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Tube Investments of India Ltd
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Ladies and gentlemen, good day, and welcome to the Tube Investments Q1 FY '23 Earnings Conference Call hosted by IIFL Securities Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Anupam Gupta from IIFL Securities Limited. Thank you, and over to you, sir.
Thanks, Renju, and welcome, everyone, to Tube's 1Q '23 Conference Call to discuss the results. From the management, we have Mr. Vellayan Subbiah, Executive Vice Chairman; Mr. Arun Murugappan, Chairman; Mr. Mukesh Ahuja, who is the Managing Director; Mr. Mahendra Kumar, the Chief Financial Officer; Mr. K. R. Srinivasan, who heads the Metal Pump Products business; Mr. K.K. Paul, heading the TI Cycles business; and a few other members from the team.
I'll hand over to Mr. Vellayan for the opening comments and post that, we can take the Q&A. Over to you, sir.
Anupam, thanks, and good morning, everybody. The -- so basically, we had a good quarter with a PBT before exceptional of INR 180 crores. Revenue for the quarter was at INR 1,957 crores compared to INR 1,257 crores for the same previous year. Obviously, as you all know, last year we had the COVID situation so the numbers are going to look a bit stark. PBT was at INR 180 crores as against INR 130 crores in the same period previous year. And ROIC was at 48% for the quarter compared to 41% in the previous same-year period.
Free cash flow for the quarter was at INR 139 crores. So with that, we'll just get into each of the individual businesses. The good thing is that free cash flow is also back to -- it's kind of -- it's higher and strong levels. The engineering business, the revenue for the quarter was at INR 1,244 crores compared with INR 815 crores in the corresponding quarter. And PBIT for that business was INR 118 crores as against INR 83 crores for the corresponding quarter. Metal formed had revenues of INR 335 crores versus INR 245 crores in the corresponding quarter and PBIT was at INR 38 crores versus the INR 26 crores in the same quarter last year.
The Cycles division had revenue of INR 246 crores during the quarter compared with INR 172 crores in the corresponding quarter and profit was at INR 9 crores versus INR 7 crores in the same quarter last year. The other businesses had revenues of INR 223 crores compared to INR 88 crores and PBIT was at INR 17 crores as against INR 10 crores in the corresponding quarter for the previous year.
At a consolidated level, the revenue for the quarter was at INR 3,799 crores as against INR 2,437 crores in the corresponding quarter, and the profit before share of profit of an associate joint venture, exceptional items and tax for the quarter was at INR 342 crores as against INR 192 crores in the corresponding quarter in the previous year. CG Power and Industrial, a subsidiary company, in which we hold a 58.05% stake registered consolidated revenue of INR 1,665 crores as against INR 1,050 crores, and its PBT was at INR 172 crores as against INR 71 crores in the corresponding quarter last year.
And Shanthi, which is also a subsidiary, and we hold a 70.4% stake there, had revenues of INR 99 crores during the quarter as against INR 67 crores and PBT for the quarter was at INR 18 crores versus INR 12 crores. Commenting on the financial results, Mr. M.A.M Arunachalam, Chairman, said despite the continuing changes in supply chain constraints, fuel and commodity prices, the company has witnessed steady performance during the quarter. Growth was higher in the domestic market in engineering, metal formed and industrial chains. The previous year was also affected partially due to COVID. The company is also making steady progress on its launch of its EV 3-wheeler and tractor products. The performance of our subsidiaries, CG Power and Shanthi have been very encouraging, delivering strong growth and profitability across all segments.
So Anupam, that's a quick kind of summary of quarter performance. And with that, we'll be happy to take questions. Thank you.
[Operator Instructions] The first question is from the line of Jinesh Gandhi from MOFSL.
Sir, can you talk about -- can you talk about the export? How is the growth in this quarter, which segment of exports are doing well?
Yes. So Jinesh, that's a good question. And actually, engineering, there's been kind of an inventory -- there actually too much inventory had built up, especially in the European market, especially for growth in the engineering business. The industrial chains business has had great exports. But for commentary on the engineering exports, I mean we really think it's going to pick up in the third and fourth quarters. But on specific numbers, if you'd like Mukesh or Murali, you guys can just jump in, that will be great.
Like, Vellayan, said, this particular quarter we see because the inventories are piling up and there is a lot of fluctuation in the commodity prices. The steel prices also come down, which going to neutralize in another 1 quarter and after that we see demand is strong. And particularly on the OEM side, engineering has done a good job by taking customer approvals on the OEM side, and that will continue to drive the growth for exports going forward.
No, so last year, Q1, we had some pent-up demand also. So in comparison, that can also be affected.
But honestly, I mean, yes, we do see a strong second half from an export perspective right now, especially with what's going on in the Ukraine, Russia thing, and I think second half will be very strong.
Sure. But can you share what more export as a percentage of total revenue, stand-alone revenue? And what would the decline in exports or growth in exports, what that number is?
For the company as a whole, it was around 16%. If we engineering alone, it is 21%.
Okay. Okay. Got it. Second question is on the engineering -- sorry, on the railway business. Are we starting to see some traction in terms of order coming through because some of your peers, not necessarily in the same segment of railways has started to see substantial traction in order coming from railways. Are we also seeing the similar traction there?
Yes, KRS, you want to take that. KRS is not on the call.
KRS is there on call, but I'll take this question. Yes, you are right. Railways, there is a traction, which is improving compared to the previous quarter and new tenders have started getting released, and that is getting released with even the better price points because the commodity prices are also softening. So going forward, we'll see the railway business plans will pick up starting next quarter.
Got it. And lastly, can you talk about your approach to investments in PI2 given that in 1Q sale for around first 4 months we have already invested close to INR 250 crores, there will be investment in -- further investments and increase [indiscernible] So how should we look at the investments. We've talked about the base investment of at least INR 200 crores per annum, but how do you approach given so much has been on that side of the business.
Yes. So Jinesh, I think there are 2 happening there. One is that, like we said, we don't see that much. I mean, though we have still a pipeline in TI3, we don't see that much activity on TI3 right now just because kind of a lot of assets we feel are fully valued, right? And so we're a bit concerned about kind of going into an asset on that side now.
And given that, we also see -- we're seeing a lot more opportunity on the TI2 side right now. So obviously, kind of the biggest area of spend has been on electric vehicles. And we think that will continue to be our biggest area of spend. And so over time, our vision is to kind of get into at least 4 platforms. We've already announced -- right now we've announced a 3-wheeler, we've announced tractor, we've announced the heavy commercial vehicles. I mean through tractor and heavy commercial vehicles were through acquisitions. So we do see a fourth platform as well. And so we see that as consuming kind of a large chunk of our TI2 capital. We will obviously kind of -- we'll continue to hold the same prudence, right, which is basically, we have said that we will not exceed 2x free cash, right?
And now as kind of our debt. So I think capital efficiency wise, we'll continue to kind of maintain that, but we definitely see a lot of opportunity in electric, and we are going to invest in that. Our sense is to take each of these platforms to market. We're talking about, roughly about INR 250 crores each, which means INR 1,000 crores outlay to get 4 platforms to market. Then we'll see how those platforms scale and then accordingly, basically see where we need to double down and invest more.
Great. And when you're talking about the fourth platform, that's the 2-wheeler side, right?
Sorry, 2-wheeler?
The fourth platform...
So we can also say that we're not doing 2-wheeler. The 2-wheeler space is too crowded, right? I mean, we've always said that we're more interested in the productive side of the spectrum than the consumptive side, which is the 2-wheeler side is too crowded and we don't see profit pools in that sector for the foreseeable future because there's just too much venture capital money going in and we just kind of -- I mean the rate at which these guys are kind of losing money, Jinesh, that's not the kind of business we can play in here. We're kind of old school, we'll still have to make money. That's kind of the way we look at it.
That makes sense. I mean that's more sustainable way of getting into business.
Sure. Thanks, Jinesh.
Next question is from the line of Aman Agarwal from Carnelian Capital.
My question was on PI2 initiative, and I guess from a medium to long-term point of view. So if I see non-EV businesses, like the truck building business, the TMT bar business and the optic lens business. So when the opportunity for the truck body and TMT looks smaller, but they do see good in terms of ROC kind of profile. While the optic lens business looks very scalable. So like how are we thinking about these businesses in terms of strategy wise? Are we focusing on better returns? Or do we think of this as very large businesses to scale and contribute meaningfully in terms of the bottom line of the company going forward?
Yes. So I think it's a good question. See, honestly, I'd say 2 things, right? One is that the businesses did get derailed quite a bit due to COVID, right? And I'd say we lost almost kind of 2 years and kind of all other businesses due to COVID. The second is that we are seeing kind of differential levels of scalability like you correctly pointed out between the 3 businesses. Of the 3, the optic lens business is the most scalable.
The challenges we've had with optic lenses is basically, like we said, kind of it's all -- it's all imported equipment. Nobody else makes these things in India. So basically we're very dependent on basically either Koreans or the very few -- all the equipment is Korean. So we're very dependent on those people coming in and setting up and getting the factory going. There's been a massive reluctance in a lot of these guys to travel. So that is what has delayed that project significantly. I mean, in the sense like the factory is up, but we're not able to get it to full production. I do believe that, that business is going to be immensely scalable, but it is delayed, right?
And with the other businesses, also they got kind of quite derailed due to the whole COVID scenario because obviously, kind of with truck consumption going down with a lot of things coming down basically, those businesses got quite derailed as well. So I would say that now it's our time to kind of rebuild. I don't think the other 2 businesses are going to be as scalable as the optic lens business. So off the 3, I would say the optic lens is going to be the more scalable.
And my second question was on our EV businesses. Like, now we are into 3-wheeler starter in the EV segment. So like what is the strategy in terms of easy way, do we want to become a very major player, do we want initiative to focus on South region, which is our dominant region and later if we are good with that, then expand it nationally. And also like in terms of tractor and [indiscernible] like, in this the EV penetration is expected to be lower. So -- and given the product is not even at a full scale even at a global level, so do you think we'll need to spend more on R&D and other expenditure on tractor and MSME segment going forward? Like apart from the already INR 600 crores, INR 700 crores we have already invested in the business.
Yes. So definitely, these businesses are going to require R&D investment. Second, in terms of you asked, why do we want to be in these businesses. Our belief really is that the future is going -- I mean, we are at a significant stage of kind of disruption in the industry. And if you look at what's happening globally also, you're going to see new global majors get defined in new categories of space, just like -- I mean, everybody kind of only talks about Tesla, but each category by category, if you see what's happening with Rivian now. Category by category, people are basically kind of -- there are new companies that are beginning to acquire a significant market share. So our objective with which we're going in is definitely to be a very at-scale relevant player. And so there is no other way we're looking at it, right? Saying that we see an opportunity where there could be a redefinition in terms of who the largest players in the country are in the whole commercial vehicle segment, and we see definite opportunities there for ourselves right.
Does it require -- your second question were in some of these areas there's not been global penetration, you talked about tractor and heavies. I definitely think that like what happened with some of the other technologies, including kind of mobile telephony, I think India is going to start playing a significant lead role in electric vehicle if we look at the next 10 years. And one of the reasons why we believe that is because if you take categories like tractor, I don't think there's going to be another natural leader that basically kind of comes out, right? India is the most logical. We sell the most tractors globally. And therefore, for India to lead makes the most sense, right?
And even with heavy commercial vehicles, the kinds of use cases, right? Because if you take what happens in the West in general, heavies run really long distances at very high speeds and therefore battery consumption tends to be extremely, extremely high. But there are a lot of use cases, especially even in India, where these heavies run point to point, right? And so you have them running like a 150-kilometer routes from a steel factory to a port, and they just kind of keep running across these points, right? And so that makes it more feasible to convert certain categories first and then other categories later. I think the heavies, I mean, to electric more easily. And so we are quite keen on being the leader in a lot of these categories. And does that mean it's going to require R&D? Yes, definitely. And we will have to invest on that to kind of make it happen.
Sir, thank you. That was really useful. Just one final question. So since we are getting into this OEM business now and being an auto amplicator to most of the players in 2-wheeler and other segments. So players like Bajaj, who is already in the 2-wheeler, but is also in 3-wheelers where we are getting into the business. And again, players like Tata Motors and M&M where they are getting into the CV side. So do we see any chances of them taking business away from us from the auto line business?
Yes. So I think that's a valid question. If you look at kind of what -- I mean, I just look at the way the world is evolving globally and I think that -- the example I like to use the most is that of Samsung, right, which is, if you take an Apple iPhone, the largest supplier for the Apple iPhone, and I still believe that that's the case so I'm not sure now, but a significant supplier to the Apple iPhone of components is Samsung, right? And yet, kind of iPhone's biggest competitor on -- in terms of kind of completed OEM phones is also Samsung, right?. So I think the way the world is evolving now, everybody has to cooperate with people in some way, has to compete with people in some way, right? And I think that, that is the way the world will continue to evolve because of the way technologies are going, right? I mean a lot of technologies are becoming very platform-oriented. And honestly, right now we have no scale compared to any of those guys, right? So kind of I don't think right now Tata would even see us as kind of a credible threat kind of at this point in time.
Next question is from the line of Jeetendra Khatri from Tata Mutual Funds.
Yes, hello. Sir, are you doing something on the light commercial vehicle side? Bosch is trying to do something on electric out there.
There's nothing specific that we've announced or talked about on the light side.
Okay. And on the heavy commercial vehicles, so let's say, if Ashok Leyland and Tata Motors ramp up their effort, so how do you plan to compete in the future?
Yes, I think that it's similar to the question that's just kind of was asked right in the sense like basically, everybody will be getting into it and different people will take different approaches, right? So which segment they choose. So we've chosen a particular segment to go after and heavy is to start, starting with a 55-ton track. And then we have to -- then we will see how those segments evolve over time. But it is going to be a market where you're going to have new entrants compete against incumbents, and that's the way a lot of these markets have been globally there.
And sir, just in is hydrogen and fuel cells, etc., if they manage to make inroads, so are you ready for the technology in the 5531 segment?
Yes. So I mean the good thing is if hydrogen fuel cell came about, right? -- the entire drivetrain -- so usually -- so basically, what you're going to have is you're going to replace a very large battery today with the hydrogen fuel cell and either -- I mean, in heavies I think it will still be a battery because we won't be able to get enough super capacitors in there, unless super capacitor prices come down. But I think basically more of what will happen is that we will replace a very large battery with a hydrogen fuel cell and some kind of storage, which would be a smaller battery, right? So from that perspective, the fundamental design stays the same even if we're going to hydrogen fuel cell. But as you know, I mean, the belief is that hydrogen fuel cell is still at least about 5 years out, especially because of the infrastructure required to kind of get that going.
Okay. And lastly, sir, what's the internal gestation period which you keep as a benchmark for TI2 for a new business?
So I'll tell you, we're also learning in that process, right? Now when we get into any one of these new platforms, we said that within 6 months to 9 months, we like for that platform to generate revenue, right? But also what we're kind of seeing on the truck -- I mean on the whole vehicle side is that the homologation process has its own time line, right? So -- and you can't get to market -- product to market till you have it homologated. So the good thing with a 55 truck is that we already have a homologated product, right? Tractor is not homologated yet, right? So tractor will take longer because of the homologation cycle. And so I think that is the constraint function. So I think it can take up to a year after acquisition to basically get the product to market.
Okay. And I was asking actually more broadly for your entire TI2, for example, your optics, etc. So broadly, what is the gestation period you have in a tunnel target.
So I don't think we can take gestation period, right? Because anyway, I mean if you ask, you want to get it going as quickly as possible within 3 months, right? But if you see what happened with optics, I mean, see, honestly, kind of -- there was a real misfortune in terms of timing, right, which is just after all the equipment started coming in, COVID hit, right? And then we decided no way of even starting up these machines because nobody even understands these machines in India, right? Nobody else. And so I mean -- so this thing is kind of -- has gotten hit by over like 2 years just in that process. And honestly, I mean, so I think kind of there is a gestation period we would like. But I mean I don't think that that's going to happen in a lot of these products.
Next question is from the line of Dhruv Maheshwari from Premji Invest.
My first question to the team is. Generally, if you can speak about the 2 acquisitions this quarter, Moshine [indiscernible] and in IPLT. Typically, what are the capabilities and the end game that we would have thought of. And just a follow-up on this one is, when we acquire, say, a controlling stake in such companies, do we try and keep the promoters on board to run the business? Or what's the thought process there? That will be helpful to know. And then I have one other question.
Okay. So the first question is what is the logic and the capability in Moshine and in IPLT, right? Yes. Yes. Okay. So IPLT, I think we just talked about it. Basically, they have a homologated 55-tonne truck, okay. They have an older version of that truck, which was a retrofit that is already kind of in the market, and so it's been running for close to 2 years, about 20 trucks that are out there. And so our intent is to basically now manufacture this homologated truck and use it for -- I mean, and sell it to basically customers who have these point-to-point applications, right? So basically, the ideal targets are basically steel, cement, a lot of them have this point-to-point application. And for the point-to-point application, the economic benefit of an electric truck is already real and current, right? So there is real economics in getting this product out to customers immediately. In parallel, we would basically start developing other products that we think will be ready in a 12-month to 18-month time frame from now. So is that clear on IPLT?
Yes, yes. That's very clear.
On Moshine basically, they have the capacity to make lease the smaller -- I mean, the lower-end mobile camera modules. And the intent there is to become a camera module provider to start at the lower end and then work our way up the chain. So that is a quick intent with Moshine, but I'd be happy to kind of. And so they already have a manufacturing facility in India, making these lower-end camera modules. And so we will continue with existing customers and then build up on that.
So is it fair to say that this could be complementary to what we are trying out with lens? Or this is going to be a separate sort of...
Yes. No, you're right. In the sense that basically now we will go full spectrum on lenses because basically -- those are glass lenses, these are plastic. But it gives us the opportunity to go full spectrum on lenses in the future.
Understood. And just in terms of running these businesses, will the existing sort of promoters continue to run it?
So it's a valid question. I mean, obviously, kind of the existing promoters will continue to have a role. And in some cases we'll continue to run. It depends fully on kind of -- on the capability of the existing promoters and their kind of -- so they will have a -- continue to have a role. In some cases, they will run, in some cases they will be part of the team.
Understood. And just one on the EV that you talked about the 4 platforms that we are planning to launch. Still early days, but are we looking at a sort of common distribution network? And because now that we're moving from an ancillary to an OEM, are there challenges when we sort of are setting up or preparing for our distribution? If you can share your thoughts there will be helpful, thanks.
Yes. So obviously, kind of -- so will it be a common distribution network? I mean these are very different products. So for the most part, kind of there will be separate distribution networks as well. And I think, your second question was a bit unclear. You're saying, kind of will there be challenges setting up the distribution network?
Yes. Are you facing any changes like we would have started of 3-wheelers, what is the [indiscernible].
This experience has been fantastic to date. I mean, so it's been a very good experience.
Next question is on the line of Niket from Motilal Oswal AMC.
Now the previous on sale side, this is my side. So just one question on IPLT. Just -- you highlighted most of the points, so largely is covered [indiscernible] get a sense on order book, the product is very low in whatever we've done. I think there were very healthy order book, but the issue is on production. So are you going to invest more to ramp up production capacity?
Yes, absolutely. So that's the first thing we will do. We're already looking at a production facility that we can get ready in about the 8 months to 9 month time frame. So volumes will remain muted until we can get the production facility up Obviously, we'll continue to keep you updated as we kind of get that second facility up, which will still be kind of smaller than a full large-scale facility, but it will ramp up the capacity significantly from current levels.
Yes, and would it be possible to share what's the order book for that?
We're not sharing yet. I think kind of you give us a little bit more time. I think maybe next quarter we'll share a more comprehensive order book.
Sure, sure. The second question was on margins. So I think broadly this quarter, safe to assume that margins would have bought a flow than the benefit of the lean program that should incrementally start flowing in the next quarter as well as the numerator denominator impact starts to come in.
Yes. I mean, I think kind of, Mukesh, I let Mukesh answer that.
Regarding lean, these are the early days, like you rightly said, the benefit has started flowing, but we have a long way to go on this, and there's a good headroom available leveraging the lean journey to improve the margin side of the story. And like you rightly said, the commodity prices is creating some issues on numerator and denominator. And that depends on the external environment, how the commodity price goes up. But we are making sure that absolute margins are always protected or it has improved year-on-year.
So EBITDA per tonne, if I want to look at it, that's only improved because then that is the right metric to have a numerator denominator match. So EBITDA per tonne in the last 2 years would have slipped.
Yes. So Niket, this is Mahindra here. We have a different mix of products. So EBITDA per tonne may not really apply to our industry. It may work for a commodity industry like cement or steel. We have different types of products, different types of valuation on products also. That may not be the right way to say.
Sure, sure. Got it. The other question was on the medical device part of the business, which is already [indiscernible] annual report. Would it be possible for you give us some flavor on where are going in terms of tire and some clarity on that.
See, basically, we're taking -- I mean, we are going to drive that through kind of acquisition to begin with because we don't have any capability internally. So we don't really want to comment on it until we first get a specific transaction that we're going to close on. And so we're still looking.
Okay. Okay. Got it. One more question, just was on the season. On the 2-wheeler side, what's the share as a percentage of revenue today because that is one category which doesn't seem to grow. And at least that part of revenue will continue to see maybe lower growth. So is there some game plan that we have to maybe add customers or increase the [indiscernible] customers.
No, I don't think we discussed kind of revenue. I mean, market share at a product level than we prefer not. So I think we have a decent market share. But obviously, in all of the products that we are, we always are looking at opportunities to expand the market share.
Sure. But on the category itself, really possible to qualify what is the percentage contribution coming from 2-wheel now.
Sorry, what is the percentage?
The percentage of revenue [indiscernible].
Mahindra, have we shared that before.
So if you look at the total TA revenue, roughly about 58% comes from auto. And within auto, it is like generally 50:50, but keeps varying from quarter-to-quarter. In Q1, it was like 65% 2-wheeler and 45% 4-wheeler.
Okay. And have you started taking orders on electric 3-wheelersr? Has that already started, the booking like [indiscernible].
Electric CVs.
Electric 3-wheelers.
Either Paul or Sushant can answer that. Okay, I don't know if Paul or Sushant are not on the line. So the -- yes, so to your question, we've appointed dealerships. We haven't started taking orders yet, and I think we will likely start taking orders in the September time frame.
Next question is from the line of Mr. Nishit Jalan from Axis Capital.
Most of my questions have been answered. Just one on the Engineering segment. That segment, we have seen very, very strong growth, both on a Y-o-Y and Q-o-Q basis. And you just highlighted that export is something which was not very, very strong in this quarter. And we do get auto industry volumes from industry body and we haven't seen industry-wide growth been strong. So just wanted to understand what is the volume value growth in the segment? And are we basically -- have we introduced some more products? Or are we gaining disproportionately in large diatubes or any subsegment within engineering because obviously, we are growing at a much, much faster pace compared to auto industry.
Mukesh?
Like we said earlier, there is some amount of gaining shares in the domestic market, that's reflecting in the total overall revenue increase. Also because of the commodity prices, the turnover is going up. So it's a mixture of 2. And like we started taking around the engineering business 2 years back, the regional balancing story. We start producing closer to the customers to optimize our cost structure and improve the delivery and the quality, which is closer to the customer. That is yielding results. So it's a combination of commodity prices going up as well as gaining share of business.
So would you be able to share a breakdown between volume and value in the Engineering segment on a Y-o-Y sector basis or Q-o-Q basis, whatever you are comfortable with?
Generally, we don't share those breakups. But indicative directionally, it's a combination of 2.
Sir, if I can squeeze in one more question. This has been asked multiple times in one way or the other. It's on IPLT on the truck side. So basically just wanted to understand IPLT hasn't done much fundraising in the past, yet they have come up and developed the 55-tonne of product, new product as well as retrofit. So what is the core advantage competitiveness that IPLT has built? Have they kind of mastered any of the specific critical component? Or is there any technology partner? Basically, how have we gone in terms of building capability that across different components or vehicle design percent?
Yes. So I think it's actually in -- and you're right, right, they've done it with very little capital. But I think that that's what you're going to see happening in India, right, which is, I think, the -- I mean, at least from what we can tell, the brilliance in the IPLT product is that is very catered towards Indian use cases, right? And especially kind of starting with these point-to-point use cases, right? Because if you had a product, for example, that you try to sell in Europe or the U.S., which had like a 180-kilometer range, there would not -- I mean, a heavy-duty truck with 180-kilometer range, there won't be massive demand for it.
The second thing is even getting to 180-kilometer range, how you get there? I mean the bottom line is because in India there's so much more breaking on the highways, there's a capability to get a lot more region. And then the third component, I actually think is that though there is no specific IP, for example, it is like, there's no IP in terms of a component that is very specific. The way the components have been stitched together, we think is very intelligent, right, because they've actually been able to do that using kind of sets of Indian components, sets of imported components and bringing it all together in a fashion that I think is economically and economically kind of -- and just from a physics perspective and from a market perspective the right product for India. And I think that, that is what is possible. I mean a lot of people call it frugal engineering or what you may, but I think that's what is possible to do in India. And that's what a lot of the new players are going to start doing, right? So that's what we think is kind of good with the way IPLT has done it, and that's where we see the opportunity.
Sir, just one follow-up, and sorry for harping on this. Just conceptually, if IPLT obviously get [indiscernible] they can do such innovation with a small amount of capital, do you think there are enough entry barriers in place in these kind of products? Or -- and if not, don't you see that -- don't you think that even this segment can get as crowded over a period of time and the profit pool may not be picking up because it's credible that they have done such a good work with small amount of capital. But if there's no IP or no major competitive advantage, then would entry barriers not be low in this segment?
See, the point is just right. I mean, if you look at kind of what's happened is that the -- there are -- I mean you've got to recognize kind of if you take the 2-wheeler space, for example, I don't know how many 2-wheelers that are electric to wheelers. But when we last did a sweep, I think there were over 80 products that were out there, okay. In heavy-duty trucks, right now there's only one that's homologated.
And so are there going to be other guys? I think in every market, potentially, yes, there will be other people, right? But we are also seeing right now what's happening is the whole venture capital space is also drying up, right? So there aren't that many guys who just want to experiment with nothing. And in our minds it takes at least like 3 years to get this product, right, which is how long IPLT spends on it? I mean IPLT has actually spent closer to 5 years on this. So in our minds it takes that long to get the product right.
And so it's not going to be that easy for somebody to just come in and say, like, listen, I piece together kind of a motor controller, a BMS battery and kind of I'll have this thing going. So we feel like the segments we're getting into have higher barriers to entry than kind of the 2-wheeler or the bus car which we think will be globally led. And therefore, that's our belief. I mean, there's no telling that we're 100% right on this.
Next question is from the line of [ Senthil Manikandan from ithought PMS. ]
So my question is with respect to the EV tractor side. So if you can just give an overview about what will be the target addressable market over the next 3, 4 years? So currently, like annually the tractor market sale is around 9 lakh units. So just a overview on the volume and how the market will progress on the EV side?
See, I think none of these questions can be answered deterministically, right? Because I mean, if I knew how the market is going to progress, kind of, I think, kind of very few people know -- like I don't think anybody knows how the market is going to progress or what the actual rate of adoption is going to be. Obviously, in our minds, it's dependent on how good a product you can get out and which segments you can cover.
There are in kind of 4 product ranges that have to be caught out there. And the initial product range might not cover as much of the market. But the largest is going to be that 30 to 40 horsepower segment and then a 45% kind of -- or a 40 to 50 horsepower. So there are -- there is one product that is the closest to homologation right now, and then there are 2 more that we will submit within the next 6 months.
But the rate of evolution of the market, I don't think we can kind of state deterministically right now, nor do we want to say here is how much our market share is going to be. We just want to focus on kind of getting -- being the first to market with a product and ensuring that it's a good product and then capturing the kind of the portion at market share for the product we get into market with. So we're going to start with the lower horsepower products and then kind of work our way up.
Next question is from the line of Sunil Kothari from Unique Investment.
Are you getting my voice, sir.
Yes.
Sir, my question is a little bit longer term and macro. Since you turn around Chola and Chola Group has proven their capability internally in terms of engineering services, exports and everything. My -- I want to understand the 2 trends which we are hearing is China plus 1, Europe plus 1, manufacturing base from, say, India, whatever products you manufacture, whether it's a chemical or pharma or engineering, a lot things we are hearing. And second trend we are hearing is people want local manufacturing more. They don't want to depend on so much disruption of the supply chain which we faced during last 2, 3, 5 years. So with your advantage point, can you elaborate on this opportunity for Chola Group from exports point of view?
Yes. I mean I think if you see our articulation of vertical selection [indiscernible] they are almost kind of driven by the [indiscernible] stent. So basically we don't see things that the whole electric vehicle market in a lot of categories, including the ones we're getting [indiscernible] are going to become kind of a fully [indiscernible] everybody wants Indian supply for mobile phones. Right now, almost all of the mobile phone components are imported from China, right, I'd say in excess of 95% of mobile phone components come from China. Over the next decade, that entire supply chain has to be developed in India. So we need to think of how that's going to happen. Similar with electric vehicles, the entire supply chain needs to develop in India. Indian OEMs need to emerge. So how is that going to happen?
And even with medical, though there's going to be a large Indian market. With all these 3 products, we are convinced that if you develop the Indian market, that will form a strong base for allowing us to get into other markets like the European markets, American markets, especially. And that's very similar to what we have done with tubes and engineering where we developed for the Indian market first, and now we're beginning to push 20% exports and then we'll push to 40%, 50% exports over the next 5 to 6 years, right? So basically it's a very similar story, and we have identified a set of verticals which we think, at least over the next 15 years, gives us significant opportunity, first, to establish a base in the domestic market and then use that base as a mechanism of getting out along this kind of what we think is going to be a very, very broad China plus one trend over the next 15 years as well.
So sir, basically, other than your internal capability, which already we have proven, you see external tailwind is also helping us in terms of this manufacturing products, say mechanical products, engineering products, bigger parts. Those are also -- there is a good tailwind for...
Undoubtedly, undoubtedly, and I think that this tailwind is really going to be very significant in India for the next decade.
Great, sir. You are doing a commendable job.
Thank you.
Next question is from the line of Vipul Kumar [indiscernible] Investment.
Congratulations for great set of numbers. My question is on the heavy truck side, we'll be launching only one model in the 55 tonnes or we'll have entire range starting from 10 tonnes to 55 tonnes?
So right now there's only one model that homologated in the 55 tonnes. So we'll be focused on getting that to market first. And so that's our focus right now. And then over time we will have to develop the right [indiscernible] market, more or less.
Can you comment on the cost advantages cost advantage in terms of percentage?
So what is that particular project -- that time of 2.5 years on this truck for the use cases that we're looking at right now. So more than that, we don't want to share, but we're seeing a payback time of 2.5 years. 2.5 years of payback time, okay.
Next question is from the line of [ Abhishek Singhal from Naredi Investments. ]
Before asking question, I have a small suggestion. If you will give investor presentation with your results, then it will be good for the small investor like that.
Sorry, I couldn't hear it.
[indiscernible] with your results, then it will be good for a small investor like us. Okay. First question year-to-year margin in [indiscernible] and power business has decreased. Then what will be the margin in FY '23? And the second question is, how much a turnover will come from respective truck and electric tractor in this year and have we started producing them?
Okay. So your first question was on -- so let me answer your second question. We don't want to kind of -- we don't want to give any -- so the numbers from electric vehicle sales in this financial year are not going to be so significant. So we don't want to give any numbers at this point in time. we see numbers -- revenue numbers ramping up only from next -- from the April time frame, though we will have some revenue this year. We don't want to kind of -- it's not going to be significant. The -- your first question, if you could just repeat, sir?
The year to year margin [indiscernible] and power business has decreased, then what would be the margin in FY '23 and as June '22 quarter 4 last year.
So I think -- so power you can actually kind of look at as the same revenue -- I mean, same margin number that we kind of reported in the first quarter, it might improve a bit but not significantly. Mobility, Mukesh, do you want to give a perspective? And the question is on margins. I think margins also will remain similar to what they have been in the first quarter, right? Could improve a bit but not much.
Next question is from the line of [ Vinod Malviya from Union Mutual Funds. ]
And I'm extremely sorry for harping again on IPLT. So I have just a couple of questions on IPL. First, I mean, as you rightly said that this product been there in the market for the last 2 years, and whatever reviews even we came across on the HMS has been very good. I just wanted to understand, both from a company's point of view and even from the use case point of view, what are the current challenges which is there? Is it like the total cost of ownership is very high over here compared to the existing series or -- and even from an operational point of view for the existing old promoters, what were the challenges? And why we have completely exited almost 2/3 have been sold to you. I just wanted to understand the thought process over there.
Yes. So first off, the promoters are not completely exited. They are still there with a significant kind of portion of the shares. So that is -- and they are integral to kind of the future of this company, so they're significantly -- they're with us in this entire process. And Subodh is basically leading the company and kind of going forward. The -- your question was kind of all of the reviews are positive, what are the challenges is what you're asking. So I think kind of there are 2 things kind is basically is working capital and then capital required to kind of set up a new facility. So it was very tough from a working capital perspective to continue to produce these trucks which were expenses. And then the company did require capital to set up a new facility, which we will be kind of putting in as well.
Okay. As far as use case is concerned, when we do a comparison between a normal commercial vehicle and electric commercial vehicle, there's absolutely no disadvantage for electric vehicle, that is a normal feedback which you're getting on the product?
Yes. We don't see any -- I mean, obviously, kind of you will lose some of the payload because of the weight of the battery, right?. That's purely on time.
Okay. Okay. And just a clarification on your previous answer, which you said. So you plan to expand the capacity. So do you -- are giving the numbers like what kind of capacity addition will happen in the next 1.5 years? Or what kind of investment...
We don't want to state that yet, right? It's still early days, so we don't want to state that yet.
Next question is from the line of [ Ankur from Future Investments Private Limited. ]
Sir, can you please share some guidance on the revenue and the margin side for the next 3 to 5 years?
Sorry, you just want broad guidance on revenue and margins for the next 3 to 5 years.
Yes, right.
Yes, I don't think we'll just give any broad terms like that. I think broadly what we've articulated around the 4 metrics continue to kind of hold, right, which is the revenue. See, again, revenue growth, we've always said, you have to look at that now at a consol level. And so broadly on those 4 items, we continue to hold what we've articulated from the beginning.
But do we see the margins going up?
Sorry.
Do we see the margins going up?
We've said that also, which is in the kind of in the next 3 to 4 years, yes, we will expand margins as well.
Okay. Great. And what kind of market share are we aspiring to capture in the next 5 years in the EV?
In the EV?
Yes.
I think it's very difficult to tell at this stage, kind of nobody even knows how many products are going to be out, what percentage of conversion to EV is going to be, but very difficult number to give right now.
Due to time constraints, we have reached the end of question-and-answer session. I would now like to hand the conference over to the management for closing comments.
Yes. I mean, Anupam, nothing specific from our side here. Thanks. Hopefully, we've answered most of the questions. We continue to be quite very optimistic about the long term. I think quite a few questions were specifically on how quickly we'll be able to kind of -- or what market shares we'll be able to get in some of these new segments. I think that's a bit more difficult to state deterministic way right now. But our focus is on building for the long term, and we continue to be very bullish from that perspective.
Thanks, Vellayan, and thanks for the time.
Yes, thank you. Thank you so much.