Subros Ltd

NSE:SUBROS

Earnings Call Transcript 2025-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to the Subros Limited Q2 FY '25 Earnings Conference Call hosted by Batlivala & Karani Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Annamalai Jayaraj from Batlivala & Karani Securities India Private Limited. Thank you. And over to you, sir.

[Annamalai Jayaraj, analyst]

Thanks, Megha. Welcome to Subros Limited 2Q FY '25 Post Results conference call. From Subros management, we have with us today Mr. Parmod Kumar Duggal, Chief Executive Officer; Mr. Hemant Kumar Agarwal, Chief Financial Officer and Senior Vice President of Finance; and Mr. Sukhbinder Singh Gill, Assistant Vice President of Finance.

I'll now hand over the call to Mr. Parmod Kumar Duggal for the opening remarks to be followed by question and answer session. Over to you, sir.

[P. Duggal, executive]

Thank you, Jayaraj. Good morning, ladies and gentlemen, and warm welcome to all of you for Subros Investor Call Quarter 2 FY '25. Quarter 2 of this financial year, we saw a muted demand in the domestic market, which has impacted the overall growth in the industry.

The Indian passenger vehicle industry saw a slower-than-expected growth in the first half of FY '25 with a degrowth of at 0.7% in Quarter 2 and a modest growth of 2.4% in H1. Whereas the domestic market has a modest growth of 0.5% in the first half of the year. This is much below than the initial expectation of 3% to 4% forecast, but underwhelming performance of passenger vehicle industry has now pose us to recast our annual growth forecast for the passenger vehicle segment.

CV segment, including truck and bus also is facing a major degrowth during the quarter, which is approximately 10% as compared to the previous year. However, there is a significant growth in 2-wheeler and 3-wheeler segment.

If we summarize the first half of the overall automotive industry performance, I believe there are multiple factor of metric growth due to the series of unforeseen events in the month of May, June and September, which has dampened the momentum like elections, heat waves and heavy rains on certain part of the country that has contributed to additional growth, except for 2-wheeler and 3-wheeler category.

Subros has stayed committed for driving the innovation and growth and which are crucial and challenging given the situation of the industry as of now. Subros has overall growth of 8.7% in the first half of the year, whereas in Quarter 2, our growth is 1.8%. In this growth journey, CV truck has played an important role, where the growth is 28% due to the new emerging segment within the CV, which is the last mile connectivity trucks where the aircon is being installed by our OEMs.

There is 16.8% improvement in quarterly profitability, and approximately 56% improvement in H1 as against our previous year performance. The results are improving based on our aggressive push for improving the internal efficiencies as well as localization where we -- our efforts are consistent.

We have already posted our results on the stock exchange, and let me elaborate the results one by one. As I mentioned, Subros has performed slightly better than the overall industry performance in Quarter 2 of FY '25, growth of 1.8% with a significant improvement in margins as a result of our efforts in the operational efficiencies.

Our company has received a revenue of INR 828 crores during the quarter and INR 1,638 crores during the first half of the year. In this quarter, car and non-car segment has contributed 93% and 7%, respectively. Our share of business in the passenger vehicle segment, aircon market is consistent at 43%. And in truck segment, our share of business is around 51%. And in bus segment, we are at 16% during the quarter.

Now let me update you on the overall operational performance. The company has realized EBITDA of INR 83 crores in quarter 2, which is 10.03% of the net sales as against EBITDA of INR 73 crores, which is 9.1% in the corresponding period. There is an improvement of EBITDA by 13% as compared to the corresponding quarter.

Profit before tax in the quarter is INR 49 crores, which is 5.87% of the net sales. PBT margin with the corresponding quarter has improved by 17%. Profit after tax in quarter 2 is INR 36 crores, which is 4.41% of the net sales. PAT margin has also improved by 36%.

On the overall business update, over the past few quarters, we have been consistent, while our financial metrics are improving. We are committed to maintain this momentum for the forthcoming quarters as well. Our focus on aggressive cost cutting, managing or optimizing on the fixed cost as well as variable costs to supportable financial results are ongoing.

The company remains debt free in terms of long-term borrowing, allowing the healthier cash generation, which position us strongly for future investment. Customers are also showing confidence in Subros and this is a reflection that we got 2 important prestigious awards during this quarter from Mahindra & Mahindra Tractor Division and Daimler Trucks for our collaborated effort with them for aircon development for the tractor and truck respectively.

Looking ahead, we are excited about the project on the horizon, including the upcoming green plant at Kharkhoda, which is a set of major milestones for our journey towards sustainable manufacturing as well as our growth in future.

I also mentioned in my previous brief in the investor call that railway is emerging as a big segment for us. In general, government effort on upgrading the railway in India is substantially improving. And our products going into railways, including the driver cabin and forged aircon is also progressing well. We have a couple of orders in hand and which we are now trying to complete that partially in FY '25 and partially in FY '26.

We are also focusing on expanding our product range, advancing its technology to meet the auto industry's evolving needs both in electric as well as in hybrid vehicle. Our ongoing development on alternative fuel, including CNG vehicle, hybrid vehicle and electric vehicle through the aircon product is also improving. And today, in our total revenue, 20% of the revenue is coming from these alternative fuel-based vehicle.

Further, Ministry of Road and Transport has also announced that AC cabin for the truck, which is going to be mandatory by October 25. Our engagement with all our customers are at now almost concluded, and we secured large businesses on this new initiative. And -- but the sales will start in the subsequent financial years.

In addition to that, our commitment towards sustainability is also progressing well, and we already announced the carbon neutrality within Subros operation by 2040. Our actions are in place towards that.

Now let me give you update about our forthcoming greenfield project at Kharkhoda. During last quarter, we informed all investors that Board has given in-principle approval to proceed with this new project. This Board meeting, we have got a formal approval for this project for the investment of INR 150 crores. We'll be setting up this plant for 0.5 million or 4.5 lakh to 0.5 million of capacity for HVAC, hose, tube, and ECM.

This would be an important strategic investment by us in the greenfield project for our growth and also to improve our presence in automotive sector. We'll be investing to enhance this capacity including all set of sustainability action, including the automation and digitalization. And this plant would be operational by April 2026.

So before I conclude, let me summarize the financial results once again, overall revenue of INR 828 crores with a growth of 1.8%. EBITDA of INR 83 crores with a growth of 13%. PBT of INR 49 crores with a growth of 16.8%. PAT of INR 36 crores with a growth of 36%.

That's it from my side. Now we are open for taking questions.

[Operator]

[Operator Instructions] The first question is from the line of Amit Hiranandani from SMIFS Limited.

[Amit Hiranandani, analyst]

Congratulations team for good margin performance despite the muted passenger vehicle industry growth. Sir, if you can help us with the passenger vehicle industry outlook for the second half? And have you won any kind of a new model in this quarter?

[P. Duggal, executive]

So at this stage, it is very difficult to make any assumption about the H2 because we have seen H1 with the muted growth and everything was poised to the response of the festive season, how it would be. There is a mixed response because the retail, of course, has increased, but our business is more dependent on the production by the OEM, not on the retail, by the OEM.

To some extent, the inventory at dealer has reduced, but we don't know how much is the exact number that would be clear by 15th of November or so when FADA will release festive season response. But going forward, there is no new model, which is going to be launched during the H2 by any of the OEM because most of the OEMs are now showcasing their new launches during the Bharat Mobility's Show in the month of January.

We have got businesses, a new business of around INR 120 crores won during the quarter, but most of the SOPs are happening in FY '26. But overall, as the industry performance expectation in FY '25 -- '24, '25, we may say that the H2 will not be substantially different than H1.

[Amit Hiranandani, analyst]

Right. And sir, how much is the current import content in percentage terms? And how is our localization strategy going on?

[P. Duggal, executive]

So our overall import content of total turnover is around 16%. And we have target to bring it down to less than 10% in next 2 to 3 years' time. When we started, we were at around 42% around 6, 7 years back. And maybe last 5 years, we reduced from 26% to 16%. So our efforts are on now to push more and more aggressive localization.

[Amit Hiranandani, analyst]

Right. Sir, despite the mixed outlook you have given for the H2 for the passenger vehicle. And do you see this margin improvement journey to continue?

[P. Duggal, executive]

I think it will be sustained, but whether it will improve or not, it depends upon how the economic situation will happen because still with some remaining imports, foreign exchange impact will be there. Whether the offset will be there in the quarter or whether it will take a subsequent quarter to offset, that all depends how the trends would be now post-election in U.S.A. But our efforts on operational efficiencies are ongoing, and we will be consistent in realizing whatever action we have already taken.

[Amit Hiranandani, analyst]

And sir, any kind of input cost pressure you are facing?

[P. Duggal, executive]

There is no as such pressure, which would be negative for the business. But yes, supply chain disruptions are ongoing. The Red Sea crisis is ongoing. The logistic delays are happening because of the congestion. Overall, so, there is no as such pressure, but we have built up some safety stock. That's why our inventories have gone up because we built up for derisking our business, a few inventories in advance.

[Amit Hiranandani, analyst]

Yes. Continue with the inventory thing, basically, it has been observed that there is an increase in the working capital requirement and the free cash flows came in slight negative in H1. So just can you just help us understanding the inventory and trade receivable both have gone up in H1?

[P. Duggal, executive]

So there are 2 aspects to that. As I mentioned, that inventories are to the tune of around INR 30 crores, INR 40 crores we have built up as part of the derisking. That is one action for that. And cash flow, there is no debt as of now. We are managing within our available working capital limits as well as through the internal accruals. So there is no financial pressure as such on the business.

[Amit Hiranandani, analyst]

Sir, last one question. On the railways, you have been very optimistic. So can you help us in understanding how much is the current revenue you are generating and the target for the next 3 years? And are the margins better in railway business?

[P. Duggal, executive]

So three questions you asked within one question. So railway, we have done so far around -- in H1 around INR 7 crores of the revenue. The order booking for railway is roughly between INR 35 crores to INR 40 crores. Out of that, around INR 10 crores to INR 12 crores or maybe INR 10 crores to INR 12 crores will be executed during the current financial year. Balance will go into the next financial year as per the terms of the contract.

Next 3 years, we see this segment is going to be very aggressively pursued both from the government side and [indiscernible] always because a lot of aggregators also coming in to build the coaches now. So we see this segment for us would be a growth in double digit in the next 2 to 3 years' time.

[Amit Hiranandani, analyst]

And sir, about margin, sir?

[P. Duggal, executive]

Margins are reasonably -- I think it is comparable to all our existence because as a business policy, we quote businesses with the similar margins only.

[Operator]

[Operator Instructions] The next question is from the line of Arjun Khanna from Kotak Mahindra Asset Management.

[Arjun Khanna, analyst]

Sir, the first question is in terms of the change for M&HCV. So while you mentioned October 2025 and you have articulated earlier for us, incremental INR 160 crores. Given that we are closer to it, do you yet think that the additional revenues we could generate per year? Or has there been a change in thought process?

[P. Duggal, executive]

So M&HCV notifications are still intact. The SOP is -- the effective date of regulation is October '25. Each OEM will decide whether they want to follow the regulation strictly or they want to build up the inventory and start production much more in advance so that the pipeline can be filled up with air contracts. Still, our assumption of truck aircon business to the tune of INR 160 crores to INR 175 crores still intact. Unless there is a drastic change in overall industry sentiments. But our -- based on our current order booking and based on our engagement with customers, we are really optimistic of this number.

[Arjun Khanna, analyst]

Sure. That's good to hear, sir. Sir, the second query is regarding railways. While you did clarify to the previous participant, earlier we had mentioned that railways is a higher EBITDA margin business. You had mentioned as high as 15% to 20%. And now we seem to suggest that margins of railways are similar to the current business. I was just curious, is the competitiveness increased currently that's why margins have come off?

[P. Duggal, executive]

No, there is no major change in what we said before. And now since we got into railway last 2 years only, based on the current basis, it is comparable to our existing business. But as we increase our penetration into railway and scale is increasing, we have chance to improve the margins for railway segment. So I have given the status in my previous answer of current situation. But as we go along in the next 2 to 3 years' time, it will definitely improve.

[Arjun Khanna, analyst]

Sure. And sir, just to understand the scale. So there would be AMCs, et cetera, also in these businesses going forward. The services would be higher margin related. Is that the right way of understanding this?

[P. Duggal, executive]

That's true. That's why the key driver for improving margin is not only the product sale, it is life cycle sales. So this will include the services also.

[Arjun Khanna, analyst]

Right, sir. While you refrain from giving the target revenue. Earlier, we have said that our goal was maybe INR 75 crores by -- in the next 3 years. So that was probably FY '27, given we did INR 5 crores in '24. Are we on track for that? Do you think possibly could be even larger than this?

[P. Duggal, executive]

No, we are -- as per that assumption only, we may surpass that number, but how much? I am a little bit concerned not to give that number. But yes, we will surpass the target, which we announced before.

[Arjun Khanna, analyst]

Sure. Sir, my last query is just Maruti as a percentage of sales for this quarter, what was that number? And the second part to it is we are hearing a lot of hybrid launches. We already have a few in the market. So in terms of content per vehicle for them, what would that be compared to the content for an ICE vehicle?

[P. Duggal, executive]

So Maruti is contributing roughly maybe around 80%, 82% of our total revenue. Second question on the hybrid part. So whatever hybrid Maruti is launching or has launched so far, we are there as an aircon supplier to them. In terms of content per vehicle, there is no substantial change. But in case of hybrid from HVAC perspective, there is no change because HVAC remains the same, condenser remains same. The content will change only in case of a radiator as well as in the compressor because they use electric compressor. And since we are not supplying electric compressor, so the [indiscernible] but radiator from a conventional ICE-base engines through hybrid, it would be roughly [ 1.6x ] .

[Arjun Khanna, analyst]

Sure. And just for the electric air compressors, is there any thought process of setting up a line in India because we are seeing movement more towards EVs at least in terms of talk of new models being launched like Mahindra, et cetera?

[P. Duggal, executive]

So I'll say that feasibility is still on electric compressor localization in India. And we also see this is as an upcoming opportunity for us to make these compressors in India. But right now, the risk factor is that despite we have been -- means the industry is talking about electrification in passenger vehicle industry, but still we are around 1% penetration only. So we need to be watchful because one line, whatever we will set up would be for around 700,000 to 900,000 capacity.

So if penetration is so low, then the idle capacity will hit the fixed cost. So we are watchful of that situation. As and when we have a firm number of market opportunity increasing rapidly, we'll expedite our localization effort in that.

[Arjun Khanna, analyst]

And what would be the ballpark cost of such a facility, sir?

[P. Duggal, executive]

So normally, electric compression manufacturing will cost us between INR 90 crores to INR 120 crores.

[Operator]

[Operator Instructions] The next question is from the line of Mihir from Equirus Capital.

[Mihir Vora, analyst]

Sir, my question was that if we see the employee cost trend over the last 3, 4 quarters, it has been increasing for around INR 3 crores to INR 5 crores every quarter despite your sales being flattish. So any reason behind that?

[P. Duggal, executive]

So employee cost has 2 elements. One is employee costs every year will increase to the tune of 8% to 10% because of the inflationary impact, which we are giving through increment to the employees. So that is one cause of that. So another part is that due to this festive season, last quarter, we built up some safety manpower and trained them because normally during the festive season, attrition levels are very high. Just to derisk our business, we had created a pool of trained manpower, and that's how in last quarter that is slightly higher.

[Mihir Vora, analyst]

Okay. So this will be the number which would continue? Or will it slightly come down or how is it...

[P. Duggal, executive]

No, it's - see, again, it will again depend upon if market is growing and sales numbers are growing, manpower numbers will not in proportionate increase other than the some level of direct manpower, indirect manpower remains same. So as a percentage term, it will start diluting at the moment we increase our sales.

[Mihir Vora, analyst]

Okay. Sure. And my second question was on the EV front. Now you are looking many EV launches later this month. So how are we seeing the traction on that part of the business currently like so on the -- like hose and those parts compressor or something which is imported right now, but on the other part of the...

[P. Duggal, executive]

So EV penetration, as I mentioned before also, so far, it is low, but there are a few projects which are -- OEMs have already announced they will be launching maybe by end of this financial year or going to the next financial year. So our presence, especially in Maruti's project, we are there for EV product other than the compressor. But for other OEMs, hose and pipe businesses, all are tied up, not only for aircon, but also for battery cooling. So we are just watchful of their launch timing. And based on that, the realization of turnover will come based to that.

[Mihir Vora, analyst]

Sir, my last question on this is that what is the percentage of like if you see penetration mix for EVs, which would be adequate to put a compressor facility like what would it be? What is the ballpark number of penetration which you see that when it will be feasible to put a compressor capacity?

[P. Duggal, executive]

Very difficult question. Even OEMs cannot answer that. So EV penetration is -- right now, a real challenge to make any assumption because if you recall, 2022 when this discussion started of EV penetration, everybody talked about 30% of overall market will move to EV by 2030 or so. Then these assumptions start diluting to 15%, 10%. So this is a dilemma right now.

So we expect that market will reach to 7 million by 2030 or 6 million by 2030 and 10% EV penetration will remain by that time as an assumption. So the market size would be roughly 600,000 to 700,000. We don't expect that 100% business will come to us. So it would be roughly -- and between -- if we target 50% share of business, still, it would be 300,000 to 400,000 number. So that's a concern point for us to assume anything and to kick off this investment because a large investment. So we need to be watchful and careful while making such decision.

[Operator]

[Operator Instructions] The next question is from the line of Omkar Chitnis from Trade Brains Private Limited.

[Omkar Chitnis, analyst]

Sir, my first question is, do you have any plans to export air conditioners to global market in this coming year?

[P. Duggal, executive]

It's a tricky question, but straight answer is, as of now, we don't want to export directly, but right now, the exports which are happening through the IPOs of OEM that we will be pursuing better. So we are exporting to Brazil market, North America through Renault Nissan IPO. We'll continue this business enhancement further. OEMs are also selling certain parts collected from us to Indonesia market or to Japan market. Tractor is selling through U.S. as well as to Japan, made in India. So that also goes with Subros aircon product.

So as of now, India market is much more -- I'll say the potential is much more to capture that. So we are focusing to capture first India market because being a market leader, we have to retain that position and realize whatever opportunities we have in India.

But of course, we are not closing our effort for exporting of these parts to any other part or any other region. So our efforts are on. So I'll update you maybe in the next forthcoming 1 or 2 calls about some concrete actions or some results of our efforts.

[Omkar Chitnis, analyst]

Okay, sir. My second question is, are we planning for Product as a Service model in coming years for passenger and commercial vehicles. So we can get recurring revenue from a PaaS model?

[P. Duggal, executive]

Directly, there is no such effort because normally, product service is handled by the OEM. OEMs and their service outlets are only doing these kind of work. So right now, we have not thought of going into product service directly as a Tier 1. So as such, no plan.

[Omkar Chitnis, analyst]

Okay, sir. And my last question is, as we have issued a Board approval to increase the production capacity at Haryana plant, what is the total production capacity? Currently, we have 1.5 million ACs kits per year. And what is the total production capacity and it will be funded through internal accruals or external funding?

[P. Duggal, executive]

So current capacity of Subros is around 2.4 million. We are going to set up 460,000 to 500,000 new capacity in this new location, which is in District Sonipat, Kharkhoda. We have taken approval to invest roughly INR 150 crores on this project. Out of that, tentatively 25, 75 will be the ratio of internal accrual versus bank borrowing. But we'll see the business situation and accordingly adjust these ratios, how much we have to invest from internal or how much we need to take from bank.

[Omkar Chitnis, analyst]

Sir, any expected to commence the production, sir?

[P. Duggal, executive]

So I already informed it is April 2026.

[Operator]

[Operator Instructions] The next question is from the line of Hrishit Jhaveri from Pi Square Investments.

[Hrishit Jhaveri, analyst]

Congratulations on a good set of margin expansion here. Can you please give us split between what's our exposure towards EV versus commercial vehicle?

[P. Duggal, executive]

Out of the total business on the car side, it is around 93% and 7% is coming from non-car segment, which includes CV, truck, bus, railway, et cetera.

[Hrishit Jhaveri, analyst]

Understood, sir. But with the new opportunity in the truck and the railway segment, do we see this mix to change in the next 3 years?

[P. Duggal, executive]

Of course, this will change and probably it would be maybe around 85, 15.

[Hrishit Jhaveri, analyst]

Okay, sir. Sir, my next question was I was going through our balance sheet and P&L, where we have a substantial increase in the other income segment both Q-o-Q as well as Y-o-Y. Can you throw some light, what's the other income this quarter? And would that be sustainable? Or it is a one-off?

[P. Duggal, executive]

I'll ask Hemant to answer this.

[Hemant Agarwal, executive]

So other income comprises of 2 elements. One is the return on the investment, which will be consistent going forward. And second element is the mark-to-market on our currency hedging. So since we have a quarterly investment from the customer with the quarter gap, so we hedge our all import exposure. So when it is reinstated at the quarter end, it is MTM, sometimes it is gain, sometimes it may be a loss. But since for all our practical purpose is forming part of the material cost, so it may be slightly here and there. But no major impact will come.

[Hrishit Jhaveri, analyst]

Understood sir. How much would be the return on investment part out of the INR 6 crores?

[Hemant Agarwal, executive]

Out of INR 6 crores, around INR 2 crores, INR 2.5 crores will be the investment and rest will be the hedging.

[Hrishit Jhaveri, analyst]

Okay. So the hedging is the major chunk here?

[Hemant Agarwal, executive]

Correct. Yes.

[Operator]

[Operator Instructions] The next question is from the line of Annamalai Jayaraj from B&K Securities.

[Annamalai Jayaraj, analyst]

Yes. I have 2 questions sir. One is for this -- we started supplying for tractors. What is the traction on that? Radiators?

[P. Duggal, executive]

So for tractor segment, we have 2 products, which we have offered to customers. One is the radiator, which goes into 100% of tractors for a particular OEM for a particular model. And we also started the aircon for tractor as well. So these 2 markets are now emerging market for us, of course, it's the ongoing market, but tractor aircon is something which is new for us.

This tractor, which is doubled by Mahindra & Mahindra that is a modern name now, it is already publicly available at OJA, will be -- other than domestic use will be exported back to Japan because the Mitsubishi collaboration. And also will be exported to U.S.A.

So we see this market will grow now because much more other OEMs also now looking into a development effort of tractor aircon. So right now, the size of this market based on the business arrangement what we have with the OEM is between INR 15 crores to INR 20 crores. But going forward, this will increase.

[Annamalai Jayaraj, analyst]

What is the competitive intensity in that sir? [indiscernible] very competitive?

[P. Duggal, executive]

So in radiator, there is. But for aircon, right now, there are not much players who are into this market.

[Annamalai Jayaraj, analyst]

Okay. And the second question is on the EV buses. So do we supply aircon because a lot of EV buses business are being manufactured in India. So what is our current exposure, sir?

[P. Duggal, executive]

So EV buses still are evolving in terms of design standardization. So we have developed the products right now EV buses, we are supplying to Ashok Leyland for that hydrogen project bus project, which they have taken. All the evolution and prototyping is complete and the 5 buses for that [ Ley ] project we already supplied and another 7 we'll be supplying for the next evolution in the NCR part.

Our engagement with customers now to standardize the specification for the forthcoming tenders also ongoing. So maybe in another 6 to 8 months, we'll have a better penetration of EV AC kit into EV buses.

[Operator]

[Operator Instructions] The next question is from the line of Shailly Jain from Dolat Capital.

[Shailly Jain, analyst]

Can you please provide me the numbers for passenger vehicle AC, CV radiator?

[P. Duggal, executive]

Passenger vehicle AC and CV, radiator?

[Shailly Jain, analyst]

CVs and radiator? What was the revenue was regarding this?

[P. Duggal, executive]

CV and radiators. So passenger vehicle overall business is around INR 640 crores out of the total revenue of INR 828 and radiators are roughly INR 120 crores for passenger car and the CV portion would be around INR 30 crores.

[Shailly Jain, analyst]

That was helpful. And what is the share for Mahindra & Mahindra. Like what is the business share what we are holding on?

[P. Duggal, executive]

So Mahindra & Mahindra, we have a business share of around 24%.

[Shailly Jain, analyst]

Okay. And how do you see it looking going ahead?

[P. Duggal, executive]

This will be increased because when Mahindra will start, the EV models launch, this is going to increase. And also since we are now part of aircon suppliers for last-mile connectivity for Mahindra also and MTBD trucks also will get aircon. So this is going to increase in the next 2 to 3 years' time.

[Operator]

The next question is from the line of Khush Nahar from Electrum Portfolio Managers.

[Khush Nahar, analyst]

I just had one question, sir. Sir, considering the industry and the new plant that you're coming up with, what kind of top line growth we are seeing in the next 3 years with sustainable EBITDA margins?

[P. Duggal, executive]

It's very difficult to predict any revenue number for the market as of now, but as I mentioned, that capacity expansion in line with customer requirements and since Maruti has already announced Kharkhoda project long back. And currently, they are on track in terms of SOP of this project.

We are setting up capacity based on their ramp-up plan, and capacities will be utilized to the strength of 70% to 80% very quickly, maybe within 1 to 2 years' time of the launch of our project also. So I cannot give you any exact number of revenue growth, but of course, we'll do slightly better than the overall industry performance.

On the margin side, we'll be consistent to improve hereon. Last 8 to 10 quarters, we have taken to reach to double-digit margins now, and we'll try to sustain these efforts to improve further.

[Operator]

[Operator Instructions] As there are no further questions from the participants. I now hand the conference over to the management for closing comments.

[P. Duggal, executive]

So just to conclude, thank you very much to all investors to show confidence in Subros and have patience in the last 8 to 10 quarters. Results started improving. Our efforts to improve the financial KPIs are ongoing, and we'll try to improve from here on.

Business, as such, I mentioned that last first half and corresponding Half 2, there would be some level of uncertainty. But going forward, FY '25, '26 is going to be promising as of now based on the current outlook. So we are watchful of this situation and best of luck, best wishes to all of you.

[Operator]

Thank you. On behalf of Batlivala & Karani Securities India Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.