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Sandhar Technologies Ltd
Earnings Call Analysis
Summary
Q2-2024
The company is delving into smart lock technology for motorcycles, with expected volumes to begin at around 10% of their output and anticipated to increase significantly. Production is slated for consolidation, which will begin next quarter to enhance efficiency, although detailed cost savings are still being calculated. The aftermarket segment is also targeted for expansion with a revenue target of around INR 80 crores for the current financial year, aiming to grow by INR 100 crores the following year. The company, which already reported a 20% growth in the first half despite the automotive industry's overall single-digit growth, is optimistic about the changing market sentiment and future growth prospects.
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Ladies and gentlemen, good day, and welcome to the Sandhar Technologies Q2 FY '24 Earnings Conference Call hosted by Dolat Capital. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Abhishek Jain. Thank you, and over to you, sir.
Thanks, Sagar. Good morning, everyone. On behalf of Dolat Capital, I welcome you all in second quarter FY '24 Conference Call of Sandhar Technologies. From the management side, we have with 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.
Good morning, everyone. Thank you all for joining in. Thank you to Abhishek Jain for organizing this from Dolat Capital. Well, as we said today, after the declaration of results that we did yesterday, I'm happy to understand the queries that you have and we'll try and respond to them, hopefully, to whatever you're looking for. Along with me is Mr. Yashpal Jain, the CFO of the company.
To begin with, yes, a good morning once again. The auto industry in the last half year have not performed to what we had expected. But we are happy to say that the company has performed much better compared to the industry. In fact, if I look at the overall industry, the growth ranges from negative in some sectors to 1% or so in 2-wheelers, 6% in passenger vehicles.
The only growth -- main growth has come from the construction sector. Against all of this, Sandhar has achieved an income of about 20% higher in the first half of the year. And if you compare it to with what we had said, we are in line with our budget accordingly.
I'm also happy to say that all the new projects, the 4 projects of sheet metal, whether they were at Nalagarh, Halol, Attibele and Mysore have now reached mature production levels. Our Romania plant has also -- has started production, and we expect to ramp it up in the year '24, '25. Full-scale operations have also started in machining for casting projects at Mysore and Hosur location. The one thing that we are very, very excited and looking forward to is the introduction of smart locks, which will happen in the next financial year, where we are now completely geared up, and I'm happy to today even tell you that the Japanese, especially Honda, Suzuki, have given us exclusive orders for the smart locks. This will be a game changer as these are adopted on a mass scale by the 2-wheeler industries.
Besides of that, we are all in readiness now for the EV product line. You're aware, I had told you in the last meeting that our DC controller, EV charger and motor controller and the hub motor are being ready, and we start to -- we plan to begin operations and production of this in the first quarter of the next year.
In terms of focus areas, we are concentrating and are on route to some areas that we feel are important for us, reduction of debt, improving operational efficiency and reduction of costs, control on new CapEx and maximum utilization of CapEx already incurred, integration of manufacturing plants, diversification of product portfolio, expanding customer base, increasing content per vehicle. But we also -- I must be -- I'm happy to tell you that our consolidated EBITDA has registered a growth of 1.2% year-on-year. So the margins that all of us were talking about have started to flow in.
In terms of joint ventures, also happy to state that in the half year, our revenue from the joint venture has reached a level of INR 151 crores. And again, a loss of INR 5 crores that we had last year. This year, we are in profit, 90 lakhs or so of profit. So basically, the drag on the bottom line, which was coming in from the joint ventures have started to reverse.
With all of this, I am going to stop here. and request all of you to ask your questions, and I've been happy to respond in terms of operational numbers and so on and so forth. Mr. Yashpal Jain will win with whatever questions you might have. Thank you. Abhishek again.
[Operator Instructions] The first question is from the line of Nitinn Aggarwala from UTI Funds.
Congratulations on this continued performance at your end. Sir, my first question is regarding if you can give us some color on how are the orders panning out from our 2 anchor customers, Hero and TVS? And in line with that, what kind of growth momentum can we see in the second half and maybe FY '25 or so if you have that visibility?
To be honest with you, I will not be able to give you projections as the norms that have been advised to us. But suffice to say that if you look at our history, the first half of the year typically is much less compared to the strong second quarter -- second half of the year. And I don't see why that would change.
So typically, I don't know, Yashpalji will win. I think it's about 40, 60 is how we do it. So that should give you some idea. Of course, it depends a lot on how the industry performs. But from our side, with the growth and the investments that have been made in the last few years, all of them have started to be fruitful. And we expect that particular momentum to continue.
In terms of TVS, TVS has now become our -- probably the largest customer for us. And again, Yashpal will give you details on what is the share of each customer in the scenario. For next year, our next financial year, again, early to say we are still on the drawing board, getting the orders. But the pace of growth that you see now according to me should continue irrespective of how the market goes.
Yashpalji would you want to give some of the numbers on TVS and so on and so forth, share of business and so on?
Sure, sir. So out of our total business, 30% is being derived from TVS, so TVS is now the biggest customer for us. And Hero share is 18% now because TVS is growing larger if we compare with Hero. And JCB stands at 9%. So these are 3 permanent customers for us. And gradually, the share of Honda motorcycles, HMSI has also grown up. It is around 3.5%. And I think in the coming half year, it will significantly grow up with the new products and as sir talked about, smart locks once they are introduced, the share of business for HMSI will also rapidly grow up. And the total overseas business accounts for around 15% of our overall revenue, which includes Bosch, Continental, Autoliv and TRW, these are the major customers who are there.
Sir, a few quarters, say, 7, 8 quarters back Hero was somewhere around 28% of our top line and now it's 80%. So is it that the others have grown significantly above that -- above Hero or have like what is attributed?
Absolutely, you've said it correctly. Hero in itself is growing for us in terms of absolute numbers. But in terms of percentage, the others are growing fast...
Or you can say we have grown more rapidly than Hero. So like the content increasing with other customers, that the absolute number of Hero are more or less going up. But our front-end is increasing business in with other customers. So that's the reason we are rapidly growing up. And the proportion on an overall basis, the share looks to be as far as Hero is concerned. But our share of business has not declined to confirm it.
Again, we also do a simple calculation, 18% of our revenue now, vis-a-vis 20% of our revenue at that point of time will give you the answer, right?
Right. I can see that on absolute terms, Hero business has also grown, but yes, TVS has been the Joker in the pack for us. And sir, also from the JV profitability we have seen now continuously 3 quarters, we have been positive. We have turned from a negative over there. So if you can give some insights on where are we on each of the JVs and how are we progressing? And are we looking out to stop operations in any of those loss-making JVs, which are still continuing to be dragged and what is the visibility with what turnaround in those JVs?
This will be a long answer, if I go into individual ones, but let me say some of the -- so all the units, all joint ventures are now in positive. There are 2 which still have a drag, the bad brag, fortunately for us, is not on account of operations. It's on account of foreign exchange issues.
So if you were to put that aside, then each one of the joint ventures is now on its own feet. So that is a big blessing. And we see that from now on, there should be acceleration in the performance of all of these JVs. I mean, if I break it up helmet which is Sandhar Han Shin, I'm happy to state that we are now at record numbers per day in terms of our production capacity. And it is getting profitable by the day.
Whether it is Winnercom, which has been profitable, Hanshin, which has been profitable Han Sung, which was a drag on the line is now positive and not this positive, it has an EBITDA margin, I think, which is in very healthy double digits. Same with Sandhar Whetron. So Jinyoung and Kwangsung are the only 2 drags, but they are largely on account of foreign exchange where we are reviewing how the methodology of accounting in terms of materials that are exchanged between Korea and India could be looked at from a different perspective as we go forward. But overall, we are quite satisfied with the performance of the JVs.
Okay. And sir, one last question from my end before I get back to the queue is we see that the EBITDA margin is -- has improved and is holding on strong. And from here on, what are the additional levers to increase it further to that double-digit kind of levels, what levels are we looking at going forward? And what is the time line -- target time line that we have in our mind to reach that double-digit?
Again, I think we are in line with our thinking of how to improve the margins. I had mentioned this to you earlier as well that the margin drop was also on account of new projects. And while our subsidiary, which is the ship metal subsidiary, where the Sandhar engineering, which is still a drag in the company, because it's still to reach maturity levels. Once those come online, which we see happening soon enough, our target of reaching double digits and well over the beginning of double digit should not be far enough.
[Operator Instructions] The next question is from the line of Radha from B&K Securities.
So my first question was that we -- like you mentioned in your opening remarks that we have started all the heat material plants and mass production and all of them barring Mysore, which will probably be affected from this quarter? So sheet metal revenues should have increased on a Q-o-Q basis as well given that new plants have come up, but that has not happened in this quarter. So could you please give us some insight on the reasons for that? And how do you see this in the coming quarters?
Well, Mr. Yashpal Jain can give you the numbers on sheet metal as to how we've grown compared to last year and to the quarter last quarter. Yashpal, do you want to comment?
Yes, sure. So we have grown in sheet metal because if you see like the percentage is 13.5%. But in terms of the total revenue, if you multiply with 13.5%, then this is pretty high if you compare to last year. In sheet metal, the turnover-wise, the sales, this has been started generating and in Sandhar itself, we have generated a revenue of INR 87 crores in first half.
The same is the case with Nalagarh, which is about INR 37 crores, INR 38 crores. So these new projects have started generating the revenues. And if you multiply with the absolute numbers versus the share of the sheet metal business, in the -- increase in turnover is clearly visible.
Sir, actually in the presentation in this quarter, we are not giving, I think, whether the red color is for 2Q FY '24 or the blue one. So you have not given the legend. So what I understood, given that previous quarter, we used to give the red highlight as the current quarter revenue. So that's why I have taken 12.6%. So that's why my question was based on that.
No, no, the red ones for the quarter has just gone by. The gray market that you see is for the corresponding quarter of last year and the blue is for the immediate quarter proceeding this one.
So sir, then as per that, the sheet metal revenue mix is 12.6% instead of 13.5%, which you just mentioned?
Yes. So quarter is comparatively higher if we go on a year-on-year basis. So that is the reason, other factors have also grown up. It's not that all alone sheet metal is going up. From INR 746 crores in the last corresponding quarter, we have grown up to INR 885 crores. So 12.6% of -- or I would say, of INR 885 versus [13.5] of INR 746 crores. The growth is visible in sheet metal.
Actually, I was talking on a sequential basis. So if we multiply the product mix that you have given, sir it was INR [indiscernible] crores in 1Q FY '24 and that is INR 112 crores in 2Q FY '24. So given that -- why I'm saying sequentially is because of the new plans that have started.
So as I told, like Sandhar engineering is dedicated to sheet metal, INR 87 crores is there, roughly INR 38 crores is in Nalagarh. So automatically, it goes to the same level that we have mentioned earlier in our call.
Yes. So once again, Radha, the Nalagarh plant is inherent Sandhar technologies, and the Sandhar engineering is the new subsidiary, which has added 3 plants while the Nalagarh plant has been consumed into Sandhar technology itself.
Sir, secondly, in the other segments, we have seen very high sequential as well as Y-o-Y growth. So could you give us some insights as to the reason for this? And you also mentioned that this MQ DCDC in the new products that we have planned. So in the presentation, it is mentioned that this will come in 2023 itself. I assume that this is calendar year 2023. So have you completed any trials runs and how is the customer response for these products till now?
So let me -- if you want it on the basis of product wise, if I look at the motor controller, we have completed the POC sample. We have done sample A, we've completed samples -- sample Bs are in the process. Some of them have been completed. The 250-watt is already completed. The others are coming in soon.
Validation, we expect to happen by the end of this calendar year. And the ICAT approval is to come in, in the first quarter of next year -- sorry, in the last quarter of this financial year. And production, like I said, will roll out from the first quarter of next year. This is the same for the motor controller. It is the same for the battery charger and it's same for the DCDC convertor.
And sir, reason for such high growth in the other segments that we have reported in this quarter?
So we have been registering growth nearly in all segments. Net growth is coming in the dye casting business in India as well as overseas. Dye casting is performing well. And I mean, as far as block and mirrors are concerned, they are going at a good case. So growth is coming nearly from all sectors. These all together have contributed to the present, I would say, the growth that we are seeing on a year on basis of 20% for the half year. All products -- all segments are contributing...
Sir, but particularly, if we see only the other segment, the revenue mix has gone up from 12.2% to 15.3%. So could you give us some insight on this?
Actually what happens, percents is just I would say, a numerator and denominator thing. The thing is absolute figure is INR 885 crores or INR 750 crores, 10% of INR 750 crores, for example, becomes INR 74 crores where as 10% of 85 becomes INR 88 crores. So you should see on basis of absolute numbers.
The next question is from the line of Mr. Abhishek Jain.
The first question was on locking system. So there is a sharp growth in the locking system quarter-on-quarter basis. What is the reason for that? And how is the outlook for FY '25 and '26? And as you mentioned about the smart locking business, so what sort of the penetration we can see in smart locking in next 2 years?
Abhishek, I will not be able to give you exactness on '25 and '26 right now, but suffice to say that the 2 major customers which are Honda and Suzuki, which are leading the way from smart locks are exclusively with us. And what I understand there, because they're exclusive, they have given us clearances for almost 5 to 7 years of their output.
Now there could be some differential in what they are planning and what they actually achieve. In some cases, it is possible that the adoption of smart locks could be faster than what they have anticipated at this point of time as well. However, from that perspective, if the market by the year 2026, goes up to 10% of the output in smart locks and smart locks correspond to almost 400% of the value of the regular manual lock, one should be able to do the calculation.
Sir, in the dye casting business, when can we expect the TVS machining revenue to start to contribute in the profit and loss account?
Already started, we are running. So if you ask me the number of machines we already have almost 70% to 80% of the machines that were planned inside the shop floors, which are working to full majority. And within the next few months, we will reach the levels that were anticipated. So this business is not only operational, it's also profitable.
Okay, sir. And for full year FY '25, what would be the contribution of this particular business and on the revenue and EBITDA terms?
Well, very difficult again for me to answer a futuristic questions, Abhishek, for reasons you are aware of. We are not allowed to give forward-looking statements in that particular manner. But again, I would like to reiterate that these are new businesses where the machining business is concerned, this will be fully operational in the next year. And from what we understand and what our understanding with the customer is that all the routing of machining that goes into TVS will go through this particular plants.
And sir, in this quarter, subsidiary business performance was impressive and run rate is around INR 200 crores on the revenue side on a quarter and -- quarterly basis. plus EBITDA margin is -- there is a significant improvement. So what is the reason? And when can we expect that Romania will start to contribute in this business?
Yashpalji has just been to Romania. So we'll be able to answer your question better.
So Romania, like they have started the production, but the Romania will go into the ramp-up of production starting next financial year, '24, '25. I think this we have mentioned in earlier calls also with our investors that Romania will see a mass production in '24, '25. That time, it will start contributing positively and a healthy growth in terms of profits and margins and adding to the value in the overseas business.
So what would be the quantum, it would be around INR 100 crores kind of the number in FY '25 because of this?
Well, I cannot say about INR 100 crores, but yes, it will be moving in the direction that we anticipated that it will reach quickly the INR 100 crore mark that we have set up a benchmark to start up any manufacturing facility here. So we will be trying to get to INR 100 crores. But I cannot say as of now as a committed thing because it all depends on the customer schedule. And maybe by the end of the fourth quarter, we would be in a position to say that how much the Romania will crack next year.
And what is the margin and the ROC of this business of Romania?
Well it is more or less equal to the Spain only, once the production ramps up and as we know the overseas business is always in double-digit in EBITDA margin.
[Operator Instructions] The next question is from the line of Pritesh Chheda from Lucky Investment Managers.
Sir, what would be the peak revenues in Romania?
Romania, as I just mentioned before this question. I mean it all depends on the customer schedule so there's no such aspect capacity constraints or we can say like a number of pieces that can be done on a daily basis. So it's -- I mean, the installation in the facilities that we have created is competent enough to take any kind of volumes in it. It all depends on -- we have a target to achieve INR 100 crores as quickly as possible.
But for the capital that you have invested of INR 90 crores, what kind of revenue maximum utilization is the number in Romania?
So we always keep an asset turn of 3x while investing in any of the projects. But over a period of time, once they achieve a maturity level. In auto type -- I mean auto compare type of industries from the starting of the year 1 or year 2, it's not possible to lease 3x of the asset turn, it gradually matures over a period of 3 to 4 years.
Okay. So basically, it will reach something like INR 250 crores in 4 years?
Yes. I mean going by that calculation.
Okay. And what is Romania numbers in FY '24. We started using that, sir?
We have started using that facility, but still it is yet to break even.
Okay. Is the company treating on improving the ROCE number by relooking at a large capital which is invested in our international operations of dye cast, it is basically 4 plants now Barcelona, Mexico, Poland, Romania, where our ROCE is at extremely low single digit. So do we want to relook at this piece of the business?
Actually, we are working on improving the ROC. So even if I tell the current half year figure -- for half year, we have ROC of 7.2% after excluding the capital work in progress, which is not yet put to work annualized basis, it becomes 14% roughly. For this year, we have set up a target of something around 15% on an overall basis. So I am hopeful even, I mean, the second half is always a good half as far as Sandhar is concerned or auto industry sometimes. We are hopeful to reach the targeted ROC of 15% in this financial year. And gradually, we have set up a target of improving every year. So at least we reach by 20 years in the coming years.
This 7% you're mentioning at the company level, right?
Yes, the consol level, including all the...
My question was only on the overseas operations.
I am saying overseas is also a part of our business. The same methodology that we are putting in India, we are developing in overseas. And gradually, we will also reach to this level.
And what is the utilization? I think the other plants which is Barcelona, Mexico and Poland, they are running at full utilization, yes?
Yes, they are running at full capacity.
So then you have a INR 700 crore capital which is invested in these international operations, out of which INR 100 crore is Poland. So INR 600 crore capital which is in Barcelona, Mexico, Poland, but that INR 600 crores capital at the 100% utilization also generate a single-digit number. So there you cannot improve your ROC?
No. There is always a scope and the capital import is something INR 470 crores in overseas business. It's not INR 700 crores. It's INR 470 crores of capital employed over there. And if I remove the Romanian operations, we are already at a very, I would say, ROC of 10%. The Romania as I told, it's not at a breakeven level, bringing a new plant up. It will take this year to ramp up the capacity, I would say, the facilities, maybe next year, they will start generating the profits in the...
Okay. And on the sheet metal side, did you mention that the sheet metal run rate is INR 100 crores for first half, what you mentioned, I did not get that sheet metal revenue number?
Sheet metal for the new projects, I mentioned. For the new projects I mentioned, they are about INR 120 crores, sir, for first half.
In first half?
Yes, new projects, not the existing ones. I'm just talking about the new projects.
So which means 120 divided by 6. So basically, you're running a new -- the new assets at 100% utilization?
No, it's not 100%. Again, I will say, it's not like a consumer goods industry. We have the machine setup. We have the facilities ready. It all depends on the customers schedule. Some of the plants have worked part of the year, some have full of the year, like Mysore has contributed only for 1 month. So we cannot just take a median or an average of the those.
Now excluding Mysore, so let's keeping Mysore aside, the other 3 plants are running at full utilization?
No, we have the capacities. It depends on the number of shifts that we are working. We are competent enough to take more orders from the customers if they increase the schedule, sir.
So the sheet metal those 4 plants, what is the peak revenue possible there? In one of the calls you mentioned INR 30 crores per month. Is that the number?
INR 30 crores?
Per month?
Yes. This is all sheet metal business that we had contracted were at INR 30 crores, but it was done on a single-shift basis. So if you were to calculate that then you can duplicate all of that. But per month is something that we will achieve very quickly and very soon.
But that is your single shift?
As of today, we have scheduled something like INR 15 to INR 16 crores a month. So we expect the same number. Halol is at INR 5 crores a month. Nalagarh is -- Yashpalji where are we?
INR 6.25 crores to INR 6.5 crores, sir, per month.
So that gives you the number. We are very close to those numbers right now. But the idea is now to ramp up with the new schedules and take it over that number of INR 30 crores.
Okay. So just reconfirming INR 30 crores per month single shift for these 4 plants?
Yes.
Okay. And you are having schedules of 16 plus 16 plus 6, plus 5. So about 11 plus 32 is about INR 43 crores today?
Yes, that's it. This is what the current scenario is. We are -- we have reached maturity levels in terms of these product lines. But in terms of output, we are still working on it. Thing is these are new plants and therefore, their efficiency has to improve. Their margins have to improve. Those only come along as we become mature in the business.
Okay. Okay. When do you see yourself reaching INR 60 crores?
Productivity is an important aspect. And productivity goes up once the utilization and the majority of that plant works.
The next question is from the line of Nitinn Aggarwala from UTI Mutual Funds.
Sir, can you share your gross debt and net debt number as on September? And what is the plan of debt repayment? What do we have? And what is the target net debt to EBITDA in our mind?
So like gross debt as of now in September is INR 558 crores, sir. And net debt is INR 543 crores, sir.
So this is a quite good number versus margin. So have we like delevered in the -- how much have we paid off in the first 6 months?
Well, in the cash flow statement, if you see, there has been some fresh borrowings on account of new CapEx and whereas repayments have already started. So I would say in or an outdoor. But yes, we have generated cash from operations of INR 159 crores. That is a very positive side for us. And largely, we are using internal networks are not heavily borrowing. And our plan is that we start selling the debt starting next year onwards.
Okay. And sir, from an OEM's perspective, we have seen that some of their volumes have shifted from 2Q to 3Q because Diwali has been late in November. But from our perspective, when have we recorded the volume, like is it everything done in 2Q or even for us, we'll see some spillover in 3Q of the festive volumes. If you can give some color on that?
So basically, like as we told we were -- based on the customer schedule, sir. So -- and the customers have started planning for the festival season starting September. So as of now, also for the coming quarters, we have got schedules from them. So I believe this momentum will continue even post the festival season also.
Okay. Okay. And sir, one last thing is that are we going to receive any incentive for the Romania plant from the government?
Yes, there's a capital incentive, 30% of the total investment from Romania government. Two of the installments we have already received from them. And it is basis the investment that we are doing in the plant put to use. The plant has been already put to use to installments we have received. Further, one installment will be received in due cost might be next year onwards.
So 2 we have received, one more we will be receiving. And that will be full and final for the 30%?
Yes, exactly it is this investment. It will use the investment and it is 30% of the invested amount. It's not that they have fixed any absolute number. It is a 30% work eligible capital investment.
And does it go through the...
Plans for new machines to be brought in. Once they are broadened again, we would be eligible for the subsidy.
This gets routed through the P&L or is directly adjusted in the assets in the balance sheet?
It does not go through the P&L because being a capital subsidy. It goes to the -- I mean the Indian accounting standards, based on IFRS has a different treatment for the capital.
Right. Right. So basically, it will just help improve the ROC better because...
ROC add to cash flows also because the capital investment goes down.
Definitely, definitely, sir. So -- and can you quantify how much it would be in total, the 30% and how much you have received?
So we have received close to INR 25 crores, we have already received. I am telling in Indian rupee because -- INR 35 crores in Indian rupees we have received because earlier euro was down, so the figure was less. Now it has gone up so it becomes higher.
[Operator Instructions] The next question is from the line of [ Shubhro ] who is an individual investor.
Congratulations for a good set of numbers, sir. And my question is regarding the smart locks that you have been speaking about. So one of your competitors is already very aggressive in this segment and has quite a lot of market share, quite a high market share. So in that context, I just wanted to understand how do you -- apart from the 2 customers that you named, Honda and Suzuki, how do you plan to address the other segments, other customers?
Very quickly, I mean, you mentioned my competitor, I don't know who you're referring to, but there are still no smart locks in the market. So if company is supplying and where is it going, then I'm not aware of this. But from what I understand that the leaders in this space are with us. And we have confirmed orders and they actually get introduced into the market. So there are some new EV for which we have also contracted, those will probably be first of the block. But if you ask me, there are no [indiscernible], motorcycles that carry smart locks today.
Hello? Am I audible? Can you hear me?
I think this line is not audible.
Abhishek can you hear me?
Yes, sir, we can hear you. I believe the line for the questioner seems to have some kind of a problem. Mr. Shubro, if you can hear us, you can join back the queue. We'll move on to the next question.
Next question is from the line of Radha from B&K Securities.
Sir, my question was on the Smart locks. You mentioned about Japanese customer wins and you be an exclusive supplier to them. Sir, could you give us some insight on what kind of volumes are you expecting to supply from next year?
From what I understand, Radha, the numbers that have been given to us constitute about 10% of their overall output. So 10% carry smart locks to begin with. And then, of course, they will be adopted on a mass scale as things go forward.
You are well aware that once the new technology is introduced, it takes a few years for it going down the line because there is also the expense portion. A manual lock cost on average about INR 100 while a smart lock goes anywhere between INR 1,600 to INR 3500. So there is a dramatic difference.
So some of the ones that we've contracted are in regions of about INR 3500, INR 3,600. So there will be a huge impact of that and most of the OEMs will adopt them on a gradual basis. But I understand that the initial volumes that they are considering are about 10% of their output.
Okay. And -- any insight on how the adoption of Smart Locks has been in the global market? And especially in U.S. or Europe and given that we are getting it from the Japanese customers so any insight to how that option has been there?
Well, the adoption has been. So if you look at expensive motorcycles, for example, or scooters, for example. Those have a constituent of smart logs now becoming a regular part of it. So if you look at vehicles that emerge from the likes of BMW or Honda, or some of the others, including some in China, for example, and smart locks. The adoption has been exactly on the same platform, which has spun over a period of time over the last 5 to 7 years, starting from about 10% levels that India is considering and then going into full adoption.
Understood. And sir, so you mentioned that we are planning to integrate some of the plants in India out of total 27 plants that we have in the standalone business in India. So maybe it will happen this year or next year, could you give us a time line on how much cost reduction can happen due to this?
Well, I will not be able to give you details on the cost reduction. All I can tell you is that very genuine efforts are on to consolidate some of the plants. So for example, Nalagarh, we are planning to consolidate 2 facilities into 1. We are considering the same in Mysore, for example. We are considering on similar levels in Attibele.
The idea is that depending on the order book, depending on the space availability, depending on several other factors on machine and output, these efforts are being made. We are very confident that starting from next quarter, this consolidation exercise will be in place. And the numbers will start improving in terms of the consolidation that happens. What those exact numbers are, I am not at liberty to say today because we are still working on them. It also depends on the order books that we receive. So all of this will have to be.
So today, for example, in 2 plants, we employ a certain number of people. Yes, some of the overhead numbers or whether it is security people or XYZ will obviously drop down. But the significant portion of it will come from several other factors in terms of improvement in productivity. So once we have and we can tally them all, we will be able to answer this question better perhaps in the next quarter.
Okay. And sir, lastly, we are also targeting the aftermarket segment in India. So wanted to understand what are the key products that we are pushing there? And are you seeing any higher traction in the aftermarket, what is our strategy there?
Sure. Sure. Yashpalji is in charge of this, so he can answer this question better.
So like aftermarket, we have started recently, I would say it's not so mature business. We have multiple host of products. It's a diversified product range that we are dealing in aftermarket is starting from automotive, and we are now planning to go for nonautomotive segment also. So we see a good growth in the aftermarket business in the coming period of time.
Do you want to know the numbers? What numbers Yashpalji?
We are expecting something around INR 80 crores of revenue by the close of this financial year. We have targeted our bottom line of around 9% to 10% in the aftermarket business.
Sir, as compared to any numbers for FY '23?
FY '23, as I told, we started in FY '23 in a separate setup for aftermarket. And I think it was around INR 60 crores something that time. So we are expecting -- we have set a target of at least growing by INR 100 crores in the coming financial year.
Lastly on the non-auto segment, you mentioned?
In non-auto segment when I...
There will also be non-auto as we do both.
Customers can be auto and -- both types of customers. That's what I meant.
Thank you so much. As there are no further questions, I would now like to hand the conference over to the management for closing comments.
All right, once again, thank you Abhishek and Dolat Capital. Thank you all the participants for the meeting today. I know there were certain questions for which we are not allowed to give you any forward-looking projections. However, we did our best to kind of give you where we are today. I am happy to state that we and the company are extremely bullish and happy with not only the results, but with also the market sentiment now beginning to change a little bit also going in for lower value of motorcycle that's coming in, which wasn't there for the last 4 years.
So with that change, I hope and I expect the company, which is already on the growth path and has grown by 20% in the first half besides the automotive industry being in very, very low single-digit numbers growth. I think we will be able to accelerate the growth, not only in the next half year, but in the coming years as well.
So once again, I want to use this -- take this opportunity of thanking everybody in Sandhar as well. And Mr. Yashpal Jain joining the call today. Thank you all once again. Thank you, Abhishek. Thank you, Dolat Capital.
Thank you. On behalf of Dolat Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.