Ladies and gentlemen, good day, and welcome to the Automotive Axles Limited Q3 FY26 earnings conference call, hosted by Batlivala & Karani Securities. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this 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. Sailesh Raja from Batlivala & Karani Securities. Thank you, and over to you, sir.
Yeah, thanks, Shubham. Good morning, and thanks to everyone who have logged into Automotive Axles three Q FY26 earnings conference call. From the management side, we have with us Mr. Nagaraja, President and Whole-Time Director, Automotive Axles Limited, and we have Mr. Raman K, Interim CFO of Automotive Axles Limited, and Mr. Kishan Kumar, who is Whole-Time Director, Meritor HVS India. I would now like to turn the call to Mr. Nagaraja for the opening remarks, followed by Q&A. Sir, you may begin now.
Thank you, Shailesh. Good morning, everyone. Wish you a belated Happy New Year, 2026. I have with me, Mr. Kishan, General Manager and President, MHVSL, and also, Mr. Raman K, our new interim CFO. First of all, it was an exciting quarter. Started a little bit slow, but momentum picked up, and I'm very glad to share with you that we were able to convert most of our order board. To start with, Raman will quickly go through the financials and followed by, Kishan giving you an update on the market outlook for rest of the year, including how our new products are faring. Over to you, Raman.
Thank you, Niji. Good mo rning, everyone. Thanks for joining this call. So I'll start off with the financial updates. So for the quarter ended Q3, our revenue was INR 562 crore, and including the other income, our total income stood at INR 570 crore or INR 5,709 million. Our expense structure has been, you know, fairly stable over the past and, you know, we have been kind of close to all our expenses at about INR 507 crore, leaving us with EBITDA of INR 725 million or INR 72.5 crore, which is at about 12.9%. So when you compare the sequential quarter, the revenue growth happened at about 21%.
you know, the margin growth has happened at about 26%. so we are front on basis points percentage, our margins grew by, you know, 52 bps, quarter-over-quarter. maybe giving you a same year-over-year comparison, I think our revenue grew by about 6%, year-over-year, and our EBITDA grew by about 14% year-over-year, and on percentage basis, it grew by 93 basis points. And in this quarter, there is an exceptional item of about INR 12 crore, which was an impact on the Wage Code that we had to take.
The new Wage Code came into effect on 21st November, so, you know, we assessed the impact based on the new wage definition and, you know, basis our feedback from our statutory auditors. So we have taken the impact of about INR 119 million, so close to INR 11.9 crores. So we, you know, considering that, our profit before tax is about INR 512 million or INR 51 crores, which is about 9.11%. So comparing to sequential quarter, we had about 10.4%, PBT. And, considering this exceptional item, because that exceptional item had an impact of close to about 2% of the margin, but overall, the margin is kind of dipped only about 1.3%, quarter-over-quarter.
Coming to the PAT, so we ended the quarter at about INR 388 million at about 7% PAT. So again, you know, that has the impact of the exceptional item of INR 12 crore. So I think these were the key highlights of the financials. With this, maybe I'll turn over the call to Mr. Kishan for the market updates.
Thanks, Raman, and good morning to all. So, the last quarter was, like Nagaraj just said, it started at a pretty reasonable average quarter that we have been seeing in the, in the past several years. But, after September, post the GST, you know, rate cuts, there was real traction in terms of demand, and this came from almost every OEM that we are partnered with, and which translated into a very strong quarter in terms of the volume. That did have some change in the product mix compared to previous years, which was anticipated. And, the overall, if I can say, the upturn in terms of percentage from where we started to where we ended, we were able to convert most of that.
It was a significant ramp up in terms of some of the products that we have launched recently, and I'm happy that it turned out pretty reasonably well. Looking forward, the next quarter, which is this quarter, which is typically again, a very high quarter in the financial cycle for the several past years, the momentum is going forward. So we are expecting it to be better than last year, at least by 5%-10%. One thing that we are very closely monitoring is how the OEMs are maintaining their inventory. So far, it is in a very healthy level, so there is a real conversion of sales, and I think we are very positive that this quarter will also turn out to be one of the best for the industry. Thank you.
Thank you very much. We will now begin with 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 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 comes from the line of Shikha Mehta from Time and Tide Advisors. Please go ahead.
Good morning, sir. Congratulations on a great set of numbers. I was just looking to understand the numbers a bit better. So when we said there has been a bit of product mix and we saw good volume growth, can you quantify the volume growth if possible? So how much of our top line growth year on year has come from volume and from pricing, if possible?
Thank you. Thank you very much for this. I will probably also ask Kishan to add comments after that. For us, it's a little bit tricky and a bit difficult for us to, you know, quantify the overall growth, you know, with respect to a specific product or product mix. What we can... I can tell you is, the product mix has been a positive. And our new product, what we have introduced, the MS-185, that volume is getting traction, which, along with the operational efficiency, which has really helped us, you know, converting those additional sales. Kishan, would you like to add anything to that?
Yes. Thanks for the question. The way we look at is, first is, whether do we have the full bandwidth when this product mix change happens. In this case, in the previous quarter, we were able to convert most of the upturn. So the 10% increase what we saw, 10%-15% increase what we saw in the quarter, we had the products available, we had the capacity to ramp up to that level. Now, what it means to our financials in terms of numbers, just as a comparison, again, tandem axles versus single solo axles. So there is definitely a difference in the per axle realization because of the architecture of the content and the fact that there is more weight, more material in the tandem. So that impact is natural when the product mix change happens.
So that is something we have been seeing for a long period of time. So in nutshell, I agree with Nagaraja. It's with the mix that we see, this is probably going to be a normalcy. This is what we have to be ready, and the agility that we have in our product portfolio and the capacity and the overall operations efficiency, you know, is what is driving us towards the right approach to manage this situation. Thank you.
sir, if I could, I just have two more questions. One is, if you see Ashok Leyland's data, who of course is a major customer for us, I think 60%-70% of our revenue will be coming from them. In the MHCV segment, which we cater to, if you remove their bus volumes, they see... They've been seeing almost, you know, 20%-25%.
Miss Mehta, sorry, not audible. You were not audible. Can you please repeat the question?
Yes. Am I audible now?
Yes.
Yeah. So I was talking about Ashok Leyland, major customer for us, and if I see their volume growth since November, has been north of 20%, only on the MHCV segment without buses, which of course, you know, we might cater to at some point, but currently, I guess, large chunk of our axles go into the MHCV segment. So when can we see, you know, that kind of volume growth come through for us, or would it not convert in the same way?
I can take this, Nagaraja. So, if I understand rightly, you are... If we discount the buses, you're saying you are looking at a 20%-25% growth in Ashok Leyland M&HCV segment. Can I confirm that please?
Yes. Yes, yes.
Okay. Right. So I, I have not seen seen the data, but going by what you're saying, if there is a change shift of 20-25, that will translate into volumes considering where we have a single source, which means we are the 100% suppliers. That is with us. We convert that completely. That is what we did in the previous quarter. And then there is a common source, where the customer has dual sourcing strategy. They can buy either from us or other competition. So that, that will decide or that will, it'll give you a comparison of their strategy versus how we grow along with their requirement or demand. So what we see is, depending on what they demand, we need to be close to 99% delivery. That's the target.
That's how the numbers roll up, when we look at our financials.
Understood, sir. Sir, could you give any indication on for how many products we will be a single source supplier, even in percent, even in percentage terms or ballpark?
Roughly 30%-50% is... It depends on the product mix, again, roughly 30%-50%.
Got it. Got it. Sir, lastly, on our EBITDA margins, as we mentioned, the product mix seems sustainable, so these margins would also be sustainable for us, right?
Yes, I think so.
Yeah.
Sorry, go ahead.
Go ahead, Raman. Raman, Raman, go ahead.
Yeah. So, yeah, when compared to last year, I think, you know, as I explained, like, the margins have grown.
... So there is, there is the mixes, as they mentioned, you know, that is some very critical factor that helps us, you know, maintaining the margins. You're right there.
Thank you so much for answering my questions. I'll come back in the queue.
Thank you. The next question comes from the line of Akash Vora from Envision. Please go ahead.
Yeah, thanks for the opportunity. So, just adding to the earlier participant's question, I would like a more detailed and elaborated response on when do you expect the industry growth to reflect in our numbers? Because industry clearly, for the last 3-4 months, these are key customers. Even if we are, you know, the wholesale supplier to some OEMs, that should effectively reflect in our numbers as well, right? So, I mean, just wanted your thoughts on, you know, how you see Q4 shaping up, and for FY 2027, what kind of growth estimates are you building in?
Kishan, you are taking that? Okay, it looks like, Kishan, has dropped off, he'll join. Let me try to answer this question. As you can see there, in the numbers, if I'm right, you know, our top line has grown, you know, almost by 21-22% compared to the last quarter. So we are expecting this one to continue. But again, FY 2027 is, you know, anybody's guess. While we are having a positive outlook, in terms of stability, whether we can grow from there, it all depends on the inventory that, you know, all the OEMs are going to end up, at the end of this quarter.
Which, probably, you know, we'll get a much better outlook as we near the, you know, last week of March. But, you know, based on the, you know, order book, we think that, you know, this quarter is going to be stable, and the next quarter will be probably a little bit flat, just like any other earlier years. But, you know, the Q2, Q3, Q4 of FY 2027, we're still waiting for the OEMs, you know, outlook, so that, you know, we can align our capacities and supply chain to that requirement.
Sir, one more question from my side, because, sir, I wanted to ensure that we have the capacities to, I mean, handle a 20-25% ramp up in Q4, as well as let's say there's a further 8%-10% jump in FY 2027 in the market. Will we be able to handle those capacities? And our last question will be on the new product, MS-185. Would like to understand more about that. What is that product? Where does it find its end use, and what traction are we seeing there? Yeah, that's it from my side.
Okay. Kishan, are you there?
Yes. Sorry, I got disconnected.
Yeah, yeah.
I don't know how much of what I was saying was... Yeah.
Yeah. So you want to take this call?
Hello. Sorry, I missed the question. Sorry.
Okay, okay. Yeah, maybe I'll just add it up and then, you know... So, the thing is like this, our current capacity utilization is around 80%. Again, our capacity is going to go, you know, up and down, depending upon the product mixes, and then, you know, different configuration, and, you know, it keeps changing, you know, almost on a weekly basis. But the current outlook, we can say that, whatever the demand is there, we probably will be able to meet, you know, most of the requirement in the short term, unless there is a big change in the, you know, weekly or daily bucket that changes.
So, you know, capacity-wise, you know, we'll be like, we discussed about, you know, we are investing it. And, you know, starting from Q1 FY 2027, and by Q3 FY 2027, we would have added all the capacities that is required for the, you know, our outlook of, you know, somewhere around 500,000, you know, M&HCV segment. With respect to MS-185, you know, where it is used and their application and how the traction in the market, maybe Kishan can answer that.
Yes. Thank you. So, it's definitely the trend. I think we have spoken about this in the previous investors call as well. The shift in the heavy duty or high tonnage vehicles, multi-axle into tractor-trailer, tandem into tractor-trailer, that's going to stay. Now, where will it reach as a peak? That's anybody's guess today. But, we think with the share of business that we have with our customers and the plan that we have to ramp up and to meet that demand, we are in fact looking at a demand in 2030. So it's five years or four years from today. So that is what our focus is. And 185 is very relevant to the industry, and that will continue to see the growth.
Where it will stop, probably, that's like I said, we will see in the coming years, when the change in the powertrain, mainly the engine, that will start driving further change in the axle. And we have a global portfolio ready for that. Thank you.
... Thank you. The next question comes from the line of Abhishek Kumar Jain from AlfAccurate Advisors . Please go ahead.
Thanks for the opportunity, and congrats for the same set of numbers, sir. Sir, your revenue growth was just 6% Y on Y, versus the industry growth of 17%. And you had also underperformed in the last quarter as well. So just wanted to understand, is it because of the change in the product mix due to slowdown in the tipper and higher sales of the buses? And just wanted to understand how long it will continue. When will you start to outperform buses that industry? What would be the suitable tailwinds, when will it start to show the numbers?
Let me answer this first. You are partially right. The impact happens when our core, which I can say that the tandem and probably the high tonnage axle, that shifts to, you know, market segment where we are not strongly present, which is today, the bus. And there was definitely more buses in the last few months and even pre the previous quarter. But that is not the primary, only reason. The other reason, which I was trying to answer in the previous question is, it's also what we do outside the M&HCV. Those markets also influence, to some extent, our top line. So I was talking about the defense and off-highway, where we are present very limited part, and then the export, which has been, I will say, a considerable drop.
So all these three, four things put together is why if you just look at the M&HCV growth and then compare with our top line growth, it will never match. These industries behave differently. It is not even just India, it is the global markets that also will have impact on some of these things.
Can you?
The second question. Sorry.
Yeah. Yeah, go ahead.
The second question that you asked was, how long this will continue? What is in our control is getting the product there, right? That's been the focus. And we have spoken about bus axle, there may be a few questions on that. I'm not sure how many of you have seen an announcement that came in about a few weeks ago, where, the requirement or the mandate is beyond October twenty-sixth, all the nine-plus meter city buses, they have to be low floor. So we are really evaluating this. What does it mean to the new product that we are in, we have in the pipeline? So once we have the clarity, you know, I'm not saying we are stopping anything.
It's just how the OEMs will take this and how their architecture will change, that will define the overall powertrain and the impact on the axle.
Okay. So, just wanted to understand the contribution of revenue from the M&HCVs versus the non-M&HCV segment, defense and export.
Raman?
Sorry, Kishan. Sorry, can I get the question again, please?
What is the contribution of MSCVs versus non-MSCVs segment revenue? I mean to say that the defense plus export.
Okay. So, our export has always been, you know, in the mid-teens. And within the axles segment, predominantly, we are on the on-highway segment. So that could be about, maybe I would say the off-highway or the defense segment should make us about, you know, another 10% within the axle segment.
90% is the M&HCV?
Correct, yes.
I'll slightly change that. Sorry, I'll slightly change that. It varies, so in the recent quarter, if you see, it may be 90, because there's a drop in export, off-highway demand and defense demand. But if all the industries or the other industries come back, it can shift 70/30 or 80/20 also.
Okay, got it. And just wanted to understand, is slowdown in the tractor-trailer also impacting the overall revenue of the company? Because that in the tractor-trailer, there is a higher requirement of this axle versus that. Sorry, in a tipper, there's a higher requirement of the axle versus that tractor-trailer. So so just wanted to understand, slowdown in the tipper segment is impacting overall revenue?
Yes, you're right. That has an impact.
So, can you give me the mix of tractor-trailer, haulage and tipper revenue in overall revenue?
Raman, I don't-
We generally,
Yeah.
We generally don't share the, you know, customer mix and the product mix, because, like what Kishan was mentioning, it can dramatically change, you know, month- to- month, week- to- week. So it becomes very difficult for us to, you know, kind of, segregate and then share that product mix. I'm sorry. So...
Got it. So most probably, the last quarter you had mentioned that, tractor-trailer, total mix is around 30-32%. So most probably the tipper could be 50%?
Again, we don't want to speculate there. I would say that a good percentage of our, you know, last month production came out of, you know, our prime axle portfolio. That is, you know, tipper axles and then the MS-185.
... Okay, okay. And my last question on that, this, in this quarter, many OEMs are saying that there's an improvement in the demand of the tipper segment, and Ashok Leyland has also launched two new tippers. So just wanted to understand, because of the change in the outlook of the tipper, the new growth can outperform of your company, as you are saying that a 20-25% growth in the next quarter, revenue?
So, let me correct that. I'm not saying 20%-25% growth, but what I am saying is definitely it's going to be better than the previous quarter fours. And, the tipper launches are there from the OEM and it will keep happening. What I would like to end this question is, we are 100% present where there is a new launch with this customer.
Okay, okay. Got it. Thank you, sir. That's all from me, sir.
Thank you. The next question comes from the line of Pritesh from Lucky Investments. Please go ahead.
Yeah, hello, sir. Sir, just to ask, very clearly, you know, from all the 4... Earlier 3, 4 questions which have been asked, we are a little bit concerned because when we look at the OE growth and when we look at your growth, there is a difference. So is there any loss of wallet share with Ashok Leyland? Is there any loss of market share with Ashok Leyland? If you could just comment on that. And, if not, then maybe you want to comment on the residual 35% of your business, because I think 60% of business is Ashok Leyland. What's happening in the residual 40% of the business?
For us to understand the deviation between the OE growth and your growth, from this quarter or last quarter, whatever, that would be very helpful, sir, for a more clearer understanding, rather than running around the bush, sir.
Let me attempt this question again. So if we look at... It is not just one OEM. Last quarter, I think every OEM had a higher demand, and against that demand, our delivery performance was in the north of 97%-98%. Which means to the capacity we have and what we could do to increase and maximize the additional volume that was in the market, we were able to serve-
Mm-hmm.
-that at the rate of 97%-98%.
Mm.
This, this did not result in any drop in the market share of our share of business with the customers. Of course, there were-
Perfect.
-mixed changes, where single source was the priority. As you understand, no line stoppage is expected, so we were able to do that. And the second question is, again, which comes again and again, if there was a way to plot our growth, removing all other elements from the revenue which is coming from non on-highway or M&HCV segment, then you will see that it is as on par with the industry growth, right? Provided there is no serious impact from the product mix, mainly the bus, because we have been saying that bus is one thing which we get impacted, and that is where our focus was, you know, in launching the new axle. So whenever there is more bus, yes, we have an impact.
But if it is the regular M&HCV segment, and if you have seen our product portfolio, we are there from 7 ton all the way up to 70 ton. Every segment that the market has, we have a product available, except the buses.
So in this comment, it's fair to conclude that above 7, 7.5 ton, you are mirroring industry growth rate, and you do not have any loss of market share with the main customer and, obviously, the other 30% of the business is some other customer. Is this a fair conclusion?
That is a fair conclusion. Even the other on-highway customers, we are able to meet their demand.
Okay.
So what is not in our control is the other segments, which will not show up in the top line because we don't give that difference of M&HCV and the other segments. But if you compare growth- to- growth, let's put it in the terms of number of axles, it is in line with what is the demand.
The other segment is what? Other than MHCV, that's what your reference is?
Right.
You have a MHCV business and a non-MHCV business, right?
That's right.
Non-MHCV business is what portion of your revenue?
It ranges depending on how the export market behaves. It can be 15%-25%.
So whatever deviation-
It's a mix of-
Yeah. Mix of the two-
It is a mix of export, defense, and off-road.
Perfect. So whatever deviation that we are trying to gauge or see, is to do with that 20% of the business?
Yes, primarily export.
Okay.
Export is
Primarily.
I think it's not, it's not just us. I think most of the companies in this domain who are into export, they are seeing this reduction.
Correct. Correct. So now from a course correction point of view, what do you see on this 20% of the piece? How does it shape up over the next one year? And first of all, in the nine months, if you could tell us this 20% of the piece, what is the shrinkage in this 20% of the piece? If that one number, if you give, would be very helpful for us to, you know, solve this, resolve this math.
Raman, I'll return that question to you. I don't know if we can give that-
Because if you give us one number, you know, we can, you know, we can stop moving around the bush, you know, we can come to some conclusion.
Maybe I'll try to just...
Yeah, yeah, go ahead, Raman.
... Yeah. Sorry, MJ. Yeah, so, see, overall, as we explained, right, the move with the export, you know, can vary depending on lot of circumstances earlier. So-
Sir, we are not asking you for the reason. We are just asking you in nine months, what is the drop in the 20% of the revenue? 20% of the business, is there a shrinkage? If there's a shrinkage, then what is the shrinkage?
See, like, you know, I will just put it this way, maybe, see, the out of the total wallet share, as, as Kishan mentioned, so we have, you know, between exports and the other business, we have closer to about 20, somewhere it ranges between 15%-25%.
Correct.
So when I see a total, you know, nine-month window, so you know, this again, you know, depending on the quarter, there are a lot of other factors that come in. So that's the reason, you know, we are not able to exactly give you, you know, how this movement happens. Because you have-
Yes.
You have the factor of all the, macroeconomic stuffs and everything that's going on.
No problem. No problem.
Yeah.
No problem.
So, like-
So let me tell you.
Yeah.
No.
Sorry.
No worries.
Yeah.
No, no, things are really good.
Correct. So, so you know, one thing you know, that we can assure is like, you know, we have, you know, we have a complete understanding of how the market is working. So I think we'll be, you know, in the range of 15%-25% across in that particular, you know, export and the off-highway business that we have.
Okay, perfect. So I'm just concluding this. Your 80% of the business with M&HCV, there is no loss of market share. You have to mirror the OE growth eventually, bringing some distortions for a few months here and there, based on who has what kind of inventory in the system. The 20% of the piece is where there are variations, and hence the overall revenue growth of Auto Axle at times doesn't mirror the OE growth which we are trying to do, correct? Are you constrained by capacity by-
That's broadly right.
That's broadly right?
Broadly right.
Are you constrained by...
Yeah.
Are you constrained by capacity for growth?
No. That's what I told, you know.
No.
Right now, we are not constrained, and, like I said, by Q3 FY 2027, we'll be completely, you know, improve our capacity to meet the peak demand in the next three years.
Perfect.
Of course, assuming that, of course, one comment, you know, of course, assuming that we have been continuously, you know, trying to increase our share of business, you know, right now with the kind of line of sight, we'll, we'll not be running out of capacity.
Okay. Just 3 quarters back, my last question, you had talked about two products, 175 axle and 180 axle and bus axle, which were introduced to your key customer, and you were talking about a wallet share rise of about 2-3%. What is the progress there on those new product line with the customer? So here, you know, we were actually looking at you re-increasing market share and growing faster because of this product line. So if you want to update us on this.
Sure. So there are three products. One is the brakes, 394 brakes, which we went into production end of December this year. So the way to look at this brake is, this is the next trend, this is the future. With all the shifts that we are seeing, this is going to replace some of our existing volume. It may not be the additional share of business. This is the trend that is in the industry, and that is why the brake is developed, and it is in production now. The second product is, it's for the tipper market, which is where our strength is, and this is also going into production this quarter.
Okay.
It's going to be a pilot production, and it will get into a full SOP. Again, there will be some cannibalization of the existing tipper axle into the new tipper axle. This is again, an upgradation of the technology and making it more suitable for the market. The third product, which is the bus axle, that's the real product gap where we are not present. And this is almost... This is ready. I will say this is ready, tested, but the concern we have now with this latest mandate from the government, that all 9-plus meter city buses have to be low floor.
Yeah.
We are re-evaluating what does it mean to the OEM, what will be their powertrain strategy, and then how this may or may not impact us. That's ready, but it's not ready for the launch because we need, we really need to focus on what is the next stage coming in.
Okay. Does the first two products, by virtue of their tech advancement, help you gain some share with the, with your OEs, or it's just a continuity of business for you?
It is both, sir. It is both. I, I would say it would be the continuity to a large extent because this is a change, this is a brake replacement. And then there is an additional, I would say, 5%-10% opportunity where it can be applied to the new bus, new vehicles, where we are not present today. So the product can serve both.
Done, sir. This was very helpful. Thank you, and all the best, sir.
Thank you, sir.
Thank you.
Thank you. A request to all participants, please restrict your questions to two per participant. For more questions, please rejoin the queue. The next question comes from the line of Ankur Kumar from Alpha Capital. Please go ahead.
Hello, sir. Thank you for taking my question. Sir, most of the volume-related questions have been answered, so I just wanted to inquire on the raw material side, cost side. Our COGS has improved in the last two, three quarters. Do you expect this to trend to continue, this in gross margin improvement trend to continue?
... So, I want to be a little bit cautious here, because the way we are reporting our results has slightly changed because of the recent related party transaction that happened, you know, three quarters ago, okay? So a few numbers are, you know, kind of moved in and around. But you are right. We have been always focusing because 70+% of our cost is the, you know, the raw material. So we have been always focusing on that, optimize our supply chain, you know, developing innovative designs, lighter designs, so that, you know, we can always continue to improving that.
So that trend will continue, and as we also look at, you know, having a better realization by introducing the new products, so that, you know, number will be continuously, you are going to see the improvement, but also considering the nature of our product. Okay, so there is only so much that we can do, but there is a opportunity over the next 2-3 years to, you know, improve in that area as, you know, high performance, high technology products are going to come in. So that COGS, you know, cost of raw material is going to come down.
Got it, sir. And, sir, in this quarter, there is a significant jump in the other expense. It has moved to over INR 81 crore versus INR 60 or so in the last quarter. So can you explain what is the increase in this?
So I'll take this question. So see, it's like, I think we have already explained, right? So we have the technical fee arrangement with Meritor. So whatever is the revenue growth, so to that extent, because it works as a percentage on the revenue. So you'll see the same amount, you know, that will also move in the other expenses. So maybe that is one significant portion. Given that revenue has grown by about 22%, you would, you know, see a similar kind of a growth there. So yeah, that's mostly about that.
Sorry, but if I look at Y-o-Y, revenue has grown much lesser than this growth in this other expense.
No, yeah, right. So last year, again, you know, we don't have this technical fee arrangement, right? So it is only pertaining to this year. So I'm just comparing quarter-over-quarter. So where the revenue grew by 22%, the cost has also grown in the similar range.
Okay. In terms of Q4, do you expect the things to go back, then our line growth to be in line with OEM growth? Or do you think we'll still continue to grow slower than the OEM?
Maybe, NG, if you can take that.
I think, you know, Kishan has answered it. I think with the current product mix, and then, you know, our share of business with all the OEMs, and with a little bit of flat, you know, export, and aftermarket, you know, outlook, I think, you know, we'll be in line with the industry. Barring, you know, those product lines where we are not present. As long as, you know, tractors and tippers, you know, they continue to, you know, grow, we will be, you know, keeping up with the industry or probably there is a good opportunity for us to also improve in other areas.
Sure, sir. Thank you, and all the best.
Thank you. The next question comes from the line of Rakesh Sharma from Sine Tech. Please go ahead.
Yeah, thank you for the opportunity, sir, and congratulations for great strong numbers in a challenging environment and constrained product portfolio. What I would like to ask is that, sir, after this India-US FTA or any, or the deal, whatever you talk about that, and this EU deal, what will be the benefits in the next 3-4 years for the company?
Thank you for the question. I will start. So yeah, definitely we see this as a much awaited positive move, both the European and as well as the North America or the US specifically. I'll talk about Europe first. We don't see a major, at least as of now, the details available, we don't see a major movement in the way we are actually exporting into Europe, because it's more what we are seeing is the import benefits, which we are not, you know, on our BOM cost, if you see, we are almost everything locally you know, available. So we don't see a big change there. But details are awaited, so we have to really understand it from a more holistic perspective.
Coming to the U.S. tariff, it's not just the tariff when it is U.S., it is, it's important to understand what the market is, what is happening in the market there. And as we stand, you know, beginning of February, I think it, the market is still expected to be low. And when I say market there, the addressable market for us is in the commercial vehicle, is the Class 8, which is the heavy duty. That is where our strongest presence is. And until unless the market improves, the tariff alone will not drive any major shift. And but what we are expecting is, with this, at least there is some certainty and clarity, and that should help the OEMs there to plan their supply chain, because everything requires 4-6 months.
If they are expecting a market comeback in H2, calendar year H2, they have to start putting things in action in March. So we are expecting that will start now. That dialogue has been almost like nothing till now because of the uncertainty. That will come back. And in the overall three to five years horizon, I think there are very good opportunities with the ramp up and everything that we are doing in the plant, that will, so that will keep us ready when the market comes back there. Thank you.
Perfect. Perfect, sir. And sir, starting FY 2027, can we expect a revenue growth of 10% and after the new capacity comes in and all this deal starts to kick in in the next financial, in the next calendar year? So can we expect a growth of 15%, something like that, starting FY 2027, 10%, and after 15% revenue growth possible?
Again, let me take this question. It more than the percentage, how we are looking at is in two ways. One is, do we have the right capacity and capability to meet the requirement, you know, technical and the capacity requirement both? And second one is, what will be the trade-off if we have to do a trade-off, which we don't want to do, domestic market fluctuation versus the global market. And, this is, this is exactly the long-term strategy that we have in place. So it is not the 10% or 15%. Is it, what is our ability to convert the upturn at the best rate? So that's how we are thinking about this, not just the number in the short term or in the 1-2 years horizon.
Perfect, sir. Sir, any new product portfolio from the parent or, any new product portfolio you are interested to introduce in-house?
I will, I will read this as whether for the current market, is there any new product required? Yes, I think the bus axle is a new product. But looking at the future trend, 5 years from now, engines getting into higher horsepower. We already have global products available. They are not localized because the market here is not ready. So when we see this happening, we will start the action of getting those localization plan in place, how we can make it more unique to India. So this is something we have been doing for years and years. The good example is 185. We knew 185 will be required in 2022. We knew that, it's going to be there.
So we are. That's why we have a seamless launch of that product, and we are ensuring that we are ramping up also in the same pace.
2032. 2022, not 2032, right?
No, sorry. 2022, we anticipated the MS-185, which is the hotcake now, that is required for the industry, and we had started all our work on that. The product was ready at least 12-18 months before the demand.
Great. Great, sir. Best of luck for the future, sir.
Thank you so much.
Thank you. The next question comes from the line of Saket Kapoor from Kapoor & Co. Please go ahead.
Hi, sir, and thank you for this opportunity. Hope I'm audible, sir.
Yes, you are.
Yes, please.
Yeah, yeah. Thank you. So, sir, as in the discussion, is it clear for us that going ahead, the next year will be the first year where we'll be seeing meaningful volume growth because of the fresh capacity addition? So is that understanding correct, first of all?
Let me just talk about this. You know, see, we did not have any capacity constraints for the current market, you know, volumes. So we did not lose any revenue because of the capacity portion of it. Like, Kishan has always mentioned, it was a product mix in the industry, at the same time, other than M&HCV, whatever the, you know, industry impact was there, that is what is kind of, you know, slowing us down in terms of growth or matching with the M&HCV, you know, growth.
What we talked about the, you know, capacities, basically to look at, you know, the future capacity whenever the, you know, the M&HCV market and then export demands come back, you know, next 6-12 or 18 months, we will be ready to, you know, convert those, you know, demands, you know, without having to, you know, lose that, you know, potential orders.
Okay. So just to simplify, in terms of tonnages, will there be additional tonnages that we will be adding to our portfolio? Or will be only the product mix that is going to change, that is also on the advent of demand, going ahead?
Let me-
Uh.
Take this question. So-
Yeah, go ahead, Kishan.
Tonnage. So I think it will be at least for the next 12-18 months, the tonnage will be the focus. But I think over that period, tonnage will not matter. What will matter is tonnage will remain. What matters is the top speed, efficiency, specific to axle efficiency, how much more further we can improve. So that is when our next generation axles will come into play. And along with that, what the expectation based on the trend is, when we move the average horsepower of the vehicle, which is still in the 200 horsepower today, to 350, 400, that is when the next generation high-efficiency products will be required. So, tonnage, yes, it will remain where it is today.
There may not be a big movement there, because globally also, we don't see anything operating on highway more than 60-70 tons. I think we have reached there. That is already done. Now, how to make it more efficient, that is the challenge in the industry. So, I think our portfolio from global experience, it's already there. So, how to seed them, how to work with the OEM, that's the focus we are having.
Thank you. A request to all participants, please restrict your question to one per participant. For more questions, please rejoin the queue. The next question comes from the line of Vijay from Nuvama. Please go ahead.
Hi, sir. Thank you for taking my question. I have couple of questions. First on, so I did some back calculation based on industry growth for an, our MHCV segment and, non-MHCV segment, 20% sales contribution. So is it correct that our non-MHCV sales has declined by around 20% year-over-year? That understanding should be correct?
So, there is definitely drop, I'll start with that. Whether it is... I, and I am not fully aware of what data you have used for your analysis, but internal analysis shows that it can be 5%-15% now, and also going forward in at least the next couple of months. Because the response I gave in the previous one of the questions-
5, 5%-15% growth, sir, or contribution?
No, the drop in the non-M&HCV revenue. I'm talking about the drop in the export revenue, for example, is in the-
Okay.
range of 5%-15% for us.
Okay. Okay. Okay. Okay, sir. Helpful to know. Secondly, sir.
Sorry to interrupt, Mr. Vijay. We request you to-
Yes.
Return to the question queue for the follow-up question.
This is my second-
The next question comes from the line of Aditya Bhoir from LKP Securities. Please go ahead.
Yeah, good morning. Am I audible?
Yes, sir.
Thank you for the opportunity. I just wanted a small clarification. For Q4, the comment was that it is expected to be better by 10% year-over-year. So in terms of sales revenue numbers?
You are breaking off.
Sorry. Sorry, Mr. Bhoir, your voice is not clear.
Hello? I, I'm audible now?
Yes.
Yeah. The question was, for Q4, the commentary was that it is expected to be better by 5%-10%, year-over-year. So is it in terms of revenue numbers?
Okay. I understand the question. Thank you. It is the industry volume. We are looking at the industry volume. The revenue will again be a mix of many things that we have been discussing in the previous questions.
Okay, okay. So it is a, the industry is expected to grow by 5%-10%?
That's right. Compared to the previous quarter, yes.
Okay, okay. Thank you.
Thank you. The next question comes from the line of Khushi Parekh from Abakkus PMS. Please go ahead.
Yeah, hi. So the question is that we mentioned about the new product on the bus axle side, and the regulation that is, you know, likely to start impacting our product itself. So how much tweaking or anything that we anticipate, and the timeline that we anticipate once this regulation kicks in? And as a continuity of this particular question, so how much of the market share we expect to have for our current largest customer for this particular product itself altogether? So any discussions that you've been having on this line as well.
Yeah. Thank you. So the regulation, what it states is from October 2026 onwards, it has to be a low floor. And when we say low floor, there is a number associated with that, 400 millimeters. Now, what we are trying to understand further is, this 400 millimeters, whether it is a completely flat floor or there are steps involved. Because you may have already seen there are low-entry buses, low-floor buses with different architecture and different definitions. So, second point here is, once that is understood, OEMs will have to look at what tweaks that you mentioned, right? What tweaks they have to do to meet this requirement. And in this exercise, what we will figure out is, our current axle, if you really see, it meets most of this 400 millimeters, depending on how the 400 millimeters is defined.
So we are trying to get that detailed analysis done. Second, say that we have figured it out, and our current product line is matching the requirement. The expected penetration with our largest OEM may be 3%-5%, because that is the only gap we see, it's 3%-5%. The third part to your question was, if it is not meeting the tweak, we don't know that yet. Whether it's a totally different architecture, whether it will require a complete low floor, which we have in the global portfolio. Whether we need that, we have no idea right now. So we are still trying to analyze this in a, you know, detailed manner technically, and also understanding from the OEMs, how they will approach this.
Each OEM may approach in a very different way.
Okay. So just to clarify, the 3%-5% that you mentioned, it is the 3%-5% market share of the buses portfolio that they have?
... 3%-4%, 3%-4% of, yes, our customers portfolio. Yes, you're right.
Okay, got it. Thank you.
Thank you. The next question comes from the line of Akash Vora from Envision. Please go ahead. Mr. Vora, you may proceed with your question.
Yeah. Am I audible?
Yes.
Yeah. Sir, are we in any way losing co- what we can say, losing market to kind of, you know, OEM doing their in-source manufacturing for axles? Is that a possibility, I mean, is that happening in India, where the OEMs are in-house assembling the axles by procuring, let's say, the axle housing, the beam and the shaft from various other domestic players?
Let me start with what we are seeing globally. We're seeing globally, OEMs are actually moving away from doing anything to do with axle. So we have examples in Europe and North America, where discussions are going on, where OEMs are asking us, "Do our axles," even including their own design, right? That's the trend, where the focus is on other technology and the other relevant value that they want to create on the vehicles. Coming back to India, within our existing business, we have this model where we supply as a kit, different parts, that's purely basically because of logistics. The entire content is ours. It is not that the modularity, what you're saying, that doesn't exist in the industry, where they pick something from somebody and then try to assemble it themselves. No.
It is mostly content is from one supplier, but it is supplied in different conditions.
So in the present moment, you are saying that the whole axle is what they look to procure, some players like you, right? And not the actual component, they'll be procuring separately and in-house assembly. That would not be the case.
So the answer is, we are supplying the whole axle and we are also supplying the axles in kits to the same OEM. It is depending on the logistics, their plant capability, what they have in that location, based on that. So the answer is, the full content at the vehicle level belongs to us. It cannot be that supplier one or competition one gives something, competition two gives something, and they bring something else and make it a... You know, it doesn't fit that way. The architecture will be very different.
So just to follow up on this, I mean, who's our current competitor? I mean, in the domestic market, who's our current competitor, biggest competitor, since we are dual source as well for many OEMs?
So our, in terms of largest competition we have is the captive OEMs, where, like, we have Tata Motors, Eicher, they do their own axles. So if you look at from that way, they are the largest competition. But of course, as an independent, sub axle brake supplier, we have multiple. We have Brakes India brakes, Dana, American Axle, and some pieces in the off-highway segment, which is very small.
For the showroom name?
It's the same names that I mentioned.
Okay. Yeah, thank you.
Thank you.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand over the conference to the management for closing comments. Thank you, and over to you, sir.
Okay. Thank you very much, once again, you know, having trust in Automotive Axles and continue to be our stakeholders. Just to summarize it, you know, the last quarter, you know, it was exciting, and we are able to convert it. The current quarter is also looking quite positive. We will do everything possible to make sure that, you know, we convert these, you know, opportunities. And thank you very much for calling in, and have a great day.
Thank you.
Thank you.
Thank you. On behalf of Batlivala & Karani Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.