Ladies and gentlemen, good day, and welcome to the Q1 FY 2025 Results Conference Call of Samvardhana Motherson International Limited. 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 the conference call, please signal an operator by pressing star then zero on your touchtone phone. I now hand the conference over to Mr. Laksh Vaaman Sehgal. Thank you, and over to you, sir.
... This call for quarter one FY 2025. The company reported quarterly revenues of approximately INR 28,900 crore, which is up 29%, EBITDA of INR 2,785 crore, which is up 44%, and PAT of INR 994 crore, which is up 65% compared to the same quarter last year. Being a growth-focused company, we monitor this metric diligently, and I would like to report that the consolidated growth on the last twelve months basis is now sitting at 18%. While we have a bit to go towards 40%, we'll surely make more progress on this number in coming quarters. Both organic businesses and acquired assets have demonstrated strong performance in this quarter.
While on one hand, the organic businesses continue to improve absolute profitability and provide growth over the market, on the other hand, acquired assets continue to contribute to our enhanced size and scale. All the M&As announced over the past many quarters have been successfully closed at SAMIL, and SAMIL is now a more diversified and robust platform of growth for all stakeholders. It is important to highlight that all acquired assets together have been margin accretive, and as synergies start to unfold, things should improve even further. These results are to be viewed against an external environment, where on the macro side, certain pockets of challenges still remain, such as commodities like copper remain inflated during the quarter and is now showing signs of softening.
The logistic costs crept up significantly due to the Red Sea crisis and congestion at the Asian ports, which resulted in longer lead times and hence higher inventories. You can see more on this on slide number six. On the vehicle production side, I want to highlight that the light vehicle production remained largely flat on a year-on-year basis. Significant amounts of growth coming out of India and China is being offset by softness of demand in the developed markets, especially Europe. Some of the industry forecasts are projecting light vehicle production to be flat or even slightly degrow in fiscal 2025 as compared to fiscal 2024. This is being attributed to the evolving platform mix due to sluggishness in EV pickup. Motherson, however, is a powertrain-neutral company, which positions us well in the medium term.
Further, the automotive trends of premiumization and SUV still hold forth and continue to drive content per vehicle growth, which again augurs well for us as well. Please refer to slides seven and eight in the presentation for more information on this. The diversification towards the non-automotive business, which we set out in our five-year plan, is now gaining traction. On the aerospace side, during the quarter, we closed the acquisition of AD Industries, which brings in capabilities of soft and hard metal machining, which is critical for engine components and setting our footprint right next to the customer. In India, we are setting up two plants to support new product lines and vertical integration and are expected to come on stream in the second half of FY 2025. Another key non-auto business being developed is the consumer electronics.
It is truly a testament of engineering and manufacturing capabilities we have at SAMIL. This new vertical, we envisage that will require investments of around INR 2,600 crore over a period of time. We are setting up state-of-the-art facilities with an estimated area of more than 130,000 sq m for this project. We expect start of production around September, October, with subsequent ramp-up in production over the next year. Our CapEx for the quarter was INR 1,078 crore. As announced earlier, we are setting up new plants to support growth coming out of emerging markets. Out of the 18 greenfields we have announced earlier, two have been operationalized and commenced production in India and China, respectively. Additionally, we're adding one new plant in Mexico.
I would like to highlight that seven greenfield plants are being set up in the non-automotive space in line with our diversification aspirations. For further details on this, please refer to slide number 12. Our CapEx guidance remains the same at INR 5,000 crores ±10%. However, with all the acquisitions closed and in light of the increased business perimeter that we have with these new businesses, we are reassessing this, and businesses such as Yachiyo, Lumen, and AD Industries have all come in. During the quarter, net debt increased by INR 3,000 crores. This is primarily attributed to the M&A closures and increased working capital requirements due to the Red Sea crisis and volatility in customer schedules. The increased working capital is expected to normalize in the second half of FY 2025.
Despite the increased net debt and CapEx for growth, the net rev, the net leverage ratio at the end of the quarter remained at 1.5x. This reflects the strong focus on our financial prudence. The net leverage ratio is well within our management targets and our comfort, and our focus is to constantly deliver. Our disciplined financial track record is demonstrated by multiple rating upgrades by esteemed agencies. Please refer to slide 11 for details. On capital market actions, I would like to provide an update on the following. During the quarter, we also issued our first dual investment grade bonds of $350 million, being a debt neutral transaction for us.
We are comfortable with our debt maturity profile and have access to well-diversified set of capital resources, with $1.4 billion available from committed and undrawn facilities, and also unrestricted cash and cash equivalents. Please refer to the debt and liquidity profile on slide 13. Our equity continues to be very dear to us. If we were to consider raising fresh capital, it will be for the growth of the company. Over the past 18 months, we have closed a record number of M&As, and we continue to see more opportunities in the developed markets. On the organic side, we are continuing to invest in growth CapEx in the emerging markets for both automotive and non-automotive businesses. As we evaluate these opportunities, we want to proactively develop our capital structure that will position us well to be able to undertake some of these opportunities.
We hence thought it is prudent for us to take an enabling resolution for potential capital raise in the future. I would like to thank the team for delivering great results, and with this, I would like to conclude my remarks and open the floor for your questions. Thank you.
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 their touch-tone phone. 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. Our first question is from the line of Jinesh Gandhi from Ambit Capital. Please go ahead.
Yeah. Hi, congrats, Motherson, on great results. A few questions from my side. One is, if I look at the organic growth excluding acquired assets, the number which you provided, organic growth had been largely flat on YY basis. Do you expect this trend to continue given the commentary of muted vehicle production growth, or we should be continuing to grow ahead of the industry based on the Greenfield plans which are coming?
Thanks, Jinesh. Which number are you referring to?
I'm primarily deducting the INR 6,000-odd crore from the revenues and looking at the organic growth.
Right. So look, I think, definitely there is, you know, quarter-on-quarter variance that happens, okay? Q4 versus Q1 and Q1 over what we had last year. We're also obviously adding in a lot of the, new businesses that are coming in. Sometimes in quarters, depending on the launches and as they are, as they are taking, you could see some, some, differences that happen on a, on a, a quarter basis. But overall, we are seeing growth because of the, macro factors of premiumization and the SUV trends that are happening and a growth in, in content. So over a longer period of time, we are seeing, definite growth that is happening, not just in the, because of the, of the acquisition, but also on the, on the organic side. But like I said, there could be small variations that happen on quarters, depending on launches.
Right. Right. Content obviously is one of the key drivers for us, understandably. Second question is on the consumer electronic component business, where we are looking to invest about INR 2,600 crores. So is this entirely for JV with Biel Crystal, or this is beyond that?
So this is particularly for the investments that we are making for that JV and for our businesses that we're gearing up for that consumer electronics business. So one is obviously on the glass side for the JV that we are making, but one is also for assembly of further electronics that we believe that we'll have a good chance for winning a lot of business from customers.
Okay. Okay. And by when we would be... I mean, so what will be the timeline for this investment of INR 2,600 crore? By when, it should be up and running?
So we will already see some of that business start towards the second half of this year, and it will ramp up next year. And this investment will continue for over a period of time, so a couple of years as well. So we are bringing that information out upfront, but as the facility comes up and the business picks up, this will be over a period of time.
Got it. Got it. And, the 18 Greenfield plants which we are investing for would they be largely operational by end of this financial year and ramp up by second half of 2026? Is that the right way to look at it?
We just mentioned that, you know, some of them have already been operationalized, the two of them that have come on.
Right.
The rest of them are in varying stages. So yes, some will come on later half of this year, and some will obviously push into next year as well.
Okay. Okay. And any sense on what kind of what would be the revenue potential of these greenfields?
You know, it's because it's automotive and non-automotive. I think we wanna stay focused on our FY 2025 number. This will add significantly to the organic side, but definitely, you know, a lot more will come as these businesses ramp up in coming years. So cannot give you the number on exactly that. But definitely there's a lot of growth to come from this organic investments that we are making.
Got it. Got it. And last question on this enabling resolution. So this will be only if we get any good inorganic opportunity, or this will also be to manage our organic opportunities in some of our debt covenants?
You know, we are very comfortable with the organic opportunities and the debt covenants. As we said, that we are at 1.5x net debt to EBITDA, so we're very far away from our covenants. We will continue to delever on the organic side. This is definitely enabling for what more comes in the future, and if a larger inorganic opportunity comes. We have a clear target for FY 2025, which is to be, you know, INR 36 billion with a 40% ROCE. But that's just preparing us because we see a lot of challenges that are still there, in the European market and in the amount of focus that we are getting, as being a superior engineering company in India and the further opportunities that we will get.
This is only for, you know, what we don't have on hand right now. Everything that we do have, we are fairly comfortable with our debt profile and how the businesses are delevering with the continued performance that they are giving. This was really a very spectacular quarter for us to have these kind of numbers on the first quarter.
Sure, sure. Great. I have a few more questions. I'll call back into you. Thanks.
Thank you. The next question is from the line of Mumuksh Mandlesha from Anand Rathi Institutional Equities. Please go ahead.
Yeah, thank you, sir, for the opportunity, and congratulations on the good results, sir. Sir, firstly, on consumer electronics business, can you talk about what kind of business opportunity size is there, with this investment? And also, I mean, what kind of customers we are, we have with us for this business?
Look, these are all highly engineered products. Again, we are working with a joint venture of Biel Crystal, so we want to get into more of the glass side of products. They are varied customers. All consumer electronics customers could be relevant customers for this. And I believe that, you know, as the push is coming in India to manufacture more and more electronics, this augurs well and gives us the capability, and we will build a lot of customers in this field. At this point, this is all that we are able to say.
Got it, sir. On this overall non-auto picture for us, sir, what kind of growth we see over the medium term, or what kind of revenue share we see for this non-auto side, sir?
Thanks. The target was always to be 25%, business to come from non-automotive. So of course, as you can see, that not just the consumer electronics, even the aerospace and the defense businesses, these are also growing quite nicely. We also have a medical facility that is coming up in Chennai, which is helping us to diversify in that field. So these are some of the segments that we have identified. We are building businesses, and I believe, you know, a large flavor of this will come in the next five-year plans as these businesses take scale.
Got it, sir. And sir, in the last previous question, you mentioned about this electronic assembly, sir. Can you share what kind of this product are there, sir?
Sorry, what kind of a?
On the electronic assembly you mentioned in the previous question, sir. I just want to understand what is this, kind of a product, basically you're talking about?
These are glass. The JV is specifically for glass products that go on a lot of electronic instruments.
Okay. Got it, sir. Thank you so much for the opportunity, sir.
Thank you. The next question is from the line of Raghun andhan N.L. from Nuvama Research. Please go ahead.
Thank you, sir, for the opportunity. Congrats on stellar performance. Sir, firstly, in consolidated numbers, raw material cost to revenue has significantly reduced by 290 basis points year-over-year. What could be the main factors leading to this reduction? I mean, the copper prices have gone up 15%. Can you also indicate on the input commodity side, which would be the main commodities apart from copper and plastic for us?
Kunal, can you help with this question?
Yeah. Raghu, I think the way to think about it is two, three things are embedded. One, obviously, the mix of businesses has changed. In quarter one, as an example, you did not have the integrated assemblies part of the business, which traditionally does carry a lower amount of, of, let's say, raw material in comparison to some of our other businesses. Two, needless to say, if you think about last year, this time, you were seeing a fair amount of headwinds, a fair amount of unknown, like electricity costs, et cetera, et cetera, which were all getting bloated up. And hence there was a pain period for which we had told you that we are working with the customers to reprice our products.
Hence, what you're seeing in this quarter is how that repriced situation is looking like from our cost of raw materials perspective. Three, as part of some of the commodity conversations which had gone already again last year around similar time zones, some of them were constructed with the pass-through elements, and that again is what we are seeing now in terms of the raw material percentage.
Got it, sir. So integrated assemblies with higher margin, repricing from customers and commodity pass-through will be the main elements. When I come to the standalone business, again, here, if I look at raw material cost to revenue, it has reduced YoY and on a QoQ basis. In presentation, you have also referred to insourcing activities leading to support for margins. If you can elaborate on the same, please.
Look, the answers here also are somewhat similar. There's a whole host of new businesses which also got assimilated in this time zone. You know, some of our existing businesses were merged into SMR, so really, the two numbers are really not comparable again.
Got it, sir. On the Aerospace business, the revenue during the quarter was over INR 300 crore. In one of the earlier press releases, the order book was indicated at $1.3 billion. How much would be the current order book, and over what period is it expected to be executed?
Yeah, I can take this. Yeah, Kunal, go ahead.
Go ahead. Go ahead, Vaaman.
Look, the order book of the aerospace is much longer than the automotive. We have not come up with independent numbers for the individual verticals. We will consider that and come back to you. But of course, there's a significant ramp-up that will happen in latter years, as we have put up significant CapEx for building up new facilities for the Aerospace orders that we have won. So you will see further growth that happens in this business. Also, we know that there is some slowdown that is coming in Aerospace on the international side, but India still continues to be a buoyant market where we see a lot of growth opportunities.
We will come back to you with more on that number. But this order book is a firm order book, which spans, you know, more than 10 years.
Thank you, Vaaman, for that. In one of the slides, you have mentioned about delaying launches in EVs, which has some impact on vision system integrated assembly. How much would be the share of EV in these segments? And in overall revenue, how much would EV programs contribute?
We can look at that number on the SMRPBV numbers that we disclose.
Vaman, I'll-
So, currently, the current of-
Vaaman, I'll help on this. EVs is currently a 9% odd share.
This will be EV plus hybrid or pure EV?
This is just pure, pure EV.
Thank you, Kunal, sir, for this. That's all from my end. I'll fall back to the queue. Thanks, and all the best.
Yeah. Just, just so that I can, I can add some more to what Kunal said. I think what's important for you to understand is, again, we are engine, sorry, powertrain agnostic. So where, you know, there are delays on the EV side, you know, we are seeing extensions of the ICE programs, which we are also on. So, thanks to Papa's direction, we've always maintained that, you know, EVs will take some time to come on Board. We cannot compress time. So we always had a balanced approach and made sure that we were winning orders, both on the ICE side and on the EV side.
So that if there is a slowdown, which is happening, and it's taking longer for the EVs to pick up, we are still very much, you know, growing still with what the content that we have on our ICE programs. So that bodes really well for us, as we are still seeing growth where there might be pockets of slowdown for others.
So ICE and hybrid will both help our growth. I remember that-
Right.
EV was 20% of order book. What would be the share of hybrid, if you remember offhand?
I don't remember that number offhand. I'm sorry. But, again, hybrids are gaining a lot more traction now, but we will look at that number and come back to you.
Thank you, sir. That's all from my end.
Thank you. The next question is from the line of Jinesh Gandhi from Ambit Capital. Please go ahead.
Yeah, hi. My question is on the organic, inorganic growth side. So, in the past, we had been staying away from powertrain-related components. Do we still maintain that strategy, or now we are open to both ICE and EV-related powertrain companies?
Thanks for that question. I don't think we ever said we will stay away or, you know, stay close. I think our vision has always been to follow the customer. So, wherever the customer wants us, we will, we will definitely be there. I think, we always want to have a balanced approach. If you know that we have also taken over the business of Yachiyo, where a portion of that business is coming from fuel tanks. And we believe that the market is big enough for all sorts of different technologies to coexist and have opportunities for Motherson to grow. And, for example, even in the future, if, if hydrogen is to come, then again, fuel tanks will be, will be necessary.
So we are staying very close to what the customer wants, and also our acquisitions are only at the customer's behest. So we really don't decide, you know, which way we go. We are just supporting our customers' ambitions… And in that, we will always maintain a balanced approach and look at both, ICE and hybrid and of course, any other electric opportunities that also come.
Perfect. So you're quite helpful. Thanks. Thanks, Aman, and all the best.
Thank you. The next question is from the line of Kapil Singh from Nomura. Please go ahead.
Hi, good evening, and congrats on a great performance. I wanted to check, you know, we've done these acquisitions recently. Where are we in the synergy journey for these? How much of it, according to you, has been explored up till now? Or we are. Is it very early days and there's a lot, lot of ground to cover?
Yeah, thank you for that question. You know, Motherson always believes that we, you know, take our time with the acquisitions to understand them deeply and integrate them, and make sure that we take the right step forward. So definitely it is early days. I think, the journey has just begun with these acquisitions. So please, keep watching this space. We will definitely come back with a lot more on this. But, definitely, you know, when we acquire the companies, we set ourselves with a, with a plan, and we've just started to execute that. And till one year, we are also, you know, very deeply understanding the function, functioning of that company, and understanding what the customer requirements are also. So we're still in very early days, and definitely more synergies will come as we go down this path.
Sure. And on the consumer electronic division, I wanted to understand, is this currently the INR 2,600 crore CapEx, is this one line of CapEx with the JV that we are doing? Or is there... Because you recorded something to assembly as well. So I just want to be clear whether, you know, these are two separate lines of businesses, or currently we are looking at just one opportunity.
Look, there are multiple opportunities, and the INR 2,600 crore investment encapsulates all of them. So, of course, we, we as you know, we are, we are a highly engineered engineering-focused company, so we're not just going to be doing manufacturing, we will also be doing assembly and any post operations that that will require. We want to be the complete solution for our customers. So obviously that, the, that starts with the more basic assembly, but then as, as you keep building on that, you will get into more highly engineered parts, which we are building for already as well.
There is INR 2,600 crore for the entire CapEx for this entire project, for all the businesses that we envisage that we need to build to make sure that we are delivering the solution to our customers.
Okay. So some of these will be outside the JV as well. Is that the right way to understand?
That's right.
Okay. And in terms of the return profile, because it's a new division for us, so if you could just some color, are we following the same guidelines, which are 40% ROCE? And you know how, you know, we've seen sometimes the greenfields when they come up in automotive business, they are loss-making initially, and then it takes some time to stabilize and improve the margin. So just if you could give some qualitative color on, you know, return profile-
Sure.
Asset terms
Sure.
Expected time to turn around or break even.
Sure. Sure. Look, you know, these are new businesses that we are getting into, so definitely we're also learning as we go along. But our focus has always remained at that 40% ROCE. We do envisage that, since these are businesses that move much faster, as you know, you know, automotive program takes almost two years to develop and last for five to seven years. But on consumer electronic side, the cycle is much, much shorter. Newer products come out every single year. So, definitely the margin profiles and the investments correspondingly are different for these businesses. And we will continue to give you the color as we, you know, continue to perform and deliver to our customer expectations.
So definitely the 40% ROCE target is maintained, and definitely we strive to be much faster in our development as required by the industry, and also turn the asset turns and deliver more profit as required for, you know, achieving those 40% growth targets.
Yeah, and if you could just refresh us on the CapEx plan for this year, and in light of this investment, is that included already or is there any change?
Yeah, Kunal can add on that, but, like I said in my opening comments, we are still maintaining that INR 5,000 crore for all the businesses that we envisage right now. Of course, because the number of acquisitions is high, and as we are getting deeper in, we are looking at those numbers constantly. But we still, you know, hope to come around that INR 5,000 crore mark ±10%. If there is some change or some significant new order wins as we have entered these businesses, that comes, we will come back to you on that. But this entire CapEx is covering all the new facilities that we want to build in the automotive and non-automotive side.
That is right. We will come back next quarter if we have to change this around using the revised business parameter. But right now we are still on the belief that it should lie within INR 5,000 ±10%.
Sure. Just if you could share some... What kind of visibility you have on doing further acquisitions? How's the pipeline looking like? That would be my final question.
Look, the market continues to be a challenging one. I think you've seen that the pace has really increased. We continue to see more opportunities that are there in the pipeline, and are hopeful to hit our 2025 targets. But again, we will be extremely picky, and we will only go after where the customer wants us to be. But, that being said, there definitely are still challenges that exist. And again, we are hopeful that we will find good targets that will help us achieve our 2025 vision.
Sure. Best wishes for the...
Thank you.
Thank you. The next question is from the line of Amit Shah from Shine Capital. Please go ahead.
Hello, am I audible?
Yes, please go ahead.
I just want to congratulate the company for crossing the INR 100,000 crore revenue mark. It's probably one of the very few companies in India which have crossed this milestone, so congratulations for that. Coming back to the quarter Q1 FY 2025, you all reported a superb revenue growth of 29%. I just wanted to have a better clarity what the numbers would look like for FY 2025 and probably FY 2026, because this, this year is gonna be a year where, where you're gonna see a ramp up of a lot of the acquisitions and your revenues coming into the picture. And a lot of these acquisitions actually have EBITDA where the margins are actually better than our company level margins. So according to you, what would, what, what should be the revenue and the PAT estimate for FY 2025?
Because some of the brokerages that I was seeing in India, some of the brokers were looking at INR 5,000 crore PAT number, or another broker was looking at a INR 4,000 crore PAT number. So you think this number is a reasonable number according to you, or this number can be little, can be a little more aggressive going higher? So what is your sense on that?
Thank you for the, the kind words at the start of your comments, but I'll request Kunal to comment on this, please.
So, Amit, as you're aware, we really do not guide on how the top line or the bottom line is going to play out. What we can certainly say is, we are right now at 18% annualized growth for this quarter. Our target is 40%. As you know, in our five-year plan, this is the last year of our five-year plan. We plan to traverse the maximum that we can between 18%-40%. We do believe we should improve significantly from where we are right now as we head towards the end of the year. There are multiple levers for the same. Part of it, you rightly alluded to the fact that you are yet to see some of the synergy benefits from the M&As come into play.
You're also yet to see some of the efficiency parameters that should help in reducing some of the capital efficiencies or capital that is blocked right now in working capital, which should get released in the latter part of the year. As you know, the INR 83.4 billion order that we had announced last year, as that comes into SOPs, you should see some of the equipment getting sold to the customer for which we are currently carrying it on our books, and hence should again lighten the capital at our end. And we continuously work on building efficiencies on the supply chain side to be able to again optimize our capital deployment there.
Hence, multiple levers by which we do believe that, overall, the ROCE should be trending upwards as we head with better years.
Got it. This is probably the last year of this five-year plan. So what do you aspire for the next five-year plan? Is it gonna be in terms of profitability? Is it gonna be in terms of revenue? Because in terms of ROC, you are still at around 18%, and our targets are close to 40%. Probably this year, we may probably adjust one to four basis points in terms of ROCE. But do you see in the next five-year plan, are you all targeting a $1 billion kind of a profit in your next five-year plan? Is that a possibility that you are thinking when you are looking at strategy issues? Is there a thing where you can build it in your organic business as well, a $1 billion profitability maybe for the next five-year plan? Is that a number that you'll be okay to work with?
Thank you for those comments. Look, you know, we will come back to you with our five-year plan. We usually kick that off around September, October, with our internal team. So honestly, we don't even know where, where that five-year plan will take us. We are really very much focused right now on delivering this five-year plan. I think you have to, you know, take, all our targets with, with what is really going on in, in the world as well. You know, all these targets were set, before we knew that COVID was around the corner in 2020. And you can understand all the, you know, different events that have happened since that time.
I think in lieu of all the events that have happened in the world, I think you would see that Motherson has really outperformed, by any means on all the parameters of global growth and what has really taken, what has really happened in terms of circumstances in this world. That being said, you know, we don't change our targets or, you know, just because COVID came, or the Ukraine crisis, or energy crisis, or inflation, or whatever you want to say that has happened, we do not, you know, deter from our effort, from our targets. So we have maintained it. We still believe that we have a very good shot of hitting them.
But I think even in the ROCE targets, you have to understand that, you know, ROCE doesn't happen overnight. It's something that takes time. We are a growth company. As you invest, of course, the growth, for you invest for growth, the ROCE goes the other way. But as those businesses then start to prosper and then the businesses play out, then the productions ramp up, the ROCE numbers also comes. So if you take, you know, those targets with all the businesses that we have had, at 2020 when we were deciding these targets, you will see that there has been a steady growth in the ROCE delivery. And of course, the ROCE always comes under pressure when we do the new acquisitions, and then for growth, as that will only come in the future.
So if you look at it like that, you will see that we have tended extremely well. The company has definitely outperformed our targets on the organic side. And as these new organic businesses spend five to seven years time with us, when we clean out the old issues with the company, start building new pipelines and start delivering on the new orders, the ROCE starts to inch up as well. The target of 40% is as a group. Multiple verticals have already achieved that 40% target with their organic business. And of course, you know, no business is available at that 40% target when we start. It's a build-up process by a lot of hard work of the teams.
So we are extremely pleased with the, the efforts of the teams, what we have been able to achieve, and definitely we will push everything we've got for this last couple of quarters till the end of 2025, and then we will also come back to you with the next target. But rest assured, it's going to be a a big number, and it will definitely not be diluted on, on our ROCE targets. And definitely we will push the teams to deliver to the best. But you'll have to be patient. Can't let any cats out of the bags because there really is no cat to be let out, as we ourselves will decide that target in this, in these coming months, and we will disclose it to the market. I hope I was able to answer your question.
I just one last question. I was just referring to your slide number seven, where you have given the production volumes for global light vehicles and global commercial vehicles. So the Q2 numbers, the estimated numbers, are only lower end, as per, as per the slide. So how do you, how are you seeing the Q2 numbers? Are they representative of these numbers for the company, or you'll be doing a lot different than what is given over here?
No, look, Q2 globally for the automotive side is always weaker because it has a large number of holidays in August. So that is a natural phenomenon that happens every single year. I think, again, the best comparison would be to compare our performance Q2 over Q2 of last year. And, as the teams, again, like I said, continue to perform better, the volumes, continue to happen due to the new launches, and of course, some impact will come because of the holiday season. But we do emphasize that the next few quarters, we will continue to perform, as all our plans of resilience and our customer focus and driving up of efficiencies, you know, continues to take shape.
So we are again, you know, very hopeful and positive and, you know, continue to deliver on all our programs that are running, and hopefully will be much better than where we were. Of course, cannot give or take any guarantees of what happens in the market, but this is generally what happens in Q2. Because of the holiday season, you see a slight dip, but that catches up in Q3 and Q4.
Got it. Thank you. Thank you so much for your support.
Thank you. The next question is from the line of Gunjan from Bank of America. Please go ahead.
Yeah. Hi. Thanks, team, for taking my questions. I just had few clarifications. Firstly, on the acquisitions that have been concluded, is there anything pending to be paid out still for those, you know, for those transactions?
Kunal, I don't think there's anything left there, is there?
Sir, the line for Kunal, sir, is dropped. I'm just reconnecting his line.
Okay. No, I think,
Okay. So while, maybe-
He will-
Kunal joins back-
- clarify that.
Maybe I can go to the other question, if that's okay.
Yeah, please go ahead.
Okay, so my other question was on this non-auto business, the emerging business, as you call it. You know, you all had laid out this aspiration to get to 25%, and we're roughly now at about 9% or so. Now that you have visibility on at least two or three of these businesses, like, right, electronics and aerospace with the AD Industries transaction, is. Could you be, you know, could you just give us a sense on how should we think about this 25% now? Is it in the next two, three years; this seems like a very viable, you know, outcome. I'm just trying to think about how to build this extremely new segment in, in, you know, in Motherson, where now there is a better handle.
I mean, completely, the electronics business sounds quite optimistic. Aerospace with AD Industries sounds quite exciting. So, you know, how should we think about the revenue growth over the next three to four years?
Yeah. Thanks, Gunjan. I think, again, we'll come back with a five-year plan on these diversified businesses as we get a much better handle on all of them. As you can imagine, they were a lot more imagination when we set them out in 2020, with, of course, you know, plans in place to go after these businesses, but they have shaped up much better than what we envisaged with all of these, you know, taking grip at the right time. I think we will come back to you with more color on that, but definitely the idea of 25% of group revenue will only be there and perhaps even grow in the next five years. But at the same time, it's not that we want to lose focus of the automotive business.
That's always been our main business, and that, too, will continue to grow. So the five will continue to grow. And these businesses will obviously grow tremendously because they're at a much lower base than where we are with the automotive business. But yeah, a very exciting future is definitely on the cards. I think you're seeing the traction that we are receiving is probably from one of the highest levels that we have seen in these new areas of business. We're building the right partnerships, we're getting the right customers, and I think it's a very exciting future. And then what's the tailwind of what's happening on the India market, I think we are very well positioned to take advantage of these and grow very rapidly in the next few years. But please give us some time.
We will give you a lot more clarity on the next 5-year vision plan for all these new businesses.
Okay, got it. If I can just get the confirmation on that no pending payment?
Sure, ma'am. Kunal sir's line is reconnected, ma'am. You can please go ahead with your question once again, if possible.
Yeah, I just wanted to check, Kunal, if there is any pending payment for the acquisitions concluded?
No, Gunjan, there should be nothing significant. There will be some payouts, which have been withheld on account of how the contractual arrangements are, but nothing of any significance going ahead.
So it's fair to assume that, you know, if there were to be not assessing any incremental acquisitions, but in the next two, three quarters, the debt should significantly come down because of the reversal of working capital and the cash flow generation in the business.
That is right. We should be looking at a deleveraging path going ahead. And we had anyway guided in the earlier part of the year as well, that end of the year should be looking one or better in terms of net debt to EBITDA. And that's the trajectory that we still see. The only part from an M&A perspective, you may want to keep in mind, we've announced a new one in this quarter, which is a joint venture with Sojitz, where we have bought Sojitz stake. That payout will happen in, in the, Q2.
How much is that, Kunal?
Around about INR 230-INR 240 crores.
Okay. And just last one from a capital, you know, perspective that this enabling, resolution that we have, is this, you know, is this keeping in mind that we don't want to really breach 1.5 net debt to EBITDA when we come across a large transaction? Should we keep 1.5 as a threshold in mind?
Look, our financial policy is 2.5. I think Vaaman alluded to the fact that this is for growth opportunities, and we are proactively looking at different opportunities. As you can imagine, there's a lot of pain in the Western world, given how the inflation is played out, given how excess capacity resides, and hence, M&A is an active space for us. And we're only trying to proactively manage our capital structure for any future opportunities that might come our way. 1.5 is not really the guidance, it's our comfort level. Our financial policy remains 2.5 times net debt to EBITDA.
Okay, got it. Thank you so much.
Welcome.
Thank you. The next question is from the line of Joseph George from IIFL. Please go ahead.
Yeah, hi, thank you for the opportunity. Just a couple of questions and one clarification. The first one is, when I look at your depreciation line, despite the addition of three acquisitions in the June quarter, sequentially, the depreciation amount has come down. So is this a good starting point from upcoming quarters, or is there any one-off in the quarter?
Maybe I can take that. Look, both depreciation amortization for the last quarter, that is 31st March 2024, had certain items that had to be recalibrated at the end, specifically in regards to the lease pieces. Given these are newly acquired assets that were still getting assimilated then. As of now, with what we know, what you're seeing in the current quarter is more reflective of what you should be seeing going ahead. Having said so, AD Industries, Yachiyo as well as Lumen, it's there for part of the quarter only. Yachiyo is for full, AD Industries and Lumen is for part of the quarter, so there might be some changes as we look through the full quarter piece as we move ahead. But these numbers are possibly more reflective.
Also, there are PPA adjustments, as you know, which will happen as, you know, more data around this topic is picked up by our auditors. We booked goodwill of around about INR 600 crore in this quarter, but the PPA is yet to be finalized. And hence there might be some variations, but should not be very significantly different to what you are seeing right now, give or take.
Understood. Thanks. The second question was, for the accounting with respect to the, JV with BIEL, will it be a line by line consolidation or, will it be accounted for a share of profits? Because we call it a JV, so I wasn't sure.
A line by line consolidation.
Perfect. Thanks. And the last question was, with respect to the commencement of the operation. So, just a clarification there. I thought you mentioned that the manufacturing in the JV with BIEL will start in September, October. Did I hear you right?
That's correct.
Okay. And lastly, the assembly operations, when is that expected to start?
That's already started.
Okay, understood. Thank you.
Thank you. The next question is from the line of Avish Bhansali from Chanakya Capital Services Private Limited. Please go ahead.
Thank you, and congratulations on the set of numbers. Can you just a little bit talk about the slowdown that is currently going in, in Europe and America? Also, the slow adoption of EVs, how you see this impacting us in the near term?
Yeah, thank you for that question. I think, look, the thing that Motherson is always focused on is 3 CX 10: no customer, no country, no component to be more than 10% of our business. I think, obviously, for the country side, India is the largest one that crosses that threshold, but otherwise, mostly, most of the other customers and the countries that we are present in is much below that threshold. So even though, you know, there is slowdown in the market, sometimes when it comes to like EVs, that we are talking about or sluggish growth, Motherson is still able to grow because of our diversification in customer profile, in our products, and of course, that our products are constantly evolving and are growing in content, as the new program develops.
So there's a lot more feature-rich content as we are doing interiors, exteriors, you know, a lot of the attributes inside, are constantly growing in product value for us. So that's how we, you know, overcome some of these situations in the market when there may be dips in different product lines of the customer. And our diversification really helps us to overcome these patches. So we are very cognizant of it. We track each and every unit of ours. We are seeing where the program launches are happening on time or are getting delayed or. And we use those facilities to, of course, be able to do diversified business.
So if one customer or one product line is not doing well, hopefully, the other customer product lines have a nice mix and there's uptake on, on the others. That's how we try to overcome and balance the effects that happen. And as you can see, Motherson has constantly beaten the market based on these principles. So there would always be pockets of these kind of times, and definitely our diversification strategy and the presence that we have built now over in, in you know, 44 countries, I think that's what really helps us to grow, even in times where there may be, like I said, some slower off takes of customers or certain product lines.
Yeah, thank you. That's all from my end.
Thank you. Ladies and gentlemen, we would take that as our last question for today. I would now like to hand the conference over to Mr. Laksh Vaaman Sehgal for closing comments.
Yeah, thank you. Thanks to everybody for being on the call and for asking all the questions. As you can see, Motherson is providing a lot of information on all our results, and all of these are already been posted on the website. If there's any, of course, any follow-on questions or any clarifications, we are very happy to take them. The board congratulated the team on a very successful quarter one, and as you would all agree with the tough background, you know, we have really done our best here and provided the best result possible with all the efforts of the teams. So thank you for your faith and confidence in us, and we continue to execute and we look forward to talking to you all in the next quarter. Thank you so much. All the best.
Thank you. On behalf of Samvardhana Motherson International Limited, that concludes this conference call. Thank you for joining us. You may now disconnect.