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Sandhar Technologies Ltd
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Ladies and gentlemen, good day, and welcome to the Q3 FY '22 Earnings Conference Call of Sandhar Technologies Limited, 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.
Thank you, Steven. Good morning, everyone. On behalf of Dolat Capital, I welcome you all on the third quarter conference call of Sandhar Technology. From the management side, we have with us, [Technical Difficulty] and Mr. Yashpal Jain, CFO. Now I will hand over the call to Mr. Davar for his opening remarks, post which we can have the question-and-answer session. Over to you, Mr. Davar.
Thank you, Abhishek, and thank you, Steven, for this opportunity to talk to you about the industry, et cetera, and of course, Sandhar. So while numbers, and I'm going to leave all of those to Yashpal to explain. I'm happy to begin by, once again, welcoming you all, wishing you a very, very happy new year. And also from a perspective of Sandhar, just to give you a broad side that we have in terms of 9-month comparison over last year, these months -- these 9 months have been remarkably better. Despite this being one of the most challenging quarters that we have seen in history. The commodity prices have gone out of the window and in some cases, gone up by almost 30%, 40%. So while the current quarter that we are in, is stabilizing, the impact of the growing commodity prices or the rising commodity prices have had a plate on every company in the sector, inside and outside. In the 9 months, we've had 2 difficult things that have also happened. One is the chip shortage, as we are all aware of, which has impacted the output of all 4 wheelers. And then in terms of 2 wheelers, at the entry-level models, there has been a slump in demand. putting these 2 things together, I think it has been a challenging quarter, and our numbers for, therefore, the last 3 months have not been what we had expected out at the beginning of the year. The silver lining, of course, is that while the entire industry has gone down, we at Sandhar have managed not only to out-beat the industry but show positive results. So I'm going to leave it there and then you can start your question-answer session, and I will ask Yashpal to kind of take on questions where numbers are concerned, and I will happily -- and supplement it with whatever any future looking statements are. Thank you.
[Operator Instructions] The first question is from the line of Abhishek Gaoshinde from Sunidhi Securities.
First of all, if you can share your outlook for quarter 4 or first half of the next financial year?
Well, Abhishek, I'm not allowed to give you numbers for the quarter. All I can tell you is that this quarter should be better on account of 2 or 3 things. One, I understand the chip shortage situation is improving. And therefore, we should see some uptick there in terms of numbers of vehicles being sold. You're aware so far, we've lost almost 0.5 million [ cars ] in terms of production during the year. I do believe that most of the car companies now are saying that things are getting back to a level which is better than what it was in the last quarter, and therefore, one should be able to see better numbers there. That's one. On the 2-wheeler front again, I understand from FADA that while sales have been low, the footfalls have started to happen in the showrooms. So that, again, is a positive, positive thing. The third positive lined-up stuff right now is that, like I said, the commodity prices have begun -- have started to kind of stabilize. And therefore, we -- you are aware that for companies like us, when the commodity prices go up and keep going up, our impact lasts for at least 3 months and even longer, it may continue to grow. But on stabilization, the compensation that we get from the customers bring us on to a normal platform. So we expect that to happen. And the losses that you get or the impact that you have of rising the commodity prices is taken off the table. So those are 3 statements that I can make with whatever I can see right now. Obviously, I cannot talk to you about the entire quarter. Don't want to open the astrologist's ball here, but that's where it is. We can't give you any forward-looking statements there.
No, sir. These are helpful. Directional things are helpful. Second thing, sir, you have applied for the PLI scheme. If you can elaborate that what kind of products or categories we are targeting under the PLI scheme to?
Well, we are looking at several, and I'm happy to tell you that in the 2 wheeler segment, for example, we are looking at a lot of electronics. We are also looking at batteries and BMSs. We are looking at battery charges. We are looking at motor controllers. We are looking at DC-DC Convertors. And for the 4 wheeler segment, some of our technology partners have already started doing stuff internationally, which we brought to India, including the rear parking sensors, cameras, security systems, lane departure warning systems, heads-up displays, radars and big sensors, different kind of sensors, and the stuff that I mentioned earlier. So there is a lot in the city right now. We're still trying to consolidate and build demand. A lot of it is mandated, a lot of it will become mandated by the government, and we should be in a position to be able to take advantage.
Okay. Just 1 last question from -- with Mr. Jain. Sir, have -- you are looking to apply for the PLI scheme. Just based on a directional, if you can?
We already applied to it.
No, no. My question is that based on your assessment, how the profitability or return of investment would be different if you now invested on the same project without PLI scheme. Just directional view. I'm not looking for a specific number. Directionally, how the things would be different with the PLI scheme?
Abhishek, it's very difficult to talk commercial right now. All I can tell you is that the PLI scheme in itself has a built-up module of anywhere between 4% to 11% depending on the products, depending on the investment and depending on how quickly you can do it over the next 5 years. So while there will be an investment, anything, if you were to say, like-to-like, if I was to do it, we have the option, depending again on the amount of input costs and the amount of value addition, on the amount of distance to be traveled, anywhere between 4% to 11%.
[Operator Instructions] The next question is from the line of Sanket Baheti from GC Ventures.
Couple of questions. Sir, how much CapEx you have done in 9 months? And what is the total CapEx we'll be doing in this financial year?
Yes.
Yes, I will respond to this. So like as of now, in 9 months, we have done a CapEx of close to INR 134 crores, sir.
Okay. And for the fourth?
And for the fourth quarter, we are again expecting to go something around INR 50 crores, I think that are.So, annual CapEx, we are planning around INR 184 crores in this current financial year.
And sir, next year?
Next year, well, we are commissioning some of the projects for our specific projects for our clients. So next year, apart from our [ revenue over ] CapEx, we have a plan to go for another capital close to INR 100 crores, sir.
So I think it's approximately INR 80 crores of your maintenance CapEx and INR 100 crores will be this combined?
Yes, maintenance CapEx are need based CapEx. It's not a ballpark. I mean the [ combo ] that equals to depreciation, we have to forcefully recur the CapEx. It depends. But yes, INR 100 crores, we will be spending on our expansion, sir, as of now. And this figure will keep on changing ways on the businesses that we are securing from the customers.
Okay, sir. Sir, in the sheet metal...
Let me just supplement that. We are currently in this particular year, the idea was to commission 5 new plants. You are aware that the Nalagarh plant was inaugurated. This was done in the month of December. And in the month of January, we've started commercial production. We have now facilities coming up in Halol, in Hosur and Tamil Nadu, in Mysore as in Karnataka and then, an international unit in Romania. If you were to look at what the outflows -- net outflows, there is a total CapEx and there is a net outflow as well. And this is taken after consideration of the incentives or subsidies that have been provided by the state or the federal government. The total CapEx we look at, for the plant here in India, Yashpal, do you want to give a number, and also for the total net outflows for all these pipelines?
Yes, definitely. Yes. I'll go ahead, sir. So 4 plants we are building up in India. So the gross CapEx based on...
5, including the one that we've done. So that gives us minus coming [ 4 ].
Yes. So [ INR 291 crores ] is the CapEx -- gross CapEx that we are doing in India, INR 159 crores, we are -- I mean it's estimated CapEx, [ INR 159 crores ] for our Romania plant. So this is a gross CapEx that we have planned. If we take out the subsidies and, et cetera, then our net CapEx remains to be -- it will be something around [ INR 66 crores, INR 86 crores, INR 90 crores, INR 115 crores ], if we take out. This will be roughly around INR 200 crores of CapEx out of [ INR 190 crores ] rough figure. The other net CapEx -- after we consider the various benefits of subsidies there.
[indiscernible] the other thing that you have to keep in mind is that all these plants are fully booked from day 1. So when they start, they go into full port production. We don't have a gradual increase of production that we are looking at, which means that a large part of the revenue will appear against these investments in the next financial year itself.
Okay. So by when these plants are expected to start?
Well, we are looking, like I said, Nalagarh has already started. It's building up and ramping up. We have Halol, which should also go into production in this financial year itself. Hosur and Tamil Nadu, also, we are targeting the month of March. In Mysore, is -- it will take us another 3 months or so. So we're looking at probably June. And Romania, again, is something where we're looking at June of 2022.
And then what would be the total revenue from this?
Well, again, we are building our capacity to overall have a revenue from these 5 plants to the tune of about INR 780-odd crores.
Okay. And so most of it will come in FY '23 itself, starting from FY [ '22. ]
Well, depending on when it starts and, obviously, it takes a couple of months to stabilize. But otherwise, the capacities are fully booked.
Okay. Great, sir. Sir, in terms of sheet metal components, so I think we have reached revenue of around INR 116 crores during the quarter. So all the new plants will be catering to the sheet metal components, if I'm -- is it right?
No, not all. Yes, some of them are sheet metal in India, but Romania continues to be our growth and expansion of high precision aluminum castings.
Okay. And sir, last thing. Sir, what is the gross debt and net debt at the end of the quarter 3?
Yes. So our gross debt stands at INR 356 crores as of December ends. And our gross -- sorry, net debt will be -- is around INR 350 crores.
The next question is from the line of [ Namit Paya ], an individual investor.
My question is regarding the targeted new products that you've listed in your presentation for both the 2 Wheeler and the 4 Wheeler segment. So do we have tie-ups for these growth OEs already? And where are we getting the technology from -- for most of these products?
Come again. I didn't get that question. Once again?
So these products that we are developing, the targeted new products for the 2 Wheeler and the 4 Wheeler segment, things like that, key chargers, keyless entries, the several products that we've listed our presentation. So do we already have tie-ups for these -- the original equipment manufacturers or once we develop it, how does it exactly work? Does it work on a full basis or do we...
It works 2 ways. One is co-creation. A co-creation is, it depends on the model, it depends on the OEM. So I can give you a couple of examples, which will probably exemplify what I'm saying. You brought about, let's say, keyless entry. Now for keyless entry, which is the new or the futuristic way of locks or security for vehicles. There are different elements to it. If you take at 2 Wheelers themselves, there are different levels. Right now, the locks that we provide cost anywhere between INR 300 to INR 500-odd. [ And where ] keyless entry comes in, the minimum level would be [ INR ] 1,600 and the maximum level could be [ INR ] 8,000. Now this, obviously, means that the features that get involved in this, bring in different technologies. So you'd be happy to know that your company has [ run ] our own R&D, which has developed the one, which is the cheapest level of the keyless entry locks. We have Whetron, which is, let's say, the worldwide supplier for Suzuki and Honda, where the cost is about INR 3,500. Then we also have technology partners of Honda Lock, who've been our partners now for 30 years, where the difference could be between INR 5,000 to INR 8,000, but they cover up the entire end of the platform that runs for the next 3 generations. So that should give you -- we not only have one. We have almost 3 backups for the kind of technologies that we are looking to offer. And depending, like I said on the model of the OEM, depending on the features required, we have adequate backing of the right kind of technology partners to take us through this.
Okay. So if I understand it correctly, any of these products that we are developing, we have some 10, 15 or maybe 20-odd products listed, do we already have a tie-up with the OE, once we develop it to supply to that respective model or...
Yes. So whatever we are developing is being developed. You see we are -- so there are certain elements. I'll break this up into 2. There are some components where we are current suppliers. [ Logs ], for example, we are the largest [ logs ] using company. Obviously, all the OEMs that are looking for anything futuristic in terms of technology for the next 3 generations, 4 generations of their vehicles co-created with us. Then there are items which we currently don't do, especially in the field of TVs and so on and so forth. Now because the customers do not know that we do them and the customers do not themselves also have the technology because these are new ideas, but the market is kind of developing. They are reaching out to people who have technology tie-ups and we have those technology tie-ups like I mentioned, with several of our joint ventures and technology partners. So we are inviting them. People are coming in. We are now at a stage where we've started talking to them about technologies, features availability that they're looking for, the commercials and so on and so forth. So that's where the scenarios are, but the traction seems to be building on the components that I mentioned earlier.
Okay. And 2 related questions to these. So new products that we developed, not upgradation like the [ logs ] that you mentioned, new products that we will [indiscernible] on what proportion of our turnover in, let's say, medium term could this contribute? I know Cabins is something that you did a few years back, but -- just wanted your sense on that, how long does it take to ramp up a new product that we are building altogether?
It depends on the change over that the OEM looks at. I had brought you an example of, let's say, the keyless entry locks. These obviously bring a huge amount of premiumization to the vehicles. So like I said, INR 400 locks goes to a minimum of 1,600. There has to be a [indiscernible] that on the OEMs, which he can afford to put in as inputs into his vehicles, and there has to be a market for it. Now everybody knows that there is an upgraded component available. The technology is available. So they will gradually build it up starting from their high models and then bringing it down to all their models. So it does take time, but it's very difficult for me to say how long that can take. There are some things which are adopted and adapted very quickly. There are some that takes a few years and more.
Okay. I understand. And my second question was in terms of traction with new OEs. So how does that work and how long does it take to build up a new working partner -- a new customer?
Build up a new customer?
Yes, a new -- or basically. So we have Hero, we have TVS, have TATA Motors, Honda...
At one point of time, we used to be very happy. Then we used to say -- well, we used to have a mandate or a KRA for the company saying that we should add 1 customer a year. That has not changed if you ask me, if we are looking at rounded established customers. But in current times, you are aware there are 64 new EV suppliers that are coming to the platform. Most of them are customers and adding and saying that we've added 20 or 30 more. That doesn't make sense while we are adding, but the size of the customer and the size of business that we can do per customer is very important. EVs is still nascent game, and therefore, it is difficult for me to say which ones we will work out, which ones will grow their volumes, which ones will become substantial. But obviously, we want to keep a foot in the door and, therefore, we are entertaining most of them. Going forward, we will have to say which ones meet the criteria that works for us. We typically like to have a customer who's INR 100 crores and more of business for us. Right now, there are several new ones which are much, much, much smaller. But on an overall platform, we like to believe that our KRA of getting new customers that offers us a minimum of INR 100 crores of revenue on an annual basis is still very strong.
[Operator Instructions] The next question is from the line of Abhishek Jain from Dolat Capital.
First of all, congrats for decent set of numbers in a challenging quarter. Sir, my question is related with the aluminum die casting business, which we have seen an increase in numbers in this quarter and the quarterly run rate has gone up to INR 1.7 billion. If we add foreign subsidy number. So can we assume that this number will be sustainable in the coming quarter?
Will be?
Sustainable in coming quarters?
Absolutely. I see no reason why. You know that we made investments. In fact, I would be disappointed if you only say sustainable, it should be a growing number. That's what we are anticipating, hoping. We've been growing even in the quarters where our output of the OEMs and the overall industry has been low. We managed to not just keep our head above water. We've grown, and we will continue to grow.
Sir, the company got a lot of the additional business from the HMSI, TVS and [indiscernible] for aluminium casting and so for aluminum casting especially for the tools and molds. So what is the quantum of orders? And how much incremental revenue will get in there for '23?
Well, again, I cannot talk of futuristic numbers, Abhishek, I'm sorry. But suffice to say that, like I said, HMSI was a customer that we added in the last year. They have given us several components. Some of them have been productionized and others are under development. This is an ongoing business for us. And like I said, every element of any new customer that we want on to our platform should be about INR 100 crores each. So therefore, we are looking at those targets going forward, whether it is for aluminum, whether it is for the new lock business that we've got now from HMSI, I'm sure you're aware whether it's the business of sheet metal that we got from HMSI that again, I think I made aware in our last investor meeting. So HMSI is going to grow to a large customer for us going forward. That's what we are hoping. That's what we are developing it for. That's where investments are being made. That's why we are engaging with them on a regular basis.
So sir, this quarter, we have seen sharp revenue growth in the foreign subsidiaries, but margin has seen a sharp contraction. Can you throw some light on it? What is the reason of margin contraction in the foreign subsidies, if you used to be on higher side in the other quarter?
Is that right? I don't think so. I don't see a margin contraction.
[indiscernible] subsidiaries, performed very well, Abhishek?
[indiscernible] Subsidiaries have done very well, yes. What is the...
Sir, can you give numbers of the overseas subsidies like the revenue EBITDA margin in this quarter?
I don't have in front of me. Yashpal, you have them individually.[Foreign Language]
Yes, I have it [indiscernible]. Let me just that...
Okay, sir. Sir, my next question is related with the Cabins & Fabrication business. You have won several new business in media and overseas demand for activators is quite a strong. So just wanted to know what is the outlook for the -- both the revenue and the margin for the Cabins & Fabrication business?
[Foreign Language] Because of the fact that I'm not supposed to talk about it. All I can tell you is that I think last month was our highest level month in terms of output. And that is an area which is going extremely strong. Add to it, what has been announced in the budget, you've seen the focus on infrastructure. You -- and if that is going to be the case, I think the -- that is one area of pressure for us, happy pressure, though, in terms of growing sales, and we see that not abating in the near future. So I think in terms of our run rate, we are already at a run rate of INR 40 crores, INR 42 crores a month in that business. And I think things will only improve thereon.
Okay, sir. Sir, my last question is related with this JV's performance. Can you throw some light on the JV's performance each and everyone?
Well, JV's performance, this year, again, 1 quarter, the first quarter was not good with the COVID scenarios. A lot of our joint ventures are with Southeast Asian countries, including Korea and so on. There were certain elements in the JVs, which were supposed to be out of India only for exports. However, because of no travel, which was allowed during this period, some of the delays came in, in the introduction of those model outputs to sales in Europe and America and also back to Korea. That has put a little bit of delay. And obviously, because these are delicate companies as being new companies, any pressure or stoppage of sales for a period of time also impacts the bottom line. However, I'm happy to say that we managed to keep things under check. The sales has now begun to grow, and Yashpal will give you the numbers.
The next question is from the line of Anish Moonka from JST Investments.
While no one knows how the future will evolve due to the inherent cyclicality of our industry, still as much as we understand, Sandhar is targeting a 30% growth over the next 3 to 4 years. I have 2 questions related to it. Firstly, what part of the target is dependent on the increasing market share in the auto ancillary industry, whether it be it due to new products or just increasing market share in all products. And what part is dependent on a possible auto up cycle in the upcoming years. The second part is on the capacity that we have, where we have given a CapEx guidance of just INR 100 crores to INR 125 crores yearly, basically equal to our depreciation. So given our past asset turnover of just 2.5x to 3x, that just adds a revenue of INR 300 crores. So are the current capacities enough to support this 30% growth target?
On a month basis, our capacity utilization at this point of time, if I was to aggregate it amongst different components, among different technologies, I think should be between 60 -- between 60% and 65%. So that's point 1. Point 2 is that you heard that we have -- we are setting up these 5 new projects -- am I audible?
Yes, sir.
Okay. We are setting up the 5 new projects. And in those 5 projects, Mr. Yashpal just told you that the total investment that's been anticipated is somewhere to the tune of about INR 350-odd crores. Now obviously, you can do the math in terms of asset turns. And that's something that we are looking to do starting from the next financial year itself. Add to that, you asked about market share. We are not looking at enhanced market share. We are not looking at -- because of the unpredictability right now, we are not looking at the auto sector to grow on a dramatic term. What we are doing is focus on technology upgradation and premiumization, and also to get newer businesses that we are not doing now, which is our call for wallet share increase, which means that from the same customers as I have today, I am trying to get new kinds of components. So I am starting from level 0. I'm not saying my share is 60%, and I'm growing it from 60% to 65%. I'm saying, I'm a 0 today. And whatever I'm getting now will take me up to a second source, third source or whatever, but it will give me a share of these new businesses going forward. I don't know if I have been able to answer your question.
Yes, sir. Good enough, sir. So my second question entails the role of R&D and what are we doing at Sandhar to be ready with the next leg of products that our customers will ask for in the next 5 to 7 years, effectively being ahead of the curve, such that we are -- we not only grow in terms of revenue, but also through a much higher value add compared to our competitors, as you already mentioned in the locks. So could you please talk more about these efforts?
So I mentioned locks and you saw that premiumization and value addition as you put it, goes up several folds and several times over. And this is not just in the case of lock, it's in almost all the vehicle components that we need. Whether it is aluminum die casting, where we are adding on certain things now from aluminum, we're also going into magnesium casting, which are of a different premiumization and they give us a much higher value addition. We are going in from regular machine components on to machineless components, which, obviously, give us a much higher value addition. This is in the commodity space. If you look at spaces which are proprietary, we are moving from 1 level of sensors to now cameras, which then brings in a much higher level of premiumization and value addition. So all across the board, all the areas that we are functional in today, we are looking at the premiumization. Even in the area of sheet metal components where we used to make brand sheet metal components, we are now moving into a different category of complete assemblies and subassemblies, which are then being delivered not as a component but as a Tier 1 product. whether it's muffler body, complete, whether it's frames that are complete, we are moving on from making parts to making proprietary items. You saw that move when we move from components on to making cabins, for example. So every element of our componentization is being premiumized, every element. In terms of your R&D I'm happy to announce that this year, if I'm not mistaken, we have, I think, almost 12 to 15 new patents that were targeted that we've already got. And that work goes on unabated. And the advantage of getting Indian patents and doing it yourself is that you don't have to pay any royalties than you had. You don't have to tie up with any technology partners overseas. And whatever you build out of here is done at Indian costs. And that is extremely important in the area of manufacturing in India.
Noted, sir. Sir, just the last question from my end. From a capital allocation perspective, I would like to know your thoughts on a buyback given the valuation at which Sandhar is trading in the market?
Well, that's a difficult question for me to answer that. I would love to buy it back if we want to, but I think we have responsibilities to our shareholders. And in fact, from what I understand, the number of shares available in the market in terms of liquid shares is not very much. So we will be talking to people have the liquidity of shares in the market can grow and what can be brought on to the table to make our investors happier as they go forward.
So, I think that could lead to a much better price recovery. So I'll join the -- rejoin the queue.
[Operator Instructions] Our next question is the follow-up from the line of Abhishek Jain from Dolat Capital.
Sir, how much increase in content per vehicle in the sheet metal for setting up new plants and addition of the new plants?
Where the new plants obviously give us a huge [ upright ]. Yashpal. [Foreign Language] you might have the numbers as to how, let's say, our content per vehicle, even if you look at new plants that are being set up sheet metal, for example, what is our content going up from where to where?
Just one moment, sir I'll just give. Sheet metals are like component as of now. There has been a threefold increase in our component price, I mean, the sheet metals. It has gone near to 1,500 content per vehicle as of now in sheet metal and it's going up, what I know, with what has been held by the customer.
Yes. So to answer that question for us, our capacity build up should -- let me tell -- in terms of capacity, we will go up to a capacity that can generate about INR 1,000 crores of revenue from the current level of what we were doing, which was close to less than INR 200 crores.
Okay, sir. Next question is relating with the JV's performance. So Amkin, which was supplying to the most of the OEMs. The company has won some new orders from the OEMs and also received some orders from the export, so what is the outlook for this business and when it is going to be profitable?
Well, we are now, fingers crossed, happy to state that we feel confident that this will no longer be loss-making going forward in the next financial year. We have -- like I said in the past, we are very happy to report that we now have clearance from almost all the OEMs, the only company to do so. And we've also built on, on a lot of export potential models that we tied up with. At this point of time, as we sit -- those are being assembled and those should start shipment soon. So we are looking at several fold increase in numbers over the next year.
And what about the -- another [ day ] of Jinyoung Electro-Mechanics, which are supplying Asian panel and sitches -- so North is a wide earlier. So what is the current status?
Well, if you want me to run all of them, I can. You spoke about the ABN panel business, which is Jinyoung Sandhar, where losses have been brought down substantially already. with consolidation. It was a new unit, and it got lost because we could not get technology partners to be here. We are very hopeful that those matters are now behind us and we should be in the volume production on a regular basis where that is concerned. In terms of Winnercom, I think we are already now in profitability. If I'm not mistaken, Yashpal, is that correct?
Yes, it's been profitable.
That is profitable. The one thing that will be a big launch for us will be Kwangsung, that has started manufacturing and started shipments in the month of January. These will be ramped up as we go forward. And again, you will see substantial numbers coming out of the exports that we do from this unit. This is Sunrisers and [ Box films ] . [ DOT ] films have been accepted very well with the customers in India, and we expect those numbers to grow and so will the Sunrisers.
Okay, Sir, my last question is related with the EVs. So what other productions you are going to add in your portfolio? And how much revenue currently are you receiving from the EV segment? And what is your target?
Right now, the EV segment, I'll give you the revenue very quickly. I think as far we will have that revenue Yes, we are looking -- EV revenue is still very small. It is very, very insignificant, although having said that, we've tied up with almost -- more than 50% of the EV makers in the country. You're aware that there are huge numbers. We've tied up with many, many, many of them that seem stable. Some of them are extremely small. Some of them are producing 10 numbers a month, which obviously has no meaning for us. Yashpal, what has been our revenue?
Sir, it is INR 38 crores for 9 months [indiscernible].
Yes. So there, you have the numbers, INR 38 crores for 9 months. If you look at it, it's less than 5% of our revenue.
Like the EV offtake starts in the -- beginning of start, our revenues will be going up. And secondly, the reason is that like quarter 2 was a less -- due to chip shortage of the business affected in overseas business also. That is the reason -- because we are supplying for 4 Wheelers as well as 2 Wheelers in [indiscernible].
What all products you are...
[indiscernible] Products, Abhishek. One is the product, which is our existing products based on commodities, which go into EV vehicles, and then there are electronic vehicles that are specific to electric vehicles. So going forward, the way we are looking at is that some of the things that I spoke about, which is, let's say, the BLDC motors which will be specific controllers, which will be specific, these will be specifically for only electric vehicles. Let me give you an example. We can say we make our sheet metal frame for a motorcycle. That can go in a regular motorcycle and that can go in an electric vehicle. But something like a motor controller or like a battery pack or like a battery management system will only go into an electric vehicle or a hybrid vehicle as well. So we're working on both items. The regular items, obviously, go from our regular investments that are already there. But some of the new ones will go in specifically for the electric vehicles where new technologies are being developed and are being bind.
The next question is from the line of Shashank Kanodia from ICICI Securities.
Sir, just to get a sense on the return to double-digit margin profile with the kind of contractual [indiscernible] that you have with the stabilized long-term prices, how soon do we get back to the double-digit margin profile and what's kind of guidance you give for the next 2 years?
Shashank, double-digit is -- a better double digit is what you're looking at. Double-digit should not be difficult to reach. There is an aberration in the double-digit thing for now on account of commodities. And like I said, if prices keep going up of the commodities, then the compensation that we get from the customer comes in only 3 months later. And therefore, we've had an impact. Yashpal, what has been our impact on raw materials?
In terms of our EBITDA hit?
Yes. Uncompensated ones.
Uncompensated. INR 12 crores, sir? It is INR 12 crores, sir.
It is INR 12 crores. Now if you were to add INR 12 crores, Shashank, we are already in double digits. And -- so I don't think doubles is an issue at all.Our stabilized things that we work for that we should be working at optimized EBITDA margins of anywhere between 12.5% to 13.5%, anything lower than that is typically on, in terms of stuff that happens, commodity prices, we get compensated, but that's the number that we kind of target.
Sir, the telco should come back in Q4 still, right? The uncompensated...
Yes, it should come back. There is some long-term asset. So when there is commodity price increase, it was in absolute numbers, you get that compensation back. But as a percentage of the output, there is a little bit of slip up that happens unless and until the model changes. And when model changes, then fresh costings are done. But in any case, double digits is the minimum that we should be looking at, is our target.
Okay. So sir, for the next year, maybe 12% is something that we should be able to do, right?
I cannot talk on numbers. And again, astrology balls, I can't open, I don't know. [Foreign Language]
Secondly, sir, just if you can throw some more light about our penetration with top [indiscernible] domestically, let's say, for example, Hero Electric, Okinawa, [indiscernible], Ola Electric. So how are we presenting with these kind of an OEMs? And what products do we supply?
We are in -- either supplying or actively developing with all the names that you heard of in the Indian context. I'll have to leave it there for the moment with that statement.
Okay. And sir, secondly, to put it, the Hero is probably the own lead product. So since we have a stronghold in Hero motor cost, so will have a substantial share of revenue or deferred segment from them, right?
Yes, as and when they appear and as and one their volumes go up, you will be able to see it in your balance sheet.
And sir, lastly on the debt profile, how do we see the debt over the next 2 years?
Well, Shashank, I will respond to this. So presently, like we have a debt size of INR 356 crores. As you know, we are building 5 new plants, right? So next for another, we are planning something around INR 150 crores of additional CapEx. But again, naturally, we will be having an internal cash approval close to INR 250 crores plus. So largely, I don't see that going much beyond our level of another INR 100 crores unit. You have to meet out like the maintenance CapEx and further expansion. We'll be restricting it. And whatever cash generation we will be generating from the businesses, that we'll be using to reduce our debt.
So you see the next [ cut to ] INR 50-odd crores, and then there till plan to reduce it, right?
Yes, exactly. Because what happens is that we are doing CapEx in a stagger manner. It's not that we are building all the capacity together. So one is going live, it's starting generating revenue. Soon another one is doing buildup. So Phase 1 of all these 5 plants will be coming up. So whatever the cash addition is there, we'll be using it for further expansion purposes. That's how we plan to do it.
The next question is from the line of Nikhil Kale from Axis Capital.
My question was more on the strategy. So in the presentation, you talked about multiple new products that you're kind of working on. So just wanted to understand, I mean, how are we looking at it because we already have a strong position in some of the locking side of [ metals ]. Now when we are getting into so many different products, how do you kind of ensure that we have the kind of correct focus so that we can scale up and become a significant player in at least a few of these components? Or are we spreading [indiscernible] tin?
Nikhil, very quickly. Very good question. Thank you for joining the call today. A lot of components that you talk about that we have spoken about fall in the same genre of componentry. So if we talk of sensors, for example, the base level of the sensor is the same. The applications are different. So if you look at companies that do sensors, they do all kind of sensors. So I might be able to say, well, you know what, we do parking sensor, we do ambient air pressure sensor, we'll do our TPMS and so on and so forth. They all fall within the same gambit. So overall, in terms of our context of technology, they're all within the same range. So similarly, some of the electronics fall in the same range. And you know that we've been working on electronics now for the past 5 to 7 years. So whether you look at USB chargers or you look at foldable keys or you look at ESLs, all of them fall in the same category. So categorization is not different. It is just that it is a new block, and that new block is not of 70 technologies. It is probably only 2 or 3 technologies that every player has to play. And you also have to understand the air pressure sensors or any other sensors for that matter in themselves do not have too much of value. So you need to combine and give it as a block to an OEM. An OEM will not buy different kind of sensors from different kind of partners. They would want to concentrate on sensor technology only with 1 or at best, 2 suppliers. I don't know if that answers your question.
Yes, it does, it does. But just taking that point forward, sir. So what I am thinking is right now in an IC, you have multiple products and multiple suppliers have kind of positioned themselves across each of these products. Now as we gradually move towards JV, specifically on the 2 Wheeler side, the address at the number of products is coming down, right? So what we are seeing is that incrementally, most of the supplier are focusing on the same products, be it motor controllers, battery BMS, battery chargers, the DC-DC convertors and all these products, right? Now like you mentioned that OEMs will tend to just stick with a couple of them and try to source most of these sensors from 1 or 2 suppliers. Do you feel that structurally, there has been an understanding that margins in these products are higher right now. But going forward over the next 2, 3, 4 years, given that you will see more and more competition for the same products, margins will come down, there will be quite a bit of margin receptive in the competitive intensity.
Absolutely, Nikhil. You're bang on. The margins will go down. and it will be left to -- only 2 or 3 players in each segment. No question about that. This is something that's always happened, and I don't think that will change. However, what is the edge that Sandhar has over maybe 50 people who announced over this is our technology partners and technology partners that have been with us for years and decades. You are aware, Honda Lock, for example, has been with us for over 30 years. And now we have not only been our partner, we set up an R&D center here in India with the Japanese engineers sitting with us jointly and doing joint development here in India. So obviously, they have a traction. They've been doing it all over the world. So when they are doing it without the customers obviously will come to us because they are familiar with this entirety. And that goes with whether it is our tie-up with [ Xetron ] or whether it is with Honda Lock with several other Korean companies who've been doing exactly the same thing. Now because these are validated, tried and tested, obviously, the customers want to go with people who are tried and tested. So if our suppliers have been supplying these things internationally to, let's say, Honda and Kia. Obviously, we will be the first stop of call for these people when they come to India or they deliver in India. [Foreign Language] [indiscernible] Nikhil, it will get even more competitive as we go forward. And therefore, we have to understand that for some years, some people might get a little bit of [indiscernible] on top. But effectively, at the end of the day, it is all stabilized business that will throw up equitable margins as most of the companies.
Yes. But sir, just on the technology partner side. So can you just talk about who are the technology partners, some of these electric critical products, be it battery, BMS or chargers or product matter wiring harness?
Yes. So wiring harness, we have a tie-up with Han Shin that we tied up, which does data cables. And now for the first time, we're not only doing data cables, we are also doing off-line data cables as well as regular wiring harnesses. So the connectors there are a little different, and that technology is available with us. In terms of Shark-Fin Antennas, there are ones which are wired and there are some which may not be wired. Again, that technology comes from Winnercom, who is one of the best known people in the field in the world. In terms of lock, ESLs and so on and so forth, we have Honda Lock, like I said, who we've had since 1987. And therefore, that's a very strong relationship where we are building on newer technologies in India in our joint engineering rental at least -- in terms of our sensors, we have Whetron. And Whetron is a large supplier in the EV domain based out of [indiscernible] and all the names that you see get covered in all of that.
The next question is from the line of Anish Moonka from JST Investments.
My question is on the auto industry as a whole. So for the last 7, 8 years, the number whether be 2 Wheelers or passenger vehicles, [indiscernible] standard, so then given your 30 years plus experience, are there any structural issues due to which we are not seeing the growth that China or Indonesia saw while economies were growing rapidly? Do you see the Indian growth story coming back in the next 5 years or the industry would have to look at exports to grow further?
My quick response to this has been -- there has been a trauma. And I use the trauma to say that with so many things happening at once. I think there was a shock in the system. You remember the mandates that came in when it started off with saying Euro 4 to Euro 6 or Euro 3 to Euro 4 standards of Bharat 3 to Bharat 4. There was a huge jump in terms of the cost that went into [ reverses ], then came the mandates, then came third-party insurances, then came things which were mandated on account of either pollution or on terms of comfort or in terms of safety. So if you look at, let's say, even motorcycles to date, the same motor cycle that used to retail at less than INR 40,000 today, the minimum price is over INR 60,000. And that, as we see, is a 50% jump over an entry price of what somebody was looking at from graduating a bicycle to a motorcycle. And the same thing has happened in passenger vehicles, the same thing has happened in heavy commercial vehicles, medium light vehicles and also in construction equipment. So there has been trauma on one side. As to it, the fact that there is this huge thing built on solution funds. So everybody, every state, every city in this country said, I see engines are computed. Little did they understand that when you were moving from Euro 4 to Euro 6, the amount of solution that was being crossed was minimal. And going forward, as you graduate from this, you will actually not have pollution coming from IT engines, those are technologies. But in the system, there is this huge shock that happened. Add to it, COVID where people stop going out. And the last thing on their agenda was to go and buy a new vehicle. Here most people, especially in the MSME sector or people who were running their small businesses or people like [Foreign Language] for example, who wanted to graduate to a motorized vehicle, were now thinking of where to get the 3 Wheel [indiscernible], let alone go and buy vehicles. So there has been a shock in the system. So where is it that we are looking at? You said about the future. India still is at less than 30 cars per 1,000 people. Compare that with the U.S., which is 560, compare it with Thailand, which is 150. I understand from my understanding or the numbers that I have from statistics, Pakistan has more than what India does. The aspiration on one hand, we talk of demographics, where we say that 65% of our population is under the age of 35 with aspirations. We talk of aspirations of rural areas where everybody talks about owning your own home, owning your own car and education for your kids. So all these 3 sectors are now that this runway. China, you're absolutely right, grew up, but we grew up to huge numbers without any headwinds. All of a sudden in the last 3 or 4 years, there have been massive headwinds. I do feel that this is mitigating as we go forward. And I'm looking at this new COVID variant that came to be the beginning of the end. And my fingers are crossed, I think once we can get past that, once the shock of this entire thing goes away, the commodity prices begin to kind of stabilize, people and banks around the world stop printing money, it should stabilize. And honestly, if the entire world is moving to India to make it not just a cost -- low-cost manufacturing base, but also the hugest market that is available today. I see no reason that we sitting in India, producing here, selling here will not be able to get benefits out of it. So to me, this is a temporary speed breaker, and we should find a highway to take off sooner up.
That makes all the sense. I totally get the optimism and potential. So any inorganic opportunities that we are in talks given the pain the industry has gone through in the last few years?
Always are, always has. And yes, there are a lot of stress assets available. However, the entire market because of easy money has gotten used to high valuations or very, very high valuations. So I think -- those are getting stabilized now, and we should hopefully have some announcements to make soon enough.
As there are no further questions, I now hand the conference over to the management for their closing comments. Over to you, sir.
Well, thank you Dolat Capital for putting this together. Thank you to all the participants today. I am not sure if I could answer questions to the best of your expectation. However, I did try and sometimes over the phone, it gets a little more difficult. I hope these COVID times pass by, and we can all sit physically across each other, celebrate back to normalcy. And I'm sure we will get an opportunity to answer your questions in much more detail. Thank you once again for being here and a very happy new year to you and your families again.
Thank you very much.
Ladies and gentlemen, on behalf of Dolat Capital, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.