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Thank you. Good evening, everyone. I am Tarang Jain here, and I would like to thank you for joining the quarterly earnings call of Varroc Engineering Limited. I would like to quickly start with the industry situation. The Indian 2-wheeler market continued its declining trend, which has been persistent for the last 5 quarters. The 2-wheeler industry volumes were down more than 13% year-on-year in the quarter. Most of our major passenger vehicle markets internationally also saw a decline in volumes. Europe and North America declined by 6.2% and 8.2% year-on-year, respectively. The Indian passenger vehicle production also fell by almost 8% year-on-year. The Chinese passenger vehicle market during the quarter, however, showed signs of revival with a plus 1.7% growth year-on-year. This, however, may not sustain in Q4 with the ongoing Coronavirus outbreak. I'm happy to announce that we have commenced production at our Poland facility, which is an important milestone in our long-term growth strategy. We expect this facility to ramp up quickly over the next year. With this, we have now 4 new operating facilities up and running, which are Poland, Morocco, Brazil and Bulgaria. Additionally, we have a new model line within our Czech facility premises. These facilities are crucial to service the new business won by us over the last 3 years from large global OEMs. As highlighted earlier, in the initial phase of the operations, these facilities run at suboptimal capacity utilization, resulting in operating losses in the first few quarters. This is impacting the current year performance adversely. In the current quarter, our consolidated revenue declined by 4.6%, mainly driven by the India business, which saw a decline of 12.7% year-on-year. The VLS business revenues in Euro terms grew by 5.1%. Our consolidated EBITDA margins were impacted by the lower revenue, along with a suboptimal capacity utilization in the new facilities. EBITDA margin for India business was at 11.2%, a sequential improvement over the last 3 quarters. The VLS margins on a like-for-like basis was at 7.8% in the current quarter, lower than the 9.1% margin recorded in Q3 FY '19. However, excluding the losses at the new VLS facilities in the ramp-up phase, the VLS EBITDA margins was at about 10.2% for the rest of the business. Our China JV saw some improvement during the quarter. The revenue in local currency was up by 7.4% year-on-year. Our share of EBITDA from our China JV increased by 72% year-on-year to INR 168 million. Depreciation and finance costs were higher, largely due to adoption of Ind AS 116 and a higher asset base. The effective tax rate was higher due to timing of the tax incentives as well as losses in the new entities. Our PAT for the quarter is at INR 298 million. PAT was impacted negatively by lower revenue, operating losses at new facilities during the ramp-up phase, higher -- and higher interest and depreciation/amortization as well as higher effective tax rate. Our focused effort in optimizing capital expenditure and tight working capital management resulted in a positive free cash flow for the quarter. As a result, our net debt has reduced to INR 23.75 billion, down from INR 25.2 billion at the end of Q2. This will continue to be a focus area for us going forward. On a year-to-date basis, we have won some significant businesses. Our VLS business secured orders of EUR 318 million equivalent annual revenue, of which orders for almost EUR 177 million are new orders. The rest are new wins -- the rest are, sorry, rewins. The new order wins bode well for our future growth. We are on track to achieve our full-year target order intake of EUR 385 million in annual revenue. With this, we are happy to take your questions now. Thank you.
[Operator Instructions] The first question is from the line of Aditya Jhawar from Investec.
And congrats on a good result in this environment. My first question is, if you can highlight what could be the revenue potential from the BS-VI product on an annualized basis? And how are things ramping up there?
So, for the BS-VI, in fact, we were earlier expecting a strong kind of a revenue in this quarter, Q4. But you see that the adoption of BS-VI from BS-IV vehicles has been a little bit slow. So, therefore, we're expecting now sales will largely come more in March of this financial year. I think on an annualized basis, I don't have a very, very distinct, clear number, but for me I think if you would take just the electronic fuel injection business and the catalyst business, we could actually expect at least a revenue going forward of between INR 250 crores to INR 300 crores annually. This is not counting what is the increase in content in some of our products likes the Magneto, the electronic cluster, et cetera, where you will see -- because of the BS-VI norms, we see some increase in product pricing for these kind of products.
So, Tarang, was the number earlier about 350 to 500, does it include our supplies both to Royal Enfield and Bajaj.
Yes. So, at present, what we are doing -- it includes both. But earlier, I think when we were discussing, we were looking also at a growth in the market in the coming year. And we had analyzed it because we were anywhere not expecting more than a Q4 kind of a production for BS-VI products. But seeing the way the markets are at the moment, we are just kind of being more kind of cautious and conservative when we are rolling out these numbers because earlier we had been kind of focusing on at least a 10% year-on-year growth. But now, I think, with the vehicle volumes, the way they are, we would be a little bit more wary for growth in the coming year.
Okay, okay. And the second question is to Stephane. Stephane, if you see the numbers of Tesla, do you think that the cannibalization of Model S and X by Model 3 is largely behind since in the last few quarters volumes of Model 3, sorry -- Model S and X were averaging about 16,000. Do you see -- do you think that the negative impact of this cannibalization is largely behind any indication from Tesla that you guys are getting?
Yes, we are honestly very surprised by the still very strong volume compared to what we initially forecasted for the Model S and X. The numbers you've mentioned are significantly higher than what we budgeted for the year. I think, for Tesla, we are 41% above our budget. So yes, year-over-year, it's a significant decrease. But these cars that have been on the market for -- I would say, was now maybe 5 years, 6 years, are still pretty strong. They are still growing interest. They are still opening to different market. And they are doing a good job to update them regularly with new features, new software. And the appeal is still there. So we are surprised, but the volumes continue to be pretty stable and pretty strong on this. So we enjoy this, especially for our business in North America. I remind you, we won a little content also on the Model Y. So we will be starting with fascia lamp and with some small lighting on this new model, including the stop lamp in the coming month. So this is also a new volume that will come to add to our revenue with Tesla.
Okay. So you mentioned, it will start in the next couple of months?
Yes, the Model Y -- the product planning in Tesla is still pretty fluid, but they are one of the most efficient carmakers as far as time to market. Their ambition is to start in a few months. We will be ready as far as lighting is concerned. If the full car will be ready? It's still a question mark to me.
Okay. That's quite helpful.
Aditya, just 1 clarification on your BS-VI question, when I was talking about INR 250 crores to INR 300 crores, that was more actually for the 2 products; the electronic fuel injection and the catalytic converters, we'd have to take all the BS-VI products, that would, of course, remain at about at least INR 400 crores to INR 450-plus crores at a minimum, just to clarify.
Okay. That's really helpful. That explains...
Yes, yes. Because I was only clarifying on the 2 new products of catalysts and the electronic fuel injection, not all the BS-VI products.
Okay, okay. And the next question is on China. So if you see the revenue run rate in -- on a quarter-on-quarter basis, there hasn't been a material movement, roughly it's about INR 1 billion. But there has been a major swing in EBITDA margin from almost 0.5% to almost 16%. If you can help us explain what resulted into this and what is the outlook for China in '20 and '21 in terms of revenue as well as margins?
So about our China joint venture, yes, the last quarter was pretty strong. We saw an increase in revenue of about 4% year-over-year for the quarter. So this was showing the premises of recovery that we are all expecting and waiting for. About the increase in profitability that we saw in the last quarter, I think we've done a relatively good job to reduce our cost base, adapting to the new reality of the market and trying to be as flexible as possible. So I think we've seen the impact of our cost reduction actions kicking in, in the last quarter in China. About the outlook, I think, in the current situation, it's difficult to predict. Even before the outbreak of this Coronavirus, we -- China is or was the market where we had the biggest difficulty to predict the future. We are all a bit -- surprised a little bit by the downturn that we've seen starting last year. Now with this virus situation, we think that there will be an impact in the next month for sure. So we want to be very conservative as far as China is concerned. We keep focusing on our cost reduction, adapting the cost base to the volume reality. And we try to plan for the worst and hope for the best.
Okay. That's very helpful. And final question, in terms of order execution in China. What I recall is there were a couple of orders that were coming for execution. Was it towards the end of '21 or beginning of '22 from VW, Geely?
Yes. Towards the end of '21, we'll start having the impact on our revenue of some of the big projects with Geely, Changan and Volkswagen.
The next question is from the line of Varun Baxi from Equirus.
Sir, the first question is regarding the depreciation cost. This quarter, we have seen a sharp jump in our depreciation cost. So, is this depreciation run rate going to continue for the next -- for the coming quarters? Or how should we look at it?
Yes. The depreciation has gone up on account of 2 factors. One is the newer facilities in VLS business, we had capitalized over the course of the last few quarters, including the current quarter in Poland. Those depreciation costs are incremental. And on top of that, we also adopted AS 116 from this financial year. So because of that, the lease-related costs are now partly booked in depreciation, amortization line and partly booked in finance cost. Earlier, they were booked above EBITDA. So a combination of that, the depreciation, amortization cost have gone up compared to last year.
Okay. So this INR 193 crore sort of depreciation will continue going ahead?
Yes. So this is more like running rate going forward.
Sir, are there any more facilities, which we are going to capitalize over coming quarters? Like Chennai facility?
Yes, Chennai facility will get commissioned probably next quarter. I think we will start...
It'll be next year. Next year probably second quarter.
Next financial year, first or second quarter.
Maybe first or second quarter.
First or second quarter. And also Poland, remaining capitalization also -- some more capitalization will happen in the current quarter and next quarter. It's only partially commissioned.
And sir, my next question is on our EBITDA margin in India business, like despite the revenue decline over last quarter we have seen a sharp jump in our EBITDA margins. So can you explain with -- what has led to that?
India?
Yes.
Yes. India business, what you see is that sequentially we have been able to improve the margin. It's largely on account of certain cost control measures taken in the earlier part of the year once it was clear that we are not going to have any industry volume growth this year and it's going to be rather decline. So, proactively, we took a number of steps in terms of optimizing the manpower cost at different manufacturing locations, including selectively taking -- shut -- I mean, closures -- block closures where required based on the customer demand. And also, we have optimized the fixed cost at the SGA line as well -- so combination of that is the -- at the benefit. And we have been -- also been aggressively negotiating with suppliers for reduction in material costs, and that is the other factor which has contributed. So, because of that, even though the revenue has declined, but EBITDA margin -- percentage we've been able to improve sequentially. And...
Okay. And sir, in this new order that you have given in your presentation, there is this INR 21 crores new order from Bajaj in electronics. So -- I mean, is it related to the new carburetor? Or what is it related to?
So I think that these are going to be kind of a few new products like you saw electronic carburetor also would be -- but basically, these are, I think, new orders to do with the regular business. There are some new models, so all the electrical -- the regular items of, let's say, our Magneto's or more of the digital clusters. I think these are -- these kind of businesses, which kind of are -- there are some switches. There are some lighting systems. It's a combination of our business, and there are some new models. There are new wins in a regular kind of parts business with Bajaj.
The next question is from the line of Ashutosh Tiwari from Equirus Securities.
Firstly, my question is on the new facilities in Morocco and Poland. How do you see the revenue ramping up from these facilities over, say, FY '21 and '22?
'21 and '22?
Next financial year, basically FY '21...
So see I think for FY '21, I think in Morocco and Poland, I think we do see between EUR 50 million to EUR 60 million of revenues in both these facilities. So we do see a ramp-up because production has already started with certain customers in both these places. So next year -- I think we are just in the process of finalizing our budget. So next year, we'll see volumes in about that kind of magnitude, EUR 50 million to EUR 60 million. I think -- going forward, I think FY '22 probably could also go to probably about EUR 100 million plus in both these facilities. So we are looking at maybe going up to probably even EUR 120 million, EUR 130 million in the -- probably in FY '22, but we have to wait and watch how the market behaves.
This EUR 50 million, EUR 60 million, you said is basically from 1 facility or both put together, you're saying?
No, no. Each of the facilities, each, EUR 50 million to EUR 60 million each.
Okay, okay. But is there some, like say some of the business is transferred from the older facility of ours also in this? Or is all new orders?
No. These are -- so these businesses are all businesses, which are all new orders. These are all new orders, which we have won for these facilities only.
Okay. And how much revenue we'll probably do for Morocco this year, FY '21? Or maybe what we did in third quarter?
This is about 20 million. I think it's about a little bit around 20 million is what we will do in this year.
Okay. And secondly, now that probably a large part of CapEx is complete or is basically going to complete, how is the plan of CapEx and also debt reduction next year?
So I think, see, now you have to -- see today, I think our focus is definitely going to be on minimizing the CapEx. So the CapEx, what we've been doing last 2 years obviously had to be done because we had to kind of -- we've won a lot of new business, and we were not in some of the regions like Morocco, Brazil and in some of the other regions of East Europe and India. So those things have to be done. All have come at the same time. Now we've been looking at expanding in these facilities -- going forward in these facilities only. But speaking about CapEx, CapEx, of course, will not be in this June at all going forward. So we are extremely conscious about incurring new CapEx from FY '21 onwards. They'll definitely be much lower than what we have been doing in the last 3 years. That's for sure, which will, of course, help us in generating more free cash flows and also reducing our debt.
So can you provide some color on the numbers basically over there, rough basically...
At the moment, I'll not be able to share the numbers because we are in just the process of financing our budget till about March end. So we are not yet very clear on it, but I can definitely tell you that the debt -- free cash flows are going to be there and the debts definitely going to be going down.
Okay, sure.
To expand on Tarang's point, we are rebalancing CapEx between facilities, so we are moving, for example, in injection molding machines from plants in Czech Republic to the new plant in Poland to avoid investing in new assets. We are developing partnership with suppliers, especially on the plastic molding, so that they bring their own facility, their own investment, their own machine close to our facility and so that we can save on CapEx, especially relative to plastics. So it's a big focus for us right now. And we are really changing the deals in terms of investment.
The next question is from the line of Ronak Sarda from Systematix.
So first of all, thank you for providing this breakup between the new facilities and the regular business, that helps us clarify a lot of things, thanks for that. Sir, my first question is on the India business. While you highlighted the BS-VI production will be lower in the quarter, just wanted to understand from your side, how has the ramp-up been from our side? I mean, are there any production glitches? Or the ramp-up has been very comfortable and the product validation has been, I mean, is well from our side?
Yes. I think that where we are concerned as Varroc -- I think see it's not an easy challenge for any of our customers, the OEMs, when you're transitioning from BS-IV to a BS-VI.
Right.
There are a lot of things involved. I think having said that -- I think, yes, it's a challenge for both the -- both us as well as the OEMs, but I think that we're negotiating all the issues which have come up pretty well.
Okay.
And I think we will all be ready. I think probably in March we will see almost like a full implementation of BS-VI products into the market. So I think if you ask me, I would say that the ramp-up is happening quite well from our side also and also at the OEM -- on the OEM side.
Right, right. So, no major issues, which can create some constraint or some cost, which can come in because of...
So I think that -- so at the moment, frankly, the only issue, which could come up, I think, probably -- for this month, February, everybody is covered. The issue is of getting in components from China. So a little bit of disruption on volumes may happen because -- see, we are probably covered quite well, probably in this year until March. But the question is not whether we are ready or not, the question is whether the OEMs and some of the other supply base, who are probably sometimes more dependent on China will be ready. So the vehicle volume really will depend on the situation in China I feel. So we will have to wait and watch how the volumes pan out. February is fine, I think. But March onwards, we'll have to see how things pan out in China.
Sure. Sir, actually, I didn't mean China because that is something beyond control right now. And honestly, there's very less information as well. But other than that, no major hurdles in ramp-up?
No. No. No major issues. No major issues at all.
Right. Right. And sir, second question is on VLS. I mean, if we see the operating losses at the new facilities. I mean, I'm assuming these are more of ramp-up related or trial-run-related costs. But we are not facing any challenges, again, on the production side. So as the ramp-up happens, this would really turn profitable as the utilization picks up. Is that the right way? Or there can be some challenges in the production in the newer facilities in VLS as well?
No, I think that -- see launches do happen. And there are a lot of launches, which have happened, I mean, for us in the last couple of years. Yes, and we have gone through a little bit of a tough phase by launching the various products. But having said that, I think -- I mean, all the launch-related costs are a little bit behind us. When it comes to at least the regions where we already kind of been launching products like whether it's in the Czech Republic or Poland or Morocco. I think that's something which we have passed, now I can say that when we -- as we move forward, we gain in sales and all the -- lot of these programs now gain momentum. We get the volumes in, like I'm talking about in Poland, Morocco, EUR 50 million to EUR 60 million each. We definitely see that we are coming out of these losses. And we are coming into some level of profitability at least.
Sure, sure. That's great to hear. And the final question is on the new products. I mean, you showcased some really good products at the Expo. So, on the digital clusters, are we currently supplying the clusters today to end customers or these are purely new products developed? And are there any visibility on the orders here?
No, no. We are already supplying digital clusters for many years. We've been in this product for maybe 15 years. We are the first one to launch a digital cluster for Bajaj -- for the Pulsar 15 years ago. So we have been doing clusters for Bajaj, for Honda, for Suzuki. We're going to also be developing for some of the other OEMs going forward. But the clusters are getting more complex as their navigation systems, which are coming in, more of telematics. Data has to be provided through the cluster -- on the cluster and through the cluster. So, the cluster is also getting more complex, and we are very ready for it. We are ready for -- we have our own telematics platform as well as we do these complex type of digital clusters. So for us, we see this as a very good growth. We see a lot of growth opportunities related to the digital cluster because going forward we won't really be seeing much of mechanical clusters anymore. They'll all be turning digital as we move ahead.
So are we targeting the 4-wheeler segment in India as well for these products? Or these are purely for 2-wheelers for now?
See, We will only target the 4-wheeler, definitely not the passenger car at the moment. But, we may be -- we may look at some commercial vehicle clusters or something where -- it's something which is very similar to what we do in the 2-wheeler. So we'll be looking more actually at the 2-wheeler industry. We still have a long way to go to supplying to most of the OEMs in India or abroad. We have a long way to go still. So I think our focus will be more 2-wheeler, but I think there are some opportunities, which could come up in probably the light commercial vehicle market, which we may be looking at. But at the moment, there's nothing firmed up in that regard.
The next question is from the line of Hitesh Goel from Kotak Securities.
My question is related to the -- basically the VLS business. If you look at this year, I think you'll end up with a EUR 10 million loss on the new plants with a EUR 40 million run rate. And I think if I recall right, at around EUR 4 million, EUR 5 million -- EUR 3 million, EUR 4 million monthly run rate, you would be EBITDA breakeven, right? So I mean, if the -- to reach EUR 40 million, EUR 50 million revenue for -- on an annual basis in Morocco that would lead to a EBITDA breakeven for next year. Can you shed some light how should we look at EBITDA margins once we move in the new plant from EUR 100 million to, say, EUR 180 million over the next 2 years? How should we look at the margin's profile?
See. I think that see, look -- see, we have made a lot of investments in all our new facilities, especially Morocco and Poland and in our expansion of the -- this thing -- Czech facility. Now, even next year, what's going to happen is that we are not running really at a full run rate. I mean we'll be probably at about 40% to 50% of the revenues we want to achieve. I can definitely say, I don't know at the PAT level, but at the EBITDA level we'll definitely be positive. That's for sure, even at this level. In fact, we want to push to do as better in the -- on the EBITDA side as we can. That's a basic focus for us, so that's where -- so we're looking at how do we optimize the various major costs of manpower, material, everything over there in these new plants. When the sales next year, though they are -- they'll be going up quite well, but it's not where we want to be. We want to be at least at EUR 100 million, EUR 120 million, kind of revenues for these kind of plants. But having said that, we are definitely going to be focused to see that. Of course, we'll be positive EBITDA, but how much more we cannot do that is going to be a focus for us for sure in these new plants.
And, if I recall it right, I think Morocco is a high-margin plant, right, because it's a lower-cost location. So once we achieve, say, EUR 180 million or so, which is the peak revenue of Morocco and Poland, right? I mean, you said?
Yes, yes.
So what kind of EBITDA margins should we assume because you're already at a run rate of 10%, 11% margin for your existing business?
Yes. Yes.
So how should we see the Morocco plant margin at peak revenue?
See at peak revenue, I mean, as a plant, I mean, definitely, we should be at, at least -- see what happens is that it's a competitive market. But I can definitely say in the place like Morocco should actually be giving you 12% EBITDA margin; otherwise, we're not doing our job.
In Morocco, also, I wanted to add that the fiscality is very attractive. So the first 5 years, there is a 0 tax. Then we have some good incentive package that are making the overall equation pretty competitive.
Okay. And on the existing plants, can you get us -- give us a sense what kind of operational improvement you're doing. There was also Electronics JV, which was going to give you cost benefits. So can you talk about that also. Stephane?
Yes. So several axes for us to improve. We are putting a lot of focus right now on our systems. We are upgrading SAP system. We are focusing on material flow and planning from SAP. These are important systemic upgrade that we need to implement in order to go from the current state to -- from good to great, if you want. So this is really a big focus for us. Among the vertical integration of electronics, we have already installed 1 SMT line in our Romania JV. We are in the phase of validation right now. So we have produced the first [ boat ]. They are in the phase of validation. The target is to start the production of the first products fully validated by the customer in July. So we have a few more months to go through this validation and to ramp up the production, but it's according to our schedule. Then, after the following year, we have 2 more SMT lines that are coming. And then, again, the following year, additional 6 SMT lines in total -- targeting 6 SMT lines in total, which will represent about 1/3 of our outsourced electronic purchases right now.
And Stephane, when these 6 assembly lines come through, what kind of cost savings are you looking at from the JV versus the...
Right now, we are confirming with the first products that we are transferring the assumption that we initially took. That means we are able to generate 10% decrease versus external purchasing price right now. And, in addition to this, we are able also to generate margin on PAT from this joint venture.
Okay. And on the existing -- basically, I got the sense on new plants, but in VLS on the existing plants exclude -- existing business, excluding the new plants, do you see any growth in FY '21?
FY '21 is the lowest point for our plant in Mexico. But after this point, we are seeing some interesting growth because we have won significant new programs during this fiscal year for Mexico. So Mexico is at the lowest point, but will come back in the following years. In Czech Republic, we have made some increase of capacity. We spoke about the M8 line. So you will see also some increase of revenue next year in the Czech plants as well.
The next question is from the line of Basudeb Banerjee from AMBIT.
First question, sir, if I see your customer segmentation of VLS, A, B, C, D, so now more or less breakup contribution of most of them are largely similar. So it's quite confusing, so if you can help us understand? May not be you take the name, but as usual you mentioned large North American EV maker in that risk.
It is mentioned in the footnotes to the Slide.
But anyway we can -- I mean, see what we can say here is that Ford has traditionally been our largest customer, and they will remain among the top 2 customers going forward too. And -- but like I said that the reason we took up such a big expansion a couple of years back with 6 new plants was to align ourselves with the whole VW group, including all their brands of Seat, Audi, VW and Skoda. And also with the Renault-Nissan-Mitsubishi group because these are 2 of the 3 -- top 3 OEMs in the world, making 10 million plus cars. So, as we go forward, we will see that -- firstly, immediately we'll see that the VW group. In fact, it's already the second largest group in our portfolio after Ford, and they're going to become the largest, I mean, going forward from the following year. We also see the Renault also. Renault, Nissan, Mitsubishi also will be growing a little bit faster than some of the rest in the coming years. The whole idea is, of course, we protect our business with the -- with our existing customers; Ford, JLR, Tesla, FCA and PSA. But a lot of the businesses we have won in the past few years has been with the VW Group and with Renault-Nissan group, which is very good for us. Because if you're aligned with strong OEMs like these, you could be sure that you will be growing in a more effective manner. So that's what's happening at the moment.
So, next question, sir, as you mentioned, EUR 385 million as the target order addition this fiscal part of that complete new models or some ramp-up of existing. So those are the peak level revenues on an annualized basis from those projects. Is that right, sir?
Yes, yes. So there also EUR 385 million includes new wins and rewins. Normally, they are about 50-50 because rewins are equally important. Rewins are something, which you already do, and they are refreshed and rewinning that is for us like winning a new business only. So EUR 385 million, you're right, is what you had said is the target, which we keep every year. And last 2 years, we've been exceeding this target actually. We have won more than this EUR 385 million. And this year also, we are hoping to achieve this EUR 385 million. We already had the EUR 318 million, which we have set until December end.
But to the questions, these are not peak revenues. These are average revenue per year for this program.
Okay. That's great. So to understand, sir, as new orders getting added, which will be average revenue per annum. Similarly, some model orders, which also our models get close to shelf life expiry, so how to understand that what is the quantum of revenue, which goes out on an average per annum so that on a net of basis one can understand the prospect down the line?
Stephane?
The average life of the projects in lighting is about 3.5, more 4 years. So that gives you an idea, but we have exceptions. We spoke about this a little earlier. We have a program that just got extended from FCA in North America, the Dodge Challenger, we have the headlamp, the rear lamp. It's a program that we have been producing now for 5 years almost, and we got extension of the contract for another 2 years. So this is always a good opportunity for us because we don't need to put additional engineering. We don't need to put additional CapEx. So we like this. So, this is to give you an idea about the life. For next year, we see a significant increase in terms of revenue. We see the ramp-up of several projects, mainly in the new facilities, but in the current facilities as well. And we should be close to EUR 1.2 billion as far as VLS is concerned.
For fiscal '21?
Yes.
Okay. That's great. Sir, the next question is as you mentioned earlier, close to INR 250 crore, INR 300 crore potential revenue in fiscal '21 from Cat Con and EFI. And later on, you mentioned, INR 400 crore to INR 450 crore overall will be a 6-incremental revenue. So will it be right to assume around INR 150-odd crore potential revenue from e-carburetor in '21?
No. I think INR 150 crores. I mean, we can't really share that number, but I don't think it will be -- we have a share of the business of e-carb. We are not 100%. And we also have to see what -- I think the e-carb opportunity is -- the number is going to be, I think, a little bit lower. But I think it's for us although there are INR 60 to INR 70 crore opportunity, the way we see it, next year.
Sure, sure. And second thing with your stand-alone EBITDA margin hovering around 10% to 12% in general. So this INR 400 crore, INR 450 crore incremental stand-alone revenue, which will be north of 12 -- 10% mix in '21 ideally. So whether this will be equal margin, dilutive or better-than-existing portfolio margin?
So I think that -- I think overall, definitely, I think our margin should definitely grow overall with [ the health ], but I think generally, I mean, with customers today, especially when the cost of the BS-VI vehicles are almost 10% more, I don't think any OEM makes -- lets you make a very good margin on any of the new products also. The products are competitive. So I think that it's going to remain in the same kind of a region, but because of higher sales, we cover our fixed costs in a much better way. So we do expect to increase the margins with this increase of sales, which is very good for us.
So will it be right to assume gross margin of these new products to be similar to existing portfolio gross margin, not EBITDA margin?
Yes, yes, yes.
Sure. And last question, sir, previous quarter when the first instance of major start-up costs for Brazil, Morocco came into the numbers. So this quarter, Poland came in. So if you can segregate that separately on a Q-o-Q basis, what was the status of start-up cost of Brazil, Morocco separately relative to previous quarters and separately, the cost related to Poland because revenue might -- as you said, was very small.
[ I think we just said ] Poland will be about INR 20 crores.
Sure. And for Brazil, Morocco compared to previous quarter?
It would be about [ 35, 36 crores ] for this quarter.
And last quarter it was 42-odd?
For last quarter, it was about [ 32 crores ] for Brazil and Morocco.
So not much of a change, you mean for Brazil, Morocco cost on a Q-o-Q basis?
Yes.
And how to look at only Brazil, Morocco, that cost in coming quarters?
That should go down.
Will it be possible to quantify or it depends upon revenue down the line? Or any color on that?
I think Morocco would go down to over INR 10 crores, less than INR 10 crores.
Which quarter?
Q4 of this financial year.
Okay. That's a significant reduction.
Yes. Brazil will be continuing at this pace.
And Poland will increase or largely will be the same?
Poland will be near around this for another quarter, then it should stabilize.
The next question is from the line of Priya Ranjan from Antique Stock.
One is on your EFI, I mean, with -- joint venture with DellOrto. So when can we see the product rollout, I mean, in terms of supply from your end?
So we are planning -- see, we have 2 customers today. One is Royal Enfield. And the other customer we have is Mahindra Two-Wheelers JAWA and other models of Mahindra Two-Wheelers. We have the 2 customers today. So we see that probably before the end of this month, we see the start of our supplies for the electronic fuel injection parts.
Okay. So is it a complete system? Or is it just a part?
So frankly, see, what we are doing is we are supplying as a joint venture the total body and the ECU, which is the 2 major products. We could have supplied the other products also, but they are more like commodities now. So what is happening is that the OEMs prefer to directly buy those products from the concerned existing suppliers. But the integration of all this whole system, the responsibility lies on us. So we have to integrate all these parts and do the whole collaboration at the customer end. So that is our -- that is the job of the supplier, though we are supplying the 2 critical products, which is something which, of course, we can't let go, and let OEMs get these 2 products [ from anywhere ], but these are the 2 critical products in the EFI system.
And what kind of opportunity in terms of sales you are looking at from overall?
Two products, I think, from a JV angle, I think it would be -- the opportunity, what I understand, would be close to -- if I have to just see the volumes, kind of a thing, it could be 250 -- it's about -- it's a INR 60 crores, INR 70 crores opportunity.
Okay. And this will be classified under share of business from JV, right?
It will be classified as a business from JV. That's right.
Yes. And in terms of -- I mean, if I have to understand that in BS-VI, we have seen 3, 4 more additional sensors, et cetera, is also getting used around the EFI ecosystem and plus the regulator rectifier, et cetera, is also changing. So how do you see this opportunity for yourself? Or there is some talk that you probably have lost some of the share in Bajaj for regulator rectifier. Is it...
Not true. Regulator rectifier is a very strong product for us in Bajaj as well as in RE, in Royal Enfield also. So regulator rectifier is one of our very -- is one of our main products. So we are very much there. We have enjoyed a very large share of business when it comes to both -- when it comes to regulators. Yes. The other parts like lambda sensor and other sensors, for the EFI, we are not present in those products. But regulator rectifier is a very, very core product to Varroc. And we don't lose any share of business here.
Okay. Glad to hear that. And just on the VLS part, if we have to assume that probably the next year, [ Europe, more -- ] production of passenger car goes down by, say, 5% to 10%. So how do you see the -- your impact in overall revenue? And that EUR 1.2 billion revenue, what you have just -- as Stephane said, is assumed at what growth rate?
Stephane?
Yes. So we are in the phase of finalizing the budget right now, but we have taken the assumption that there will be a smaller decrease in European and North American market. We don't see a big decrease. We see a smaller decrease. Keep in mind that last year, in North America, for example, 17.1 million vehicles produced. This is a pretty good number. This is a small decrease, but it's a pretty good number. Europe has also a pretty sustained number also year-over-year. The big question mark is China. So the EUR 1.2 billion that we see in terms of revenue is showing a potential increase of over 20%. That's significant in a market that is in a slow decline. This is the result of the business acquisition that we had in the last 3 years. This is the reason why we have put all these additional capacities. Now this is the time for us to deliver on all these projects that we have acquired, that we have developed, that we have not validated. And now we are ramping up with the customers.
And just on Brazil part, I mean, we have seen that you have guided like Morocco will be -- costs and the start-up costs, et cetera, will be lowered in Morocco. But Brazil, why do you see that cost is not coming down, start-up costs as well? My sense is probably Brazil market is recovering overall.
Yes. Brazil market overall is recovering, but we are very small in Brazil, and we decided to stay small. This is a market where it's very complicated to make money, lots of taxes, lots of barrier for business, lots of, let's say, administrative additional costs. So we want to keep Brazil to support our global customers and global platform. Today, we have one project with [ Ola ], one project with Volkswagen. This is part of our global strategy. But we don't focus on Brazil for Brazil. We don't want to become the Brazil #1 lighting player. Actually, the Brazil #1 lighting player is losing money and has been losing money for a long time. So we want to be careful in this complicated market.
And as far as the Tesla plants in China as well as their plant for Germany, so how do you see, I mean, the product you required to revalidate your supply agreement with these facilities or your existing agreement suffice?
No, there will be new contracts for these additional facilities and additional volumes.
The next question is from the line of Nirmal Bari from Sameeksha Capital.
My first question is on the TVS. We had acquired some business with TVS. So how is that part ramping up?
Yes. So I think we have acquired the business of Magneto's for the 2-wheelers of -- for TVS. We are going to be in 4 models of TVS, as we move along, I think the first batch of Magnetos for, I think, one of the models is going to start in this month in February. And then slowly over the next [ few ] months, I think all the models will ramp up, and we're expecting a volume of at least per month 60,000 to 70,000 of these Magnetos per month. And post, I think, the successful launch of these Magnetos, after a few months, I think we do expect that we -- there are some more products which we've been discussing with TVS open out for us as we move along.
Okay. But [ at present ], what is the opportunity size in terms of revenue?
So I think about 45 crores to 50 crores minimum on the Magneto side.
Okay. And in continuation with the previous question on Brazil. So we had actually given up on the second phase of expansion on Brazil. So what was the CapEx that we were anticipating there, which is not going to happen now?
It was about EUR 8 million, which is not going to happen now.
The next question is from the line of Aditya Jhawar from Investec.
Yes. Just wanted to check on Sa-ba. One of the reason of acquisition was to get access into Hyundai. Has there been any progress on this front?
Yes. We won our first project with Hyundai. This is called a garnish lamp that is on a small vehicle called the i20 for Hyundai. So we have won already our first program in Turkey. Thanks to this, we are trying to open the doors also with Hyundai in India. They are going to audit us in a few weeks in our new plant in Chennai. We are in discussion with Hyundai in Mexico. And we are in discussion, pretty advanced, with Hyundai in Vietnam also so, so far, this is panning out pretty positively.
The next question is from the line of Mahesh Bendre from Stewart & Mackertich.
I just missed the number. I mean for the new facilities that come up, there is Poland, Morocco, Brazil. What kind of contribution we see in this financial year?
This financial year, Mahesh, it will be negative. I would say about 30% negative EBITDA margin.
No, no. I'm talking about revenue.
Revenue will be very small. So right now, if you see, we have done almost INR 220 crores till now, so which may go up to, I would say, about INR 300 crores.
INR 300 crores, okay. And next year, you were talking about generating additional EUR 50 million to EUR 60 million both from Morocco and Poland.
Both plants.
Both the plants together.
Yes.
There'll be other plants also.
So EUR 130 million, EUR 140 million additional incremental revenue can come from these facilities is a right assumption?
Yes.
Okay. And another thing, sir, last 2 quarters, we have seen our performance has deteriorated in terms of profitability. Our net margins have fallen back to the 1% now. Though our operating performance has been good, EBITDA margins are good, but the rest of the items below the EBITDA has been really impacted. So do you think the current quarter is the -- I mean, is the bottom that we are seeing now? Or is there any possibility that a similar situation could happen next quarter as well?
Well, I think, let's see, today, see what we have been missing on so far in the last 5 quarters, I would say is the sales. See, unfortunately, the sales in India have degrown, and we have been almost flat in our VLS business. We see now a good momentum from January onwards in our VLS business, which is, of course, 62%, 63% of overall revenues. I think -- so having seen this, we do expect, of course, that the worst is behind us. And we are only going to be improving going forward. And that's why we are focused. I think we needed these sales, and I think this is definitely going to help our overall performance now going forward.
Sure. So I mean, in FY '20, when could we see a dramatic change in terms of our performance? Because if the revenue -- incremental revenue comes up, operating margin slightly goes up and rest of the fixed costs are covered, we could see a dramatic change in the profitability.
Yes. So we will definitely see, I mean, an increased profitability, a good increase in profitability next year.
Sure. And sir, last question, on domestic market. You said we have received many orders, INR 200 crores, INR 300 crores of orders. Sir, assuming that the market -- 2-wheeler market remains what it is now, flat growth, still be able to grow 10% of our market?
We'll grow 10% next year, saying -- keeping the market remains the same. We will definitely grow 10% next year because of BS-IV and also because of cross-selling on some new customer like TVS from Magneto and some other customers also, some new products. So we'll definitely grow 10% next year from this year's level.
Sure. So what kind of tax rate we should assume for the next year?
Yes. So next year, probably, the tax rates will go up to some extent because, in Czech, we are kind of close to maxing out on the tax incentives that we can avail and utilize. And of course, Morocco and et cetera, we will have benefits [ from Morocco and ] Poland, but that may not fully compensate. So next year, we are still working out the budget, et cetera, but probably from a 20%, 21% level, you may see it go up to 24%, 25%.
In FY '22?
I'm talking about FY '21, the next financial year. The one beyond that, it's a bit difficult to estimate [ and talk about ]. And it will be probably around the 25% level. You can take it for the time being.
Sure, sure. And sir, the last thing I mentioned, any CapEx plan? I mean any CapEx number you would like to share with us for next 2 years?
Yes. We are currently in middle of our budgeting process, so [ we have not yet formed ] the numbers. Definitely, it will be on the lower side compared to the current year because a large part of the investment are made in the greenfield facilities and so on. So you will not see the same level of CapEx. And -- but it would be pretty much [indiscernible] to give numbers at the moment. But it will be definitely lower than...
But CapEx will be lower than -- with depreciation, is it an indication we should look at?
Pardon?
Is depreciation [ lower than CapEx ]?
Depreciation. Yes, yes. See depreciation will be there on the investments already made right? So the...
No, no. I'm saying the CapEx -- incremental CapEx will be lower than depreciation cost, is it the right way to look at it?
Not necessarily because depreciation is a combination of the depreciation on the physical asset plus the amortization of the engineering costs plus the amortization of the lease rentals, the capitalized lease rentals. So it will not exactly relate to that.
No. I'm just looking at -- I understand that you are going through a budgeting process. But just wondering if INR 670 crores, INR 680 crores is the depreciation cost for this year. Then -- I mean maybe INR 750 crores next year. Then the CapEx will be lower than this number or higher than this number. Just any view on this.
Yes. It will be kind of equal or maybe slightly lower than that.
The next question is from the line of Niranjan Sakhalkar from Acuitas Advisors.
I wanted to know if you are seeing any impact of the coronavirus on your OEM customers in Europe and North America and, in turn, on your orders?
Stephane?
So for the moment, no impact from the customers. But it's still early, I would say, for the supply chain. There was just an extension of 1 week of the Chinese New Year vacation. So everyone was covered with the material they had in the pipeline. As far as we are concerned, the good news is that we have been able to restart both our facilities. The facility in Changzhou received the authorization from government 2 days ago and restarted production today. The facility in Chongqing received the authorization yesterday, and we restarted today. We are not at full capacity because we don't have the full crew right now. But it's more than enough to cover the needs that we have for our customers. Most of the customers are restarting later this week or next week. When we look at our top customers, Changan is restarting on the 14th, so on Friday. Changan Ford is restarting on the 1st of March for 1 facility, on the 18th of February for the other one. [ CJLR ], on the 17th of February. So we have a pretty good understanding of where we stand with the customers. Some have already restarted. GMC, for example, has been producing some ambulances since the 30th of January, and we support them with our lamps. In terms of supply chain, we -- for the business that we have outside of China, we don't have a direct supplier located in China right now. We are allocating our purchases in low-cost countries but close to the regions where we operate. So that means mainly in Eastern Europe, in Morocco and in Mexico for our Mexican and North American operations. The exposure that we see to our business is mainly on the suppliers of our suppliers. So that means the Tier 2. On the electronics side, a lot of electronic components are made in China. So we are developing backups, trying to understand the available stock of electronic components and [ bolt curves ], trying to develop some contingency to avoid any impact. We do have some injection molding tooling sourced in China. The exact count is 156 right now at various stages, some are in development stage, some are at the end of the process. We have a very close follow-up of this. In order to be proactive, we decided to stop the sourcing of injection molding tools in China right now. The last batch, we were able to source in Malaysia, for example, this week, but we are monitoring the situation. So as far as we are concerned, we believe we are pretty much under control. As far as the customers, we haven't seen any shutdown right now. There is a risk that someone will not be able to deliver one piece, and the chain will be stopped. But I don't think we will face any long-term shutdown. That's our position.
The next question is from the line of Nishant Vass from ICICI Securities.
My first question was on the business VLS, and you've been highlighting about reducing CapEx. Just want to pick your brain about how do you think about the fact that your major competitors, the larger ones, are continuously highlighting increased R&D investments as high as 10% of sales. And [ dramatically ], I would kind of get your sense on this, because you're moving away from, say, halogen to LED, and in your presentation, you highlighted ADAS products. How much do you need to focus on continuous development into R&D? And what kind of investments do you think you will have to outlay for that? And are you -- are we going in that direction where you're kind of scaling CapEx down and ignoring good CapEx also? What's the risk sitting there? The second question associated with that is similar to Tesla, where we kind of missed the bus a bit. Do you see any risk with existing customers, some of the larger competitors trying to get in, say, Ford in that manner? And how are you placed with the new programs for Ford in the larger SUVs, which are transitioning from halogen to LEDs in North America? And I'll follow up with more questions.
Stephane?
Well, that was a lot of questions, but trying to take one after the other. In terms of engineering, we -- please keep in mind that we think that we have a different footprint than our competition for engineering. 93% of our engineering resources are in what we call the cost-competitive countries. Czech Republic is our #1 location in terms of engineering, in terms of development. This is where we have our core innovation team. And when we compare to our main competitors, their main core development site is located either in Germany for HELLA or for MAHLE. It's located in Japan for Koito. For Stanley, it's located in [ Houston Valley also ]. We have a cost advantage from that perspective. And our number 2 engineering location is India. And we are strong in India, and we believe India is a great location in terms of finding the right profile, the right competencies, but also having the right cost base. So the combination of the hourly rate in Czech Republic and the hourly rate in India allows us to do a lot of things at a relatively lower cost. In terms of positioning, we are not positioning the company to be the #1 innovator of the market. We position ourselves to bring technology innovation with cost-competitive solutions. We try to bring the cost down of the main -- of the many new innovations. And we have been successful to bring low-cost LED to the market, for example. And this is the sense of history. We see a decrease of the halogen technology to be replaced by low-cost LED. So this is where we play right now. With generalist customers, with customers that are bringing volumes but are also bringing a certain level of technology. If we look at vehicles like the Ford Fiesta, the Ford Focus that are entry vehicles in Europe's segments A, B, today, we are switching from almost 80% of halogen to 100% of LED. And one of the main drivers for this is the emission. By switching to 100% LED, the car manufacturer is getting the benefit of 1 gram of CO2 per kilometer. And right now, with the kind of target that they need to comply with, this is starting to become a big deal, and we take advantage of this. So that's about engineering. About CapEx, I think we have invested a lot in the past years. And now it's important that we milk the assets that we put in place. We are not in a race with spending most. We want to spend smart. We think that going forward, it's not going to be a big differentiating factor on the cost to produce anymore the plastic. So we are trying to save our money in terms of plastic injection. We think we have enough capacity. We try to continue to invest smart. That means we invest more in electronics. We are investing in our electronics JV, for example. In terms of investments, we are trying to reduce also the assembly line so that for every new projects, we don't have to invest in the new assembly line. So we've developed -- [ found out ] that are allowing us to reuse up to 70% of our assembly lines from 1 generation of product to the next one. We have developed also low-cost suppliers. We source in Turkey. We source in smart places to allow us also to keep the CapEx down. In the current quarter, the focus is really on the cash generation. And these actions on CapEx are helping us to show positive free cash flow in this quarter. And this is what we want to show going forward. So I answered to engineering and to CapEx, what was the third question, sorry?
Yes. So the third question was primarily on competitors trying to break into your existing [ stronghold customers ].
Yes. So that's part of the game. Some competitors are trying to get our business, but we are getting their business [ in essence ]. So it's -- there is nothing that is certain. There is nothing that we take for granted. I think the most important for us is to perform on a day-to-day basis. If we give the right quality, the right delivery and the right cost level to the customers, then they have no reasons to distrust us or introduce new competitors. A few months ago, we received the supplier of the year award from Ford. And this is a very big sign. We're the only lighting supplier that Ford decided to reward globally. So this is showing their confidence in us and in our business. We have a level of quality today in the range of 7,000 IPB, that means incident per billions of parts we deliver, which we believe it's a pretty good level in terms of quality. The industry average is around 10,000 right now. Have a PPM level at around 73. So these are things that are very important, that are part of the fundamental, that's a big focus of Varroc. We need to do our job. We need to do the job well. So that the customers have no reasons to move away from us. But at the end, it's also a cost game. So as long as we keep our cost leadership with our low-cost footprint, we are not afraid of the competitors that have plants in Spain when we are able to produce in Morocco. We are not afraid about the competitors that have plants in Germany or France when we are able to produce in Czech or in Poland. We are not afraid of competitors that are in the U.S. when we are able to produce in Mexico. So today, this has played in our favor, and we need to keep this competitive advantage going.
That's quite helpful. Just from your remarks through the call, you kept on highlighting about China. And how do you think that strategy will play out because China, most of your competitors will have a similar footprint [ on cars ] and the fact that the market in China is quite fragmented, you have a lot of joint venture players across the spectrum. So how do you think you will differentiate yourself in China?
We believe that we are too small in China right now. We have the ambition to grow. China is the #1 automotive market in the world. To keep our current position in the market, we have to grow in China. We think that the current situation with downturn since last year, with now a new crisis, it's a great opportunity to try to challenge the status quo. We have some discussions with our JV partner right now. We'll see how we can make things move. But Tarang can add to these statements. We have ambition to grow in China, that's for sure.
Yes. I mean, see, China is obviously the biggest market in the world. I think what happens is that all -- in the rest of the world, we are our own. And as Varroc, we're always very aggressive in the marketplace. Now in China, I think a little bit we're limited, I think, also by our partner because they don't seem to be as aggressive as we are. But having said that, I think, obviously, there's a downturn at the moment. And I think we need to do much more. And that's what we have been discussing with our partners in China. And there -- from last year onwards, we have been winning some good businesses with Geely and also with SAIC -- with the VW Group, SAIC and FAW, who are some of the bigger players in the Chinese market. So that way, things are moving. Things are moving. But yes, not as much as we would have liked, we would like to. But having said that, I think we are, in a way, aligned with our partners, and we're doing our utmost to kind of grow in this market.
Yes. So because -- sorry if I keep hopping on this. But just to understand, because -- if your customer gives you a larger order book in China, you would definitely need to invest incrementally more on that, right?
Yes.
Your current capacity would not be suffice for that?
So we have been investing, but what has happened is that traditionally, our customer base in China has not been very strong. I mean we are with Ford, we are with Changan. We are with JLR. But we've not been with some of the bigger players there who are like the VW Group, with SAIC, FAW, Geely, BYD. They are some of the bigger names. And that's something like what we have done in the rest of the world, where we were lined in a much stronger way with VW and Renault-Nissan. Here also, we are attempting to do that, how we grow in with the winners in the market. That's something which we're very conscious of for the last couple of years. And we have one business, and CapEx is not really an issue because China is a joint venture. Yes, last 5 quarters have been kind of weak, but generally, I think from a company angle, it's very strong. The China JV is very strong financially. So that's not an issue. And to invest there independently, not a problem at all. We could do that anytime. So we are focusing on winning business first. And then, of course, I mean, whatever needs to be done needs to be done.
Okay. A small clarification on Tesla. You mentioned the Model Y. So is that going to be supplied from the joint venture? Or are you supplying it from somewhere else?
So today, we have been sourcing the Model Y for the delivery off of Fremont, California for North America. And then this is for the fascia lamp. This is for the stop lamp, and this is for some small lighting reflects and so on. Tesla doesn't have yet sourced the Model Y for China production for these lamps. They are using our lamps right now for the few cars that they are producing, but they have not sourced the full volume production yet.
So then once it starts in China, in the plant, would you be supplying it from the Chinese joint venture or it will continue to be from Fremont?
Right now, we are supplying from our Turkish plant, this small lighting. And if we are confirmed and if they want to localize in China, for sure, we would be supplying from the JV.
The next question is from the line of Rohit Balakrishnan from VRDDHI Capital.
Hello? Yes. Am I audible?
Yes.
Sir, I'm a bit new to your company so pardon me if the questions are a bit basic. Sir, in your presentation, you've mentioned like-to-like comparisons. So when you are doing like-to-like comparisons, what are you adjusting for? When you're talking about like-to-like in understanding your India business and in your global business, VLS, so what is the adjustment? That is what I want to understand, both for your revenue and for you EBITDA.
Yes. [ Nitin just said ] -- in revenue, it is basically -- in revenue and EBITDA, both, it is basically the Brazil, Morocco, Bulgaria start-up costs in the last year. In this year, it will be Chennai and the Romanian JV start-up costs. The other item is basically the launch cost to differentiate between these 2 quarters and Ind AS 116 adjustment.
Got it. And the other question that I had is for your domestic business, this year, you're saying that it will be growing at about 10% because of BS-VI. But if I were to look at slightly longer-term, over the next maybe 2, 3 years, what is the kind of growth that you are looking at in the domestic market? Historically, it grew at about 12% between 2015 and '19. So I just want to understand, is that the kind of growth that you will mimic or that will be -- this time, it will be much more than that given you have BS-IV and new products?
No. We are looking at definitely a double-digit growth as a minimum in India. And not only the BS-VI products, but there will be also a lot of cross-selling happening off a wide range of 2-wheeler products with other OEMs, whatever we supply to Bajaj. We also slowly -- year-on-year, we're increasing the number of products we supply to an individual OEM. And we're also acquiring new OEM, which is also driving our growth. Other than that, in the Indian market, when it comes to 4-wheeler on the interior plastics side, on the engine, there are a few products we do for the 4-wheeler side. Also, we are doing quite well. We're winning a lot of new business from various customers. So a 10% growth is, I think, for us, something which is a given. How much more we can do, how we can maximize that to a higher level of double digit is something -- what we are looking for. Other than BS-VI for 2-wheeler, we have also developed some of the EV products, some of the electronics around EV, the motor, motor controller. So that's something which, in the coming years, is what also we're going to drive moving forward.
Sure. And just a couple more questions. One was just -- so in your -- I think last time, in the call, you talked about this vision of about INR 20,000 crores in [ Slide 20 on your financial ] which has gotten very good now given the market. So 2 questions on this. So when you think this plan -- this target that you will achieve? And what was -- I mean did you also incorporate some acquisition, inorganic portion as well?
So INR 20,000 crores, obviously, was the vision we set for ourselves in probably 5 years ago. And yes, I mean we have fallen short for -- that included both organic and inorganic growth. We did at a time when revenues were hardly INR 2,000 crores, INR 2,500 crores. Last year, we did about -- a revenue of about INR 13,000 crores with 50% of our sales in China JV. So yes, we have been growing. Yes, the markets, the way they are, we have been a little bit -- from a revenue angle this year, has not gone as per expectations. But I think going forward, yes, we are going to be -- at the moment, we are looking at a lot of organic growth, not so much inorganic immediately, looking more organic. But organic growth is something we're doing pretty well in, whether it's in VLS or in India, I think we have won substantial business over the years. And that would enable us to at least have a minimum 10% growth if not more. We'll be, of course, aiming for a much higher growth in India through 2-wheeler, BS-VI, EV products going forward. [ When it comes to ] 4-wheeler, more of light-weighting of our plastics. Those are the areas we're really focusing in a very, very good way, and we're getting a lot of good traction here also.
Got it. And when you say 10% growth, sir, just so India and the VLS also you're expecting at least 10%, right?
Yes, yes, of course.
Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.
Okay. Yes. I'd like to thank everyone for joining the call and also for the questions. And I'd like to also thank you for your continued support to the company. And yes, all of us understand the industry situation and the challenges that we are facing, and we are hopeful that the measures that we have taken in terms of optimizing the investments already made, correcting the cost structure and improving the efficiencies over the last 2, 3 quarters will -- the results of which will become more visible in the current and coming quarters. So with that note, we would like to close the call. Thank you.
Thank you.