Q3 23/24

Feb 2, 2024

Ladies and gentlemen, good day and welcome to Amara Raja Energy & Mobility Limited Q3 FY24 earnings conference call. As a reminder, all participants online will be in listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ambar Shukla from Motilal Oswal Financial Services Limited. Thank you, and over to you, sir. Thank you. On behalf of Motilal Oswal, I would like to welcome you all to the Q3 FY24 earnings call of Amara Raja Energy & Mobility Limited. Let me introduce you to the management participating with us on today's earnings call and hand it over to them for the opening remarks. We have with us Mr. Delli Babu, Chief Financial Officer. Without any further delay, I request Mr. Babu to start with his opening remarks. Thank you, and over to you, sir. Thank you, Ambar. Good afternoon to all of you who have joined this call. Thanks for coming in. During the current quarter, the consolidated revenue growth was around 15% on Y-o-Y basis. This has come on the back of the lead-acid battery revenue growing by about 12%, while the new energy business has doubled its revenue compared to the previous year. The lead-acid battery business, the revenue growth is on the back of volume growth in four-wheelers both in the aftermarket segment and in two-wheeler aftermarket segment as well. We have seen a robust volume growth. Four-wheeler aftermarket grew at about 11%, whereas the two-wheeler aftermarket grew around 15% during the current quarter. While the volume four-wheeler, there was a very marginal growth of about 2%. The two-wheeler volume growth was around 30%, while the other applications in terms of the home UPS batteries, the growth was stagnant because we have been meeting the requirement through the trading route since we don't have the manufacturing facility as yet. On the industrial battery side, the overall volume growth was around 6%-7%. Most of the segments grew around the same level. While we have seen some strong growth in the telecom segment, which was about 2% higher than the average. The four-wheeler exports also registered a robust growth this quarter, about 25% in volume growth. On the international business side, we have just commenced shipments to the North American geography. While the revenue for these exports is recognized on delivery basis, the commencement of consignments has started during the quarter. On the margin side, in the lead-acid battery business, the lead base was around INR 2 lakh, which was almost 8%-9% higher compared to the previous year same time. But on the back of this volume growth, when we look at the higher lead base, the EBITDA margin will show, compared to the previous year, there is a reduction that is completely because of the higher lead base. Also during the current quarter, we had a trading revenue of about 7% because we are now trading on the two-wheeler batteries. On a YTD basis, the margins are cumulatively better than the previous year. For the current quarter, considering the higher lead base, there is reduction in the overall operating margin. But on a quarter-on-quarter basis, the margins are showing their increasing trajectory. On the new energy business, the revenue during the period has doubled, and about 80% of the revenue is coming from the battery packs that we are selling to three-wheelers and two-wheelers. We, in this quarter, have commenced battery pack deliveries for the telecom sector and some other industrial power backup storage requirements as well. We are producing chargers for the three-wheeler and two-wheelers, which we are supplying to the OEMs like Piaggio and Mahindra and others. As far as the other updates for the quarter is concerned, the tubular battery factory reinstatement is in progress, and we expect the plant to be ready for the season of 2025. In the new energy business, the Divitipalli location where we are setting up our giga corridor, currently the land development and the design works are in progress. We expect that the operations in the giga corridor will start as said earlier during FY 2026. This is the brief on the operations. I will now request any questions that can be taken up. Before that, maybe let me also give one update, that the integration of plastic component business that was purchased from Mangal Industries is also complete. We received all the required approvals from the NCLT and other stakeholders. The effective date for this merger will be February 1, 2024. We will be completing the restatement of the financials, and that information will be available to you as part of our annual accounts. Over to you for questions. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from question queue, you may press star and two. Participants are requested to use handset while asking the question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Kapil Singh from Nomura. Please go ahead. Good evening, sir. My question was on new energy business. Could you tell us who are the leading customers for the battery pack business for two-wheelers and three-wheelers? Are we looking at other segments like four-wheelers, for either battery packs or chargers? Is there some product development or likelihood of revenues from that segment as well? Yeah. See, currently, as I have said in the opening remarks, currently the major customers are Mahindra and Piaggio. On the two-wheeler side, we are having some customer accounts. We are just commencing some of the commitments to the new customers. The volumes on the two-wheeler side are still low. As far as other segments are concerned, we have also started supplying some battery packs to BSNL as part of their country requirement. Also we will be commencing the battery pack sales to the telecom, other telecom tower companies during the coming quarter. As far as product development roadmap is concerned, yes, we are looking at developing chargers as well as battery packs at a higher voltage requirements as well, which will be suitable for four-wheeler requirements. I think that will take some more time before we put up those products, being available to the market. Okay. Sir, these orders which are coming from telecom segment, are they replacing the lead acid batteries or they are incremental? It is actually both. In some of the small cell towers, they are using the lithium packs, and they have also started now looking at replacing the lithium battery packs in some of the base tower stations itself, where the backup requirements are suiting the lithium requirements, lithium technology characteristics. But over a period of time, if the lithium prices were to continue to fall the way that they have been doing in the last six, seven months, yes, they may consider a larger migration as well to the newer chemistry. Understood. And sir, you have also mentioned entry into the North American market. This is for which product, and what is the scale of order book that we have mentioned? This is for the four-wheeler AGM batteries that we are manufacturing. While I will not be able to share the numbers on the order book and all, because there is no such concept of order book. These are basically purchase contracts that will come in based on the requirements of the large retail chains that are there in that country. They are reasonably sizable opportunity, so hopefully they will gain more traction in the coming quarters. Okay. Because the press release actually mentions we have a substantial order book, so that is why I was checking. Yes, we do. We do, but these are order books that will come as part of the long-term contracts, which are changeable based on the market conditions over there. You know the size of the market over there. Naturally, these are sizable orders, but in terms of numbers, I wouldn't want to delve into the details here. Sure, sir. Sure. I'll come back in the queue. Thanks. Thank you. Next question is from the line of Raghu Nandan NL from Nomura Research. Please go ahead. Thank you, sir, for the opportunity. Sir, couple of clarification before I get into questions. Firstly, given that near term, some pressures on the cost, have we taken any price hikes in January, February to offset that? No, we have not taken any price hikes as yet because these levels of current lead levels has been there for the last, almost during the current year, lead always been hovering at this level. I do not think we have taken any price correction except for in case of B2B cases where the passing on will happen. Got it. Because, your competitor has taken. On the volume side, sir, of our inverter, how was the performance Y-o-Y? Y-o-Y, there was no growth. We have just done whatever we have done in the last year. Got it. Sir, coming to my question, one on CapEx and investments. How much do you expect for FY 2024 and 2025, both from the lead acid battery CapEx and new energy investments? My second question was on the lithium project, which is progressing as per plan. For this project, if you can give some color, how you are seeing traction with customers, how do you see the ROE over a two, three-year period, assuming the ramp-up happens to 70%-80%? Can you see ROE of 15%? Will there be any support because of the PLI scheme where the rebidding has started? Would that also help your Would those incentives help your profitability there? Yeah. As far as new energy is concerned currently, as we have mentioned in the earlier calls as well about these three projects. One is increasing our pack capacity as such. Current capacity is about 500 megawatt hour. We would like to ramp it up to 2 gigawatt hour over a period of time. The second project is about the customer qualification plan. The work of that has commenced. Then we have ordered the required equipment, which is more for testing the products and then getting it homologated with the OEs. The third project is about the ePositive Energy Labs, which is basically a research institution that we are building. As far as the initial 2 gigawatt hour plant is concerned, that is something that we said will be operational sometime in FY 2026. As of now, when we look at the return ratios, considering the current pricing levels and also the equipment CapEx levels, we still believe at the EBITDA level around 10%-11% is possible. When we look at the ROE, considering the asset turnover ratio and also the current sale price levels, still it will be very difficult for me to put a number. At this point of time, we are reasonably confident that return on equity could be in the similar range of 10%-11%. These numbers, as I told you, can only be taken on their face value until we achieve a given scale. Any subscale operation in the cell manufacturing will not be the right time for us to really measure the return on equity. 8-9 gigawatt hour scale, when we are running at the cell level is when I think we should really look at what return possibilities are coming up. As far as your first question was- CapEx and investment. CapEx and investment is concerned, I think current year we will be closing with an overall investment of about INR 250 odd crores in the lead-acid business and around INR 250 odd to INR 300 crores between the lead recycling plant as well as the new energy business. I think next year we will have at least about INR 600 crores of CapEx coming in, which may be predominantly focused around the new energy business. Got it. So in standalone operations, generally what we do that INR 400 crore kind of CapEx, that would continue as a for lead plus lead recycling, and then the new energy would further take additional investments, because the INR 1,500 crores which you are investing in Giga corridor, that is what you are saying, right? That this year INR 200 to INR 300 crore and next year maybe INR 500 to INR 600 crore. See, the overall CapEx for lead-acid business because we are pushing the most of the investment on the recycling plant, might get completed by end of this fiscal or maybe the first quarter of next year. So the overall lead-acid CapEx may be in the range of INR 250 to INR 300 only for next year, and another INR 300 to INR 400 crores will be required for the new energy business for the equipment that might get delivered in the next year. So the numbers may change by about a margin of INR 50 crores here and there, depending on how the product progresses. Got it, sir. And the question I asked on PLI scheme and whether you will be participating and whether the conditions for the scheme is same this time compared to the last time? Yeah, there were only few changes that they have done. There are not many, and I do not think they are very seriously material. I think the product characteristics, the value addition requirements within India, and also the ramp-up requirements are more or less the same, and even the subsidy amount is the same. I think we should be able to participate in this tender as well. While this is only for a 10 gigawatt hour tender that the government has launched, I think we will be able to participate in this as well. But obviously, the overall story around the new energy, I do not think there will be any rethinking whether we qualify for PLI or not. Understood, sir. Wishing you all the best, and thank you so much. Very useful. Thanks. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to only two questions per participant. Next question is from the line of Jignesh Gandhi from Ambit Capital. Please go ahead. Hi, Mr. Delli Babu. Congrats on good numbers. Quickly, one clarification on the cell level EBITDA, which you mentioned. You are expecting about 10%-11% EBITDA margin based on current pricing for cell manufacturing operations, or you are referring to 10%-11% ROEs? See, at a level of 7 to 9 gigawatt hour scale is what I am saying that operating margin, Jignesh, because anything less than a 2, 3 gigawatt hour, definitely you will not be able to hit those numbers. You need scale for hitting a 10% to 11% EBITDA margin. Okay. The ROE requirements based on the current CapEx, rough estimate suggests that it may be around that lower double digits. But if the CapEx costs were to come down, then maybe situation might improve. But we have seen the kilowatt hour sale prices also coming down quite drastically in the last 2, 3 days owing to the lithium carbonate prices coming down and also the capacity utilization elsewhere is not full. So there is definitely a tendency to use capacities and then sell at lower prices. While this, I believe, would be more of a temporary blip, I think we will see again the prices climbing once the demand increases. Anything around $80, $90 per kilowatt hour is a reasonable sale price to expect. Otherwise, the unit economics will be very difficult to manage. But even if we look at the current prices level, I still believe, because this is more driven by the material costs that are reduced, I think I still believe the operating margin-wise still 10%, 11% is possible. But as I said, all these are estimations at a given scale. They cannot be done at a sub-scale operation. Right. Got it. A couple of questions. One is, on the standalone revenue, we have seen about 9% growth in this quarter. Whereas we are hearing about 12% top growth in the lead acid business at consol level. So the gap is due to the price pass-through, which should be there in B2B business. Is that the right understanding? No. When you look at the standalone statements, last year same quarter, there was a lithium battery revenue as well. Okay. If I take out that revenue and then purely look at the lead acid battery revenue, you will see that in the segment financials that we have given, where the revenue for lead acid batteries last year was about INR 2,570 crores, which has grown to INR 2,896 crores this quarter. Okay, got it. On the lead prices side, are we seeing further inflation from what we have accounted for in Q3? Because that's what LME prices are suggesting. Aluminum, in that context then, we've also seen price increases in the replacement market. I don't think, see, lead is hovering between 2,050 to 2,150. That is the range that we are seeing at least for the last four to five months. Given this range and the price levels where we are, I don't think there is a serious correction required after pricing. But if lead were to continue to remain at levels of 2,150 and 2,200, then maybe, yes, there may be a need for a price correction. But otherwise, if it oscillates between these levels, I think we are fairly priced is what I believe. Got it. Great. Thanks a lot. Thank you. Next question is on the line of Vibhav Zutshi from JP Morgan. Please go ahead. Yes. Hello, sir. Thanks for taking my questions. My first question is on the new energy business and particularly what's happening in China where LFP battery prices have come down to as low as $50 per kilowatt hour. Obviously, it's very early days, but just the fact you mentioned that some 11% EBITDA margins are possible. On one hand, how should we think about it? As battery prices come lower, is it an opportunity for you to cater more to, say, telecom applications when the volume can go higher? Or is it that pricing can be under some sort of pressure? How are you thinking about this situation? Yeah. You are right, Vibhav. See if per kilowatt hour price of LFP were to come down to 50 levels, which at least the last price that I have seen in India is about $60 to $65. But if it were to further come down, right now I am seeing two reasons why there is this pressure on the pricing. One is there is the inherent competition within the Chinese market and also the material prices, particularly on the lithium carbonate, LVA it has come down, are two contributing reasons for this kind of a price drop. And when we look at the financials of those companies as well, only large capacity, large-sized companies are able to operate around 8%, 9% kind of a margin, whereas smaller companies are finding it to achieve even a 5% EBITDA margin. I don't think this level of pricing can continue forever, and then, the projects be viable because the capital intensity of this business is quite high. If operating margins of 4%, 5% or even 6%, 7% are not sustainable from a business scale point of view. At some point of time, these prices have to revert back. It cannot continue, like this is what at least my reading is. I may be proven wrong because the similar pricing tendency is happening even elsewhere, like solar cell prices also. Now when we look at the Indian cost structure, I think after whatever understanding that I have, I think on conversion cost side, I think we have, I would say there is a reasonable possibility that we may not be costlier compared to any other manufacturer in the world. While on the material cost side, yes, the Chinese ecosystem will definitely give some advantage to them. How much is that advantage? At this time, we believe there could be a 15% on the material cost advantage that may be there for the Chinese companies. That is something that we need to deal with as we move into this business, particularly on the cell side. On the pack side, I think it is fairly a known story because you simply assemble the packs and then it is about the BMS and the other thermal management systems. That is what is the value driver there. But on the cell price, I think conversion cost side, we are reasonably good. Material cost advantage is something, it will take some more time for the Indian ecosystem to really fill in, and it's going to be a long haul. Got it. No, that's very helpful. Thanks for the detailed color. Just as a follow-up, what we are seeing is that there could be a massive overcapacity kind of situation coming in the next couple of years globally, as far as cell manufacturing capacity is concerned. Do you see any risk of, say, dumping of these cells on India, which might result in this kind of a situation? Or, given the fact that you mentioned that we'll be okay from a conversion cost point of view, still, it's not going to be that big of a threat. Any thoughts on that? Yeah. See, I think as we speak also, it's happening. It's not that it is not happening, because 3 months ago or 4 months ago, if you observe, the kilowatt hour prices were somewhere close to 100. I'm sure that pricing pressure is definitely acting on players who have excess capacity, and they are definitely trying to find sources where they can dump the material as much as possible. Like I said, the material cost side advantages what the Chinese ecosystem has. Yes, definitely it will be a challenge for the Indian ecosystem to meet it. But that is something, an industry issue. It is not specific to any one particular company. But if you talk about world capacities, yes. As we speak, if the penetration levels were to become only 30%, 35% and not beyond that on the four-wheeler side, then I think, yes, people will feel this higher capacity burden for a long time to come. Unless the penetration levels on the EVs four-wheelers were to drastically increase to at least 50%, then I think some respite will be there for the capacity utilization. This may also result in some level of consolidation where the excess capacities are there. But yes, it is definitely a new thing that has emerged in the last three, four months. Then we need to be wary about how we invest capital behind it, and then be careful that we are not burning too much cash without understanding the operational dynamics of it. I think we are closely looking at the situation, and then we'll calibrate our plans depending on how this pricing situation emerges. Unfortunately, we got disconnected from the line. Next question is from the line of Mukesh Saraf from Avendus Spark. Please go ahead. Yes, sir. Good evening, and thank you for the opportunity. My first question is, again, just on the numbers. First up is the other expenses. I think last couple of quarters, you were mentioning certain one-offs with respect to higher insurance charges and consultancy charges, power costs, et cetera. Other expenses continue to go up QOQ. So, are we still incurring some of these costs, sir? Yes, Mukesh. The insurance cost is a per annum cost that has increased. Every quarter we have a INR 10 crore burden coming up on a quarter-on-quarter basis. If we look at it that way, there is that burden that is still there. We are also working on certain projects to enhance the internal efficiencies where we are spending some money on the consultancy. I think that should give us the operational efficiency in the coming quarters. Those two one-offs are still there in this quarter also, and I think the efficiency results, some of them may flow in Q4 and then balance in the next year. Okay. Got that. Secondly, on the new energy business, currently on the battery pack, I think you mentioned 80% of that revenue that you see is battery pack. We are seeing the margins improve there. What is your driver for that? What kind of utilization rates we are at of that 500 megawatt capacity that we have right now on the assembly? Yeah. See, the profitability driver is less dependent on the total capacity utilization, because generally, the pack is not a very capital intensive process. But we are seeing- Yeah Considering the volume what we have sold, there is some bit of material cost advantage we had, and also the overall process efficiency also has helped in a bit of better margins. As we increase the scale, some of the fixed costs we have in that business also is actually getting absorbed on a larger volume. So beyond the scale and some bit of material cost advantage, there are no other factors which are giving that efficiency. So, if I look at the other way, what kind of revenues we can do with our current assembly capacity, say, this coming year at 25, until obviously the cell manufacturing will start beyond that. What can we do, sir, on this front? See, the current run rate, obviously the revenue side will also depend on where the battery pricing is, because again, 70% Yeah of the pack is lead. Correct. The current run rate of INR 150 crores can be easily sustained with the existing process, and it can even be stretched to about INR 200 crores. I think with the current capacity what we have, INR 200 crore revenue is possible. Got that. Just lastly, the recycling plant. I think you mentioned from first quarter it can start operations for us. Is that correct? Yes. Next year, first quarter is where we are expecting the operations to commence. Okay. Will this largely replace a third party source right now, or will we start using a lot more recycle lead? We have been increasing the recycle lead portion, depending on- Right sources available for a very long time. You know, we have reduced our import content quite drastically. Yes The BFSR, BWMR rule compliance, whatever scrap we are procuring, I think that might get processed in this facility itself. Okay. That way, the proportion of the secondary lead vis-a-vis the primary lead will not alter just because this facility has come up. But some of the facilities that we are depending on third parties might come down, but we do not completely eliminate the third party dependence. Got it. Great, sir. Thank you. I will get back. Thank you. Next question is from the line of Manan Shah from Electrum PMS. Please go ahead. Hello. Sir, you are not audible. Hello, am I audible? Yes, sir. Yes, sir, you are. Okay. Just a clarification regarding our lithium-ion cell manufacturing of 2 gigawatt plant. Are you going to manufacture NMC batteries or LFP, or both? Yes. To start with, I think NMC will be the first chemistry. Soon after that, we should also get into LFP because in the long term we believe LFP will be the dominant chemistry. That is what we have said even in our earlier calls. We believe 60% of the market will be requiring LFP and the balance only might be the NMC and other chemistries. Okay. Have we collaborated with any MNCs for technical know-how? No. At this point of time, I don't think I have any update on that front of technology collaboration. There are certain efforts that are happening internally and we are also working with certain other agencies. As of now, if you ask me whether we have a large technology partner for this business, no. Okay. Last question is regarding our investment in Log9 Materials, where we own 15%. Are we taking any technical know-how from there? Or if you could shed some light on what exactly is our relationship with them. Yeah. See, as a startup, we made our investment. We are also working with them for certain technology requirements that what we have. Our intention of investing Log9 was definitely strategic. At this point of time, beyond this, I don't think I have any other details to share with you. Okay. Got it. Thank you so much. Thank you. Next question is from the line of Abhishek from Dolat Capital. Please go ahead. Thanks for the opportunity. Sir, what was the new energy business revenue in nine-month FY24? Sorry? How much was the new energy business revenue in nine-month FY24? About INR 400 crores. What is your target for the next year? No, I do not think we have been talking about any targets in these calls. Okay. As you are looking to add many products to leverage your distribution network, like you added lubricants, you are also looking to install solar panel installations. Just wanted to understand, what are your plan to just improve your revenue from your distribution network? See, as a matter of leveraging the channel access, yes, you are right that we have launched our lube business. I think the all-India rollout is just being concluded. So I think it will gain some traction in the coming quarters. As far as solar panel business, along with the batteries is concerned, we look at home energy as one piece, which could be a backup storage, which could be a solar panel requirement. So there are multiple ways to approach this entire home energy business. Right now, the concept around this business is getting developed. So in the future, as we see the opportunity, either a battery agnostic solution can be developed around the home energy requirement, both for backup as well as solar. As and when we launch those businesses, we will update you as to what is the business case of that. Thank you, sir. That is all from my side. Thank you. Next question is from the line of Kapil Singh from Nomura. Please go ahead. Sir, you mentioned that there was 30% growth in two-wheeler OEMs. Can you just give some color, like what was the driver? Is there some new customer that has ramped up there? No. I think the customer portfolio-wise is the same. It is only that volume growth was higher during the current quarter, Kapil. This is just market growth mainly. There is no new. Yeah, it is more of the volume growth that we have seen in the OEMs. Okay. Yeah, thanks. That is it from my side. Thank you. Next question is from the line of Prakash from Acorn Trade. Please go ahead. This Mangal Industries acquisition merger signed is there? Yes, that is getting concluded now. I think we will be completing that merger in the current quarter. Okay. And the swapping ratio is the same, whatever the upload on this one is there at the time of merger documents? Absolutely. Yes. And at that time, you mentioned this one is there, after this merger, EBITDA margin improvement is there, 0.75%-1%. Whether it reflects in the next year? Yeah. Once we restate the financials, I think we will be able to comment on those numbers. Okay. Thank you. Thank you. Next question is from the line of Sanjay Satpathy from Upper Circle. Please go ahead. Yeah. Hi, sir. Just need a clarification. This new inverter battery factory, when is it likely to come up, sir? We will be using that factory, for the calendar year 2025 season, it should be available. We are expecting to commence the commercial production sometime in February 2025 or March 2025. Okay. Until that time, you will be doing this trading for that business? Yes, you are right. As far as your electric vehicle lithium-ion batteries consumption, can you just give us some progress when it is likely to start commercial production? As I mentioned earlier, our objective is to look at starting the commercial production in FY 2026, and I think as of now, there is no change in the plan. Unless there are further things that require more time or less time, we will come back to you as and when that understanding emerges. Understood. The last thing if I can check, considering that your competition has taken price hike and the costs have gone up and you are not taking price hike, so are you likely to see continued margin pressure or you have something up your hand that will help you to improve margin from where it is now? See, I think considering the lead base and also once the tubular factory comes back, manufacturing revenue, if we can improve, yes, there is a possibility of improving the margins further. As far as rate hikes are concerned, I do not think we will shy away from taking them once we see a stable lead price over and above what we are currently seeing. Because right now there is an oscillation happening in a $100 range. When such oscillations happen, that is not the time we actually look at the price rise. But yes, if it sustains at a higher lead level, we will definitely consider the price hikes. Whereas in the B2B segment, it is an automatic pass-through that happens as and when there is a price change in the material happening. Understood. Thank you a lot, sir. Yes. Thank you. Next question is from the line of Apurva Jain, an individual investor. But right now, Hello? Hello? The next question is from the line of Apurva Jain, an individual investor. Yeah. Yeah, sir. I have two questions. The first question is regarding the fungibility. Let's suppose right now, as you said that we would be having two chemistries in our new energy plant, right? It would be LFP and NMC. I want to understand that in future, let's suppose a couple of years afterwards, if some new chemistry comes into, for example, the sodium-ion battery, which we are hearing, right? Our new factory would be fungible to manufacture those batteries as well or we have to do some another capital for that, if required in future? Yeah, that's a good question. Actually, based on whatever understanding that we have so far, the chemistry changes are not going to cause too much capital redundancy, whereas the form factor will change. That's our understanding as of now. We believe even on the sodium side, at least some of the processes may not significantly change. But some of the processes may undergo a change when it comes to sodium battery chemistry coming up. But we believe that CapEx fungibility or the change of equipment that is required to move into a different chemistry, I don't think is going to be very significant. But between NMC and LFP chemistry changes, at this point of time, we don't believe there is too much of capital penalty for us to change. It's only that the changeover times will be little longer. That's our understanding. I wouldn't say we have fully understood this, but I think we'll come back once we understand further on what are the equipment that is currently used. But we believe sodium-ion for a commercial scale is still some more time away, but we are keeping a close tab on it. Okay. And sir, my another question is regarding what is the revenue potential for the phase one of the new gigawatt plant which we are raising into? Which would be, I think, will be commercializing in FY 2026. See, at the current price, the NMC pricing is around, let's say about $60-$70 per kilowatt hour, and then on a 2 gigawatt means it's 2 million kilowatt hours, so you can see what's the math. Okay. And sir, I think I missed in the initiative, what are the margins we are estimating in this, in the new energy business line? As I have mentioned earlier also in the call, I think the time for margins, while we have done a lot of scenario analysis, we believe at a given scale, a 10% operating margin is possible. A lot will depend on how the material pricing will behave. So if material pricing were to continuously come down and capital intensity were to remain at the same level, then I think even that will be a challenge. But we believe at this point of time, at 8-9 gigawatt hour scale when we achieve, is when we can see an operating margin level of around 10%-11%. Okay. My last question, how much percentage of our revenue we sell to the aftermarkets? Be it two-wheeler, three-wheeler, four-wheeler. From a volume point of view, I think almost 50% of our volumes are through aftermarket. Okay. Thank you. That is it from my end. Yeah. Next question is from the line of Vibhav from JP Morgan. Can you repeat the question? In this quarter and then the We cannot hear you. Okay. Is it better now? Yes, sir. Good. Okay, yeah. Thanks for taking my follow-up. Just wanted some clarification on the demerger process with Mangal Industries. You said that the deal will get concluded in this quarter and the updated financials will be provided when? In the annual accounts. Okay. But it will get completed in this coming quarter? Yeah. Because February 1 is the closing date. Okay. Got it. Just one last follow-up. This North American export that you have commenced, how should we think about the export revenue potential? Because I think last year we saw some kind of a slowdown because of the anti-dumping duties. But in general, how much of a growth potential can these new orders bring? Yeah. As I think we have articulated earlier, the idea is considering the opportunities that will be available because of the consolidation that may happen in the lead acid market. There is a reasonable scope to grow around 15% kind of a number in terms of volumes. But that depends on enhancing the market share in the existing markets where we are operating and also getting into some of these newer markets. At this point of time, the AGM battery supply is definitely helping us ramp up some of these imports. We have to see how it unfolds as we move ahead. Got it. Thanks a lot. Thank you. Ladies and gentlemen, as that was the last question of the day, I now hand the conference over to management for closing comments. Thank you everyone for joining and we will be happy to take your questions next quarter. Thank you. Bye. On behalf of Motilal Oswal Financial Services, that concludes this conference. Thank you for joining us and you may now disconnect your lines.