Ladies and gentlemen, good day and welcome to Automotive Axles Ltd Q2 FY 2026 Post Results Earnings Con call, hosted by Batlivala & Karani Securities India Pvt Ltd. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sailesh Raja. Thank you, and over to you, sir.
Thanks, Sailesh. Good morning, and thanks to everyone who have logged in to Automotive Axles 2Q FY 2026 Earnings call. From the management side, we have with us Mr. Nagaraja, President and Whole Time Director, Automotive Axles. Mr. R anganathan , CFO, Automotive Axles, and Mr. Krishan Kumar, GM, Meritor India. I would now like to turn the call to Mr. Nagaraja for the opening remarks, followed by the Q&A. Sir, you may begin now.
Yeah. Good morning again. This is Nagaraja Gargeshwari here. I once again welcome all of you to this Q2 FY 2026 investor call. As you're all aware of, there were several headwinds with the new legislation coming for M&HCV , basically AC cabin introduction last quarter, and then we all know about what is happening with respect to tariff. In spite of that, we have done a pretty good job, and we are able to protect our margins. So to start with, I would request Mr. Krishan Kumar to give a quick update on the market, followed by our CFO, Mr. Ranganathan, to talk a little bit more about the research. Over to you, Krishan.
Thanks, Nagaraja. Good morning, all. The last quarter was very interesting. Like Nagaraja said, there were headwinds, but also if we look at the Indian context, the domestic consumption has been really good, and we see the agriculture sector really contributing, rural coming back, and as a result, World Bank and IFB both have revised the GDP outlook for India, which is very positive. Another very significant difference between the past quarters is, even though the overall index of industrial production is low, around 2.8% cumulatively, the sectors like manufacturing actually contributed very well in August and September to the rate of 4.8%. That is expected to continue. We are expecting the GST revision also to boost the sentiments.
The Q2, as Nagaraja said, even with all the headwinds, the M&HCV market did a volume of around 95,000-98,000 vehicles with a reasonably good product mix of trucks, tractor trailers, and buses. Going forward, we also expect the Q3 and Q4 to be ending very strongly, probably better than last year. That is what we are expecting. There were some real good highlights for us in Q2. As we discussed in the previous investors' call, we had launched the 15-meter bus axle, which went into production last quarter, and then we also migrated one of our very traditional old products, which we were exporting, into a new product called 59, which was already productionized for other customers. This last customer also migrated into that.
And then we launched two axles, two families of axles, which are traditional axles, but for a very different application. So one is for a 4x2 electric tractor trailer, and the other one is for an 8x4 electric tipper. So our products are now traditional mechanical products are also now approved for electric vehicle applications. And other big recognition was we won the Silver Award for superlative supplier category for aftermarket performance, where we continuously improved our delivery performance, and right now at 98%, 90%, we won this from Ashok Leyland. So with that, I quickly conclude on the market outlook and the past quarter updates. Thank you.
Yeah. Very good morning to all of you. It's my immense pleasure to wish you all a happy Diwali, though it's late, and the New Year wishes to all those who have started the New Year on the Diwali day. With this, I just want to do quick highlights of the financial performance. This quarter, we have done about INR 470 crores. As compared to last quarter, we are slightly down by 6%, and as far as the half year is concerned, we did about INR 969 crores. Totally, we're down by about 3%. The product revenue down by 4%. And overall EBITDA for this quarter, we achieved about 12.4%, and as compared to last quarter, 11.7%, and as compared to last year, it was around 11.4%. So overall, this quarter performed. Overall the performance for the margin is concerned is much better compared to the previous quarter.
This quarter, we happen to have a couple of one-timers, which is unusual. All of you know that we have started selling to the customer directly from April 1st. So this quarter, we had some upside on the revenue because the exports revenue, we recognize it has got some mixed benefit this quarter, plus we also have foreign exchange benefits, and that's also a reason for the better margins. Apart from that, we also had some one-timers. Some of the liabilities which we not required, we wrote off. If we remove the exceptions, we'll be close to around 11.8%, more similar to last quarter, though the revenue was up. So very high level, and INR 470 crores, about 12.4%, and the normalized number could be around 11.7%, 11.8%. So with this introduction, I'll probably move on to the question and answer.
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 touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Radha from B&K Securities. Please go ahead.
Hello, sir. Thank you for the opportunity. Sir, my first question is that some industry reports are suggesting that the average age of M&HCV trucks on Indian roads is 10 years, which is higher than the past two decades, and there is also mandatory scrapping of older government vehicles older than 15 years, which is expected to boost the replacement demand of the industry. However, the average age is near all-time high for the industry at 20-30 times versus 20 times in the last upcycle, so considering all these factors and also the cyclical nature of the industry, what is your assessment of the replacement demand, and when do you expect this to play out?
Kishan, I'll take that, yeah. You're absolutely right. Your observations and the reports that are suggesting. But in addition to that, a couple of things we need to understand. If you really see the last three years, at least, or four years, rather, the market is around 400-420 range. And even this year, we are expecting the same, and the next year may be a 3%, 4% down. So the cyclicality has changed. The nature of the behavior of the market has changed. Now, in addition to all the things that are happening, including the DFC, right, we think the variations from year to year, whether it is plus or minus, that will be very small, which we are already experiencing. So the cyclicality is now, I would say, is within 10%, not like the earlier times when we used to see 15%, 20% and more.
So which means if we are at 400 now with the replacement cycle coming in, the next expected peak is by 2029, 2030, where we can touch 480,000- 500,000. And by then, with the support of the domestic consumption, the GDP and everything, even the tonnage carrying capacity also will be required more. In addition to that, we also see the trend of higher HP engines coming in with more payloads. So all these will probably stabilize around 2028, 2029, and then we see a peak by 2030, and then we may expect a very different cyclicality, which even now we are trying to simulate, but that's how we think the market will behave in the next couple of years.
So you mentioned that next year you expect 3%-4% down?
That is still debatable because this GST sentiment, how that will go ahead, that will be probably defining the overall volume, but our early forecast was we may be around 5%-6% down, but that may cut down to 2%-3%. That's what I'm seeing, and also on top of that, what is important is how we end this year. That will define the next year.
Thank you. Sir, compared to last 15-20 years, the cycle is changing now. So what is leading to this reduction in cyclical nature of the M&HCV industry?
There are a couple of things. I think the first thing that we need to recognize is the COVID years were actually a reset. A lot of things changed from that year onwards. So we did have a bounce back immediately after that in 2023. And then after that, the dynamics in the market, the better infrastructure, GST simplification, the roads becoming much freer in terms of reaching point A to point B, and the heavier vehicles like tractor trailer, that is what we are seeing now. All this is actually meeting the market demand. So that means the 400-level market is able to give what the overall demand is. So when that happens, when we have continuously two, three years of stable volume, the cyclicality naturally reduces from seven to six to eight years to maybe three to four years, and even the variation will reduce.
That is what we think has happened in the last couple of years.
Okay, sir. Thank you. That was very helpful. Welcome back to the team.
Thank you.
Thank you. The next question is from the line of Amit Hiranandani from PhillipCapital. Please go ahead.
Yeah. Thank you, team, for the opportunity. And first of all, we wish all the very best to Ranganathan, sir. Sir has been very, very supportive to us. Yeah. Sir, my question is basically on your revenue. So M&HCV industry production for Q2 grew by 3%, but our revenue dropped. Was this only due to the impact of the tariffs in exports?
Maybe I'll take this question. Krishan, you can supplement that. I think what Krishan mentioning, there were two things. One is the product mix. So as you are aware, usually the Q2 is where, because of the monsoon, the tipper sales will be down. So we are very strong in the tipper segment. That to some extent affected our top line. And apart from that also, we see that quarter to quarter, different customers have different sales. So because we are kind of concentrated in a few of the customers, to some extent, the product mix and their overall sales also kind of affected us. You are aware that Europe is very stable, but North America, especially the M&HCV market, is down. So it also had some impact on our top line.
Like I said, in spite of all these challenges, which we think, like Krishan mentioned, because of the GST 2.0 and robust domestic consumption, we expect that we should be able to make up for some of those lost revenues in the upcoming two quarters. Krishan, do you want to add something?
No, I think you summarized that. It's primarily we think the product mix had some impact last quarter. And some of that we have offset with the bus launch, which otherwise would have been even deeper. Yeah, like Nagaraja has said, next two quarters should be really positive in that sense.
Sir, how much is the exports as a percentage of revenue? An approximate number?
Ranga, you would like to answer that?
Amit, thank you very much for your kind words. The point is that your specific question, which is still at the same level what we have been doing it in the past, it will be slightly wider than the double digit. At this moment, we are just working on the same level, so.
Okay. Understood, sir. And then is it possible, I mean, for you to give some color on different segments of the CV industry like the MHCV, small commercial vehicle and buses? How do you see the demand from October onwards?
Krishan?
So we don't follow so much on the LTV side. As you know, we are playing only, I don't know, 7 and a half ton and above. What I can tell you at a very high level is, and which is also true probably for the last two quarters, even though the market has stayed at 400-420 level, the contribution from truck versus bus, that ratio has changed. So we have definitely seen more buses. And within the trucks, what we have seen is the Heavy-Duty segment growing where the higher payload, even including the 4x2 tractor that I mentioned earlier. So that contribution is also increasing. And I think this is going to stay, or at least next couple of quarters is going to stay.
This is when we think the efficiency will start kicking in, when the fleets and the truck owners will start talking about efficiency, which is where the next cycle of new products and the market opportunity for the market to move up. That is when we expect it to happen in the next three to four years.
I understand, sir. Sir, lastly, are you seeing any kind of commodity pressure for the coming quarters?
No. At this point of time, we don't envisage anything. But again, it is anybody's guess with so many if there is a spurt in the demand. We believe that there is enough capacity as far as our major commodities like forging and casting are concerned and steel is concerned. We don't envisage anything, but it could be anybody's guess. What happens, we don't know, but we don't foresee any major changes to the commodity.
No. Just to say, we're looking at commodity price changes you're talking about?
Yeah.
Amit?
Yeah. Yes, sir.
No. As we already maintained, any commodity changes is always back to back. So I don't see any issues as far as the financial perspective.
Understood. The last question from my side is broadly. A few quarters ago, we were guiding to reach the better margin levels. So are we on track on this journey, sir?
Say it again.
A few quarters ago, we were guiding for the EBITDA margin to reach at the mid-teens level, +13% . So are we on track on this journey, sir?
My answer to you is yes. You see, you have a full-fledged analyst with you, so you can just put the volume change and look at the numbers. Definitely, we are on track, absolutely. And if you really put the year-on-year performance in operating performance level, yes, definitely. Barring the mix is one issue which we had as part of business, we had to bear other than that we are on track.
Great, sir. All the very best. Thank you so much.
Thank you.
Thank you. The next question is from the line of Shubham Bhatra from Ambit AMC. Please go ahead.
Hi, sir. Thanks for taking my question. I have two questions. Firstly, we saw a structure change happen during Q1. And post Q1, if I look at your numbers, we have seen a gross margin expansion coming in as a gradual quarter. However, we are also paying for it. Eventually, the EBITDA margin flow-through is still in line with what we were doing before the structure change came in. So when do we start seeing the benefit of this coming in on our EBITDA margin and profitability?
Sorry, sir. Sorry to intervene. Your voice is not clear. We're not able to. It's not quite audible.
Sir, is it better now?
Yeah.
Yeah.
Yeah. Sir, I'll repeat. So we did a structure change in Q1, FY 2026. Post which our gross margins have expanded subsequently over the last two quarters. We have seen around 300 basis points of expansion, 300bps- 400bps . However, the EBITDA margin flowing is still in line with what we were doing before the structure change came in. So when do we expect the EBITDA margins to expand in line with how our gross margins have expanded after paying the royalty that we pay? And secondly, you highlighted that there is very good demand in the tractor trailer segment. Do we have any plans of entering the dead axle business which are used in the tractor trailers?
Probably I'll take the first question as far as the margin is concerned. See, operating margin, we have a very specific target, and we need to work on it.
I do really see performance on the operating margin level. Secondly, there were a couple of factors I just wanted to bring in perspective to you. One is about the volume, which has a bearing impact on the fixed cost. So definitely, that is one of the elements which is affecting the EBITDA, point number one. Point number two is about the mix. So these two elements is probably how to manage it. Next two quarters, you really see that as volume picks up much better compared to the first two quarters, you will have the bearing benefit to the EBITDA also. And other side, probably Krishan can answer.
Yeah, sure. So we are talking about the trailer axles here, which you mentioned as the dummy axles. So in the industry today, even though tractor numbers are increasing, the trailer market is still very, what do you call, fragmented.
You have only one or two big players in the market who understand the technology, and they appreciate companies like probably us because we also have trailer technology with us globally, and we did do a very deep analysis on the Indian market, the product, and we do have the product on drawing, but to enter into this market, I think the market has to really mature in terms of the safety concerns that the industry has with tractor trailer applications, the increasing speeds, and some of the other elements, and also to add here, trailer axle is always clubbed with the trailer suspension, so then it becomes very strategic whether we want to get into suspension, so these are under evaluation. We are discussing and very closely monitoring how the industry is moving.
Our first priority was to have the trailer live axle available, and that's what exactly we did in the last couple of years. So we ensured that when the trailer market comes back, we do have the right brakes and the axle for the prime mover. And then comes the trailer. Probably in the coming couple of quarters, we will see how it moves, and then we will have our strategy ready for it.
But sir, if we in case you are right in that we have the tech for it, so in case we decided on entering that segment as it's a growing one, it would not take us substantial time to come up with a product, right? We can launch it in the market in, let's say, a year's time once we decide.
Probably over a year because we do have to do our own validation, which can go up to 12-18 months, but definitely, it will be much faster than probably developing something from the scratch.
Got it, sir. Got it. Thank you.
Thank you. The next question is from the line of Abhishek Jain from Alf Accurate Advisors Private Ltd. Please go ahead.
Thanks for the opportunity and congrats for the recent set of numbers in a tough time. Sir, how has the recent GST reduction impacted the sentiment among large and small fleet operators? And what is the current level of fleet utilization in the industry?
Krishan, you want to take that?
Yeah. The first one is still a work in progress. I think we are not yet seeing a real, of course, the sentiments are positive, but I don't think they are contributing to the numbers yet. It will take a couple of more, at least one or two quarters more, to see really what is that impact. And that is why I said we are upbeat. We do think we will end up better than what we forecasted in the beginning, at least by 5%. Let's be very optimistic there. Beyond that, I think it is very hard to say right now. There are a lot of other elements will also play in. The input-output GST is something every company is evaluating once we move into these two slabs from the four slabs.
I would say it will take a little bit more time for us to have a better feel for it.
What is the current level of fleet utilization?
I don't have exact numbers, but what I know knowing by the number of old vehicles and their usage versus the new vehicles in the last couple of years, fleets are actually good fleets. Let me clarify myself. Good, efficient fleets have actually improved their productivity at least by 5%-10% in the last couple of years, and that's been very consistent. So one reason for that, of course, is the good infrastructure. But the second one is they have also understood overloading is not anymore going to help them if they really want to be quicker, faster, and without much downtime. I think combination of that, I would say about 75% is right now with the fleet utilization is with the good fleets. One area which we are still struggling is the loading-unloading, and that's where we are expecting this tractor trailer changeover may help some segments.
May not be all segments, but some segments.
Okay. And how much is the impact of the DFC in overall M&HCV's volume? And plus that, there's also another issue with the slowdown in the export. So how much impact on the tractor trailer segment because of this?
I'm sorry, but are you relating export and tractor trailers? I didn't get that well.
Yeah. Actually, just wanted to understand about that. In heavy-duty trucks, how much impact of the total because of this slowdown in the export? And how do you see the volume will?
I don't think there is a direct impact on the heavy-duty segment because they are all domestic consumption, and if you are talking about the export from inland to port, I don't think that has got a big impact because of the reduction in export. At least we have not seen that in our company.
Okay. And impact of the DFC in the overall MHCV's volume?
Your voice is a little breaking up.
Sir, just wanted to understand how much impact of the DFC in overall volume, dedicated freight corridors?
Yes. In the long run, two things we have to understand. It's not just DFC. The other thing is the efficiency, fuel economy, fuel efficiency, and the productivity in the industry. I think combined, it may have around 7%-8% impact in the long term. Right now, we don't see that much. But once everything is established in the long run, beyond 2029, 2030, it may be a 7%-8% impact. But that will be taken care with the natural increase in demand. So I don't see it is probably a neutral impact for us.
Okay. And my last question on the share of business in the different OEMs like Ashok Leyland, Mahindra, and others, Daimler and all.
Sorry? So, you mean your question is on the share of business with these customers?
Yeah.
Yeah. We are maintaining this for the last several years. We are between 60% to 70% with Ashok Leyland, of course, and then very high double digit with Mahindra and Daimler as well.
Thank you, sir. That's all.
Thank you. The next question is from the line of Amul Rao from OneUp Financial Consultants. Please go ahead. Hello, Amul. As there was no response from this participant, we will move on to the next question. The next question is from the line of Nikhil from SIMPL. Please go ahead.
Yeah. Hi. Good morning. Thanks for the opportunity. Hello. Am I audible?
Yeah. Yes.
Thank you. See, you did explain on the sales side, but I still want to understand it a bit better. So if we do a sales bridge between last year and this year, we didn't have the export benefit which has come in this quarter because of the change in the agreement. And overall, if we look at the MHCV production, it is up, it is in a positive territory. But still, our sales are flat. So which means if I adjust for the export, our domestic sales would have seen a degrowth. Can you just help me understand this difference in what is the production on domestic and what our sales is getting reported net of export business?
No. I'll give my perspective. Probably Krishan or Nagaraja can add to it, so I'm not sure. The overall MHCV borrowing buses probably still not growing much is my data, what I have it with me, and probably bus segment, we are in the process of penetrating it with the initially Krishan told us the new model introduction and all this stuff, so that's one clarity I just wanted to give it to you. I think we are more or less, if we really core segment, we are doing it. I think we are in line with the market as far as the growth is concerned, and as far as other questions are concerned, probably that's basically what your main understanding is required. I think anything else? Probably Krishan, you want to add something?
Probably I would put it this way. Yeah. If we had a same level of export like the previous year, we would have probably outperformed. And on the contrary, if I compare our readiness for the bus and tractor trailer last year compared to now, that would have been a negative. So net to net, probably you are seeing it is flat because we have nullified the export impact by launch of the new products for the segments where we would have hit by the product mix issue. So probably that's why you are seeing the domestic market alone, the growth, what Ranga mentioned, and our performance is almost on par.
But, sir, even if I adjust for the new product introductions, and as we said, Ashok Leyland is our largest customer, and then Mahindra. And if you look at their production numbers for the quarter, they are both in the positive territory. So if I adjust for the new product, then also those numbers will. It seems we are negative. Because for both of them, if I look at their production numbers, they are up by 6%-7% on an average for the quarter. So have we lost market share with these guys?
No. That's exactly what I was trying to draw a parallel. The product mix has helped. I will put it this way. The difference what you're seeing on the downside, that would have been bigger if we did not have the product. So that has bridged some gap. You are right. We are still on a 2% probably lower than the overall market growth. That 2% is where we still have a product gap, where Ashok Leyland did more buses where we are not today present. That is where we are coming in. And on the tractor trailer, we had less number of axles and less number of brakes because that is a natural shift. So for Ashok Leyland, it is a number of vehicles are increasing. But our axles will be one instead of two or 2.5.
Okay. So you mean to say that their production has increased, but the number of axles which we were providing, that volume has come down, is lower?
Naturally. Because of the volume. Naturally. If you look at 4x2 tractor versus an 8x2, in 8x2, we will have two axles and four brakes. In a 4x2, it is just half of it.
Okay. So when you say product mix, you mean to say there would be smaller tractor trailers which have been sold where the quantum of volume with Ashok Leyland is lesser versus where our quantum is larger?
Yes.
Would that be the right understanding?
That's right. That's right. But also, we do have one or two products in the pipeline that should help us in the future to reduce that impact to us.
Okay. Fine. Fine share. Thanks. I'll come back.
Thank you. The next question is from the line of Nishita Sha nklesha from Sapphire Capital. Please go ahead.
Yes. Hello.
Hello.
Am I audible? Yes. So I just wanted a clarification on a previous participant's question. You mentioned that you'd guided that volume would be down by 5%-6% in FY 2027, but now you are saying that it will be down by 3% only. Is that correct?
That depends on where we end up. So I will probably not make that as an official statement. We are still seeing the next two quarters. If we end up on a higher side, maybe that difference will still be there. It all depends on that. Right now, we think it is about 5%-7%.
Okay, okay, and can you quantify the volume number for Q2 for 2026?
If you take 5%-7% on a 400,000, it's roughly around 370, 380.
Okay. Understood.
So that's what 400 is what I'm taking as a base, but that may change. That's exactly what we have to see in the next two quarters.
Okay. So 400 of revenue is what you're taking as the base. Is that right? 400 revenue you are taking as a base, right?
Not revenue. It's the M&HCV volume.
Okay. Got it. Also, so you mentioned that the EBITDA margin will reach mid to teen levels. Can you give a timeline by when it will reach that level? Hello?
Ranga?
So can you say it again? Sorry.
Yeah. You mentioned that we are on track to reach an EBITDA margin to mid-teen levels. Can you give a timeline by when we will reach that level?
No. That's what I'm saying. In terms of run rate, yes. We are just hoping that if the volumes do good, you can even see the kind of run rate in the next quarter also. It depends on the market volumes. We also need to have the when you look at operating margin, you'll definitely reach the run rate. But when it comes to beta, it's more about the fixed cost absorption impact. So definitely, we have an ideal model in our system internally to measure that 13%. So mostly, probably if market comes back to the normalcy as in 2023-2024, you will definitely see it much better than what we are planning.
Okay. Understood. And my last question is, in the previous call, you mentioned that you are going to launch 13.5-meter and 15-meter coach axles and nine meter bus axles. Do you have any update on that?
Krishan?
Yes. So the coach axle we launched in the Q1 that went into production in Q2. We are doing significantly good ramp-up on that. And on the nine and 12-meter axle, it is in the testing. We have actually a little slowed down because we want to really understand how the electrification of buses plays here. If it is moving faster than what we expect, maybe in the next three to five years, the diesel in the nine to 12-meter segment may not be so much. So we really want to understand that aspect and ensure our product will be ready for that electrification also.
Okay. Understood. Thank you so much.
Thank you. The next question is from the line of Ravi Purohit from Securities Investment Management Pvt Ltd. Please go ahead.
Yeah. Hi. Thanks for taking my question, so just wanted to understand this a little better because I think since this change happened between Meritor HVS and our arrangement after the shareholders voted out the earlier arrangement and the new arrangement was put in place, and all the sales were supposed to be routed through the listed company, and basically, what it should have meant is that the top line should have gone up by that much amount, right? I would assume at least by 6%-7% or 7%-8% just because of the change. Now, this quarter, we see there is a decline in our revenue. So should we understand that had this arrangement not changed, we would have actually reported a 15%-20% decline in revenues even when the industry volumes are flat to positive? There is something missing here.
We are not able to kind of correlate the numbers that we are reporting on the sales side. I'm not talking of margins here. I'm actually discussing only the sales part of it.
Yeah. I'll take that. I'll take that. And probably Krishan and Ranga will add to that. Again, we have several pieces to that. I think we have been repeating that. One is, just now Krishan mentioned, our exports; it has got affected with the current tariff condition. And even before tariff condition itself, the U.S. market is down by 30%-40%. You must have heard it from other people also. So there is one such impact. And also, like I said, while the industry numbers will remain flat, the share of business between different OEMs will kind of impact our top line. And that also kind of added to that. Okay.
So if all the OE share of business, if it had stayed same and the industry volume would have stayed the same, definitely like what you are saying is the sales of whatever that 4%- 6%- 7% would have seen the top line. But unfortunately, that is not as happened. So it is just more of a timing when the sales started happening through Automotive Axles itself, and then the market went down, and that's why you are not seeing that change. When the normalcy comes back, you are going to see that effect of bringing in the sales to the Automotive Axle.
So I'm still not clear. I'm sorry to repeat this, sir. You're saying industry normalcy, meaning the industry is okay. There is a problem with our products?
Sorry. The industry, when you are looking at the overall M&HCV volume, but if you go out and look at the share of business for each of the OEM, it is changing, and also, like what Krishan mentioned, product mix is changing. There may be more vehicles coming out of the bus where we may not be present, and then also, the tipper where we supply two axles versus the tractor, we supply one axle. That is also have an impact, so this is a kind of a transition time. Everything is happening. That's why we are telling you that in next one to two quarters, this quarter, and by probably definitely next quarter, this normalcy will come back, and you are going to see that additional benefit, what you expected to see in the top line.
Just to kind of, sir, add further on this point. So if earlier, the exports used to be never booked on our books, right? We were used to never book the revenues and exports on Automotive Axles books. The exports were predominantly taken care of by Meritor HVS.
No, sorry. That is wrong. That is wrong. We always manufactured. It was just like any other domestic sales. It was routed through the Meritor. Definitely. We still had our share of revenue out of exports.
Okay. So again, so basically, had this transition not happened of routing through our company, this quarter, we would have reported 15% decline. In the earlier format of Automotive Axles reporting, we would have probably reported 15%-20% decline in sales. Is that what we should understand?
No, no. Sorry to intervene. How did you say 15% decline?
Because we reported 6% decline this quarter, and this is despite us booking the revenue. So basically, the top line is higher, right? So earlier, let's say if there was 10% sitting on Meritor HVS's book and we sold something.
I'm sorry to intervene once again. That's what I'm telling you. You're putting so much assumptions to it. The 10% that we have explained the previous calls also. Meritor HVS revenue has got their own aftermarket revenue, which is still a big part of the business. So what we migrated, the entire OEM, what we are selling to customers, it's migrated to Automotive Axles. If you grossly look at the revenue and compare it, you may see something else. Okay? So whatever we are selling, one thing I will assure you that under the new model, all the sales to the OEMs and everything, it's going directly from Automotive Axles. It's not routed to the MHVSL. Second is about the revenue per se compared to the last quarter. The last quarter is also the same transition has happened.
Compared to last year, I agree with you because last year, we recorded the revenue at the transfer pricing level, and this year is full-fledged end customer revenue, gross revenue level if you compare it. Yes, it could be like slightly higher than this because the base is quite different. Compared to last quarter to this quarter, it may not make a difference. In the last quarter also, you would have done it TP if you had not migrated to the new model. The percentage between quarter to quarter remains constant. Compared to last year, yes, that could be the percentage drop could be slightly higher than this, maybe another 3%-4%. That's basically the TP and the customer price differences. Again, I'm assuring you that we have just migrated to the new model. The 100% sales are happening throughout the year.
Yeah. So because, sir, the thing is, Bharat Forge has gone ahead and acquired, let's say, another axle company, right? American Axle. Now, we just kind of worry whether this transition is kind of negatively impacting automotive axle shareholders' interests or whether it is not. And because the numbers don't see kind of any increase at the top line level, which logically it should have. I mean, assuming everything set as per this, 100 should have become 108 or 107 or whatever, right? But here, it's actually 94, 95 instead of 107. And I just note that.
Yeah. American Axle is already there in the system before or after the acquisition by the BFL. So it's not about that because of that. Governance is a fundamental element of Automotive Axles. We continue to maintain the governance at a very high level and we strictly go with the governance principle, absolutely at Board level, at the operating level. So that assurance, definitely, we'll give you that. Market dynamism and the share of business is basically the market-driven and definitely, I don't know about the performance on the other side to comment on it but Automotive Axles perspective, and we are maintaining it to whatever the share of business, what we are the products segment, what we supply, we are absolutely on the trends of the customers and definitely, they'll always just go for improvement. I'm not saying no. I take the spirit of what you're asking for it.
But it has nothing to do with American Axle or any other governance issue. I assure you that the shareholders' interest of this organization is of utmost concern for us. And we never do anything against shareholders' interest. And so that probably I can just give you the assurance about that. It's not about anything outside. I don't want you to get too much concerned that there's anything happening over and above what you see. The answer is maybe not. But definitely, we are on top of the governance.
Okay. Okay. And sir, just one last question. I think in the.
Sorry to interrupt. Sorry to interrupt, Ravi. Actually, to ensure that the management will be able to address all the questions from all participants, we need to.
Okay. No problem. I'll get back in the queue. Thanks.
Yes. Ladies and gentlemen, in order to ensure that management will be able to address questions from all participants in the conference, kindly limit the questions to two per participant. Should you have a follow-up question, please rejoin the queue. The next question is from the line of Viraj from SiMPL. Please go ahead.
Yeah. Hi. Just a follow-up on the previous participant questions. Now, see, if you look at our conversation in Q1, what we said that we couldn't map the export billing altogether, and that should fully reflect in Q2. Now, roughly on an average, we are doing around INR 60 crores of quarterly exports. And then we have also sustained in Q2. So if you look at that, and then the launch and some contribution from the bus segment, one would think that the overall growth or the performance in this quarter would be materially higher. Now, I get that there's a product mix element, say, with Ashok Leyland in the axle part. But even there, or even if you look at the tipper sales, right, for the industry, you're still talking about a mid-single digit kind of a volume performance for the tipper, about 25 tons.
Same for tractor trailers, with Ashok Leyland and others. So in that perspective, if you adjust for the product mix, the performance doesn't add up in any sense.
So yeah, let me take that. Again, I think, first of all, I want you to assure that we have not lost any share of business with any of our current OEMs. Okay? Neither we have lost any export business opportunity. So this is purely reflecting the market. Okay? So it is a bit difficult to explain every aspect of it. Like I said, the major contribution for it, one is some of the sales of our OEMs and some impact from the export sales, and then the product mix. That doesn't mean that we have lost any share of business with our customers.
So what I'm asking is, just to add to what Nagaraja just answered, some points is about overall, anyway, Q1 to Q2 is slightly lower. Q2 is slightly lower than Q1. And exports is better than the Q1. So that mix is really it's happening in the Q2.
So what is contribution of tractor trailers in our overall mix indicatively? And second is, what is the contribution from exports now? So does it reflect the full quarter numbers of Q1 and Q2, or it still doesn't reflect the full quarterly numbers? Hello?
Hello.
Yeah. Am I audible? Hello?
Yes, you are audible.
Yes, you are audible, Viraj.
Should I repeat my question? Hello?
Hello. Krishan, would you take it?
See, for us, it's like if I'm right, you are looking at what is the tractor trailer share of business, right? For all the customers whom we are serving this particular product, we have a 100% SOP on that. But our product is also used for not only for a tractor trailer. It is also used for a certain 10x2 application also. Okay? So right now, while it is difficult for us to put a percentage of what exactly of the total, I would say that it is one of the major contributors, anywhere between 20%- 30% of overall sales.
So okay, that is one. But even if you look at the export piece, right, we are doing somewhere around INR 60 crores-INR 70 crores of quarterly sales. And that generally we are sustaining in Q1 and Q2 both. In Q1, we didn't report bad numbers, both in terms of the sales and operating expenses. That was the communication which was given to us. And we were expecting the whole Q1 numbers to reflect in Q2 and the Q2 to normalize. But we're not seeing that also. Yeah.
Again, I think we are going round, round, like what we're telling. First of all, I want to again reassure you, we have not lost any share of business. What Ranga mentioned during the last investor call was it is basically it does not reflect to us until it will go out and reach the customer. Then only we can realize that. But having said that, the previous quarter also, the sales were there because we MHVSL did not manufacture anything. So we always sell it to MHVSL. MHVSL sell it to ATL. So that revenue recognition is always going to be there. Only thing for the first quarter, it was different because that change had happened. Having said that, again, it is just too many pieces have moved around in the Q2. That's why we are seeing it. Otherwise, we wouldn't have been able to maintain our margins.
When you look at the margins, if we are not making the right top line and the right product mix, it will be very difficult for us to achieve that. So again, we can keep on asking the same question. Our answer is there is nothing to worry about it. All the sales are happening through the Automotive Axles, and BFL taking over American Axle has no impact to us because we are two different independent companies, and we always continue we have been acting always as an independent company. We continue to be independent, and for Automotive Axles, it is always focused on the investors' value creation. So we will continue to focus on how we can generate or we take care of all our investors.
Just to add to what Nagaraja said is about, as mentioned, that mix is always a kind of thing.
The point is the second quarter, we had better mix from exports, which is also reflected in the market. Of course, there's a Q1 to Q2, there's a decline in the on-highway volumes. So there are two combinations.
So I'm not at all looking at quarter to quarter. I'm really comparing year- on- year. And I understand that.
I'll add one more point. I'll add one more point to it. Year- on- year, also the commodity, there are about around 3% roughly. I'm just telling after the hike. Over a period. I need to check. But around 3%-4% is the commodity. Also, the reduction has been accommodated. So year on year comparison is one is about the transfer pricing. We are built at our own we build our MHVSL with the transfer pricing. This year, we're building with the customer price. Second is the commodity, what has been accommodated in the business. That has also brought down the sales and the value terms. These are the two factors we need to keep in mind. My memory goes well. I'm not sure. I need to check.
About around 3%-4% impact will come in the revenue because of the commodity.
Okay. I think now we are coming to the probably end of the session. Before we close the session, I just want to share it with you. As you are aware, Ranga has decided to take an early superannuation. 21st November will be his last day. He has been with the Automotive Axles for 11 years. His contribution is incredible. He's a great leader. And then we would like to wish on behalf of Automotive Axles management and Board all the very best for Ranga for his future endeavor. Thank you.
Thank you, Nagaraja.
Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all participants in the conference, kindly limit the questions to one per participant. The next question is from the line of Saket Kapoor. From Kapoor & Co .
We'll take it as the last question, please.
Yeah, yeah. Namaskar, sir. Hope I'm audible. Namaskar.
Yeah, yeah.
Thank you, sir, for the opportunity. Sir, if you could just help us with the tonnage. I missed your earlier commentary. So sorry for the sake of repetition. How have the tonnages saved? And there is an improvement in the margins that we see for this quarter. So how sustainable are those? And some color on how H2 should be shaping up in terms of, I think, Q3, Q4 are much better than what the first half are. And then I have a bookkeeping question also.
Okay, so I'll give a little bit of perspective. If you see operating margin level, we are consistently doing better, and that run rate will continue, will improve, and point number two, as far as return perspective is concerned, I already mentioned in the initial beginning of the call, we had some one-time benefits. We had some write-back from liability, which is no more required. Plus, we had some FX benefit, and from last quarter to this quarter, we had some FX benefit this quarter, and also the mix perspective, the exports are much better than the Q1. So overall, basically, the one-timers have given some 0.4% benefit, and mix and FX would have given another 3.3%-4%.
If you really look at the volume, it's down compared to the Q1 by 6%. The margin more or less remained constant in spite of the fixed cost absorption impact. So next quarter, the guidance will be to the volume. Definitely, as per the Q1, it's better than the Q1. The volume goes up. Definitely, the leverage on the fixed cost will definitely see EBITDA margin.
So we will see an improvement in the EBITDA margin. This is what you are alluding to?
That's why in H2, we are looking at quite positively compared to the H1. And definitely, the EBITDA margin will improve as fixed cost leverage benefit will definitely improve.
Okay, sir. When we look at our current asset under investment, that has gone up significantly.
Saket, sorry to interrupt you. Sorry to interrupt, Saket. Due to time constraint, we need to close this conference.
So for follow-up, sir, any medium where I can interact, Mr. Ranga? Or how can I get my questions answered?
Drop a mail, sir. Otherwise, you can drop a mail, and definitely, we'll answer you, sir. Surely.
Due to time constraint, this was the last question for today's conference. I now hand the conference over to Sailesh Raja for closing comments. Thank you, and over to you.
Yeah, thank you all. Especially thanks to [audio distortion] . Nagaraja, would you like to give any comment?
No. Yeah. One last thing. Oh, yes. Probably Ranga, you go ahead.
Yeah . Just I want to give one thing to all the investor community. Then Nagaraja can give a closing. With 11 years of existence in this organization, I'm super honored. Thank you very much. A lot of support I get from all the analysts and investors. And it's a lot of learning experience for me, enriching how the market is looking at the performance and what type of expectations. So always that helped me to play my role better. Thank you very much, each one of you. And secondly, as far as the organization perspective, I just want to reassure, saying that this organization is very highly ethical and governance-oriented at all levels, right from the board to the bottom line. So everything we do, we'll keep in mind of the interest of the shareholders and interest of the investors.
We will ensure that we bring the best governance in the organizations. Some of the questions, sometimes you require larger information with you when you compare the market. That's probably one of the things we have today to take away and see that how do we need to address these questions much better in the future. We'll take it as a homework. Nevertheless, we are continuing to do our best to satisfy the customer to make the right deliveries. We are trying to fight for our share of business. We are working with the long-term agreements with the customer to ensure that we sustain and grow in the share of business with all our customers. As we have been last five years, we have been working on a lot of strategic initiatives in terms of improving the cost and improving the margins.
That effort will continue under the leadership of Nagaraja and Krishan. And I'm just assured this organization will go to much higher levels in the coming quarters. Nagaraja, over to you.
Yeah. No, I think you summarized it very well. Again, to reassure, when this lot of moving pieces, they fall into the place, you are going to see all the benefits that are coming back to you, both in terms of top line and also bottom line. Once again, thank you very much for having confidence in Automotive Axles. And we're looking forward to your continued support. Thank you.
Thank you. On behalf of B&K Securities India Pvt. Ltd., that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Okay. Thank you.
Thank you.