot of waiting, in some cases, the waiting, I understand is over 1 year. So it's good times ahead.
Where two-wheelers are concerned, this was an area which was causing concern to everyone. But from what I understand from FADA. And from what I understand from the demand pull of the OEs in this sector, things seem to be in a much better shape than they were a few months ago. So I think there is positivity even in the segment. The segment has been confused in the past on account of several factors.
One is, if you look at it post the Euro 6 jump, the cost of these vehicles have gone up by almost 30% to 35%. And there was obviously a lot of resistance, and that needed time to mute out and moderate so that people could get an understanding that this is where the new vehicles are going to be in terms of price.
The second aspect, obviously, was also on account of the powertrain, whether it should be IC engines or electric or whatever other options that were being put on the table. I think that also kind of sorted out. People who are going to the electric route are going the electric routes, some of the traditional players that were very large in the IC area have also kind of shifted [ tome ] and they are saying that they would be manufacturing EVs as well, but they will take it gradually and slowly.
And we will then correspondingly look at how this entire thing has to be handled going forward. Where commercial vehicles are concerned, there is a little bit of volatility. But having said that, the number seems to be going up. Tractors, you're all aware, are doing well, especially in some of the [ theme ] makers, construction equipment again is something which has been doing well. There is obviously going to be some change in the powertrain norms here in terms of euro transfer from Euro 4 to Euro 06.
But on an overall summary, I would say that the auto sector right now is in a good year. There are some factors that are affecting the industry while commodity prices have begun to moderate, and that is a good sign. There are, however, other inflationary costs that continue to benign this particular sector. Add to it the fact that the interest rates are going up, the inflation numbers are still high, not only in India, but around the world.
There is still a lot of uncertainty on account of the war clouds that not only stay, but also shower at times between Russia and Ukraine. So there are those geopolitical risks as we sit today. But I would say where the automotive industry is concerned, a lot of the stress and concern factors are in the windshield and we should be on a good way forward.
That were my opening remarks. You have all to see the results that were declared yesterday. I'm very happy to take questions. And me and Mr. Yashpal Jain who is here, will try to cover up any clarifications that you might have. Thank you.
[Operator Instructions] The first question is from the line of Resham Jain from DSP Investment Managers.
So I have a few questions. So first one is with respect to this quarter, where we saw that you saw top line growth while margin didn't come through, which has, in fact, gone down to almost [ 17 basis points ].
Sorry to interrupt, Mr. Resham Jain, we cannot hear you. There is no response from the line. [Operator Instructions] The next question is from the line of Abhishek Jain from Dolat Capital.
I had -- congrats for a decent set of numbers in a tough time. Sir, my first question was regarding the gross margin. That is continuous under pressure. It is because of the higher revenue from die casting and cabin fabrication business? And just wanted to understand what would be the key tailwind for the margin expense in [indiscernible]?
Okay. Thank you, Abhishek, for that questions. very quickly, I think that was the question that Resham was also trying to ask. Well, if you look at the margin drop, that margin drop is largely on account of the new CapEx that has been put. And if you look at it, these are initial commissioning and other onetime start expenses of the new projects.
That being one, the second thing is that the sale has started and revenue has started in some measure from these new projects, but the costing still has to be finalized with TVS for that matter.
So while the formulas in have been worked out, that final call is likely to be done today or tomorrow, and we are hopeful that within this month, we should be able to close that [ factor ]. So I would say that there is an aberration. And I have Mr. Yashpal Jain, who will explain to you the losses that have been incurred on account of these new projects.
And if it wasn't for these losses, what would the actual gross margin be? Mr. Yashpal Jain.
So like as we mentioned in the presentation also on a half year basis, there has been an additional loss of INR 20.25 crores, I mean, INR 20 crores on the round side in terms of losses from the new projects, which is on account of major significant initial costs that are not part of the capitalization.
So if we have to alleviate this and resetted EBT comes to INR 61.71 crores, which is roughly 4.32% of our income, which used to be a profit in the past also. So more or less, we are on the track, sir. And in the subsequent quarters, this impact of one-time expenses -- we're charging of onetime expenses towards the new projects won't be occurring again money. That's how we would like to respond to this.
So in second half, these excesses won't be incurred, so most probably that the margin will improve by 200 to 250 bps in the coming quarter?
Yes, sir. Definitely. Reason being because this is a onetime -- many sort of external -- what happens with that the moment you start doing your groundwork activities internal sampling, the capitalization stops. But the volumes actually, they kick up after a certain period of time. So in between this is the expense, but there is no revenues supported by it. So these are those costs.
And largely, we have all the plant commissioned now on the expect the Mysore one, which will be coming in the last quarter. So more or less, that won't be occurring much more reason being the Mysore samples are already tested in our Hosur existing facility. That's not going to [ happen again ].
Okay, sir. And sir, during this first half, we have seen a strong revenue growth in the aluminum die casting business. So just wanted to understand what is your plan for this business? And are you looking to keep your business from 2-wheelers to 4 wheelers and the EVs because many companies are getting a lot of the order win in this business. So if you can throw some light over there.
Yes, because like in first half, the die casting has performed very well. It has evened out of all other verticals also. We are very bullish like in -- four-wheelers, we are already getting through our Barcelona operations. In India also, we are in the four-wheeler segment and three-wheeler segment for die casting. And we see a major scope in this. Even we have working opportunities to work on a cross-border basis also for die casting products. So I mean, in the coming period of time, we are very bullish on the die casting business. And definitely, we'll see a higher profits and higher volumes in this business.
So what is the current margin in the aluminum die casting, sir?
Well, aluminum die casting has given us -- a EBITDA margin of 8.5% in the current half year. Reason being, there were some new projects also which were commissioned new lines were commissioned. So in the coming period of time, obviously, it will be crossing double-digits EBITDA margin. And with machining the margins will be even more beyond 11% to 11.5% now.
Okay. And sir, in the sheet metal business, you had a very high target of around INR 500 crores to INR 600 crores for FY '23. Once while -- see the number in the presentation that is showing only INR 189 crores kind of the numbers in the first half. So is it included revenue from the -- in the other business or what? We are not able to understand it, sir.
No, Abhishek, thing is that if you see the SOP date for various plants that we discussed last time also. They have been -- that we decide based on the customer's requirement. So all these sheet metal plants will be coming in the mass production from April '23. So in the current financial year, I would say in the current half year, there is not much of the sales value from the sheet metal business.
We are actually under the testing processes. 3 or so plants are under testing process, one is under the construction process. So the volumes will really start picking up from FY '23. But in the next quarter, you will see a major footfall in terms of Hosur plant, Nalagarh plant and Halol plant.
So what is your revenue target from the sheet metal business for near to medium term, sir?
If you ask me for the current half year, we are targeting something INR 130 crores to INR 135 crores of new businesses. When I say INR 130 crores, it is new businesses, which includes the Halol, Hosur and Nalagarh plants, right?
We are targeting something around INR 130 crores, next year, we have plans exceeding INR 400 crores from these sheet metal projects. And this is for existing business, existing plant which is generating roughly INR 1 crores.
So that means the net in second half FY '23, you'd be able to get a revenue of around INR 330 crores, INR 340 crores from the sheet metal?
If we include the old one, it will be INR 300 crores.
And what kind of the margin can we expect from this business, sir?
At EBITDA level, we are trying to -- 5% to 10%.
Okay, 10%.
Yes.
And how is the margin in the cabin and fabrication business. We have seen a very impressive growth in last couple of years. But on a margin front, how is the picking up right now because the utilization level has improved significantly. So can you give some guidance.
Utilization has gone up earlier, it was hit by the commodity increase. As you know, the price settlement used to take 6 months on the [ BSV ] are. But now gradually, the prices are stabilizing. So we'll be seeing again a good followup margins in the coming half here in the CFD business and cabins and fabrication.
So can you give some guidance on the margin in this particular segment?
Roughly, we have closed at around 8% EBITDA in this -- in the first half. And we expect to improve it further in the next half.
[Operator Instructions] The next question is from the line of Kumar Gaurav from Dolat Capital.
My first question is in two-wheeler segment. Recently, you have launched a mini [indiscernible] variant of their existing variant. So are we benefiting from this? I mean have you seen any increase in share of business from Hero?
Hero's volumes are more or less they are constant as of now. We are launching the models, but the volumes are remains to be constant in Hero, and we are maintaining our share of business in terms of sheet metal as well as in locks and mirrors. Our proprietary business as well as sheet metal business. So there has not been a dip or a significant increase given Hero is at the constant level. They are launching the product -- but it is yet to pick up in the market. So as and when it increases our -- obviously, our volumes will also go up proportionately, yes.
Okay, sir. My second question is in ADC segment. So sir could you predicate the order being a new order in the ADC segment? And...
Well in ADC right now, we are catering to nearly all the OEs, which induce Honda, TVS, then Hero, Royal Enfield. And these are the regular orders, I would say -- because in addition to that, if you remember, we have got on machining business from TVS, that is also a part of the castings business. That will be coming into commercial by Jan '23. But the volumes are increasing, and we are targeting new markets and new customers also in four-wheelers and commercial vehicles also.
We have also just received the order from DENSO, and that is growing. So in all, we are very, very bullish on the ADC business, including the casting business and the machining business. In the machining business, we are moving 35 lines from TVS into our own facilities. And this will become a substantial forerunner for us not only for what we do in India, but also for exports in the future.
Okay, sir. And what is our current capacity utilization in ADC segment, sir?
Well, if you ask me because it depends on part-to-part basis, there cannot be an exact number. What we are -- I mean we have sufficient capacity available in case of surge in the demand. That's what we can say. So it won't be impacted. We would be able to cater to the demand.
We do not need any major capital expenditure whatever increase in volumes is likely that we see, whether with DENSO or with other businesses, can be managed either within the existing capacity or with incremental capacity increase, which could be 1 machine, but it's not setting up new plants.
Okay, sir. And sir, my next question is on CapEx and debt side. So I think our H1 CapEx stood at INR 133 crores. So what is the full year guidance for CapEx?
Yes, sure. I'll just tell you how the CapEx we will be moving and we are working also substantial. So in the first half year, if you see in the cash flow statement, we have done a CapEx of close to INR 133 crores, right?
Right.
At the same time, we have generated cash from operating activities of INR 106 crores. So roughly INR 23 crores, we have gone for the incremental borrowing in the first half. This is how we have managed. To complete all our projects, we require to incur an outflow of around INR 296 crores as of now as on date to complete all our major 7 or 8 projects that we have in the pipeline, right?
And we are expecting to generate a cash of around INR 120 crores in the next half. Another INR 24 crores, we'll be getting a cash subsidy in the month of March, which has been confirmed by the government of Romania. So we will have an internal accruals of around INR 144 crores in the next year against INR 296 crores.
So if you deduct that, INR 296 crores minus INR 144 crores, so our incremental borrowing be INR 152 crores. Current borrowing levels, if I say, it is somewhere around, if I say current borrowings is INR 567 crores, right? So we will be around INR 700 crores because thing is that in the new projects, TVS has revised the payment terms from 45 to 15 days.
So 30 days of working capital benefit we have got, that will ease up on working capital pressure for other projects also. So working capital, we won't be increasing any limit. We'll be managing. In fact, we have a target to reduce our working capital utilization by another INR 20 crores in the next half. So we'll be landing something around INR 690 crores to INR 700 crores at the end of March '23, this is our debt we are targeting.
Coming to the next -- how we are going to repay. Next year we are targeting a cash generation of close to INR 200 crores, so straight away. And the breakup of this INR 700 crores would be around INR 300 crores for overseas, INR 400 crores for domestic, in the next year. And out of this INR 700 crores, INR 200 crores roughly with the working capital. So term loan remains to be INR 500 crores and we are in a very comfortable position to pay at least INR 200 crores in the next succeeding financial year. This is all.
[Operator Instructions] The next question is from the line of Resham Jain from DSP Investment Managers.
Yes. Am I audible now? Sorry.
Yes, your audible, Resham, good morning.
Okay, okay. So sir, overall, I think on the balance sheet side, CapEx and growth, you did mention about it. But philosophically, if you can explain because over the last 2 years, we saw a lot of challenges at the industry level, but I think things are coming back. But going forward, I think as of today, if I look at your debt-to-EBITDA ratios and all, it has been -- probably might be at the peak of your CapEx cycle. But going forward, how should one think about the overall debt levels which company is comfortable with?
And out of the total CapEx, which we have done till now, let's say, over next 2 years, what kind of revenue and EBITDA you can generate out of it? If you can just explain more from the trajectory perspective, I'm not asking for any specific numbers, but just from the trajectory perspective. So.
Sure. So Resham, I'd like to address only the -- I mean the question. In terms of debt, as I explained some time back, we are targeting our total debt of around INR 700 crores at the end of the financial year, right, which may be around INR 200 crores of working capital, which keeps on fluctuating depending on the basis, INR 500 crores of term loans.
And debt mix would be around INR 300 crore oversea and INR 400 crores India. Overseas, we are seeing a borrowing rate in the range band of 1.6% to 3.25%. This is a -- so these are kind of interest that we'll be spending. So average it comes to around 2%, 2.5% for the overseas borrowings. Another INR 400 crores, out of INR 400 crores, we have INR 100 crores of working capital, INR 300 crores would be a term loan debt.
Next year, with the new projects coming, with our existing business, INR 200 crores of cash we can easily generate. I'm just giving a very practical response today. So we will be leaving with a term loan of around INR 100 crores and other INR 100 crores is the working capital. So this is how we plan to manage our debt, and that will be a very reasonable level for us to manage because although overseas may be something around INR 70 crores to INR 300 crores, but the outflow in terms of interest would be a very, very meaningful amount. Even if we take a higher rate of 3%, 3.5%, it won't go beyond that. This is one thing.
Secondly, once all the projects are coming into the mass production that we expect from April '23 because it takes time to get sample tested, [indiscernible] by the customer and all other models. We expect barring the machining business because it is on a job-work basis, so you can't see a bigger turnover, but in the case of sheet metal and Romania, whether we expect a turnover of, in the first year itself, something around INR 500 crores.
And machining, we are targeting as per the customer estimate, it can be around INR 77 crores. This is the type of revenue that we are looking in the coming financial year from the new projects. Other things remaining equal, no major incidents happening in the economy or geopolitical conditions. As far as margins are concerned...
Okay. So going forward what kind of -- so what kind of debt to EBITDA you will be comfortable with going forward is my question?
Yes.
Because I'm specifically asking this because what has happened in the last 5 years, we have seen all kind of events in the industry. And it might be -- I don't know, it may be prudent to have a right level of debt. But -- so I was just asking from that perspective that what will be a comfortable level for you guys?
Yes. So I'll answer a way like that we are comfortable as I responded and we have very structured [ pay ] off the debt. Secondly, as far as margins are concerned, in terms of if you see our figures, there has been a onetime cost of INR 5 crores on account of Romania because job work has started over there. There are licenses cost, et cetera. Yes. So total INR 20 crores of losses have been pulled up on account of the new projects. But if you take the [ EBITDA ] count for overseas, it is around 14%, with a net profit margin of double digit terms. I mean, 5%, 5%, 5.5% of net profit margin overseas. So that kind of margin will continue even in the Romania business. This is one set of answers for the margin.
Secondly, for machining businesses, we are in a place, having a contract with the -- clear contract with a customer of 8% margin on the total turnover value. EBITDA is roughly -- will be -- I mean, fluctuating. It will be from a day one, it will be about double digits. As far as sheet metal concerned, we are targeting a 10% of EBITDA in the first year for the new process.
Okay. Okay. Got it, sir.
So if you average out all these business models -- because machining, you will see a lesser sales figure, but at the same time, we have a confirmed -- interest and depreciation reimbursement of INR 21 crores. So if the value goes INR 100 crores, the percent might come down, but if the value remains INR 50 crores, then INR 21 crores divided by 50, you'll see a very high level of EBITDA. That's all.
On an average basis, we will be showing a double-digit EBITDA in the next year. We have taken many steps to integrate our operations also and to rationalize our cost house. So that impact will come over a period of time, another 6, 7 months time.
[Operator Instructions] The next question is from the line of Abhishek Jain from Dolat Capital. As there is no response from the line, we'll move to the next question, which is from the line of Arjun Khanna from Kotak Mutual Fund.
Just on the lines of the question of the earlier participant, if we look at the business, obviously, we have faced through a number of difficult circumstances. We seem to be pretty confident of the future, but we don't know what may come through. So in light of this, if you look at our debt levels, it seems to be on the higher side.
So how do you characterize our business prospects going forward in terms of CapEx, et cetera, would you wait to see the income flowing from this side pay down debt before we undertake further CapEx because we seem to be into a number of lines of business at this point of time in the automotive space.
Arjun, thank you for that question. Well, we are -- let me just say, we are very conscious of the projects that were taken up. But there are 2 things that I want to bring in line. One is that all the new businesses that have been set up, all investments that are going right now, and which will conclude within this financial year, are all meted out to 100% capacity utilization.
So these are all businesses which will mature over a period of time. These are businesses that have been taken as soon as we are ready, the entire lines are going to be consumed. So these businesses will start throwing out margins from day 1 with a positive margins. Typically, when you set up a new plant and you grow capacity from 10% to 20% to 50%, there is that lag that happens. Fortunately for us, all these new investments are fully mature investments that will grow out money from day 1.
So that's your answer number one. From the debt perspective, like we said, our margins have dropped on account of, like I mentioned right in the beginning, because of onetime initial commissioning cost and other start-up expenses. And also the fact that when these plants are set up, you would appreciate that 2 or 3 months do take for the customer to -- like Mr. Yashpal said for QAVs and for quality establishment. So those losses at the rate of about INR 20 crores happened in the last quarter, the results that you are seeing, which has dropped our margins.
But I think going forward, as we mature, as the units come into full line maturity in production, which is happening, what happened very quickly, we will take care of that. And also, as Yashpal ji said, that we will generate close to about INR 200 crores of free cash flow that will go into debt repayment in the next year itself.
So next year, our domestic debt will be -- we will be less of about INR 100 crores of term loan and about INR 100 crores of working capital, which I think is extremely, extremely manageable and under control by the organization. So that's what I want to leave you with in terms of debt. So we are quite comfortable with how we are managing debt. But you see the opportunities that came during COVID was something that we did not want to leave by and these are going to show great results for us going forward.
Sure. And on the lines of business, so essentially, we seem to have a position across components. We seem to be more horizontally inclined by having a small amount of revenue from a number of components apart from our historical proprietary products where we actually have a high assay locks, et cetera. Just wanted your thoughts on that.
Well, let me talk about our segment diversification and in that sense, Arjun. We already dominate the wallet share of the products that are manufactured by us, especially in the two-wheeler segment. so if you look at our locks, we are the largest lock producer. If you look at mirror, we are the largest mirror producer. If you look at our sheet metal tools, we are the largest in the world. If you look at our cabin business, we are the most diversified in the entire country.
So it leaves us with less option than for us to look at diversification in other areas to grow our wallet share. And that's what we've been doing but corresponding to your last question and this one, I am very happy to say that from our perspective at our given snapshot time, we see no further investments for a considerable period of time going forward.
So we have no more CapExes that are in line to be spent in the next year, for example. And therefore, we look at debt to be paid off very, very quickly before we move into any other segment. So for the moment, the diversification is kind of complete. In our existing lines of business also, we have made investments to upgrade our technologies, smart technologies, for example. If you look at our smart locks for where we've already got the orders for some of the major customers and some of them should be coming in shortly.
This will deliver us a 5x take on the revenue that comes from our traditional locks. So -- and that is going to become active starting next year, financial year '24. So you will see -- and all of those investments are already in-built. So I don't see any further capital investment of a large degree coming in the year next. And we will pay down the debt that we have taken so far in the subsequent years.
Sure. And sir, my final question is, in the first quarter conference call, you spoke on how on the third quarter, you'll decide on JVs going ahead in terms JV, to take a look at where we want to scale up and otherwise. How has been the journey until now? Because since inception, we haven't quite seen it...
I'm glad you asked this question, Arjun, I'm glad you asked this question. Our helmet business, which goes under the name of Sandhar Amkin. It has witnessed the turnaround, it's become EBITDA positive on an overall basis, but also on a monthly basis, it's become PAT positive. So that's a very happy news for you to see. We will see on an annual basis. In March '23, we will be positive on a PAT basis for the entire year as well. So that's on the helmet business.
Winnercom Sandhar and Sandhar Hanshin are already PAT positive as we speak, with both registering sales of over INR 35 crores each. Our Sandhar Hanshin Technologies registered a sale of INR 27 crores. And has already so far have been PAT positive to the tune of INR 1 crore, and these numbers will grow very, very quickly from here on.
So this is in regards to core, Sandhar Whetron is EBITDA positive, and we expect the business to grow in '23/'24. In the case of Jinyoung where our half year registered sale is INR 24 crores here. And in the case Kwangsung, while the margins have become EBITDA positive, the foreign exchange fluctuation have kind of hit us, And therefore, we expect those.
So what we have done is we've reached out to our JV partners and suggested that some of the imports that happen in these particular JVs should be converted to Korean local currency of KRW instead of U.S. dollar where we believe that these fluctuations are minimal compared to the volatility in the U.S. dollar. We are expecting positive responses there. And therefore, I'm very, very happy to say that where the joint ventures were eating away a lot of money, that will not be the case going forward.
Sure. So do we project the breakeven in the overall in terms of run rate for fourth quarter, should we see no negative drag? Is that the right understanding?
Well, in all the other cases, like I mentioned, Sandhar Amkin, Winnercom, Sandhar Hanshin, Han Sung, Whetron, it will all be neutral or better, where these 2 cases are concerned, it depends largely on the exchange rate fluctuations and we'll have to see. But for a large part, I would say, from an operational level, all of them are now positive.
Sure. And how much further CapEx you would need a part of the loss funding for these JV projects?
We are not looking at any more CapEx in these joint ventures.
[Operator Instructions] The next question is from the line of Abhishek Jain from Dolat Capital.
Sir, as the company is quite aggressive in EVs right now, so what is your plan to expand your business in the EV segment? How much is the current order book with you? And what all products are you going to introduce in EVs.
I think in the presentation, it's already been marked on the EV segment that we are getting into. So one is the EV segment that we've already started supplying with our present rate of present portfolio of components. And then there are some that specifically being designed for the EV industry. And if you look at what are the new products that have already been developed so far which are compatible, are the electronic steering column lock, the foldable keys, the tire pressure monetized system, USBs, detent foldable mirrors, keyless smart locks, ambient air pressure sensors, CBS, mobile holders, mirror with turns. These are all -- that are in the supply mode right now. But if I go forward, and these are being now supplied to Ather, to Ampere, to BGauss to TVS, to Matter, to Booma Innovative, to Revolt, to [ Electric ]. So these are the customers being targeted. Also, three-wheelers and four-wheelers of Mahindra and Mahindra, Tata are all being supplied with our consistent range.
The next line of components that are specific for EVs, which is the hub motor, we are proto-ready now. Our performance validation should be complete by February of '23 and we expect the ICAT approval to happen in July of '23. The mid-drive motor, again, proto is done, we expect ICAT approval by April '23. The motor controller, we expect proto readiness in the next month. And again, we are expecting that by March, April of '23, these will also be ICAT approved.
DC controller, this is something that is -- as we've been working on since November of 2022, we expect that in a month or 2, we will get ICAT approval. EV chargers, we expect ICAT approval by May '23. The battery management system, which we are working on, as for the moment being put on hold, and we expect ICAT approval to be given on the February of '24 and ICAT approval also in the same month. So that is the overall context and summary of what we are doing in the EV stage.
So what revenue are targeting from FY '23, especially from the EV segment from existing products as well as the new products.
I do think we gave this number as the last scenario.
So Abhishek, like if you ask EV, like -- in from overseas operations, like we are expecting a turnover of INR 400 cores, right? So it's all supplying to the four-wheeler segment, which include EV and non-EV, both, right? And another 2% to 3% of our domestic is going for the EV companies. That's how it is placed.
Okay. Sir, my next question is related with your contribution from the two-wheeler space, it's still is a very high of 57%- 58%. And the passenger vehicles and CVs is only 40%. So what is your plan to move from two-wheelers to four-wheelers to winning new business, especially in the aluminum die casting or -- and in other business like locking system and [ vision ] systems.
Well, Abhishek, to be honest with you, we don't have a very strong work in place where we say that we will only take four-wheeler orders, and we will not take two-wheelers orders. And therefore -- and because we've been in this space, like I said, smart locks will probably quadruple the revenue in locks over a period of time because the value of each lock is that much higher.
Now obviously, if it goes to two-wheelers, that revenue will continue to grow. Die casting again is something that happens both for two-wheelers as well as for four-wheelers. And obviously, one cannot differentiate. So I am not saying that there is a drastic change that is changing in the portfolio of two-wheelers versus four-wheelers versus construction equipment or off-highway equipment.
All I am saying is that we are following with orders that come our way through any of these segments, but we -- our intent is to grow on the value add of each one of them and margins on each one of them. Every business that we take should have a very adequate level of profitability for us to grow. We are not taken in by our dependence on two-wheelers or four-wheelers at this point of time.
Sir, in a particular aluminum die casting business, many companies are winning new business in the EV segment from the exports. So like the battery housing and motor housing and all. So are you looking to get those business if you can throw some more light over the.
Yes, Abhishek, I'm very happy to say, and I think Yashpal ji had referred to it, that with the onset of our machining business. Now this would mean like I said, 35 lines, 300 new machines that will be used in these 2 segments. Most of the exports that happened from India happened in a machined home. And you have seen some of the companies that today carry a huge -- a big multiple of that evaluation that goes towards the machine parts.
So while we were machining earlier, but this new facility will take us to a new level, which will open doors for exports in a big way where the value-add is much, much higher. So we are now very keen and very happy that this business will start on a full-fledged basis, and you will see the results of it in the next quarter.
So what is your current proportion of the maching in total revenue? And how much it is expected to increase and how this will get the benefit in the margin?
Well, like I said, like Yashpal ji also said the new business that we've taken from machining, we are taking only on a job-work basis so that we don't get saddled down with working capital. And just the machining business, which is on job-work basis, has been calculated in the first year to be worth INR 77 crores and a margin of something like INR 21 crores to INR 22 crores on an EBITDA basis that has been agreed upon. Those are the numbers.
But obviously, it will open many, many doors for us to be able to grow not only from a company that does casting and basic machining to very deep precision machining that we will be doing in the future.
Okay, sir. And sir, in a locking season, what is the current proportion of the keyless locking revenue?
I think it's about 20%.
20% is a working revenue share of the total business.
And how much is the keyless or smart locking system revenue?
Well, at this point of time, smart locks are still to start, we are starting, I think, in this next quarter with some EVs, but our major line will come from Suzuki that begins in '24, where the manual and the other business put together over a period of 2.5 years is about INR 500-odd crores.
So are you not supplying any components in iQube -- the TVS iQube?
Any components to?
TVS iQube?
We are supplying to iQube. But those are normal locks. Those are not smart locks. Those are what we call 4 in 1 locks. So nobody started using Smart Locks as yet.
Okay. And if -- and what is the difference in the content vertical in the locking system smart locks versus the normal locks?
The capital cost would be anywhere between INR 350 to INR 450 and a smart lock begins at INR 2,000.
Okay. And sir, you have also added...
Actually a new order that we got, which is for Honda scooters, which is the new model the new motorcycle, which is being launched now, the 100 CC motorcycle, which is being launched from Bangalore, which is going to be their mass production, and we are sole suppliers for that particular product. That will begin from next financial year as well.
Okay. And sir, these locking system, you were only supplying to the Honda cars in the four-wheeler segment. Are you looking to get business from the other players?
Yes. We have already got business from Tatas. And we are also now very close to closing with 2 others, the names of which obviously I can't announce right now. And this would be a very high margin business because of the change in the mix.
Yes. Okay. And sir, my last question is your revenue guidance for FY '23 and '24? And what is your margin guidance for FY '23?
Yashpal ji?
Yes. So for current year, we are expecting to close something around 24% above from the last year's figure. March '22, you can take a 24% up, to settle something between INR 2,800, between INR 2,900 in the current year, right?
That's net.
Net. On a sales basis. This is our target. And next year with the new project coming where another, we are targeting a 30% jump on the total volumes.
And there was a 30% jump on the volume side, but...
On the value...
On the value in the next year.
Next year, with the revenues from the new projects adding up to our existing business.
But next year, the sheet metal prices will correct because of the fall in the metal prices. So will hit in fact...
That time has to see how the commodity trend goes in the next year, whether downwards or upwards. Yes. But that will not have a significant rate because all our business is new. So values are building from new businesses not from the price of the component will as much. And margins because then will go up even higher in the value falls.
Great, sir. And what is your margin target, sir, for FY '23?
Obviously, we target for -- FY '24, we target a double-digit. FY '23 is still, like, as I said, INR 20 crores of the initial losses, we have that pressure. So we are expecting to close something either on a good note of around 9% at the EBITDA level. It can be up also depending on the fourth quarter performance.
So you were talking about the extraordinary expenses of the INR 20 crores, it is incurred in first half.
Yes, it has incurred in the first half so on an annual basis, in any case, it's going to hit the P&L account, even if I annualize that. This INR 20 crores will always remain. Part of it may be recovered, but some cost is cost. That is the initial set up when we set up the plant, the licenses and all other things, our initial sampling and testing cost, there's QAV's cost that incurs, happens for onetime cost.
So there will be little bit pressure with the new project like Mysore again will be coming into picture fourth quarter. So this pressure will continue for the new projects. That's why I said April '24 or; 23 onwards, we will see a streamline in our business with all these activities being finished upon.
So all these costs are shown in the other expenditure or in a RM cost.
We take it in P&L, yes.
It goes to P&L in the appropriate heads, if it's a machine, the material cost that we got the material cost, if it's a job-work expenses, it will go to job-work expense. In the proper head it goes.
Okay. Sir, in the RM expenses, how much was the one-off expenses in this quarter?
Regarding, can you come again?
Sir, in RM cost, how much were the one-offs in this quarter?
One-off in the RM. You mean what is the impact of RM?
Yes. So the RM cost has gone up significantly. Is there any onetime expenses which had taken in this?
Okay. Okay. I think that's about 4% or so. If I remember, it's at 4%. I think it's initial quarter.
It's 4%. Initial cost was, it has gone down. Because initially we need to build up some component supply for your -- on the franking, casting, so that's all. So it's around 4% impact is there. Barring that there is no other negative in that.
[Operator Instructions] As there are no further questions from the participants. With that, I would now like to hand the conference over to the management for closing comments.
Well, thank you once again to all the participants today and all the questions. We are excited about the future. Like I said, the next quarter and very, very excited about the next year where we believe that we would have stabilized as an organization with no extraordinary kind of CapEx and a streamlining of our operations. We are also quite bullish on the macro state of India. And we believe that we will be able to take full benefit of whatever is coming for all of us to see here and observe.
With that, once again, a big thank you. Wish you all a very happy new year and god bless.
Thank you. On behalf of Dolat Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.