Schaeffler India Ltd
NSE:SCHAEFFLER
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
2 768
4 815
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Schaeffler India Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day and welcome to Schaeffler India Limited Q1 CY '24 Earning Conference Call.
[Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to mister -- over to Ms. Gauri Kanikar. Thank you.
And over to you, ma'am.
Good morning, everyone. Welcome to Schaeffler India Limited's earnings conference call for the first quarter ended 31st March 2024.
We have with us from the management today Mr. Harsha Kadam, our Managing Director and Chief Executive Officer; and Hardevi Vazirani, our Director, Finance, and Chief Financial Officer. Mr. Kadam will first take us through a short presentation of -- on the results, after which we can open the floor for questions. Thank you.
And over to you, Mr. Kadam.
Okay, good morning. This is Harsha Kadam. And along with me is my CFO here.
Hello. Good morning.
Hardevi Vazirani.
And I would like to take you briefly through my presentation now, so let me start. I move to Slide #2. As always, I would like to start by sharing some good news. And in the first quarter of '24, we were recognized by our customers for the exemplary customer centricity that we demonstrate both in terms of our service level to our customers as well as value add to our customers.
So the first customer that we were recognized was TAFE, one of the largest tractor manufacturers. And here the award was in the transmission application for the double- and the single-clutch products that we developed for them and which have been successfully now production lines. This is an esteemed customer for us. And winning the best supplier award from TAFE means a lot to Schaeffler India. The second award has been bestowed on us by John Deere. And I am proud to say that this is the fifth year in succession that we have continuously won the award from John Deere. This is a partnership award for quality and technology support. We actively engage and work with John Deere for their tractor applications. Here again the products involved was the double-clutch as well as the long travel dampers that are used in the tractor applications. And we were recognized for the sustained service and support that we have rendered during the last -- during last year.
The third award that I'm proud to share is from the area of our work that we do on corporate social responsibility. We as an organization stand committed to not just play a philanthropic role but actively involve and engage ourselves in the CSR activities that we drive. And one such initiative for which we have now got recognition is the best skill development program that we have been running in our center called the STEP center, wherein we actively engage the rural mute; and put them through training programs for gaining technical skills in the areas of CNC, turning, milling and even mechatronics; and thereby prepare them for employment opportunities. Last year, over 1,000 youths have participated in this program; and with 80% of them successfully securing placements with compellingly good salaries, I must say. And UBS Forums recognized this CSR initiative from Schaeffler India as one of the best skill development programs that a corporate is running in the country.
Having covered this, I would now move on to the agenda for today. I will touch briefly on the economic and the [ industrial ] situation, after which, I will take you through the business performance and the highlights for the first quarter and also then move on to the financial performance of the company in the first quarter. That said, let me now take you through the economy. I mean to the next slide.
Talking of the GDP growth in the country. As you can see, in the first quarter of 2024, the estimated or projected growth in GDP stands at 7.2%, which is definitely supported by moderating inflation as well as the demand that is running in the domestic market. Both the manufacturing and the service sectors seem to be prepped up and doing fairly well, but that said, the RBI, the Reserve Bank of India, too projects close to 7% for the fiscal year '24, '25. And they have revised from their previous projection of 6.6% to 7%.
And when one looks at the index of industrial production as well, as you can see here, the healthy run of the metal products as well as the transportation and the manufacturing sector all put together -- the manufacturing in the food products, beverages, even rubbers and plastics, have all demonstrated double-digit growth rates, including the [ mining ] which was [ about 8% ] growth. Talk about manufacturing that posted about 5% growth, and electricity or energy production with [ 7% growth ].
One looks at the inflation. Well, while the inflation has moderated, the overall food inflation still remains high at 7.7% compared with last year, although the projections are -- by the RBI are that the inflations would be tapered down to about 5%; and try and get them down, over the next 3 quarters to 4 quarters, below 5%. We will have to wait and watch for that.
On automotive production front, overall production growth was about 5.2% in the first quarter of the year. And this came on the back of a strong growth in the passenger vehicles business as well as the light commercial vehicles. However, the medium and heavy commercial vehicles, which I will talk in a while, as well as the tractors, showed a degrowth or a flattened performance compared to the previous quarters.
I move to the next slide, where I'm going to talk about some of the core sector performances. As the data is available only for Jan and February, I will cover only the 2 months, but as you can see, again, the core industry sectors: The cement sector has grown close to 8% compared to the same period last year. Steel production as well is on the positive side with 8.6% growth. Talk about coal production, which is close to 11%. And as I already touched upon, electricity generation is up by 6%, all indicating the strong manufacturing activities and industrial activity. Now that said, as you can see, the weightage in the sectors on the right side correspondingly also determine the impact on the growth rates in the country.
I now move to the next slide and talk a little bit on the segments within the automotive sector. And let me start with the 2- and 3-wheelers. This is one sector that has shown a very strong rebound. And as we can see, it's a clear 25.6 percentage growth compared to the same quarter last year. And consistently, this has been in the last year a muted performance in this sector, which has now started to bounce back very strongly. Take a look at the passenger vehicles. And again here again we will find a strong double-digit growth, close to 11% compared to the same quarter last year, clearly riding on the back of the strong demand for the SUV segment within the passenger vehicle doing much, much better than any of the other hatchbacks or the sedans.
Coming to the commercial vehicles sector. What you see here is a steady performance. We have not seen a degrowth, though hope this is the bottoming out of the commercial vehicles sector. However, our performance itself has been a little muted in this sector, as the sector itself has been down. I will come to that in a while. Move on to the tractor segment. The agricultural tractor has always been -- in the last 4 quarters has been consistently lower. And here again, this quarter too, it was 15% lower than the same period last year.
Now that said, I move to the next slide to touch upon the business highlights for the first quarter. Before I get into the business highlights, I would like to move on and talk a little bit about a restructuring that we have carried out in the organization. Globally, Schaeffler has restructured the divisions, which we were having 3 divisions earlier, have now been split into 4 divisions. Now why has this been done? Considering our emergence in into the electric mobility play and -- it has become relevant and important for us to create a new business division called e-mobility, which you see there on the slide.
So accordingly, these other 3 business divisions have been now restructured and renamed, so the earlier automotive division is now split into e-mobility as one of the vertical divisions, and then the powertrain and chassis as the second division. And the automotive aftermarket division which was there is now renamed as Vehicle Lifetime Solutions. The industrial division which was earlier there is now remained as bearings and industrial solution. Now in the process, it was not just about renaming the industrial. What we have done is all the bearings businesses which were there, even in the automotive, be it the plant and machinery or the employees, have all been reallocated under the industrial segment, industrial division. So that said, hence, what -- we will be having now the measurement parameters pertaining to 4 divisions: e-mobility, powertrain and chassis, vehicle lifetime solution, bearing and industrial solutions. And this new structure has come into effect from the 1st of April 2024.
While this has been done, these 4 divisions will continue to operate across all the 4 regions where we operate in, as you can see in the background. And also it cuts through all the function, so this is our target operating model going forward.
So 2 changes. One is the creation of e-mobility as a new division. And second is the transfer of the bearings business, which has been the automotive, also under the industrial part of the business. Accordingly, the disclosures in the quarterly results also have been reinstated in a segmented way.
Now let me move on to talk about the performance for the first quarter 2024. So while we still did face some headwinds and challenges in the marketplace, we have been able to post robust performance, year-on-year growth. [ And including the domestic ] Indian market, our growth was 12.4%. And this has come from across sectors, barring a couple of sectors, which I will talk about. The margins remained resilient primarily because of the clear focus that we have kept in terms of our activities that we drive to manage our operating costs as well as ensuring that we continue to secure new business wins and try and manage the mix of the business portfolio that we operate in.
So the quarter, the first quarter of 2024, we have been able to deliver INR 1,849 crores. And that is a clear 9.2% growth compared to Q1 2023, while if one were to compare it with the preceding quarter, Q4, more or less it remains the same. It's a flat development in this quarter. This has translated into an EBITDA of INR 338.8 crores; and the EBITDA margin, when compared to the preceding quarter, 8 -- 18.3% and the preceding quarter being at 17.9%, resulting into a profit after tax of INR 227.7 crores and thereby delivering a 12.3% PAT in the first quarter. Comparatively, 11.7 percentage was there in the preceding quarter.
We did have some challenges on the free cash flow. As you can see here, we have delivered a negative cash flow of INR 25.6 crores, which if one were to compare to last quarter, it was [ a whooping ] INR 177 crores coming in, in Q4 2023. And it was INR 3 crores compared to Q1 in 2023. Now that said, we have always seen the first quarter will have a muted free cash flow number. And entire focus is to recover the situation in the coming quarters, and we stand committed to ensuring that we get it back on track.
Our working capital have been in the reasonable range, which I will talk in a while. And while we have been able to sustain the top line and the bottom line numbers in this quarter, our consistent effort is to see how we can better it in the second quarter of this year. With that, I move to the next slide.
[ Our continuity ] in the business of ensuring that we are able to sustain the top line growth in spite of the headwinds, it's positive because of all the new businesses that we continuously keep striving to win, whether it is in the automotive technology space where we have been consistently launching new products and solutions addressing the reliability and the emission reduction needs of our customers. And we have ensured that we have garnered our new business and particularly in our transmission business both in the commercial vehicles as well as in the passenger vehicles segments here, as you can see. I mean a number of wins have come in, in the commercial vehicles sector for us.
Talk about Vehicle Lifetime Solutions, where we are further expanding our coverage in terms of our reach as well as in terms of the more traded products that we want to add to our portfolio. I am happy and proud to say that we have added a few more products such as the coolants for the engines as well as a new category of grease that we have brought into the market as well and some more products extension when we come to the front-end auxiliary drives or the timing kits in the passenger vehicles segment. So our continued portfolio expansion in the Vehicle Lifetime Solutions is paying dividends for us. And we will continue to keep the focus and drive in winning new businesses, adding new products to win new businesses [ here ].
Moving on to the industrial -- Bearings and Industrial Solutions. Here again we have been focusing on leveraging the acquisitions that Schaeffler has made at a group level. And I am happy to share here that we have won some new businesses, particularly in some specific high-engineered sectors such as the industrial automation sector which is the [ machine tool ] industries which will call for very high-precision gearboxes which are required in these applications. And we have managed to secure new business during this year. Of course, on our foundation product, which is bearings, as well, we have won some new businesses [ only when there are ] trains for the -- in the railway sector, for cylindrical roller and tapered roller bearing [ clutch ].
I move on to the financial highlights now. So as we can see, our revenue from operations in the first quarter was INR 1,849.2 crores, which is a clear 9.2% growth compared to the first quarter of '23 but, when compared to the preceding quarter, I did already talk about it, was at the similar level as the last quarter.
So where has this come from? And as you can see here, the Automotive Technologies has contributed almost INR 56 crores compared to the last quarter, better performance. And the Vehicle Lifetime Solutions too has brought in about INR 14 crores. And industrial has brought in strong INR 107 crores additional coming in, which takes the revenue from the operations up from INR 1,693 crores of Q1 '23 to INR 1,849 crores. Although, exports, on the other hand, we have seen a bit of a drop when compared to the first quarter, as we can see. We have lost INR 20 crores on the export market, predominantly because of the sluggish demand from the Western sectors, which is mostly on the European market, as well as the Asian market.
So overall, our year-on-year growth has been robust. And the domestic business within India, we have done 12.4% better than the last year, but quarter-on-quarter, definitely we still have to push hard, push forward to keep -- sustain this growth momentum as we see it.
So accordingly, when it is split between the 4 new restructured divisions, what you see is the automotive technology is grown 4.8% in the first quarter over the preceding quarter and 9.1% better when compared to the Q1 '23. Vehicle Lifetime Solutions, this is a cyclical business, and the first quarter will always be lower when compared to the preceding quarter. The Q4 is always the highest business and hence has registered 13.2% lower numbers than in Q4. But when compared to Q1 '23, as we can see, it's a 9.7% better performance.
Talk of the Bearings and Industrial Solutions. Here again, over the preceding quarter, we have seen a drop of 6.3%, but compared to Q1 2023, we have grown by almost 16%. The export business, as we saw, surprisingly, has started show some uptick in the first quarter. When compared to the preceding quarter, our export business grew by 19.6% in this quarter, but compared to last year, we are actually down by 7.6%.
With the restructuring that we have already effected, you will see that the business pie has now moved more in the industrial -- Bearings and Industrial Solutions, which is [ garnering ] about 42% of the total revenue. Automotive Technologies, it's about 35%. Exports continues to be around 14%, and lifetime solutions is about 9%. That said, I move to the earnings quality.
So EBITDA, as I already mentioned, we were able to deliver INR 338.8 crores in the quarter, registering 18.3%, which was shade below compared to last year. However, when we look at absolute numbers, we have grown 4.9% compared to last year and 1.8% better than the preceding quarter as such.
So that said, where has this EBITDA come from? Obviously the gross margins have improved. And while -- we did have some adverse impacts coming on expenses and other income areas and some of the employee costs which -- as a result of the wage agreements that we have done in the something -- performance increments that we have given. So that has come in and impacted our EBITDA earnings as such.
So the year-on-year earnings moderated marginally, but however, we still have the strong fundamentals in place. And when we -- one look at the profit after tax, we can see that we were able to close the quarter with INR 227.7 crores in the quarter, registering a 12.3% PAT, which definitely was a little below compared to the 13% that we did in the first quarter of '23. However, in absolute number, we have grown 3.8% better than last year and 4.4% (sic) [ 4.7% ] better than the preceding quarter.
On the working capital. I'll move to the next slide. And here, again, our working capital went up to INR 1,352 crores in the quarter, which was an increase compared to the Q1, but however, we believe that the demand that we see coming in from many of the sectors is recovering. We believe that this kind of inventories needs to be there to service our customer needs. And this is an optimum level of working capital that we would definitely want to operate with, in the 17% to 19% range, and we will continue to keep -- hold our working capital around this.
Now that said, talk about the CapEx. We have been consistently investing over the last few years in ensuring that we continue to localize a lot of our production in India and increase our localization content. And clearly in line what that strategy, even in this quarter, we have been able to invest INR 173 crores, as against INR 118 crores in the same period last year. This has taken our CapEx as a percentage to sales to 7%.
And I did already talk about the free cash flow. Yes, we did have some challenges on the free cash flow, but then this is the normal start of the year. The first quarter always registers lower free cash flow. And the similar picture was there even in last year, first quarter. However, we are now keeping the focus to say can we bring in some consistent performance quarter-on-quarter in the free cash flow as well.
Now that said, I move to the next slide, which is more on performance indicators. And to sum it up: As you can see, while we have registered on the top line a 9.2% growth compared to last year, our performance in the preceding quarter has been flattish, delivering an EBITDA of INR 338.8 crores, resulting in a margin of 18.3%. And with all the investments that we have been making [ in ] as well as the depreciation impacts that have started to come in, we have been -- or we were able to deliver an EBIT margin of 15.1% and bring in an EBT of INR 305 crores as such.
The profit after tax, I did already talk about 12.3% margin that we have delivered. We continue to sustain our CapEx investments, although we are judicious in terms of where we are investing. We're continuously monitoring the market even on the export side, and we have been judicious in -- and prudent in making our investments in the right portfolio or product as such. Free cash flow, I already touched upon. And I'll move to the next slide.
So the consolidated financial results. This slide shows about the consolidated picture including the Koovers acquisition that we made last year. Koovers, as you all know, or KRSV Innovative Auto Solutions Private Limited, as you all know, is the subsidiary of Schaeffler India Limited. This is a B2B e-commerce platform. And this was a strategic move that, as Schaeffler India, we decided to get on to in our Vehicle Lifetime Solutions market space.
And so KRSV, as you see, has posted a revenue of 24.6% (sic) [ INR 246 million ] in the first quarter, while the financial parameters of EBITDA, EBIT and EBT are still negative, as we are right now in the ramp-up mode by way of expanding the footprint of Koovers pan-India. We have started to now move into the West and the Northern region. Predominantly, when we acquired the company, which -- was focused only in the [ Southern ] part of India, more so in Bangalore and Chennai. And now we have started to expand the footprint aggressively, so very soon, we will be able to see the positive results coming out here as well.
So as a consolidated unit, Schaeffler India Limited, we have been able to close the quarter with INR 1,873 crores on the revenue. And our EBITDA stands at 17.8% consolidated, with an EBIT before exceptional items, as you can see, with 14.5%; and earnings before taxes also, at 15.9%.
I move to the last slide. And to summarize: We have invested in the right foundation products in India and are also continuing to invest in the emerging sectors in India. And the testimony of that is also our focus on the market and our customer-centric approach, which clearly is helping us to continue to sustain the growth momentum in the domestic market in India. Exports, on the other hand, we did see challenges and headwinds in preceding quarters. However, in this quarter, we do see some rebound. We will have to watch cautiously and watch it for a couple of other quarters. The next few quarters will tell us how the export is going to fare.
Our sustained quality earnings and the measures that we have put already and more that we will be putting ensures that we continue to sustain and deliver the profitability story of Schaeffler India to all our stakeholders. And the operating metrics continue to remain. Our CapEx commitment continues to be there. However, we will be more cautious and judicious in terms of being agile in our investment decisions going forward, but the strategy of investing to grow and localize more in India is still strong and on the right track, I must say.
So with this, we will continue to stay optimistic yet be cautious and be more agile; continue to show the resilience that my team has demonstrated, so far. And although the market is very volatile and uncertain, but -- certainly we will try to play the game more smartly going forward as well.
With that, I conclude my presentation. Over to you.
[Operator Instructions] The first question is from the line of Mukesh Saraf from Avendus Spark.
My first question is on exports. You did mention that you were surprised with the kind of pickup in the first quarter. So yes, there has been a sequential [ increase ]. Could you give some more color on how do you see -- I mean, going ahead, how the ramp-up in exports [ do ]?
[indiscernible]...
Yes. It's not audible...
[indiscernible] exports...
Do you want me to repeat the question, no?
No. We have -- just a second. We're having a bit of a technical glitch on the speakers, so...
[Technical Difficulty]
Okay. So your question was -- if I heard it correctly, it was on...
That's right. So the question is just on the visibility that you have going ahead. Because there has been a sequential improvement, but you also mentioned in the opening remarks that it was surprising, the improvement. So is this like something that we can expect will continue to improve from here? [indiscernible].
Yes. So if we look at exports then, quarter 1 of 2024 vis-à-vis quarter 4, we saw a rebound. A good 10%, more than 10% rebound, we saw; and this came from all the regions. Of course, one thing is that the stocks that Europe was consuming have reached optimum level. And thereby, they have started placing the orders now, but at the same time, there were some efforts put in by the management to acquire Asia Pacific markets, where we have also fared quite well. All in all, the response from all the regions was better than Q4.
Okay, okay. So we can expect kind of this improvement, sequential improvement, to continue from here on.
So the order book looks promising. At this point of time, we plan to maintain the average through the year.
Okay, [indiscernible]. And secondly, on the e-axle order that we have already, can you give some sense on the time line here of -- I guess, this year, sometime, we are expecting [ the business to start there ], so will you give some sense on some time lines then?
On the e-axle business, what I can say is that the project is progressing very well with our customer, but it's -- and it is according to the time lines that we have committed, yes. Rightfully, our [ sales ] investments also is on track. And as the situation progresses, we will definitely start to bring in our localization strategy as well and start to implement some actions towards localizing partly our production lines -- have also started to be now effected, but as I said, I cannot share more details on the project, but then nevertheless, we are on track.
Right, sir. Got it. And just lastly, just a bookkeeping question. Under the e-mobility solutions, you have industrial bearings there, so I mean, does that include [ only railways, tractors vehicle ] business? Because it's split on the mobility and others. I'm just trying to understand. What are the...
Mukesh, I just wanted to correct you that the new division that is created is called electric mobility, which is purely for the electric mobility on road, yes. So the railway as a sector continues to remain under the industrial division and which is now we are calling it the bearing and industrial solutions. It's going to remain there. So there has been no deduction or changes within the erstwhile industrial division. There has been only an addition. And that's the bearings business which was in automotive has now come under the industrial...
Right. So in the stock exchange release of the segmental revenue, there is something called as mobility components and related solutions. And then there's something called others as well. In each of these, you have the 4 subsegments. So just wanted to understand. What are the differences there [ which you actually see the most ]?
Yes, Mukesh. Just give us a second...
Sure.
[ Components and related ] solutions [indiscernible].
Related solutions [indiscernible] solutions...
And related solutions. So Mukesh, the way it has been shown here is mobility components and related solution, so -- but if you see, so -- that all the 4 businesses which we track is already there, so...
Yes. And then there's other also. Below that, there's others. And in there again, there is a Bearings and Industrial Solutions and the [ intercompany ] exports [ as such ]. And then I think it gets totaled up into the third segment -- never mind, sir. I'll probably take it off-line...
[indiscernible] no, no, no. I can answer this right away. So if we see, mobility components, it is all linked to passenger vehicles, tractors, railway and so on, but other than that, our sectors like wind, power transmission, industrial distribution, that falls under others. So everything that is related to mobility is in category A. and rest all sectors are in category B.
Next question is from the line of Harshit Patel from Equirus Securities.
My first question is on the wind sector. So as we had mentioned last time, CY '23 had seen [indiscernible] because the exports from India were pretty much sluggish. So can you think that, in CY '24, we can reach back to those [ CY '22 ] levels? And what is the share of wind as a portion of overall our revenues at the moment?
So I mean, before Harsha talks on the business aspect of when, let me clarify that, when we talk about our exports, it does not have the wind portion. We sell to the wind producers in India, who in turn export to Europe and other countries, so when we sell them, it is still domestic sales. Our export is not towards -- directly towards wind. We sell domestically to the wind producers and they export it.
Yes. So to your question on the business progression. So first thing is there are 2 parts to the business. One is the domestic demand for wind equipment, and the second is our customers manufacturing in India and exporting. So in the total business, 80% to 85% is exported out of the country by our customers, correct? Now that business -- so the domestic demand continues to be stable, has been stable in the past. It was the export business that was down and -- over the last few quarters. We saw that. Coming into Q1 2024, what we have seen is a very strong uptick compared to the Q1 of '23. If we go back 4 quarters, we have seen a very strong uptick, almost a 70% growth in demand we have seen come back. Now if one were to do a little deep dive and look at -- there are 2 applications that go into the wind. One is the equipment itself, and second is the gearbox manufacturers. What we have seen is a very strong demand coming back from the gearbox manufacturers. The wind equipment is -- still is improved but not at the same pace as the gearbox manufacturers. So I must say that we are beginning to see strong demand for gearbox that are getting exported out of the country as of now. Hopefully, the wind equipments too would start to make a strong recovery as we have seen in the gearbox.
Understood. My second question is on the pricing. Could you give us a little bit of flavor on bearing pricing both in the automotive as well as industrial bearings? Have we taken any price cuts in the past 1 year also? Because the commodity inflation has pretty much stabilized vis-à-vis what it was, let's say, 1.5 to 2 years ago.
Pricing is always on a comparative level. That's the first point I want to make. It's relative. Second is, yes, you are right. The commodity prices have stabilized. And our pricing is always linked to the commodity price movement. And so we -- our contractual agreements with the customers are always linked with the price of the commodities at a global level. So that said, if the prices would have gone up, certainly we will have -- try and recover those prices from our customers, but if the prices were to go down as well, we will have to pass on the benefits. So -- and those, I don't have the details of where we have given or where we have taken, but what I can say is it is very well sequentiated with the commodity price movements and we continue to operate [ in that line ]. This applies to all suppliers who play -- who are in the automotive and the industrial space.
Right. Sir, I understand that you have to pass on those benefits to your large institutional customers, the B2B contracts that you might have, but do you also have to pass on the [ same in ] the aftermarket?
No. Aftermarket, we do not pass on. Aftermarket -- invariably, to cover the inflationary increases, we do increase prices. All manufacturers, component manufacturers, increase the price every year. And [ automotive, the ] aftermarket, and the industrial aftermarket is the only sectors where we follow this rule to increase the prices every year unless it is a strategic approach not to increase the prices by the organization.
Understood. Sir, just last one bookkeeping question. In the vehicle aftermarket solutions segment, are there still bearings? Or these bearings are also moved to the newly created segment which is Bearings and Industrial Solutions.
So the Vehicle Lifetime Solutions will continue to sell bearings. They will continue to sell every other product as well. The -- only the manufacturing is moved under the industrial side, so nothing changes, as far as the external customer is concerned. It is an internal restructuring that we have done. And it's just a reallocation of the team, the plant and machinery into the industrial. So that's the only change, but otherwise, from an external perspective, everything remains the same.
Next question is from the line of Pratit Vajani from Union AMC.
Sir, I have 2 questions. Firstly, on the export side. So you called out that the wind sector is largely not part of exports and that is part of industrial, but we have seen very strong order book, so can you call out? What is the segment -- as in we largely have PVs, so where is -- where are we seeing that growth, whether it's the North American region or the European region? If you can give a little bit more flavor on that part.
Yes...
Yes. So if we see our performance on exports Q1 vis-à-vis Q4 of last year, just quarter-on-quarter: We have seen the uptick from all the markets, Europe, America, Asia Pacific, also China. We have seen order books improving, while for other regions, specifically Europe which is a main contributor to our exports revenue, there have been -- stocks have been optimized at their levels, so order book is coming in. But at the same time, management had put conscious efforts to get new order book from Asia Pacific, which has contributed to this increase.
Okay. And the other question which I had was related to the Vestico (sic) [ Vitesco ] acquisition which was done at the -- Vestico merger which was done at the global level. So if -- from what we understand, Vestico also has an India entity. And we as Schaeffler have maintained the One Schaeffler policy, so do you have any visibility as to whether you would be -- what would happen to the Vestico entity and the Schaeffler India entity? How are you thinking about that? And if any time lines as such which the management would want to give out.
Yes. First, the name of the company is Vitesco. And this globally is a strategic acquisition for Schaeffler fundamentally because -- as we are venturing more and more into the electric vehicle technology space. The critical part of electric vehicle technology is the power electronics. And that is where Vitesco's competence brings in a lot of value for Schaeffler, hence strategically this global acquisition. That said, in India too, Vitesco is present as our -- a private limited company. And right now as I am speaking, we are evaluating the functional integration of Vitesco into the Schaeffler portfolio. However, the full integration of Vitesco within the Schaeffler India Limited listed entity will take some more time, as we will have to do a thorough due diligence as well as do a lot of groundwork before we venture in that direction. And as of now I am not in a position to reveal the time plan for this.
Next question is from the line of Pramod Amthe from InCred Equities.
So the first question is I wanted to get your perspective on the railway segment. [ You delivered about ] new wins. How is the pricing scenario there in the current situation?
Pramod, did you say pricing scenario?
Yes, yes.
[ So I am still to ] understand. What are you trying to...
We understand the opportunity is pretty large, and -- but there are incumbents who are there [ versus ] you entering into that segment, so how do you see the pricing scenario when you've won these new contracts?
Okay. So let me give a background, and then probably I can try and answer the question. So the earlier model with which the Indian railways operated was they were issuing tenders for whether it is a wagon, whether it's a locomotive, with all the divisions they have geographically, so -- and the manufacturing units they have, each were independently issuing tenders. And one had to bid and compete in the tender. With a lot of privatization happening now, particularly on the wagons -- we are already seeing the wagon manufacturing is now being privatized. We see a different approach with the private manufacturers now, so we see less of tendering but more of technological discussions and engaging with suppliers from a partnership perspective. And that's beginning to happen now, but has it completely changed in railways? Not yet. It's beginning to happen, so this is the first transformation we have already seen. So what does this mean to players like us? One, for one, it means that we can offer better-value solutions and products to the customers. And now with privatization and modernization both going hand in hand, the demand for better-value products is definitely going to be there. And we are strongly positioned and competent, with all the capabilities, the investments, the manufacturing footprint that we have put in place for railways, to start to compete in a better way.
So that is the big change that is happening. Rightfully, yes, there are 4 or 5 players in India who compete within the railways, but as you know, railways is a growing business and very relevant for our play of things. And we have our portfolio of products where we are strong. And as the railways get modernized and they raise performance levels, we strongly believe we have a portfolio which can compete in those new applications that are already there. So coming to pricing, I am not able to answer it precisely as to what you mean by pricing, but the model, it's transforming there. And we believe that we are able to now start to play strongly in the railway sector as well.
Sure, sir. This is helpful. So second question is with regard to the new products you talked about in the annual report. There seems to be like almost 10 new products which you plan to introduce [ per se ]. I wanted to know. Amongst these, what are the big ones to look forward in terms of addressable market; or in terms of [ making the influence ] on your revenue in a "next 2, 3 years" perspective?
See our strategy in the market is we believe that IC engines -- if you take the automotive market. IC engines will still continue to grow, albeit at a lower-CAGR growth rate, but then there is still definitely demand for IC engines, so our investments in that direction, to manufacture those products, will continue. And hence, we will continuously pursue the market for new business wins on those existing portfolio. The second is we will continue to upgrade our existing products to meet with the regulatory -- changing regulatory norms that are coming up, the new CAFE norms or, for that matter, if Bharat Stage 7 were to come in, yes. So we are now building up the engineering competency as well to stay competitive with that. On the other hand, with the emerging technology like electric vehicles as well, we continuously invest. We continue to invest there both in terms of competence development as well as phased-manner localization. As the market is beginning to pick up, more and more electric cars are produced in the country. We have started to now -- we already have a business win and we are now pursuing other new opportunities there, so there will be new business wins even on the electric vehicle technology space as well.
So rightfully said, if you are going to ask me which is the big ticket one, well, I will say, both on the automotive side and in the electric -- e-mobility side, we have big wins. So cumulatively, we will continue to pursue and we will continue to make business wins. Even on the industrial side, for that matter, with so much infrastructure growth that is happening, our industrial -- core industrial sector customers are investing in capacities, new capacities and new greenfield projects, so there again we continue to produce the existing products more and service their requirements as such. So clearly, wherever the opportunity is there, we believe that there is a growth opportunity, Schaeffler would continue to focus and continue to invest.
Next question is from the line of Mahesh Bendre from LIC Mutual Fund.
Sir, we have been talking about CapEx of 1,500 crores over next 3 years. So we already [ done ] CapEx last year. We are in the midst of that, doing that. So when will this get reflected in the numbers? I mean, when we -- this CapEx that we're putting into factories will start reflecting in our sales.
So partially, it is already reflecting...
[ Moderate reflecting ].
It is reflecting because the investment is not only into the capacity. Investment is in setting up of new plant of Hosur. Investment is include backward integration, roller localization in Savli, so there are many things which are done to do the localization of finished products. So we are already selling those products in the market from imported sources. When we localize, we are now selling from within our plants, so sales does not necessarily increase. Or when we do backward integration, it is that the parts are available easily within the local market. So there are several topics within those investments of 1,500 crores which are not directly always linked to increase in sales, but yes, we can say that significant amount is towards that. So some part, we already see that it has started impacting. And that is the reason you see that the company is able to sustain the margins; despite inflationary pressure of over [ 8% ], that the margins are maintained because localization has been done for the child parts et cetera. So CapEx is to be seen in those categories. And you will see that -- increasingly when the market comes back in tractor commercial vehicles, you will see those effects coming in.
So you mean to say that the CapEx will start influencing your operating margins maybe because, a lot more things we were importing, they will get produced in the -- our factories now.
Well, it is already impacting. And that's why we are able to sustain our EBITDA margins close to 18% despite having inflation of -- last year, inflation averaged about 7% in the prices, personnel costs, fuel et cetera, but we still registered EBITDA margin over 18%. And this is all possible because there are several measures in those directions.
Sure. And sir, last question from my end. Out of our total sales, how much is from the aftermarket, both including auto and industrial?
Give us a moment.
But we already show in the pie chart 9% was coming from aftermarket, Vehicle Lifetime Solutions.
So Vehicle Lifetime Solutions, we already showed that is -- from the domestic sales, it's close to 10%, [ but similar ] would be in...
[indiscernible].
[Operator Instructions] Next question is from the line of Saif Sohrab Gujar from ICICI Prudential AMC.
Just one question. Can you share, where are we on the Hosur plant...
Yes. As you know, last year, we had started off the year by laying the foundation stone for the greenfield project construction. As I'm speaking now, the first hall construction is underway. Last month, me and the entire leadership team were there to assess the status of progress; and I must say that we are on track. So when the hall and the building is completed, the machines will start to roll in as well. So as we are going to set up, some new machines will come in. And some would be moved from our existing location as to create more space in the older plant as well. So that, we will start, expectedly, next year to start to produce from this plant. So all in all, we expect, by the end of this year, the entire project to be completed.
Next question is from the line of Salil Desai from Marcellus Investment Managers.
Yes. When you mention that extra efforts were made to increase exports in Asia Pacific, can you explain in a little detail what these efforts are, in the sense do you need to put marketing teams there? Or do you need to talk to the group and make a case for sourcing it from India?
So as you know, that region, Asia Pacific -- sub-region India is part of region Asia Pacific. So there are ongoing discussions with Asia Pacific management [ both ] on the order book situation. And in Asia Pacific, we are present in 11 countries, wherein, Southeast Asia, there are 7 countries. And the markets like Indonesia, Philippines, Malaysia, Thailand or even Korea, these all are part of Asia Pacific, so the management both of those respective companies are in the common meetings we -- where we draw up the actions. And respective colleagues from the industrial division in those countries, they put extra efforts to get us the order book -- and also that, the Southeast Asia countries, we don't have any plants to produce the products that we produce, so they import from us.
I see, okay. So this would be kind of a more sustainable source of exports for you. It's not a onetime event. Is that understanding right?
That's what we are trying to [ do ].
Next question is from the line of Mumuksh Mandlesha from Anand Rathi.
Congratulations on good results, sir. Sir, industrials and bearings have seen a good 15% growth on a Y-o-Y basis. And if you look, last quarter, Q4 quarter, [ it's just ] 5% growth. So from which sectors we have seen a much better growth this quarter. And also just to add: On aftermarket, we've seen a 10% growth. Any subsectors or products you want to mention which have seen good growth in aftermarket as well?
So let me take the industrial part first. So a couple of sectors that we have seen strong demand coming up in the first quarter, one, obviously, wind. We already talked about it. The second one is the 2-wheelers, which we classify under the industrial division. And here again, as you know, the industrial -- the 2-wheeler business bounced back with double-digit production growth rates happening in the country. We've also seen a strong demand coming in the power transmission sector, which is fundamentally the gearboxes as well as electric motors that are manufactured in the country. So these were some of the large. Of course, we did see also from the cement and the steel sector good demand coming back, although not as high as it was when compared to the 2-wheelers and the wind. The wind and the 2-wheelers have been the strongest growth for us in this quarter.
And coming to the second part of the question. That is on the Vehicle Lifetime Solutions. Well, while we have -- it appears that we have done better when compared to Q1 of 2023, but the first quarter of every year is always a low start for the automotive aftermarket or Vehicle Lifetime Solutions, as we call it, but surely, with the vehicle part numbers increasing in the market, the demand for the aftermarket products also is going up. Hence, strategically, one of the reasons we also resorted to the -- to acquiring the B2B e-commerce platform is exactly to facilitate the growth story of the Vehicle Lifetime Solutions products there.
So fair to say in -- I mean, in the VLS segment, the vehicle lifetime solution, broadly the growth has come across the product lines and segments, subsegments.
Yes. Also what's also happening is the transition of BS-IV to BS-VI, which happened in 2020. Now you will see more and more vehicles of BS-VI coming back for repairs. And hence, our portfolio of products, we have been proactively developing and now keeping them ready. We have been able to service those vehicles that come back for BS-VI -- with BS-VI technology. So our product offering was also made ready, and hence we are seeing now the good demand coming for the BS-VI products as well.
Got it, sir. Just lastly, sir, I mean, the upcoming new emission norms like CAFE and BS-VII. How do you see the change in content per vehicle, sir, there?
The content per vehicle. Yes, rightfully, when the BS-IV to BS-VI transition happened, obviously the value of the products that we are offering is definitely much better, as it has to conform and also perform of with -- to the new requirements of the new regulations. So rightfully, if BS-VII were to come, yes, we are prepared. And we do have the engineering capabilities to reengineer our existing product to do -- meet the new demands of regulations that will come in. So we have done that in the past. We will continue to do that going forward in future as well.
Next question is from the line of Rishi from Kotak Securities.
Yes. Sir, just a little bit more details on the export side of things while you alluded that we had seen a recovery across geographies. But at least in terms of end-consumer segments, if you could comment like which are the important segments for us in terms of exports and where we are seeing some green shoots at least on a sequential basis. So any insights on that would be helpful. And just one bookkeeping question: Any CapEx number which you would like to put in for CY '24? That will be helpful.
So I'll take that question, Rishi. So on export, we -- these are our [ intercompany ] exports, so we supply to our group companies and they'll sell it to the end market. Mainly -- the exports are mainly in industrial division. There are some parts in automotive also, but main is industrial division. And on your question on CapEx: As -- we had committed that, in 3 years, we will do 1,500 crores; and this is the third year. And we will be keeping our promise.
Okay. So despite 1Q number of INR 170 crores, overall full year still will be around 500 crores.
Can be over that, but we don't give the year guidance...
The last question will be from Mr. Balasubramanian from Arihant Capital.
Sir, on the localization side, like, what kind of subsystem-level products we are focusing on in the automotive segments.
Okay, I will not be able to give you specifics as to which product lines we are localizing. All I can say is that our consistent effort to continue our investments to localize more and more in India is well on track. Our localization percentage as of quarter 1 was at 77%, and last year, it was at around 75%. So we will continue to localize more and more. And now our effort is also on to localize more and more at a component level for the automotive applications where we continue to import some high specialty products from Europe. We definitely want to localize that as well, so our effort is focused on localizing our purchases that we source from our suppliers outside of India as well. That's a clear focus area for us.
Thank you. Ladies and gentlemen, that was the last question of the day. I now hand the conference over to Ms. Gauri Kanikar. Over to you, ma'am.
Thank you, everyone. Thank you for joining us today. If you have any further queries, please do reach out to me at gauri.kanikar@schaeffler.com. Thank you, and have a good day.
Thank you. On behalf of Schaeffler India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.