Sona BLW Precision Forgings Ltd

NSE:SONACOMS

Earnings Call Analysis

Record Revenue and Strategic Expansion in EV Sector

The latest earnings call revealed that the company achieved its highest-ever revenue and EBITDA, driven by a 53% increase in BEV revenue, now comprising 33% of total revenue. However, the U.S. off-highway market and Indian EV 2-wheeler sector remain challenging. Revenue grew by 22% year-on-year, while adjusted EBITDA margins improved by 1.2%, reflecting better operating leverage and lower costs. The company plans to raise up to INR 2,400 crores for potential acquisitions and strategic opportunities, reinforcing its commitment to innovation in EV technology and products.

Introduction

In the recent earnings call, the company's leadership was enthusiastic about record-breaking quarterly earnings, including revenue and EBITDA. Despite challenges in specific markets, the company demonstrated resilience and strong performance.

Challenges

The primary challenges include a weak off-highway market in the U.S., which has struggled for 8-9 quarters, and issues in the Indian EV 2-wheeler industry related to the FAME subsidy fallout. Additionally, global logistics issues, particularly the Red Sea crisis, have increased freight rates and container availability challenges.

Financial Highlights

The company witnessed significant financial growth with revenue increasing by 22%, EBITDA by 23%, and net profit by 27% year-on-year. BEV revenue grew by an impressive 53%, now constituting 33% of total revenue. This growth is attributed to higher operating leverage and lower input costs.

Electrification Strategy

Electrification remains a strategic priority, with the company significantly increasing its BEV revenue share from 26% to 33%. The company secured new orders in the electric vehicle segment, including its first order for an in-cabin sensing product, ACAM. This signifies the successful pivot of NOVELIC from an engineering services-led business to a product and semiconductor chip design business.

New Product Developments

Two new products were added to the company's development roadmap: an integrated motor controller for hub motors and a high-voltage integrated motor controller. These innovations aim to enhance performance and meet the increasing power demands of high-voltage electric vehicles.

Order Book Growth

By the end of Q1 FY '25, the company had 27 EV programs in production and a robust order book valued at INR 233 billion, with 79% of it being from the EV segment. New wins included a driveline program for a Class 5 electric truck and the company's first product order in the sensors and software business.

Regional and Segment Performance

North America remains the largest market, contributing 43% to revenue, followed by India at 28%. Importantly, ICE-dependent revenue has shrunk to single digits, signaling a shift towards electrification and reduced reliance on internal combustion engines.

Technology and Innovation

The company is committed to expanding its product portfolio with innovative solutions like the Park Gear for commercial EVs and ACAM sensors for passenger vehicles. These advancements reinforce the company's leadership in the EV market and its dedication to integrating advanced safety features into modern electric vehicles.

Future Outlook and Strategic Moves

Looking ahead, the company is evaluating several potential acquisitions and strategic opportunities. An enabling resolution to raise up to INR 2,400 crores was approved to support these initiatives. The company's focus remains on maintaining its growth trajectory through new programs, customers, and products, irrespective of underlying industry growth trends.

Conclusion

Despite specific market challenges, the company's strong financial performance, strategic focus on electrification, and innovative product developments position it well for sustained growth. The robust order book and strategic initiatives underscore the company's commitment to driving value for its customers and stakeholders.

Earnings Call Transcript 2025-Q1

[Operator]

Good evening and good afternoon, ladies and gentlemen. Thank you, and welcome to Sona Comstar Q1 FY '25 Earnings Group Conference Call. [Operator Instructions] Please note that this call is being recorded. [Operator Instructions]

Some of the statements by the management team in this call -- in today's conference call may be forward-looking in nature, and we request you to refer to the disclaimer in the earnings presentation for further details. The management will also not be taking any specific customer-related questions or confirm or deny any customer names or relationships due to confidentiality reasons. Please refrain from naming any customer in your question.

Now I will hand over the floor to Kapil Singh, Head of Consumer and Digital Commerce Research India, and lead auto analyst at Nomura. Kapil, please go ahead.

[Kapil Singh, analyst]

Good day, everyone. To take us through 1Q FY '25 results, we have with us the management team from Sona Comstar, we have Mr. Vivek Vikram Singh, MD and Group CEO; Mr. Kiran Deshmukh, Group CTO; and along with him, Mr. Praveen Rao, who is the CTO Designate; Mr. Sat Mohan Gupta, CEO of Motor Group -- Motor business; Mr. Vikram Verma, CEO of Driveline Business; Mr. Rohit Nanda, Group CFO; Amit Mishra, Head of IR; and Pratik Sachan, GM, Corporate Strategy and Investor Relations.

Before I hand over the call to Vivek, I wish you a very happy birthday. And now I will pass this on to you for the opening remarks and also the presentation.

[Vivek Singh, executive]

So thank you, Kapil, for the birthday wishes. Yes, I turned 45 today. When I joined Sona, I was 35 years old, knew almost nothing about anything. Now in my tenth year at Sona, I'm still learning, still trying to get better at doing my job.

So with that being said, let me move on to doing my job, and welcome all of you to the earnings call of what has, once again, been our highest ever quarterly revenue, EBITDA, BEV revenue and BEV revenue share.

But we'll begin, as we always do, with the challenges. First, off-highway market has been weak. And this time, I want to highlight the U.S. off-highway market, which has actually been struggling for the last, I'd say, 8, 9 quarters straight. Production declined further last quarter. And given our high market share in this space, this has affected the sales of our differential gears as well as differential assemblies to this segment.

Second, the Indian EV 2-wheeler industry continues to face issues related to FAME subsidy and the subsequent fallout on demand. Quite frankly, in our entire EV portfolio, the EV 2-wheeler market remains the most disappointing one, from a gap in projections and actual sales.

On the cost side, the Red Sea crisis continues, which means that there is a further increase in freight rates as well as there are challenges on container availability. So this remains a continuing and ongoing challenge.

But as usual, the good news outweighs the bad in a lot of ways. In financial terms, we achieved the highest ever revenue and EBITDA. BEV revenue has continued, as I've said, repeatedly over the last 4 quarters. This is our growth driver, and we grew BEV revenue by a staggering 53% last quarter year-on-year, and its share in revenue has increased to the highest ever at 33%.

We've also begun FY '25 with meaningful new wins in the electric vehicle segment, which we'll talk about later. We've got our first order for an in-cabin sensing product, ACAM, which gives us the confidence that we are moving with agility on our long-term strategy of pivoting NOVELIC from an engineering services-led business to a product and semiconductor chip design. This was the hypothesis with which we made this acquisition, and we are very proud that in such a little time, we've been able to achieve that hypothesis.

We've additionally made substantial progress on our technology road map by winning customer orders for 2 new products, and we also added a further 2 new products to our development road map and Mr. Deshmukh would cover that in a later slide.

Coming to the numbers. On a Y-o-Y basis, our revenue grew by 22%, while EBITDA and net profit increased by 23% and 27%, respectively. Our margins have improved due to operating leverage. That's the core reason of the growth being higher than revenue growth. Once again, I want to highlight that BEV revenue grew by 53%, and the BEV revenue share has reached 33%.

On our biggest strategic priority, electrification. Our BEV revenue share has increased from 26% to 33%, and BEV revenue in rupee terms has grown to over INR 2.8 billion. For us, the growth in BEV revenue has been 5x the growth in non-BEV revenue, and that should give a clear indication of where we are deriving this much higher than industry growth from.

We continue to build on our EV order book. At the end of Q1, we have 27 EV programs in production, 12 which are mature and completely ramped up and 15 are in various stages of ramping up. The remaining 28 programs are, of course, not yet in production and will start during this or the following years to come. We will elaborate on the new wins in the next slide.

So the first one is a driveline program. This is for a Class 5 electric truck for an existing North American customer. The customer is a new OEM of commercial vehicles. Earlier, if you recall, we had won the order to supply differential assemblies to this customer. And now, and thanks to Vikram and his team's persistent efforts and having proven their skills, we've been awarded 3 more products within the same vehicle.

The intermediate gears, the input shafts and a new product for us as a company, Park Gear. This has increased our content value on this truck substantially and increased the order value by 170% or INR 6.8 billion. The second one, although smaller, is one that gives us great pride. This is our very first product order in the sensors and software business. The order win is to supply ACAM or in-cabin sensors for electric passenger vehicles. It has come from a new customer, an Asia-based new age OEM of electric passenger vehicles.

As highlighted in the last quarter, I think I mentioned and spoke about it that we are pivoting NOVELIC from an engineering services-led business to a product business. And this is quite special. We have long prided ourselves as being a company that can make an acquisition and make that company, whichever we acquire, much bigger, better, newer, more innovative than it used to be. Our ability to provide the freedom to innovate, our ability to provide the right capital and the right oversight is something we take great pride on, and this proves that our NOVELIC acquisition hypothesis was correct. It gives us confidence that we are on the right strategic path and moving with great momentum.

This slide is a good, let's say, visual summary of the reach and diversity of our electrification mission. This quarter, we've added one new customer and one new program in Asia. And as you can see, I mean, this literally spans the whole world, our EV exposure is truly diversified across customers, programs, products and geographies. And this is the reason that despite some customers not doing well, our revenue growth from BEV was 53%.

Coming to the next priority and our order book. So our net order book, we have added INR 11 billion worth of new orders last quarter. And at the end of Q1 FY '25, our net order book has expanded to INR 233 billion. The EV portion remained high at 79% of the order book kind of indicating what our future would look like.

And our fourth and a very important KRA for us, diversification. The trend of increasing electrification and decreasing ICE dependence continues unabated. Now this quarter, we have seen, for the first time, the ICE-dependent revenue shrink to single digits to merely 9%. The demand slowdown in Europe has meant that the revenue share from hybrid and micro hybrid has been lower than in the previous year.

Because I invariably get asked this, I thought we'll preempt it. The question about BEVs and hybrid. So here's a reminder that while 33% of our revenue comes from BEVs, 21% is from hybrids and 37% from products that are power source agnostic. So from a commercial and purely commercial perspective today, our content value is highest actually in plug-in hybrids, followed by battery electric vehicles, followed by hybrid, followed by ICE because we sell high torque differential assemblies and starter motors both to plug-in hybrids. We also have the opportunity for hybrids to offer traction motor solutions for that vehicle.

However, when I answer questions from the analyst community, and I talk about the future powertrain technology, I try to do it candidly and honestly as an engineer and as a student of the automotive. It isn't that when I answer, I only think of what is good for Sona Comstar. I think of what is the right answer and what is the truth that I want to share. So here's our take on this. That hybrid solutions in most industries do not last too long. They are bridges to one or the other technology. And this is because having 2 separate powertrains and developing 2 separate engineering systems and trying to optimize for them both is by definition, inefficient. And over time, I think people will see that.

There are lessons from many other industries like hybrid of digital and film cameras that Kodak launched, hybrid of tablets and e-readers, TV and personal computers hybrid, hybrid of analog and smart watches and many, many more examples where hybrid products were introduced, but faded over time. And this is why we believe that BEV will be the absolute future in 2035 and beyond. Although, again, if I'm just putting my Sona Comstar hat, if the industry shifts entirely to plug-in hybrids, we will not complain from purely financial perspective because, like I said, that's where we make the most money.

Moving on to the other revenue cuts. Geographically, North America remains the largest end market, contributing 43% of our revenue. While India remains our second largest market with a revenue share of 28%. After a fairly strong, I would say, recovery last year, we have once again seen a slowdown in demand in Europe. This quarter, our fastest-growing segments have been EV differential assemblies and EV traction motors. And this, as you can see, is reflected in the changes in the product mix. The continued weakness in off-highway demand in U.S. and India means that nonautomotive revenue has declined to just 9%.

That's all for me. And with this, I turn over to our Group CTO, Mr. Deshmukh, to update us on the technology road map. Over to you, sir.

[Kiran Deshmukh, executive]

Good evening, everyone. We share our technology road map during every investor call, and most of you are now familiar with how we depict our approach to technology development. We keep bringing new future products in this chart and mark them when they are commercialized.

So this quarter, I'm excited to share significant developments in our product portfolio that underscore our commitment to innovation and leadership in the EV market. In this quarter, we successfully commercialized 2 groundbreaking products, First is the Park Gear for a Class 5 electric commercial vehicle, a product that stands out for its unique safety and reliability features. This product has been developed in collaboration with a new age North American OEM specializing in electric commercial vehicles. Our Park Gear is designed to enhance the safety and reliability of commercial EVs, meeting stringent industry standards and addressing the specific needs of this burgeoning market.

The second product we brought to market is the in-cabin sensor for child presence detection, known as ACAM. This innovative solution is tailored for an electric passenger vehicle from an Asian new edge OEM. The ACAM sensor is a critical safety feature designed to detect the presence of a child in the vehicle, preventing tragic accidents and ensuring peace of mind for car owners.

Utilizing advanced radar technology, this system offers precise and reliable detection, even under challenging conditions such as when the child is asleep, covered by a blanket or is in the seat well. This product aligns with our region of integrating advanced safety features into modern electric vehicles.

Looking ahead, we have added 2 promising products to our technology road map. The first is an integrated motor controller for hub motors. This integrated motor controller will offer superior performance and efficiency as the demand for efficient and compact motor solutions grows. Combining the controller and motor into one unit can reduce weight, minimize wiring complexity, and enhance overall system reliability. This makes it ideal for various EV applications, particularly in compact and lightweight electric vehicles.

The second future product is an integrated motor controller for high-voltage systems. This product is designed to meet high-voltage electric vehicles' increasing power and performance demands, providing enhanced control and efficiency. Integrated controllers for high-voltage systems streamline the powertrain architecture, leading to improved thermal management and reduce energy losses, which translates to better vehicle range and performance.

These additions to our technology road map reflect our strategic focus on expanding our product portfolio and driving innovation in electric, personalized, intelligent and connected vehicles. We are confident that these developments will strengthen our market position and deliver substantial value to our customers and stakeholders.

Thank you for your attention, and I now it hand over to Rohit to cover the financial update.

[Rohit Nanda, executive]

Thank you, Mr. Deshmukh. A very good day to you all. It's my pleasure to share our first quarter results for financial year 2025. Our revenue for the first quarter was INR 893 crores. It has grown by 22% year-on-year, while the underlying light vehicle market in our 3 largest markets are North [ America, Europe and ] India grew only by 3%. Our BEV revenue has grown by 53% to INR 283 crores, and it is now constituting 33% of our total revenue.

Our reported EBITDA grew by 23% year-on-year, while EBITDA adjusted for ESOP cost grew by 27% to INR 259 crores. Adjusted EBITDA margin expanded by around 1.2% over the same quarter last year due to operating leverage and lower input costs. Our profit after tax adjusted for ESOP cost grew by 29% to INR 148 crores, primarily due to higher operating profits.

This brings us to the final slide on our key ratios. There are not many big changes here from March. Our value addition to employee cost, the return on capital employed and return on equity ratios continue to remain strong. There is some improvement on the working capital turnover ratio, which has improved to 5.1x, and fixed asset turnover ratio which has improved to 3.8x.

With this, we have come to the end of our first quarter's earnings presentation, and I'll now hand the proceedings back to the Nomura team for Q&A.

[Operator]

[Operator Instructions]

[Kapil Singh, analyst]

Vivek, by the time the question queue is building, there is a development where the company has taken approval for fund raise. So I would request you to also articulate what are the reasons for the same?

[Vivek Singh, executive]

Sure. Yes. So first thing, it's an enabling resolution. It allows us to raise up to INR 2,400 crores. So I just want to first put that out. Why? Obviously, it is fairly well known that for our usual organic expansion, we don't really need much external capital. So this is because we are evaluating a few potential acquisitions as well as some strategic opportunities like JVs, collaborations, et cetera.

And I mean, we've been working on many of these opportunities for, I would say, the past 6, 7 months. And if most of these transactions and opportunities were to fructify, we would definitely need external capital.

Given this scenario, we presented this and the Board reviewed and approved a proposal to raise funds. I think the Board also constituted a Board committee for this purpose. And like I said before, this approval is an enabling one which allows us to determine the equity and/or any other permissible, I would say, equity convertible security/instruments to fund these transactions when necessary.

We cannot, frankly, at this point, share any more details because as you would know, any of these transactions would have fairly high degree of confidentiality attached to it. I just want to assure everyone that we will stay absolutely true to our vision as we have for all our lives. And for the 3 years, at least the public markets have seen us. And whatever our targets are, they would be within the mobility space, and they could be in around a theme of EPIC mobility.

[Kapil Singh, analyst]

So Vivek, can I also ask that since you are evaluating these opportunities, what will be the principle based on which these acquisitions will be done? So for example, are you looking at these would be more smaller tech kind of companies or these are companies which are more like turnaround candidates. So just some thoughts on when you look at acquisition candidates, what is that fits in your framework? What is the framework? If you could just help us understand that?

[Vivek Singh, executive]

So we've done 2 acquisitions in the last decade, 2. One is Comstar, and one is NOVELIC. That's pretty much it. In both cases, it was a buy versus bid. We look at if we were to do it organically. Most times, we are almost trying to do that thing on the bid. And we either realize that this is way beyond our current set of capabilities or it would take far too long, and hence, it is much better to buy. We try to build as much as possible, but we buy in these cases.

We are not turnaround people. We are humble enough to know that if someone has been running their business for decades, we are not some geniuses who would come and figure out how to run it better than them. We do not have the hubris to think of us like that. Most likely because we come in, we end up putting a lot more compliances, a lot more structure. We would tend to decrease margins initially and reposition for the long term. What we have been able to do, both in Comstar and NOVELIC, and I think that would be the attempt with anything we acquire, to make it greater or better or faster than what it used to be.

We can -- Comstar is a great company and a great starter motor company, which we have been able to pivot into a far more future-looking traction motor, suspension motor, inverter, controller, a lot more technology-focused. Technology is the access on which we tend to play. And that's what we bring to the table I feel that we can get them access to the right capital, deploy capital well.

When we can get the focus back on technology, we can take focus of that management team away from short-term things, meeting targets because a lot of time, top managements get bound by myopic KPI meeting objectives this quarter, this year, what part, what do you need to do to bonus. Can you free them and give them enough capital and say the risk of failure also we will take. If you fail, it is our failure. If you succeed, it is your credit. And then give them that kind of capital and freedom to fail, give them the R&D budget. That's what we are good at. And that's what we will continue to be good. And I don't think we can change so quickly.

I mean, like I said, this is my 10th year, Mr. Deshmukh's fourth or fifth decade, Vikram's third or fourth decade such. We've been here for a while. We have developed a culture. We have developed our value system. I don't think we can deviate from those.

So yes, that's added out if I answered it, but it is a very philosophical question. And unless we talk each acquisition opportunity, it would be hard to give a specific general one. All of them will have something unique about it. And yes, so small and big is not how we look at it traditionally.

[Kapil Singh, analyst]

That's helpful. Diana, I think we have the queue now. So please go ahead.

[Operator]

Okay. The first question goes to Aditya Jhawar. Please go ahead with your 2 questions.

[Aditya Jhawar, analyst]

Vivek, can you hear me now?

[Vivek Singh, executive]

I can. I can.

[Aditya Jhawar, analyst]

Yes, yes. Congratulations on good set of numbers. My first question is on PLI. So have we started accruing the PLI benefit? And since now we have a couple of products where we have certified for PLI, and what it appears that our customers are also certified for their end product. So just wanted to understand that what is the thought process here that what quantum a supplier can claim and what quantum the customer can claim the PLI benefit?

[Vivek Singh, executive]

Sure. So I'll let Rohit answer that. He knows far more than I do. In general, he knows far more than I do, but this subject, he knows much, much more than I do. But we are a conservative company. We will not recognize revenue till it has come to us. We have made that clear, I think, many times, that unless we receive the money, we have no idea what the quantum will be. We have been approved for 4 products already. The remaining products that are in the queue are also progressing. We will see when that happens. I don't think anybody is going to receive money this year, this financial year. So it is next year that this question of revenue recognition and how it will come up, but Rohit can elaborate.

[Rohit Nanda, executive]

I think you've broadly answered the question. So yes, so we are not recognizing it as of now, and the intention is that we recognize it from next year and the revenue certainty is there. So there are 2 parts to the revenue certainty. One is there are thresholds to be met in terms of capital investments, et cetera. And second is what's the quantum of benefit that we will end up getting because that is a subject matter of the total claims under the policy. So it would be prudent to start recognizing it from the next financial year only.

[Aditya Jhawar, analyst]

That's helpful. Second question is on NOVELIC. Congratulations on the order win, the first order win in NOVELIC. So looking ahead in the next 2 to 3 years, so clearly, you will see a lot of OEM in India launch the product, which would have a requirement of radar-based sensors. So in your discussions with OEM, are you sensing that you are at advanced stage and certain discussions and OEMs are comfortable with our product proposition? And in case you can give a number that from a percent of revenue contribution, how do you think that will shape up in the next 3 to 4 years?

[Vivek Singh, executive]

So I'll take the second part first. Yes, no numbers. When I said that when we come in and acquire a company, this is the freedom we give them, the freedom from pressure of short-term targets and numbers. If you take that pressure off, you can do things in a much better way and do what you really intend to.

I would say the first set of customers are likely to be more in Europe and U.S., India will be a little later. We want to do this. I mean India, one, there is a higher degree of cost sensitivity. Second, the more advanced use cases. Let's say, any technology like radar sensor may have 7 or 8 use cases that can be deployed. European, more high-end carmaker would like you to do all of those 7, 8, while someone who wants to pay less and is more cost conscious, would only want 2 or 3 use cases. So you don't learn how to deploy all of them, and you want to learn the full range of your capabilities of your product.

So we are going to focus on Europe, Asia, and U.S. before India, so outside India. But no short-term targets, Aditya, because I think the potential, I think Jinesh had asked last time, and I said, it's so huge that each contract, even this one that you win is multiple times the annual revenue. One, every single one is like that. In these scenarios, instead of trying to be greedy or try to figure out how much more, it is more important to make the product better and do as many things as possible. So we'll continue on that path, but it is very exciting. I mean every opportunity that we're talking about is fairly large compared to what the business -- the size of the business.

[Aditya Jhawar, analyst]

Yes. Perfect. Final question, your commentary on Europe was slightly subdued, and we're also hearing that there is some production disruption in OEMs because of excess rains and flood. So are you seeing that OEM looking for production cut as we progress in this coming quarter?

[Vivek Singh, executive]

So I think we've maintained this for the entire period that we were listed that we will like to give bad news first, bad news takes the elevator. And Europe, we have been flagging it for a while. Yes, it's again going down. So that, you are right. There are many things. But the ones you talked about are more micro. I think it is, in general, if we achieve flat, it would be a good outcome.

[Operator]

The next question goes to Jinesh Gandhi.

[Jinesh Gandhi, analyst]

Am I audible?

[Vivek Singh, executive]

Yes, Jinesh. Long life. I just mentioned you in the last comment.

[Jinesh Gandhi, analyst]

So a couple of questions, one is on the acquisition side and otherwise also, how do we think about the nonautomotive space in terms of the opportunity and what we can do there? What are your thoughts on that?

[Vivek Singh, executive]

As long as it's within mobility. And I have -- when we changed our definition and our vision to mobility, I'd explain mobility, but I'll do it again. Any device that moves passengers or goods from point A to point B for us is mobility. So if it's a bicycle, it's a drone, it's a train, it's a bus, it's a tractor, car, two-wheeler, all of them are in mobility.

We will not go outside our vision. Our vision says mobility technology, so we will remain within mobility. So yes, as long as that -- I mean, that fix into non-automotive. Actually, automotive also will be defined slightly differently. A lot of analysts think automotive only passenger car. Even an off-highway vehicle like a tractor or an ATV will not be considered.

So that's why we said mobility, that's the definition. That's the scope. We won't just pitch up and start making like smartphone parts or start an NBFC or something. So that's not going to happen. I mean we're not random people. We are engineers, we are good at manufacturing. Our vision is fairly defined, it will be within mobility.

[Jinesh Gandhi, analyst]

Okay. I mean what I was trying to understand is railways, obviously, you mentioned it will be but something on the defense and that side probably may not be a part of it.

[Vivek Singh, executive]

No. Defense, no, not at all. I mean that's a slightly ethical thing also. We do not want to make things whose explicit purpose is to harm human beings. So defense is kind of out, especially making weapons. That's not what we were put on the planet for.

[Jinesh Gandhi, analyst]

Right. And second question, again, on the PLI side. So while, obviously, we will only account for it when we get the cash. But based on our current revenues, say, 1Q revenues, what percentage of revenues would be eligible because some of the revenue is going to OEM who also have PLI incentives, we won't be eligible for that. So would it be possible to say what percentage of revenues will be eligible for PLI today?

[Vivek Singh, executive]

Sir, Rohit -- but what is this about if it's going to customer we will not be eligible or whatever?

[Jinesh Gandhi, analyst]

In the sense that a customer claiming PLI, so for example, say, someone like TVS who also is a PLI beneficiary. And if your motors are used there, then you can't claim if they claim. I mean if they don't claim then you can claim on that. So that's what the PLI document talks about. So that's -- and hence that question.

[Vivek Singh, executive]

Here I don't think it works exactly like that. If you're not making something, you can't claim PLI for it. Anyway, Rohit, you can answer as to the percentage.

[Rohit Nanda, executive]

Sure. So as of now, the products that are approved are all in the 2-wheeler, 3-wheeler EV motor side. So for now that's the revenue that you should track on which the eligibility is there. So there are still like a couple of more products to be approved in that segment. But largely as of now that's where the approval is. So that's the revenue on which we'll be eligible.

[Jinesh Gandhi, analyst]

Okay. And the large chunk will come from the differential assemblies which we export, because that's also sensible -- a bigger portion of revenue today. Is that a fair enough statement?

[Rohit Nanda, executive]

So this -- whatever is approved is also sizable. And right now, I'm not talking about the products where we don't have the approval so far. Since your question is -- I mean I'm just trying to answer as it stands today, that's the position as of today.

[Operator]

We'll move on to the next participant, Gunjan Prithyani.

[Gunjan Prithyani, analyst]

Just 2 questions from my side. I'm just trying to get a better handle on how to think about growth, particularly from the comments that you made on the -- on India as well as the Europe, that Europe is seeing some softness, India also from a tractor and CV perspective, there is not much growth right now. So how should -- if you can a little bit give a color, either geography-wise or product wise how to think about growth. And I'm not looking quarter-to-quarter, more from next 12, 18 months perspective.

And just an extension to that, on your order book, are we seeing any delays in the programs just because either the demand has been softer than what people were anticipating at the beginning of the year or because of some pushout of EV programs that we continue to read in the press?

[Vivek Singh, executive]

Yes. So always be careful to apply your own wisdom to what you read in the press in general, I would say. That's true for almost everything you read. But let's start from the top, which is how to think about growth.

If we were dependent only on underlying industry growth, we would have grown about 20% in the last 3 years. We have grown more than 100%, right? As I think we mentioned quite a few times that we grow because we add new programs, we add new customers, we add new products. It is not going to be aligned with the underlying industry.

Every quarter, I start with the challenges, right? Every quarter, I say at least 2 or 3 segments, which are not growing. I mean by that logic, we should have been negative growth for the last 10 quarters. But we are not, right, because that is not how it works.

Industry growth is something, if it happens, it adds to whatever percentage you grow by. But if you keep adding new products, if you keep adding new customers within existing customers, if you keep increasing your share of wallet, you will continue to grow.

I mean automotive in 2019 was 96 -- or 2018 was it, 96 million to 97 million vehicles were sold, 2018. We have not even crossed 90 million after that in 5 years. Even in that scenario, if I look at our 5-year growth, we are like 3x more. So yes, it's a great perspective to have if you're tracking the industry. But if you're looking at individual companies, their growth will not be lockstep with those things.

As far as I remember, in the last 3 years, Europe passenger vehicle has been soft in growth. Off-highway has been soft barring 1 year, which was I think FY '21, off-highway has been soft. Commercial vehicles has not gone back to 2018 level.

So again, I don't think there is a direct correlation. And EV growth rate, I know last quarter also, Gunjan, you asked me EV slowed down, last to last quarter also you asked me, last to last to last quarter also you asked me.

[Gunjan Prithyani, analyst]

No, no, Vivek, I am not getting to EV slow down. My question was on order book conversion. Honestly, I mean, I understand the business drivers well that you all have been delivering on content value. You all have been delivering on market share. So absolutely no question around that. What I was just trying to understand is, is there a delay in the order book conversion is the simple thing that I'm trying to get a handle at.

[Vivek Singh, executive]

That was the second part. Second part is order book conversion, which also answered 2 quarters back. Not really. We are not seeing any program delays, to be honest, in the launches. There aren't that many happening around this time anywhere, which is the truth. But the reason we have grown 53% over last year is because some happened, right. So no, we're not seeing much delays. What we try and do each quarter, we let our numbers give the answers. And if something is growing by 53% and we are seeing -- we are not seeing a slowdown, I mean you should give the benefit of doubt to the actual numbers rather than on what is read in the press.

Also, I think we have a lot of local bias that if you read press in India, it will automatically talk more about India automotive. India automotive as a percentage of world EV is so small as to not matter. But we read a lot about it and hence our perceptions form and they take far more weight than they should. And I think that could be the root cause of that, I would say, difference.

We are seeing some launch delays, as I mentioned in my opening comment in the EV 2-wheeler space, which as I said, has been fairly disappointing for the last 2 years. It is one of those sectors that has never truly taken off. And now, and this is one of the things I've been thinking about a lot. At this price point, I mean, most of them have come very close to ICE 2-wheeler price point. Even at this price point, if we are not seeing that much demand, I think it's a demand issue. And which means for us, we need to focus far more on 3-wheeler electric light commercial vehicles, electric buses, other electric vehicles for at least for India. Outside India, I think it's fairly business as usual.

[Gunjan Prithyani, analyst]

Okay. Got it. My second question is on the 2 new products that you spoke about, Park Gear and the integrated motor controller for the high-powered vehicles. Now on Park Gear, I mean, pardon me for the ignorance, but this is not -- this is neutral to the powertrain, right? And what is the potential that we see from this segment? This is something which we've added in this quarter. So if you can share a little bit more color around can this be cross sold to existing customers?

Anything on that you can share on the potential or addressable market? And this integrated motor controller, is it got something to do with the Equipmake alliance that we had done? Or this is completely different because I thought that was the arrangement for the high-powered vehicles, right?

[Vivek Singh, executive]

So good question. I'll invite Vikram to speak about the Park Gear and Sat to speak about the integrated motor controller separately because they are both separate products. But just before they speak, I think when we did that integrated dry motor controller, we realize that it's a great idea from a thermal management, packaging, like weighting cost all perspectives. So why not replicate it in every type of motor. So why not in hub wheel and also why not in high voltage. It doesn't have much to do with Equipmake, but I'll let Sat speak about that. But Vikram first Park Gear.

[Vadapalli Verma, executive]

Regarding Park Gear, it is only used in the EV drivetrain. So it's not like power source neutral or in ICE transmission it is not used.

[Vivek Singh, executive]

Vikram, a question can we cross sell for the customer.

[Vadapalli Verma, executive]

What is that?

[Vivek Singh, executive]

Can we sell to other customers? I think people said...

[Vadapalli Verma, executive]

Yes, yes, it is. As I said, it is used in all the drivetrains in the EV. So this product can be sold to any -- all the other EV players.

[Gunjan Prithyani, analyst]

And what would be the cost of this product, if that's possible to share a broad range?

[Vadapalli Verma, executive]

Not -- again, it's different sizes applied at different points of the drive system. So it will vary quite dramatically how it is applied.

[Vivek Singh, executive]

So Gunjan, it's basically the same. If a Class 8 truck has that, it will be like very, very high value. If a small electric car has that, it will be very low value. I think I tried to explain someone else that bevel gears for example, range in price from x rupees to 100 x rupees actually. And the average will not give you any meaning because the range is very wide. It's the size of the drivetrain and the torque. So it's going to be a very wide range. Sat, you want to answer the integrated motor controller answer?

[Sat Mohan Gupta, executive]

Okay. Gunjan, the integrated motor controller, as Vivek said, I mean, we are looking at to incorporate the technology which we have already developed for drive motors into the hub motors and take it further from our existing range, which is till 96 volts to 350 volts, which would be good for 3-wheeler applications and the light commercial vehicles, which is in 1 to 1.5 ton capacity.

As Mr. Deshmukh said, I mean, it gives a lot of benefit in terms of efficiencies and the performance. So we are working in-house on in-house technology for smaller motors, which would be in the range of 40 to 50-kilowatt from 96 volts to 350 volts.

As far as Equipmake is concerned, I mean, Equipmake is for the high kilowatt bigger motors, and the voltage is about 350 volts. So you can -- we are having that agreement to support the bigger applications.

And I saw the question -- there was a question on the development status. So Equipmake products our development is as per the plan. We are going ahead, and we will start approaching customers. So there is no delay or there is no issues on the development plan for Equipmake. Hope I answered Gunjan.

[Operator]

We now move on to the next investor, Arvind Sharma.

I think he has some issue with his audio. We'll move on to the next one, Nitij Mangal.

[Nitij Mangal, analyst]

Vivek, can you talk a little bit more about NOVELIC? How do you see that company, let's say, over the next 3 to 5 years? What are the key competitive advantages there? And let's say, even when you talk about this in-cabin sensor order they've got. I mean is that because the technology is different? Is it because -- I don't know maybe they can do it at a better cost. So how are you trying to position NOVELIC over the next 3, 5 years? And what is the kind of play area for them?

[Vivek Singh, executive]

Nitij, good question. So I'll start with what we desire or what we hope. We want to make NOVELIC one of the world's most respected and valued sensing companies. So for now, the focus may be only on mmWave radar sensing. But we want to do much more than that. We want to integrate radar with camera to provide a truly integrated [ salon ].

ACAM is one of our first area because in-cabin is a new need. The NCAP thing has been delayed by a year. So it's a little slower than it would have been. But it will come in every way. And it is not -- and Nitij as I keep saying whatever we meet that in our industry, it's not just good enough to be better as a product. You have to be better and more economic. You have to do both, which is what we're trying to solve that if you can put one radar sensor let's say, behind the mirror.

And that replaces 4 or 5 weight sensors that measure detection or someone sat down or not, it takes away wire harnesses. It takes away the need for other sensors that detect if people are there or not. So it should actually be net positive for those. That's one of the ways to sell that you not only provide more application cases, you also provide it at a much better cost than what it used to be. We are looking at adding more use cases like intrusion alert, proximity alert to the same sensors. So that's on the ACAM side.

Second, it is also that we're trying to make it a truly mobility company, which would mean even in industrial areas, wherever there are robots for safety reasons, for lifts, anything that moves. If it has some intelligence, it needs to sense its environment, it needs to sense objects around it, and we have a place.

And we want to be able -- I mean the reason we gave them -- why we did primary funding is this, that make the best talent available to them that they can explore many, many more use cases to take their great technology and make something out of it.

The third area is on the semiconductor chip design, which is currently a small business. It's only about 20% of the revenue of NOVELIC. It's in a separate -- it's housed in a separate subsidiary. We want to be pretty much bigger. I think a lot more and it is your background, you would know, although you would have been happier if you had stayed on with NVIDIA, don't you think no?

But a lot is moving on to the software from the chip. So the chip used to do the heavy lifting, most of the circuits did the heavy lifting of the logic. Now a lot of it is actually shifting on to the software that enable that chip and that's where I think a lot of people like NOVELIC.

And NOVELIC's origin by the way, from IC. It's a novel IC, novel integrated circuit. That's how the name came in to being. We see a lot of potential there. We are investing in it. We are adding a lot of talent. Let's see. Hopefully, we'll have something to report from that segment too.

[Nitij Mangal, analyst]

I have one follow-up on that. So I mean I would imagine NOVELIC will not be doing chip manufacturing, of course, right? So at some stage do you -- I mean is there a competition, let's say, if I assume you'll still get chips manufactured from the likes of Infineon and all, right? And those are the companies which are also some of the largest automotive chip suppliers, right?

And they would want to also offer such solutions. I think now Infineon used to offer a NOVELIC design-based solution earlier. So is there a competition for NOVELIC from companies where NOVELIC will be buying chips? And just one more on that, 3 years, 5 years out, how much -- how big can you think NOVELIC can be as a part of Sona's revenues?

[Vivek Singh, executive]

So I would clarify that one. I don't think we'll be in competition. I think -- we don't name customers, but all our chip customers will come to lean upon us far more as the big shifts from chip fabrication to the software part. And we want to be that trusted supplier.

This industry is very fast evolving. This is a new kind of supply that wasn't really required earlier. Chip makers will add all of it, and these guys were very small. I think out of the total value of the chip, there will be a far more share of specialist software and chip design people. I think that industry is yet to come into its own fully, but it will. I mean the new one although this is for offline.

They have even like a jigsaw puzzle that they take broken chips, not like full wafers, and try to use them as if it's one chip, actually the overarching software architect. So there is a lot more that's happening these days. And I don't think it's competition, I think it's collaboration. There will be more.

I think it's happening in the EV sector also, a lot of people who used to be competitors are customers/competitors/suppliers. A lot of these lines, I think, are merging. So we will see. What percentage? We don't know. We hope it is a significant one. We know it will be -- we are confident that in 5 years, we won't be talking in percentages. We will be talking about how many times have we grown with them. And hopefully, that will then see how we have been able to execute on this hypothesis. So let's see, let's see. But it is an exciting part for us.

[Operator]

We will go to Arvind Sharma.

[Arvind Sharma, analyst]

Audible now?

[Vivek Singh, executive]

Yes, Arvind. Very audible.

[Arvind Sharma, analyst]

On the domestic e2-wheelers part, we see 2 things. A, e2-wheelers is going smaller and yet the volumes not catching up. So where do you think the industry is heading on? And also how does that impact your revenue/profitability?

[Vivek Singh, executive]

Profitability will increase. I mean, they're not the most profitable segment of our revenue to be honest. It is a great industry from which we learned a lot because there is volume. You get to do many iterations of your motors. But it isn't the most profitable one. You can ask any supplier who supplies to 2-wheeler people. That's not a profit-making segment.

Revenue, it is 7% of our revenue. We will keep adding customers and share of wallet. So we will keep growing it. But it isn't, at least from what we see today, it doesn't look like it's going to be as big as I would have answered 2 years ago. Two years ago, I thought the EV 2-wheeler space is going to be truly huge in this country.

Although if you remember, Arvind, when we presented on this in one of our earnings calls, and we said that we think e3-wheeler followed by e-buses, followed by EV 2-wheeler, followed by EV passenger car is the order, we see electrification happening in India. The order remains the same, but EV 2-wheeler percentage, I think, should be revised downwards because it isn't growing, and we are not also seeing much policy support. Although you guys track this far more than I do. It is 7% of revenues is obviously not where we spend most of our energies, as a percentage of profit it will be much lower. So there is that.

Like I said, we've learned a lot in the 3 years. We started with low power, low voltage. We have kept moving up. And as Sat mentioned, we are now working on 350 volt, 40-kilowatt type of solutions. We will keep trying to get higher and higher on both voltage and power and try to get to the larger value segments for us.

[Arvind Sharma, analyst]

Got it. Just one more question on the again, domestic EV space in the passenger vehicle segment, like you said, for you the HEVs, then BEVs, then hybrids. But now what we also see lots at least currently the models are essentially very similar to their ICE counterparts. When we shift to battery electric vehicles in India, do you see content per vehicle increasing again?

[Vivek Singh, executive]

Yes, that's a short answer, yes. With increasing torque our value goes up. That's a very straight line correlation.

[Kapil Singh, analyst]

So we have a question in the chat box. This is regarding your EBITDA sequentially more flattish, but sequentially, if you look at the PAT, it is down. So if you could just explain that?

[Vivek Singh, executive]

Yes, Rohit, this is for you.

[Rohit Nanda, executive]

Typically, in the fourth quarter of the year, we have certain tax adjustments because of which tax was lower last quarter. You will see this trend in most of the earlier years. So last quarter, there are tax adjustments towards the end of the year. So last quarter, tax was exceptionally lower actually.

[Kapil Singh, analyst]

Okay. So tax rate -- average taxes for the year it should be around 24% to 25%.

[Rohit Nanda, executive]

Yes, it should be between 24% to 25%.

[Kapil Singh, analyst]

Diana, that's all from the chatbox.

[Operator]

Yes, there are no other questions at the moment.

[Kapil Singh, analyst]

Great. So we can conclude this call. On behalf of Nomura, I thank the management team of Sona Comstar for taking out time for this call and also all the investors for joining the call. Unless there are any closing comments from anyone, we can close the call.

[Vivek Singh, executive]

No, thank you so much for everyone for attending, taking our precious time and attending our call. Thank you.

[Operator]

Thank you, everyone, for joining today's call. You may drop off the line. Have a good evening.