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Ladies and gentlemen, good day, and welcome to the Sandhar Technologies Q4 FY '22 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 from Dolat Capital. Thank you. And over to you, sir.
Thanks, Fagan. Good morning, everyone. On the behalf of Dolat Capital, I welcome you all on the fourth quarter 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 management for giving us opportunity to host the call. Now I hand over the call to Mr. Davar for his opening remarks. Post, we'll have a question-and-answer session. Over to you, sir.
Yes. Good morning, Abhishek, and thank you for this call to Dolat Capital and to the facilitator. I also want to wish everyone a very good morning to all the participants today. As we said today, and we've announced the results yesterday, I think at the time when it seems after a long time, the clouds are kind of cleared or clearing, and it looks like a happy runway ahead. So with where we are today, with whatever signals we are getting from the automotive industry, from the market and some of the challenges that seem to be abating now, it seems as if we should be back into applying more soon enough.
So with that positive note and with that positive sentiment, once again, a big welcome. And I'm very happy to answer questions that all of you may ask.
[Operator Instructions] The first question is from the line of Anish Moonka from Asterix Capital.
So in the past, we have made it clear of our ambitions to keep the ROCE around 20% to 25% in any projects that we've partaken. However, the projected ROCE of the recently entered machining project is just at 15%, as mentioned in our presentation. So what are the reasons to dilute the ROCE in this project? Additionally, how big of a challenge do we see continued inflation to put on incremental CapEx?
Anish, thank you for that question. So if you've seen the presentation and you have seen the machining business that one is talking about, this is the numbers that have been given to you for the first year itself. These are annualized numbers that have been given to you. But if you look at it, and in our history, we don't believe that we have ever started a project with an expected ROCE of 15% in the first annualized operation itself. If you also look at it, we are looking at the EBITDA in this particular case to be much, much higher. So we are working -- we are looking at it at almost 27% of EBITDA, is what we are looking at this particular business. So as soon as it matures and graduates, we will be in that figure of 20% to 25%. You would appreciate that when you start new projects, they do take time. In fact, like I said, this is the first one where we are beginning with an assured ROCE of this to begin with. I don't know if that answers your question.
That makes all the sense, sir. So my second question is on the long-term gross margin trajectory of the business. So we continually mentioned of the trend of premiumization in our existing portfolio. Lucrative exports of China [indiscernible] beneficiary. Adding a lot more technologically complex products with relatively less competition. Thereby as an outside investor, it does look like our gross margin and EBITDA margin trajectory should trend upwards over the next 3 to 5 years. Am I reading it in a right manner, sir?
Anish, you're absolutely correct in your approach. And I would be in your shoes asking the same questions. So congratulations on that question. The quick response that I would have is that obviously COVID has killed many of here in this particular case. And things have slowed down, not only from a perspective of how we anticipated or how the auto industry anticipated. In terms of premiumization, that kind of slowed down. You are aware that the 2-wheeler industry, for example, has had the last 3 years which have been extremely, extremely challenging. And one of the things that they have not been able to do at the speed that they expected was premiumization because the overall appetite of the industry drops significantly. Now in those case scenarios, for them to add more cost was probably not the best thing to do.
However, as we said today and in my opening remarks, I mentioned, that a lot of clouds are kind of receded and we see pathways ahead. So whether it is in terms of the order book that is building up now on a monthly scheduled basis or the call from the development teams to aggressively move on to platforms that involve premiumization have become quite aggressive from where we were in the last 3 years. Last 3 years, we were following up and asking them what is happening. Why are these projects getting delayed? This was supposed to happen and that was supposed to happen. But thankfully now, we are back where we are getting calls from them on a follow-up basis and on the call to quickly develop new components that they want to put on their vehicles.
So that was very helpful, sir. Finally, I was recently reading a 2020 article by Oracle on how they helped us improve and to automate our processes, improve decision-making and cut costs. Sir, could you please talk about our IT investments over the past few years? And how have they improved the way of doing business?
IT investments?
Yes.
Okay. So for us, IT is in 2 particular areas. One, of course, is the internalization of the overall connectability or connectivity of our businesses with the output of data that we get. That is one. The second, of course, is also the IT facility of the technical side, which not only is the involvement of connectivity in terms of software, but also what we call PLM. PLM is an activity in IT which connects all the technical grounds of all our plants working together in commonization of technical data. So let me explain this to you. We make one component, let's say, in Dharuhera, one in Haridwar, one in Mysore. There are different quality teams. There are different customers. There are different materials. There are different suppliers. Now at one point of time, one customer would ask us to change a certain specification, and that would change at that particular location.
Today, with our PLM, we have standardized formats that exist in terms of our drawing, upgradation, R&D, everything happens together so it is happening across the Board. So that is one kind of technical connectivity which is connected to our design and operational software. And the other portion is connectivity with our ERP, where a lot of decision-making today and analytics today happen on account of the data that is thrown out from the inputs that are done at every place. So whether it is our HRM, which is our human resource management, whether it is our financial management, whether it is our purchase management. On that, Mr. Yashpal Jain, who is also our CFO, is in charge of that particular vertical, which is IT. I would request him to supplement me in giving you this answer.
Yes, sure. Anish, fact is that we are working on all the confusion. And really all the tools of Oracle, we are using, which includes there is invoicing to the integration of all the various functions within the company, real-time access to our data and analytics part also. So as of now, we are completely, I would say, into the IT more with the ERP facilities and the backup modules also. And we are consistently striving towards reducing the paper load within the organization. That's how we are working right now.
So cumulatively, with these investments, do you see this making an impact on your EBITDA margin profile as the business comes back to normal pre-COVID levels?
Yes, obviously because -- so basically, IT will be -- I mean, if you are asking from the IT perspective that investment we are making into the IT so what I mean is that we are using a cloud software, there's the annual renewal charges that we are paying to Oracle. As far as kind of a matter of hardware is concerned or the investment in IT [indiscernible]. Secondly, the value addition that we are getting from IT, I would say, using the ERP model for the interconnected models is much higher, much larger than what we are spending on the IT right now, with the easy ability for information, scan all our locations as far as the customer databases and the vendor databases. We are much more achieving the economic benefits of going to that setup. That's what I'm saying. And it will consistently improve our EBITDA margins the moment we are going to more IT digitalization.
[Operator Instructions] The next question is from the line of Kumar Saurabh from Scientific Investing.
So first, congratulations for the amazing work you have been doing despite such a turbulent 3 years which we have seen. My question is more around the industry growth rate, and specifically 2-wheelers. And this could be a rough guesstimate, sir. I would like to know your view. So if we look at 2-wheeler industry, they do across 1.5 crore to 2 crore of sales annually. So if we add all the 10 years of number, I'm just guessing in India, there will be maybe around 20 crore bikes. And if we look, we have almost 25 crore households, and just taking estimate of one bike per household so doesn't the industry looks almost penetrated given the prices have really gone up and people who have not yet purchased bikes, maybe there will be lower in all the strata?
So historically, I know we have done at peak 8% kind of growth rate in 2-wheeler, which is now in negative. So do you think the previous kind of growth rate will come or we will peak around maybe 3%, 4%? I'm not asking from a 1-year perspective because we had 3, 4 bad years. But over a long term, 5, 6 years, what do you see as the industry growth rate? And from where we will get our growth rate? Will it come from export? Or will it come from replacement demand? How do you see that growth playing out? And how are we preparing to your double-digit growth rate?
Kumar, again, a very valid question. And I think a lot of this negative sentiment has come about with what has happened in the last 3 years. However, so let me talk about where we sit today. Where we sit today, from the month of April that we completed to the next few months, we have clarity on almost a 25% to 30% increase in schedule. That is kind of a firm scheduling, not flexible scheduling, but firm scheduling. Post to that, we believe that with the festival season coming on, that schedule is likely to stay on Board. Now I say this, and yet the negative ring of your question still remains as to whether this is the flavor of the month where there is a temporary spike or is that how things are. Now when you mentioned the numbers, what you mentioned of 1.5 to 2 crores of population that we have, we actually, at one point of time, we're selling 3 crore motorcycles. Now calculate what you will, but the ownership of motorcycles or 2-wheelers as we have, is still very low to some of the other developing countries. That's one.
Secondly, the premiumization of personal transport within itself hasn't taken off the way it should have. And India still is struggling at 30 cars per 1,000 people, which is at least 15x less than what it is in the developed world. Now on one hand, we say that we are growing as an economy. I don't believe that, that will happen without the emphasis and growth in the ownership of private vehicles. As soon as we're going for personal vehicle aggregation, the jump to cars will happen when the bottom of the pyramid, which is 2-wheelers or motorized transport, can go up, we believe, and if we take the example of China. Then the same thing happened at a certain trigger. So my belief is that we are still much away from stagnation levels of growth in the 2-wheeler industry. We do believe that the numbers that we are talking off for 2030 today are higher than 2x of what they are presently or what they were even in 2019.
So I think the premiumization will continue. The growth in the volumes per se will continue. And a value proposition from our perspective is, one, the growth of mandatory and premiumization of parts, which means the parts that are being used now will bring in more technology, will have more value. Locks, for example, that we do, the value of that is likely to be 4x, 4.5x of what I supply today. It has already started. If that goes in, I get 4x the revenue from the same product. But it goes into motorcycles. And even if motorcycles don't grow, the value proposition for an investor in Sandhar always benefits. Higher the premiumization, higher the value addition, and EBITDA margins, of course, because of premiumization go up. So I think there is a win-win to that particular level and support. I mean it is to say that if you look at the car market around the world or some other markets around the world, we're stagnated in terms of world growth.
But in terms of supplier confidence, in terms of supplier balance sheet, they'll continue to improve because the vehicles that you buy today are much more premiumized than what they used to be.
And 2 more questions. One, sir, whenever any industry go through a very long pain period, usually, the weaker hands, they get out of market as the market consolidates. And in auto ancillary, we have gone through 3 years of pain. So on the ground, have you seen like the weaker players getting out, which is going to benefit those who are there with stronger balance sheet? That is question #1. And second, any visibility we have from the OEMs on the chip shortage, if we are getting out of the chip shortage situation or it is going to continue? .
Both questions are different. Let me take one at a time. You spoke about -- you're absolutely correct. There is a lot of pain in the industry. However, for us as a company, it has been a time of opportunities. And in this time of opportunity, in the last year, 1.5 years and 2 years, we have taken on new projects. And I don't know if you have had a look at the presentation. The presentation gives you images, in fact, of the new projects that have been inaugurated in the last few months and some of which are going to be inaugurated or go onboard in the next few months. Now with that, we are looking at a growth of over 40%. And those are numbers that we are kind of projecting are because of confirmed orders that we have. So for us, it has been a time where not only this, we have also been in the market looking for such pain assets, but they have to be endorsed by the customers. There have been customers who brought us some of these where we've gone and looked at them. And obviously, we will look at it when it is accretive to the value for our shareholders. So that is point 1.
Thankfully, we've had a strong balance sheet, and we continue to have a strong balance sheet. And therefore, we are one of those people who are projected to benefit from this low period, not from a perspective of maybe the bottom line directly because of various things, but definitely from a perspective of opportunity for growth for a long time and medium time in the future. So that's one. In terms of the semiconductor shortage that you spoke about, the information that we have today is that things are abating. You will see -- I mean, I know for a fact that there are so many models of both cars and motorcycles and some other products as well where production has suffered on account of the supply chain. But the information that we have today is that things are changing. The tide is changing. The volumes of semiconductor availability are getting better. We don't have to wait for new plants to come up around the world for that to become better.
Some of the lines that had been -- assembly lines that had been attuned to electronics have come back to servicing the auto industry. Of course, the prices of semiconductors have gone up, no question about it. But the availability is getting better. And from what we understand, the time line that is being given to us is that we need to be prepared for an onset of a much higher demand in the second half of this year itself. These are indications that we are getting to this.
The next question is from the line of Arjun Khanna from Kotak.
Sir, I just wanted to understand, how do you see the CapEx outlook for FY '23, '24 -- for FY '23 and FY '24?
Yes. So I would ask -- reply this question. Largely, we'll be finishing our new projects within financial year '22, '23 year. So if you say the CapEx outlook for '23, '24, as of now, we don't have any plan to go for a new expansion unless we get a request in the later part of the year from any of the customers or from any inorganic expansion. That's one thing. Secondly, routine maintenance CapEx, yes, we always incur as a policy, does not exceed our annual depreciation, which will be roughly around INR 100 crores to INR 120 crores for the year ending 31st March '23 year. So that would be our CapEx, sir. But as of now, all our projects will be finished and will be on the commercial production by the end of March '23 year.
So -- and what would be the CapEx for FY '23?
Yes. So we have set up a target. We'll be incurring a CapEx of roughly close to INR 350 crores to INR 400 crores to finish up our new projects, plus to maintain our existing assets, sir. And a portion of this will be funded from the cash accruals that we'll be generating during the year. So in any case, our debt equity ratio on a consol level, including our overseas operation, won't exceed 1:1. It will be below 1:1.
If you see this year, we had a strong free cash -- negative free cash flow to the firm, almost INR 260 crores, INR 270 crores. Probably, with the CapEx schedule for next year, we would again have a strong negative free cash flow to the firm. So while you talk of 1:1, is there any concern that it may just exceed that, because earlier, we were envisaging a lower absolute net debt for the company?
No. I don't see it fair to us even if we have a 1:1 ratio. And as far as in the coming '22, '23 financial year, we are projecting our free cash flow. Free cash flow, where it means that if I can add back my depreciation to my earnings, we will have something around close to, I would say, excluding it, I think this would be around 38%. We will have something around INR 240 crores of cash in hand with us, sir.
Right. Because if I see historically also, we have never generated that kind of even net cash flow from operating activities. So what brings us the confidence that will happen this year? Because we continue to see reports that possibly the semiconductor issue may last for maybe another 12 to 18 months.
Basically, the thing is that if you see in the past, our operating cash flow has been positive. Largely, we are investing in the business from the operations itself. And the debt we...
No, no. Even this year, we had a positive on a consol basis. Net cash flow from operating activities, I think it was closer to INR 50 crore even this year. It's just that on an FCF basis, the number seems to be negative last year even though we had INR 124 crores of cash flow from operating activities, our net cash flow -- or free cash flow to the firm, accounting for capital expenditure and subsidiaries, was yet around only INR 20 crores, so hence, the concern.
No. Basically like -- as of the current financial year, we are expecting the prices of commodities to be stabilized. So one of the reasons of the increase in the movement of working capital was to build up the inventories, to avoid any critical situation where we run short of the inventories, are to trigger the price escalation. So that is one of the reasons. Secondly, industry overall was facing troubles, including the vendors. So we have to support our vendors. So if you see our working capital movement, a large part was used by us in building up the inventories for the new projects as well as our existing projects as well as to save up the vendors so that they are also strong and they keep on servicing us. That was the reason, which we expect in the current year to neutralize that.
Sir, just to talk on this point further. Given that we are expecting a 40% growth, at least that's the guidance in revenues, wouldn't working capital move up substantially?
Actually, we are renegotiating the payment terms also with the customer, the settlement of the increase also. So that's the reason we have considered all the factors. And some of the new projects, the payment conditions maybe a little bit lower as compared to earlier in the project. That's all. So we have taken a cumulative average of all those.
Arjun, we have been impacted dramatically on account of the commodity increase. So if you look at the prices of commodities the change that has happened in the year, in some of the commodities, for example, if you take nickel, it has gone up from INR 1,200 to INR 2,441. That's more than doubling it. If you look at zinc, that has gone up dramatically. Brass, that has gone up dramatically. Steel, that has gone up dramatically. Aluminum, that has gone up dramatically. In the last 18 months or so, the amount of commodity increases has [indiscernible] everyone. But thankfully, the way we understand today from a geopolitical standpoint, from a geographical standpoint, from what we get from the market and what we understand, the time and the tide has started to abate, in fact, turned positive. Now for 18 months, the company had to do with continuous price increases, and that impacted us, some for a long-term perspective, some for a short-term perspective. If you calculate last year, our consolidated EBITDA has been impacted by 23%.
That's a huge number. And obviously, all that goes into the bottom line as well. Now a large part of that changes when the commodities are stabilized. And we do believe that for this particular year, irrespective of the growth of the industry, with our new businesses that we have kicked off and where start of production has happened and the lag of COVID to a certain extent, the softening of the commodity prices, these will all play into the positive territory for us.
Sure. So would it be a fair expectation that margins should head up this year again towards double digits on a consolidated basis?
Absolutely. Absolutely. Absolutely. No question about it.
Sure. And the last question is in terms of the interest rates. Are we seeing hardening of interest rates? And what's our expectation for FY '23?
Well, I think we are at the best lending rates from the lenders. I will have to thank them. Yes, [indiscernible] RBI goes with the increase in the repo rates of the banks [indiscernible] rate. Obviously, that may impact us. But as of now, I don't see a much hike in the coming period of time. And hopefully, we will be able to maintain within our current level.
The next question is from the line of Mayur Patwa from Sahasrar Capital.
And congratulations to the manager for the nice set of numbers. Yes. So I have 3 questions. The first one is, I want to understand, basically, when you say you're working more on focus on the premiumization of the product, how much is our revenue share at the moment? And what is our -- what we foresee maybe in 3 year, 5 years down the line, what will be the share of premium products to the overall revenue?
Okay. Is that the question or is there more question?
Yes. Actually, I have 3 questions. So this is the one. The second, I also want to understand about the improvement on the EV segment. So how much again is the revenue from EV segment? And how -- what are the efforts we are taking to improve the same? And obviously, the third one is basically, when you say that our EBITDA margin has reduced significantly in the last year, mainly because of the raw material prices and other things, so how much of that we could really pass on to the customer? And what is the long-term impact we see on the margin side because of this increased cost?
Okay. So let me talk about premiumization first, Mayur. Thank you for those questions. In terms of premiumization, you would appreciate and understand that all the products that we do have premiumization that has already been announced or is being carried off in some of the premium models. So to give you an example or any examples, if you say, pick up any product that we do. If we do products in the line of locks, for example, I already mentioned that some of the locks going into the future not only go up 4x in terms of price, in terms of premiumization, but some of them even go up to a level of 10x our current selling price. So there is a huge line that's been built up. And these premiumizations also are of different categories and levels. There is something which we may call Generation 1, which is likely to come in now. Then there is Generation 2, which is likely to come in 2 to 3 years from now. And then there is probably Stage 3, which will go onboard 5 to 7 years from now.
Some of them are on account of passenger safety, some passenger comfort, some passenger entertainment, and some on account of regulatory mandates that the government comes up with. So if you put all of these together, there is a huge, huge, huge pipeline. And that is not only in terms of locks, for example, it's in terms of mirrors. It's in terms of seatbelts. It's in terms of any product lines. If it's looking at antenna, for example, that we do today or if we look at parking sensors that we do today, the premiumization comes from not only having beeps that come in from via parking sensors, but from cameras that attached -- get attached to it. So every product that you look at, there is premiumization that is happening across the board in every category of product lines that we make and supply to it. So that is your answer #1. In terms of EV segment, EV segment -- so in terms of percentage growth has been very dramatic.
We are, of course, a little constrained in the number of signals that we get from the industry. Sometimes, they are aggressive. Sometimes, they are not. However, for us as a company, we are quite agnostic to the EV space. We supply to all the EV suppliers. Today, I think we have customers -- almost 42 customers that we supply to. So we have tried and tested. For us, it's not a proof of concept. But it's a question of, out of the 42 that we supply to today, how many of them will survive? So there is consolidation. The good news is that because we supply to almost all, even if there is consolidation and the numbers grow up, we are a part and parcel of that [indiscernible] going forward. So we don't get negatively impacted even whatever the ratio is between IC engines or between hybrids or between EVs.
Now the thing is that as far as the Indian government is concerned, they have given some numbers in terms of how much EVs will be there by 2026, by 2030, and so on and so forth. But the fact is those numbers are still very small. Even as percentages if we were to see, it shows that the IC engines will continue. That powertrain will continue to grow irrespective of the moment of the EVs. At this point of time, the customer, of course, has been a little confused as to whether what is long-term powertrain to be bought. If I buy an IC engine today, will it be available tomorrow? Will everybody move to the EV platform and so on and so forth. EVs still have some space and time to be able to prove themselves on a mass ground. We still have to wait and see. If you look at 2-wheelers, for example, a large part of the 2-wheelers have been sold at low speed, lead acid battery.
We will have to see how the battery componentry, battery prices have a fold in EV-ization, as we call it. But for us as a company, it is really agnostic as to who we supply to, whether it is an EV supplier, an IC supplier, a hybrid supplier or a hydrogen fuel cell supplier going forward. Your third question was on the long-term impact of -- you said something, right? What was the third question?
On the raw material cost, the material prices?
On the raw material prices? On the raw material prices, if you look at where we are today, of course, the last 18 months to 24 months have been a very, very terrible period for us because we've had a continuous loss every quarter on account of increase in prices. Now what that means is that every -- the last 3 months average price is the price that becomes the price for me for this quarter. Now the problem is that this quarter, again, there is a rise that's happening. Then I'm suffering a loss every, every, every quarter. But when it abates, when it slows down, when it stops or starts to come back, that's where the benefits come to us. On an overall perspective, typically, we are compensated from over a period of time. Now the thing is, if you were to look at any price, while the prices may stop today, but if the average over a period of time in terms of inflation does have an impact, that impact stays in our balance sheets and profit and loss account for the entire lifetime.
And those are only recovered in terms of margins that we get from a reevaluation of our costs whenever there are new developments, new models or new parts that are designed and taken care of. So that can happen only when model changes. Otherwise, there is, as an impact, the entire industry works on the same criteria of how costs are calculated in terms of commodities. So that's why I said, some models that in the last 10 years or 12 years, we do have an impact, that continues in our books. But if they are short-term kind of models, obviously, the impact is taken off. And in case there are temporary spikes in commodities that happen and they come back, then we don't lose anything because at one time, we lose, and then subsequent times, we recover.
We do believe there will be some recovery due in this current year because prices have gone up or -- to crazy amounts. We don't believe those are sustainable. And if they are not sustainable and they come down, whatever amount they come down to, that would be a benefit, that would be passed back to us.
Excellent. So basically, you are saying in the long term, we should not have any margin impact because of this?
No, no, no. This is something that happens. If you go back, 30 years ago, steel used to be at INR 20 -- INR 15 a kilo or INR 18 a kilo. And it grew from there on to, let's say, stabilized at INR 40, INR 45 a kilo about 3 years ago. And now we have gone up to levels of INR 90. They've started to fall. Aluminum, similarly. Zinc used to be INR 100.
[indiscernible] basically what the price?
INR 350.
So basically, what we are seeing is, obviously, [indiscernible] you can pass down to the customers, and that should not have any impact on the price.
Because of the gradual change that happens 3 months. Again, I think the entire industry has woken up today and has gone back to the OEMs, where we are in negotiations, saying this 3-month period doesn't work for us. So we would like it to change. This -- at one point of time, this used to be 6 months. It was brought to 3 months. Now we are saying it should be done on a monthly basis. If that happens, then the commodities will truly become an absolute pass-through for the entire industry.
The next question is from the line of Abhishek Jain from Dolat Capital.
First of all, congrats for a strong set of numbers in the challenging quarter. Sir, what is your revenue target for FY '23? And what would be the revenue growth in the different segments? I mean with sheet metals, anyone competition and with your core business like locking sector?
Well, Abhishek, obviously, I will not be able to give you absolute numbers. But what I can say is, with the investments that have been done that are matured and have taken off already, we are considering the overall revenue even to be on a conservative side to grow over 35%, for sure. In terms of, if you want segmented stuff, then there is the proprietary business where I think the revenue will grow close to 30-odd percent. In terms of the die casting and molding business, we believe the numbers of revenue growth will be about over 20%. In terms of sheet metal and the light businesses, we look at that number to grow up by -- again, in some cases, because they are absolutely new, there, the numbers are going to be in triple-digit growth. So on an overall perspective, we are looking at numbers to grow, like I said, over 35% seems to be a conservative enough number to me to give you, around that. But obviously, the margins growth is where we will concentrate. And those should be much, much higher than the overall growth numbers that we are talking about in terms of top line.
And what will be the incremental revenue from the sheet metal business because of this capacity addition?
You want to take that question. You'll have the numbers in front of you, Yashpal Ji?
Sir, I'll take up that question. So yes, basically, Abhishek, your question was that how much business we will be getting from the new project that we are in? Am I right?
He's talking specifically of sheet metal.
Sheet metal.
Yes. So for -- basically, we are expecting a revenue -- do you want a number from us? I'll just give you the number. We are expecting a revenue of something odd INR 230 crores from the new sheet metal businesses that we -- the projects would be executed at during the year.
[ Through ] sheet metal businesses.
Yes.
Yes. Thing is that some of the -- I mean, like, Mysore et cetera, they will not be operating for full year. For the part of the year, they will be operating. So going forward in '23, '24, this figure could be much, much higher compared to what I have to...
[Operator Instructions] The next question is from the line of Basudeb Banerjee from ICICI Securities.
Just a couple of questions. One, what's the [indiscernible] value per unit for volume seen as of now, specifically?
Mr. Banerjee, sorry. I didn't hear you too well. Can you speak a little louder?
Yes, sir. With regards to the premiumization aspect, as you rightfully mentioned in the beginning of the call, that you are looking at premiumization coming backwards positive. So with Royal Enfield being one of the key premiumization drivers in the 2-wheeler space, what's your [ kit ] value per unit of Royal Enfield as of now?
Come again. What was the question? What about Royal Enfield, the last part of your question?
Content per vehicle of Royal Enfield, as of now, how it has been progressing? And what's the wallet share of the key products that you are supplying to them? Because they are also having various new launch plans in the coming quarters as well.
So Mr. Banerjee, first of all, I'm happy to announce that all the premium models are with us, for all the product lines that we do. In terms of premiumization of that model is one thing, but premiumization of components in the same models is also there. So from that perspective, we are a part and parcel of every new activity that is happening in our existing range of components that we already supply them to and also addition of many parts that we were not supplying to Royal Enfield that have fallen into our [ kit ].
So on an average, what will be the valuation for the model as of now?
In terms of contribution per vehicle, I don't know about -- Yashpal, do you have those numbers?
Yes. [indiscernible] for Royal Enfield, sir?
Yes, sir. Revenue per vehicle?
For all of them? For...
On an average. Only for Royal Enfield, sir, on an average.
On an average, sir, if I was to calculate, including the wheels, including the handle bars, including the locks, I would say that our contribution to them would be close to about INR 3,000 to INR 3,500. In some models, even higher.
And how much should be that compared to, say, HMSI or other normal 2-wheeler supply you have?
TVS is probably the maximum where I think it even goes up to over INR 10,000 a vehicle in many a case. In the case of Hero, depending from model to model, it could range between INR 2,500 to INR 5,000 something on. That's where those numbers are. But of course, you will have to realize that they depend from models to models.
So by that logic, should we be right to assume that there is a long way to go for that INR 3,500 in Royal Enfield to move at least to INR 5,000, INR 6,000 in the near term?
No, no, no. You look at the overall parts, maybe those parts. Like I said, there are some in which there is an averagization. For example, for Royal Enfield, now we also give them hubs and clutches. We also give them wheels. We also give them handle bars. And there are some new portions of castings that have just started, some sheet metal that are just started. The potential for there is, of course, going as much as what we do for some of the others. So I would imagine that the potential for us is to go up to INR 10,000, in case we were to take the entire [ kit ]. Some we don't take because their volumes are much smaller. We also have to play the volume game. For us, they are extremely important for us to enter a certain area because it requires a certain amount of effort, resources, in terms of teams that you build up.
And in some cases, it also means expansion in terms of capital equipment or putting up plants nearby to service them on a regular basis. So keeping all of that combination, yes, it is growing on a gradual basis. But I would imagine those are the numbers today. Unfortunately, I don't have the exact numbers in front of me right now, but I'm giving you a ballpark.
Sure, sir. That's helpful. Second thing, sir, as in the initial part of the call, you said you are seeing some scheduled orders growth of almost 30% in the coming quarter, though it is [ rated ] by COVID generally spiking. From a sequential perspective, sir, from a Q4 execution perspective, how are you looking at the Royal Enfield outlook from -- or your TVS outlook from a sequential perspective?
Well, because you are specific to Royal Enfield, I don't have the exact numbers of Royal Enfield. But suffice to say that if you look at it from a sequential standpoint, you have to realize and understand or appreciate that in the quarter that happened, the last year quarter of April, May, June was a washout. May was completely shut. June was shut to almost 0.5 degree. April was okay, but it wasn't the greatest. As a quarter, we have lost out on the entire -- not as per se, but also the customers and the OEMs lost a lot of sales. We believe that this would -- so I don't know if it will be a comparison because this will be hugely higher than what it was in that particular quarter of April, May, June.
Sure. But I'm saying from Jan, Feb, March of fiscal '22 compared to the quarter just -- which went by, how are you looking at supplies to them from June quarter or to September quarter outlook per se?
Good news has started from the month of April onwards. So January, February, March is not something that we can look at. Those you've seen the results of everyone, and you've seen where they're going and what they've done. They've largely been in the same place to a large degree. But April, May, June is where we see things changing, the positiveness in the entire industry stroking up. And we believe that this is the quarter which will make a substantial difference.
Sure, sure. Because that is also getting [ corroborated ] from the retail figures of April, May and June. So as you are also saying that -- say that will only give the conviction further for improving outlook for the 2-wheeler segment.
That's how it seems, sir. Well, the footfalls, I understand in showrooms has gone up dramatically. The export pools have started to happen to a better degree during the last few year -- year or so. The export numbers had gone up, and they continue. So in the last few months, in fact, they had gone down, I see again a traction coming in for the export model. The domestic market seems to improve with footfalls in the showroom. So the overall impact -- and the biggest thing is inventory has come down. The inventory that was lying with dealers has come down dramatically. And the entire system has become more lean. So there was a time when most of these companies were making their 2-wheelers on a "Dum Laga Ke Haisha" basis, which meant that they were just producing. Not really concerned too much about the inventories. The inventories in the market, in some cases, had gone up to over 3 months. Now that those have come down to realistic levels and even below, the pipelines now are pulling for our components to be built. So I think it's becoming more and more a just in time play.
The next question is from the line of [ Navneet Baja ], individual investor.
I have a couple of questions, sir. You currently have about 54% of your revenues from 2-wheelers, 24% from 4-wheelers. How do you see this standing over the medium term? And are there any margin or ROI differences between the various segments?
[ Navneet ], thank you. Is that the only question? Is there any other question? So I can just...
No. I have a couple of more. So one of your projects which you are undertaking is the SMP project, which is into printed circuit boards, USB chargers and a few more. So this is, as far as I understood, a little different from what you've been doing till now. So again, which customers are you taking to your -- on other margin profiles and the interfaces in these projects, [indiscernible]? That's my second question. And my last question is, sir, how difficult or easy is it to add a customer or a new model? So for example, I believe you supply to Tata Motors in their EV segment. So how, again, easy or difficult would it be to extend your relationship to, let's say, a Tata Nexon or for that matter, JLR?
Okay. Let me take that one by one. You mentioned about the ROI in the businesses of 4-wheelers and 2-wheelers. Again, as a company, we are -- we look for opportunities. And those opportunities, of course, are governed by the ROIs, the ROCEs, and the affliction and our traction with those customers. So if you ask me as to whether I want to do a 4-wheeler business more than a 2-wheeler business, the answer is no. We are agnostic because at the end of the day, I want return on capital employed. I want a good business. So while some people could be doing 4-wheeler businesses, but then 4-wheeler businesses have their own challenges. One, for example, the fragility of the volume of sales. Secondly, the scales to which you operate in, the changeovers that happened. So for us, it's a question of which order can we get and whether that order will be able to give us the return on investment, is question number one. Is the one better than the other on an overall perspective? Yes and no. Sometimes, this is better. Sometimes, the other one is better.
Our current ratio, like you said, is 54% for 2-wheelers and 24% for 4-wheelers. Is that likely to change? Perhaps. But are we pushing towards that to change? The answer is no. If I get more orders and better business in 4-wheelers, I will take it. If I get something better in 2-wheelers, I will take it. In case I get something better in electronics, I will take it. If I take -- if I get something in construction equipment, which is a growing sector, I will take it. So this is a coincidence that this is where we sit today. One reason could obviously be that in some of the areas that we operate in, the volumes are much, much higher in the 2-wheeler space. If we make locks, for example, the price of the locks is probably the same in many cars and many 2-wheelers, but the volumes are extraordinary. We are the largest lock producer in -- typically in the world, if you ask me. The same way with mirrors, but the volumes come from there. And if the percentage margin is higher, then it is very agnostic for us to pick that up. That's answer 1.
Answer 2, on SMP. SMP leads towards premiumization of several of our own componentry, first of all, which means we are now going to be doing smart handles, which we've already started. We started USB chargers. We do electric steering rods. We do parking sensors. We do shortened antennas. We do audiovisual monitors. So for all of these, currently, many of these SMP -- these PCBs are being imported. Now when you import them, obviously, the cost is much higher. So working with our customers, we have to agree that if we localize this, there would be a margin play which will go up, some of which will be shared by the customer and some of them would be shared by us. Going forward, in our quest for electronification and premiumization, we believe that these numbers and the PCB assemblies required in India would go up substantially. And therefore, we've opened for ourselves a new line of business. So this will be profitable from day 1.
And we don't have to go out seeking for customers to begin with because we ourselves internally are going to be customers with a much bigger value add than we get today. That is question 2. In terms of Tata Motors. Tata Motors, see, our industry is quite small. There is a huge amount of entry barrier. There are only so many people in play. And for any component ramp, there are only 2 or 3 players. In some cases, in our case, for example, with some models or with some of the OEMs, we are the only player. In a case like this, these are long-term relationships. So for us to jump into a Nexon or for this or for that is natural. The only thing is, sometimes, there is competitiveness on the pricing.
Now that we are very strict as a company in terms of making sure that whatever we supply has to be supplied with a minimum amount of ROI and a minimum amount of margin, sometimes we let some of these things go to the others if that makes sense to them, because the overall run, if it is not going to give me that in terms of scale, size or profits, then we have to be very choosy in what we do. You have to understand, there are as many number of OEM players in this country as they are around the world. And so you will be able to service everyone, every model. If you want to get into that rates, then obviously, it affects your bottom line. So we are the ones that are able to choose we -- on who to take, which model to pick, where to go. It's not as if Tata Motors doesn't know us. It's not as if these RFPs don't come to us. All the RFPs in the business come to us for the complementary that we provide to them.
Ladies and gentlemen, we will take the last question from the line of Shashank Kanodia from ICICI Securities.
Sir, firstly, I just wanted to know, last year, we did grow 25% in terms of revenue. So what will be the volume...
A little louder, Mr. Kanodia?
Yes. I just wanted to check, last year, we've grown 25% in terms of value. So what is the volume growth? And what is the valuation net growth for FY '22 on the consol basis?
From the consolidated. You want to answer that question, Yashpal Ji?
Yes. Sure. So Shashank, you are interested to know the -- I mean, the value-wise growth?
Sir, volume growth.
What he's saying is what is on account of inflation, is that what you're saying? Compared...
Sir, what is volume [indiscernible] I just...
Actually, I did even not have exactly the volume growth in terms of number of part supplies because of the diversity. The number of cars, I mean, the number of components or part numbers that we supply run into thousands. So some maybe supplied in millions, some maybe like few hundred thousands and so on and so forth. That is a difficult question for me to answer. All we can tell you is that on a generic basis, this 25% growth has come in from new product lines that have opened. And these are new entries into these OEMs for that kind of parts. You are aware of the industry, right? If you look at the industry, you have seen that while the industry has grown much lower compared to how we've grown, or in fact, the industry has kind of gone down, we have still been able to manage our 25% growth. That 25% growth has come in from newer kind of paths, newer kind of businesses, which have started now and which is going to help us in scaling up this growth and the growth numbers that I spoke about.
Now we haven't taken too much of growth in the industry in our projections for the future. What we are looking at is our growth which is coming in from new components, new premiumization, and so on and so forth. In this particular year, we are now looking ahead for. We have not even looked at any growth that -- or numbers that appear from any commodity increases. Because sometimes, the pass-through, that also has an impact. So exact numbers, to which components, we'll be very happy to send you numbers in terms of comparisons, if you were to choose the parts that you're likely to have information on.
And sir, secondly, for -- if we concur with guide for double-digit margins, but your bidding performance is hard to depict that. So could you give us a realistic sense as to what could be a sustainable margins for us?
See, we have done margins in the past. When I answered this question in the last quarter of last year, we had -- at that point of time, we had stopped expansions. And I think we were at numbers of between 12% to 13% towards the EBITDA margin. And we believe that with the combination of the diverse product lines that we have, that is a margin which should be a standard margin for our industry, for our kind of complementary that we do. Of course, over a period of time, in the last year, there have been various changes. So -- and there have been ups and downs in terms of sentiment, in terms of commodities. But that is probably -- if you look at that particular quarter, I don't have the numbers in front of me. But that was a sustainable quarter from a perspective of the output, from a perspective of capacity utilization. It was idealistic in some part.
I would imagine that as a company, that is what our take is and that is where we should be. So if you ask me, what is an idealistic margin? I would say, not just idealistic, but something that has been achieved in the past and something that we wish to always hold is between 12% to 13% margin.
Right. Sir, you -- in your opening remarks, you mentioned about supporting your vendors, right, in the times of difficulty? So does we also make a support from the OEM clients? Because even you are now down towards single-digit margin trajectory and single return ratios. So does that flow from the OEMs to the ancillary players like you as well?
Well, we -- the OEMs do have lines of credits and discounting and so on and so forth. So one of the reasons for our working capital probably limited -- has gone up because we've stopped using that discounting. They charge us too much money for this discounting facility. Yashpal, do you want to say something on that?
Yes, yes. Yes, sure, sir. So basically, Shashank, the question is that we get the line of credit as I told, the discounting facilities from the bankers nominated by the [ OEs ]. But normally, the discounting rates have considerably gone up. In some cases, they are even beyond 7%, 7.5%. At the same time, we are getting the working capital limit by something around 4%, 4.5%. So what we normally -- what we do is that we don't go for a discounting from the customer side. We are with the same working capital facilities. So that is probably one of the reasons that you see the debt levels are showing higher, because bill discounting [indiscernible] with the current liabilities. That's how it goes.
And to answer your question, a lot of small scale, a lot of other people in the industry that were in pain and where they had no available line, they went to the OEMs, and OEMs supported them. But for us, we feel otherwise because we believe that our strengths are strong. We have not utilized that. In fact, we have given support to our supply chain.
Right, sir. Okay. And sir, combined FY '22, '23, they're doing something like INR 500 crores of gross CapEx, right? So what kind of asset terms can we generate from that particular segment?
Again, it will be a hybrid, right, depending from component to component, from the vertical to vertical. Sheet metal will be different than locks, which will be different than mirrors, which will be different than this. Each unit will be different. We do have a working. Yashpal ji, do -- would you have the presentation that we had the other day?
Yes, sir.
The terms that if you have it in front of it, just open it and give some idea.
So like we are expecting something growth of around 35% in terms of our revenue on the current levels, right? Which is one of the things. So if you ask the asset terms if I'd take the total asset term of my company, that would roughly be, if I say, it will be about 2.5% in the coming year. And with this, I will add, because a couple of my projects will be starting later part of the year, post third quarter. So if I have to take the complete capacity utilization, for example, I take a scenario '23, '24, it can exceed even -- go beyond 3%, 3.5% with the volumes.
3x to 3.5x. Yes.
yes, yes.
Okay. And sir, lastly, do you see debt figures for this -- at the end of this year? Or you see a consistent growth in the debt levels also for the company?
No. Debt level like or -- largely new projects will be finished in current financial year itself. So we have kept a target to keep our debt levels below 1:1. I mean debt equity ratio. And for the coming years, we don't see much CapEx investment unless we get some new projects where we go for some inorganic expansion. And at the same time, with the capacity being used from the new business as well as the existing business, we'll be on a fast track to repay the debt also, to reduce the debt.
Because a few quarters back, your commentary was debt should have picked in FY '21 itself. And now we have almost double that this year and probably will have even more debt coming on our books for this fiscal year.
Even at that point of time, we had said that under the current circumstances, we had no reason to expand debt. So these businesses that you have seen have been thrown as opportunities on to [indiscernible]. And these are all new. And these required very quick working. In fact, some of the projects are coming up within 3 to 4 months on fully matured start-up basis. And obviously, when something like that happen, these are -- you could consider them inorganic in some point.
Yes, sir. Sure. One last thing, sir. On the EV front, if you can name some of your clients in this and the parts that supplying to them, it will be great.
I think we have given that in the past. It's a long list. It's a long list of the manufacturers and it's a long list of components. So if I have to read them out, it would -- it could take a while. But I would say that in the Indian context of the EV industry, we are participating everywhere. In fact, even to a point of not only the people who set up establishments, some people who are planning to set up establishment. Some of them which are in the trial and error mode are also buying most of the components.
But -- and the last, [ kit ] value remains broadly the same result to where we [indiscernible] we do in the IC part? Or is there some addition to it?
Yes. There are some additions to it. In fact, there are several components that we have developed only for EVs, specifically for OEs that work with those kind of currents. And those are completely different. So it's not interchangeable directly. These have more software. These are more electronic in nature. It's how it is. We are also now developing some componentry which specifically only going to EVs in their powertrain.
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments.
Well, once again, a big thank you to Dolat Capital for putting this together. A big thank you to all the participants today. Thank you for all your questions. I'm not sure if I've been able to do justice to your questions in terms of my response. But sometimes, that happens when you are talking on the phone. I'm hopeful that the next time around, with things improving the way they are, maybe we can spend more time in a physical meeting, Abhishek, and address some of these things to even better satisfaction and maybe detailed presentation rather than the 1-hour slot that we had today. But like I said in the beginning, let me close with that, saying that while the year has been extremely, extremely challenging in terms of whether it was the second wave of COVID, which had disrupted the business in the last year, of April, May, June, which was the crazy upward trend of -- it wasn't trend. It was crazy aggressive nature of commodity price increases, whether it was the shortage of semiconductors, whether it was the negative sentiment in the market, whether it was the continuous increase in other input costs.
Power went up. Steel went up. Wages went up. In fact, in our European operations, gas and power is costing -- was costing us 8x of our regular power cost. And of course, there were the upcoming BS VI phase regulations and transitions that were confusing the market on EVs and so on and so forth. But going forward now, I think I believe that all of that is in the past. The impact of COVID has melted down. Restrictions have been eased. And I believe that this will give the much needed momentum to the industry. The economy and the global health situation is also improving. So for us, 2022 looks to be very, very positive. The commodity prices are expected to be stabilized. The new plants that we have put up or in the process of just completing will add to revenue. It will add to margins. It will add majorly to the content per vehicle. The schedules from OEMs that I mentioned have improved dramatically.
And the first quarter is looking to be completely undisrupted in a sense. The vehicle inventories are at record low. And the chip availability is improving. So from my perspective, this year should be a good year. And on that positive note, I want to thank you all once again for joining this conference. Thank you.
Ladies and gentlemen, on behalf of Dolat Capital, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.