Thank you very much. Good afternoon, ladies and gentlemen. I hope and pray that all of you are healthy and safe where you are, and that you are taking adequate care of this pandemic which is there in front of us. I think normally we go quickly to questions and answers, but maybe all of you would be a bit concerned about the atmosphere and what's happening in different parts of the world. So together with Pankaj, Vaaman, Gaya, and me, we will try to give you a little bit of a scenario painting, if you please, telling you what's happening in the question and answer that's happening between Vaaman, Pankaj, myself, and Gaya. So please bear with us. We'll try and finish it off within five minutes so that you can focus on exactly what you want to know.
Sehgal, Pankaj Mital, I think it's important that everybody knows what is the kind of situation which is there globally. Laksh Vaaman Sehgal, can you take America and give us some background on what's happening there?
Sure. So let me take you back to the start of the year, January, February, when we were just starting the last quarter. I think things were looking quite good. All our plants were doing very well. And we first noticed that the COVID situation had broken out in China. And very quickly, our plants in China went into lockdown. So in fact, we were one of the first people in that aspect to see the effects of immediate lockdown and shutdown that happened and all the plants going into lockdown. And we suddenly saw that effect moving towards Europe and towards the U.S. So as we got more into February, March, we saw that, yes, it was inevitable that the plants in the U.S. and everything would also go into lockdown. And we started preparing ourselves on a global basis.
We took a global team and we said, "Look, if what's happened in China is true and the cases are now globally increasing, we should start preparing already that all our plants are going to go into shutdown." In fact, I together with my entire family came back to India just a few days before the border shut down because we did see an extended at least six- to eight-week period where plants would be shut down, going from our experience of what we had learned from China. Seeing the effects that that would have, we really prepared ourselves and started mobilizing all our units. And in fact, because this was our last year of our five-year plan, we had a project running called Project Victory, which was already very much focused on reducing the cost base so that we could finish the month in a very strong number.
So we saw that the plants, everything were following these projects quite well and were very well placed to react to the situation of COVID. And all our plants in the U.S. went into shutdown except barring a few that were deemed as essential services that were making wiring harnesses, for example, ambulances, those kind of vehicles. Those kind of plants were still remaining open, but the majority of them had shut down. So now only in May have they really started to open. The automotive supply chain is a complex one. It cannot be start up and shut down overnight. So the customers have been cautious to open up to make sure that the supplies are there from thousands of suppliers together.
But globally, don't you think that the governments outside India are that much more aware that automotive has to come back very quickly because of the overall effect it has on the GDP and the country? And the support also is huge that has come there, isn't it?
Yeah, that's very actually. We actually are very grateful to all the support that we have got from all the government agencies worldwide. In fact, as soon as the lockdown happened, a lot of our plants got support in terms of payments for salaries, in terms of loan support, etc., that we got loan amount just to make sure that our working capital and sector could survive during this lockdown and supply payments, etc., would not be affected, and this happened very, very quickly.
In Germany, I believe you got the payments within three days of the government announcement.
That's right. Even in the U.S., within the week, we had the support. So we are really grateful that the world recognizes how crucial the automotive supply chain is to the backbone of the entire economy. And we got a tremendous amount of support, which has really helped us to go through this tough time of all the plants being closed.
But Gaya, just to bring you into the conversation very quickly, that actually helped us a lot when we, in about June last year, we had come up that this was our final year of the five-year plan. So we have to be very ROCE-focused. So we had, which we all know as Project Victory, which was to how to improve the ROCE and how to control and all these things happening. Can you throw a very quick light on that? Is that the reason why we are having such phenomenal low debt and all that?
Yes, sir. So there were two parts to it. Number one, we knew that there is a challenge in the greenfield, which you also mentioned in today's remarks also, Chairman comments also that we continue to face challenge at one of the plants, Tuscaloosa. So definitely, it was very important for the rest of the plants, the rest of the family members to come together and start working on conserving the cash as well as cutting down the cost. And quarter four of the financial year, which is calendar year quarter one, is always the best. And this is the first time possibly I'm seeing in the last 23 years that quarter one is the lowest in a financial year. Therefore, the teams were working very hard to make sure that we conserve the cash, we bring down our receivables, we bring down our inventories.
As a result, we could generate one of the highest levels of cash flow operations while our top line is dependent on the customers being an OEM supplier. But I think we have always learned that we had to see what we can do internally better. So the result of which are reflected both on the operating performance as well as on the free cash which got generated. Not only that our debt level are lowest in the last 11 quarters, but also importantly, we distributed the dividend both for financial year 2018-2019 and 2019-2020. In fact, 2019-2020 would be the highest payout we saw. So I wish we had.
Correct me if I'm wrong.
Correct me if I'm wrong. The new orders winning and all that particular thing also doesn't really require huge CapEx spending because almost all the CapEx for the particular orders that we have won is already there, isn't it?
Absolutely, sir. And our CapEx is the lowest in the last four years. And this is after we have added PKC as well as SMRC. So while we continue to add the businesses and we have been able to conserve the cash or better understanding on CapEx, and it is not that these are top-driven. These are driven at the plant level because everybody realizes what return on capital employed ROCE means to their plant or their unit or their company.
Thanks, Gaya. I'll try and bring Pankaj in. Pankaj, I think the HR people and operation people did a phenomenal job in India. Can you help everybody understand what you're getting the feel in India? And also congratulate the board also actually congratulated everybody. What an amazing job that you guys did. But a little bit on the Indian side, we are seeing a bit of slowdown. And also, if you can, PKC and MSWI, if you can give a little bit of a listen, but very quickly so that in two minutes we then close and ask for questions.
Right, sir. So in India, we used this lockdown period to engage with our people, used our e-portals for training, and engaged everyone in e-trainings and also all our associates to remain in touch with them and also all our suppliers so that when we open up, we can have good communication and ensure that everybody's trained on all the safety aspects. And within this lockdown period, we also made all our plants compliant with all the safety requirements after COVID as we had learned from all our international operations and especially from China what all precautions we need to take. So as of today, all our plants are open and people are there. We see every week that the customers are improving their demand and their forecasts. First one to have a good requirement was our export customers. Nearly 15% of the standalone is exported out.
And our customers, especially in Japan, and they never close. So all their inventories were getting exhausted. So they have a very good demand. And also now Europe has opened up. So we see good traction from there. And the next one was the farm equipment sector in India, which has come back very strongly. Then we saw the two-wheeler industry coming back and the passenger car industry following up to be followed by the commercial vehicle industry. We are fully prepared. All our plants are in good shape. So with people in there, ensuring that the demands which are coming from our customers, we meet them. And we remain prepared for every step-by-step enhancement in their requirements.
But an amazing job done to reduce the cost at every angle, isn't it? I think the COVID scenario actually gave even more focus to that because of the emerging situation, etc., in India, isn't it?
Absolutely, and everybody contributed wholeheartedly. We could see how everyone was engaged and nobody had imagined such a pandemic, so it's a very unique situation, and we saw complete unification and excellent ideas coming from everyone. Even designers were working from their homes and ensuring that all the design work, even the guest meeting work for the customers, nothing suffered during this period. Similarly, we also saw in PKC, China came back faster and at more than 100% levels today than Europe came back, and now we see the American side picking up as Mexico opened up for manufacturing, and same as with MSWI, that farm equipment sector, not just in India, but also in the US, very strong, so they are marching ahead and since they were also essential services, so they didn't stop even in Mexico during the emergency period.
Thank you, Pankaj. On the cost side, our traveling bills have come down to virtually zero. So that could also probably explain the better profitability. Thank you very much. And we are ready for the questions. I hope you enjoyed this little chat because it's a good way to make you understand what the general condition is. Thank you very much. Back to you.
Thank you very much, ladies and gentlemen. 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 telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use the handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
Come on, Richard. I'm not giving you.
We take the first question from the line of Jay Kale from Elara Capital. Please go ahead.
Yeah. So thanks for taking my question and congratulations on a good set of numbers in a challenging environment, and hope all is safe at your end. First question was regarding your seeing a very strong performance at SMR and many other businesses as well. You also mentioned that you did receive some support from the government in various geographies. So would you be able to quantify if at all, would that have come in the quarter four or was it more to do in the first quarter, in the current ongoing quarter?
So most of the supports and everything have come in the first quarter. So they're not reflecting in the quarter four. I think it is prudent to tell all of you that, of course, but till Q4 up to March end, only our China plants in that quarter were really affected. China plants came back towards the end of March and the rest of the plants of the world went into lockdown and forced conditions. So definitely Q1 will look very different to Q4 because there hasn't been any production for the last two months. And things are only opening up now and we are hopeful of the quick pickup in June, July that's coming up. But yes, definitely credit to the entire team. They worked extremely hard on Project Victory, which was to reduce all the costs from our plants in the last year.
That has definitely helped even the COVID situation to alleviate. They would have done even better, but we are grateful for all their actions that they took to showcase that performance. Definitely Q1 will be an aberration and in no way can be compared to what Q4 has been done since the impact was very limited. Q1 will be definitely an aberration as we report to those numbers.
Sure. So that's great. I mean, with such a depressed everything, you posted a pretty strong set of margins. So I'm assuming there's no one-off in SMR, as you mentioned, that most of the things are coming Q1. My second question is on the.
Just one moment. Just one moment. Even the help that is coming from the government is 95% loans. It's not anything which is a grant or something. Gaya, correct me if I'm wrong.
Yes, sir. That is right, sir.
Okay, good. So please go ahead with the second question.
Yeah, great. Thank you. And second question was on the standalone side, you posted quite a resilient performance despite the industry being down in Q4 and that too even when the copper prices were lower. So just wanted to get your sense, how are you seeing this income? Is it that you are seeing a strong content increase because of your BS6? Most of the platforms and most of the OEMs would have transitioned to BS6 in Q4. What would have been a few key drivers of this revenue outperformance on the standalone side?
Pankaj, can you take this one and then just hand it back to me? I have one comment only to make. Go ahead, please, Pankaj.
Right. See, our performance is backed by, of course, how our customers performed in the last quarter, and as you rightly mentioned, that definitely the customers had already started building Euro 6 products as well, so they started ramping them up in the last quarter. Some of them have started even before January, but most of them started to build up from January to March, and there has been an enhancement in the content, so it's not just Euro 6, but as new models come up, they always have more enhanced features as the customers want more enhanced features, so it's a combination of both.
Okay. Okay. Got it. Great. Thanks for all the.
I think I wanted to add one of the reasons why we are very sure that the demand in India is going to come back the moment this whole thing opens up is because of these exacerbating circumstances where you had a COVID pandemic, so everything closed down in a hurry. Secondly, there was very little inventory in the system because people were changing over between Euro 4 and BS 4 and BS 6. Secondly, I think, thirdly, I think there is the amount of liquidity that's available for people. Their expenses for the house, for everything else has been reduced in the last two months. I think the fourth most important reason is that there is going to be a need for people to believe that some form of private transportation is going to be better than getting into taxis and shared things and all that.
That I think is going to be a reason why demand is going to be more, but the supply is going to be restricted because things are going to take slower to open up and come to capacity. And that means that there is going to be a vacuum. And hence, even all the segments, ABCs, D segment, every segment, according to me, is going to do better. But that's my personal thinking, my personal view. Sorry, go ahead. Back to you.
Sure. Just one last question on the bookkeeping side. Your depreciation seems to have taken an impairment of around INR 30 crores. Gaya, if you can just clarify what was it regarding?
See, as you know, our major part of the investment goes into land and building. So this is in respect of some of the land and some buildings. I think it's a portion of that. Because if those land or buildings are not put to their use, then they get valued at a fair value. It's an accounting thing and non-cash item as of now. Surely we have bought the land to build a factory there, but it is prudent accounting to do the fair valuation every time.
Sure. Great. Thanks and all the best, Sir.
Thank you.
Thank you. We take the next question from the line of Raghunandan from Emkay Global. Please go ahead.
Congratulations, sir, on good set of numbers. And thanks for the insights at the beginning of the call. So two questions from my side. Firstly, can you share the CapEx plan for FY2021? And secondly, net debt has seen a reduction between the December quarter to March quarter. If you can throw some color as to what are the components which led to this reduction? And also, you've given details of a strong liquidity situation. Just wanted to understand your thoughts there. Thanks, sir.
Great. Gaya, I think you should take this one.
Yes, sir. I come back to the CapEx later because that is something which is a question of business coming back quicker. I think what we try to emphasize on the net debt level or the debt level, we have been very focused on conserving the cash. As Vaman explained that we saw in China how the things started fading away because of lockdown, etc. At the same time, our Project Victory was in place, which means that we were able to reduce the working capital. Our CapEx, which we have been saying for so many quarters, that our CapEx, once the greenfield are done, will come down. You can see that in the last four years, the CapEx has been lowest.
Further, this net debt reduction is to be also seen that in the month of March, we also paid an interim dividend, maintaining the same level in terms of the per share dividend, but higher payout ratio, so obviously, there is much more focused on the capital employed as part of improving the return on capital employed, and truly reflected because the chairman has always been telling that when we are into a five-year plan, initially the debt level goes up because we have to build capacity. I think we have built around 40 plants in the last five years, so as these CapExes have come down, as we have improved on working capital, we have reduced the net debt level.
Also, what is important is when the whole situation turned into a lockdown situation, so we had a challenge that we have a Return on Capital Employed, but at the same time, in an uncertain world like this, we have to be sitting on cash. So we decided to take some liquidity lines. Subsequent to the year also, then we took an approval from the board to raise INR 1,000 crores of NCDs in India. We raised only INR 500 crores in a record day of three or four days. So therefore, what is important is when there are uncertain times or there are likelihood because this situation is not caused by any particular market or any particular industry. This is a worldwide problem. So going by the experience of China, when the things come back, they come back very quickly.
So we have to be always prepared to refuel the engine, as I use the term, because when the operations will get to a normal, there will be a need to put in the working capital. So we think it is prudent to keep a good liquidity, not just because of the uncertain situation, but also to really pick up the operations as they start there. Similar to what Pankaj was talking about, preparing the supply chain, preparing the facilities and all that.
Gaya, can you interject and also explain that because we have cash in our balance sheet, hence our ROS is also looking a bit on the lower side, isn't it? But circumstances, it was a very prudent thing that we had taken, knowing the decision that we're going to make sure that we have a lot of cash in the group.
In fact, as I mean, old people, we were remembering in today's board meeting, 2008-2009 was the year when we generated one of the highest levels of cash in a crisis situation of Lehman Crisis. This year again, I mean, last year of Vision 2020. We have created the highest level of cash from operations. We are very focused on that and to breathe whenever the situation demands so. In respect of guidance.
Also, by making this statement, you're also probably telling the people that we love crisis.
I mean, so there is an opportunity.
You have high cash. Okay. Sorry, go ahead. And otherwise, if you finish, then we.
I mean, how can we forget SMR coming to us in 2019? So that's a good segue to that.
Okay.
At the same time, on the CapEx side, I think we have always been saying that CapEx will come down gradually. As of now, to put a tab on the figure will be difficult because we want customers to come back and see how they start in terms of the new programs and all that. As of now, we have not had any significant delays or any program being delayed in a significant way. So we would look forward for more guidance from the customers and then come out with the exact number.
I think one particular thing, he also wanted some kind of a number. He said at this particular moment, things are very uncertain. I think a number below INR 2,000 crores for CapEx for maintenance and other things probably would be the accurate number.
Yes, sir. Even last year also, when our CapEx was 2,200, it also includes some of the land and building we bought in Serbia because it was on lease and we wanted to expand there. So our CapEx has been closer to 2,000 crores even last year. So we have always been maintaining CapEx as the greenfields have gone.
Basically, the message that we are giving to everybody is that INR 2,000 crores for normal business or lower than that, and acquisition and all this particular thing would be a different matter, isn't it?
Absolutely. That is indicated.
Thanks. Back to you.
Thank you so much for the detailed answers. Also, sir, can you highlight in terms of the challenges on Tuscaloosa operations and how you see things going forward over the next few months? How are you coordinating with Daimler and how you see the situation panning out in the future?
Yeah. Thanks. Usually, this is the first question. It's number three, so maybe I just find that there are other pressing issues now in the world. Like I have been talking to you all throughout last few quarters that we are putting a lot of focus into the improvements over there. The two green fields that we talk about, Kecskemét and Tuscaloosa, to give you an idea, in Kecskemét, before the COVID thing really hit and the plant got shut down, it actually had hit break-even levels. So that was a great achievement by the team there. SMP Tuscaloosa, also we have made a significant amount of improvements and progress. You can see the numbers, how the losses are being reduced consistently at SMP Tuscaloosa.
To give you an idea, together with the customer support, we've been able to reduce 2,400 people that were in the plant to already close to 1,800, 1,900 people. So that's a significant reduction in the people that we have had. We continue to get Daimler's support to be able to change some of our feeding lines, our assembly operations, etc. And perhaps that's been the only silver lining of this entire shutdown that we could put in a lot of improvements during this close-down phase to further improve the plant. So yes, we are getting a lot of support from our customers over there as well. They understand the size of this elephant over there and are totally supporting us to bring in the improvements, which we will continue to show quarter on quarter.
Unfortunately, the COVID situation hit at the time it did when we were going to show you the best performance in SMP Tuscaloosa. But again, barring this quarter, once the plant is back up and running, which it has just started again. We envisage in quarter two is when it will finally get back to its pre-COVID levels if nothing else changes. You will really see the impact of all the improvements and efficiency that we have built in over there.
Thank you, sir. Thank you so much. This was very helpful. I'll come back in the queue for more questions.
Thanks.
Thank you. We take the next question from the line of Kapil Singh from Nomura. Please go ahead.
Hello, sir. Congratulations. A truly remarkable performance on all fronts by the team. My question is on the plants that we have open. Can you give some idea how many plants are open currently and what is the revenue run rate that we are back to compared to the original run rate?
Yeah. So we can give you a little bit of a consolidated view on that. The majority of our plants went into shutdown by the time April came around. A majority of them were all in shutdown except for our China plants that had just started back up. They were actually the learning ground for us to bring a lot of our plants back into open in May as we have seen as the different geographies have relaxed the lockdowns. So at this point, we have almost all our plants are completely open. It's in the presentation number of the manufacturing facilities that are open. So I'm just going to read it out. There is about 39% of our plants which are greater than 75%.
And by that, we are really talking about more people coming in and the attendance ratios and how we see the demand really picking up there. So 39% are over 75%. Between 50%-75% is about 22% of the plants. Between 25%-50% is 27%, and less than 25% is around 10%. By the end of June, we do anticipate that the complete majority should be greater than 75% level as the volumes and everything picks up. Definitely, in the Western world, India might be slower as we are seeing the number of cases in India are still peaking and more and more hotspots are being declared. So India is the only question mark really there, but the rest of the world with the numbers that we are getting would be towards that 75% plus by the end of June is the feeling that we are getting.
Hopefully, it will stay that way.
Thanks for the detailed answer. Secondly, I wanted to check. We were earlier reporting SMB performance ex of SMRC and greenfields. So any thoughts on why we are changing the format going ahead or why we are using a different format now?
We gave that special number on our disclosures to give you the impact of the startup plants that the investments had been made, and there were a lot of questions around it. Now those plants have ramped up, and of course, SMRC has also been longer than a year, so it becomes all part of SMP. So it's really not prudent anymore to give that information. We will continue to answer any questions regarding any startup. But like I said, post the COVID shutdown, Kecskemét had already hit break-even. We made tremendous progress in SMP Alabama when this COVID situation hit. But once it settles, we believe that we will make a ton of progress there also, and most of the plants there are now moving into a mature phase rather than startup. So it's not relevant anymore to give that information.
But again, if you have questions and things around it, we will be happy to answer those on many of the calls.
Kapil, to be very fair, this time we have tried to give a lot more data because of the special situation in terms of. So we thought it is becoming too bulky, that data. And of course, this being an annual year, so you will have a lot more information in the annual report, both at MSSL and SMRP BV. I think SMRP BV call is tomorrow, and their annual report would have been released by now.
Sure. Sure. That's helpful. So Vaman, we should expect even the Tuscaloosa plant to turn profitable sometime in FY2021?
Look, we are making the best effort towards that. There is a lot of support that we still need from a customer to get it over the line. We are talking about the changes that we are doing in that plant, even from visibility of our suppliers. We only get a three-hour window from our first supply that we get at the start of the week. We are increasing that window to five hours. That will give us a head start in terms of improving our efficiencies and supplies, which kind of hold us back. And then we have rework costs, etc., re-sequencing costs. So all these things are in play. Definitely, our intention is to get into profitability as quick as possible. And the COVID situation has put a little bit of a speed bump on that.
But let the plant come back to its normal volume levels and let this quarter go by. I will give you a lot more color on Tuscaloosa in the next report.
Sure. I'll look forward to that. And sir, any comments on the next five-year plan?
Wonderful question. This is, I think, that team.
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Operator.
Hello. Yes. The current participant has just placed the call on hold. We'll proceed to the next question. It's from the line of Jinesh Gandhi from Motilal Oswal. Please go ahead.
Sure. Hello.
Hello.
Yes, sir. Can you hear me?
Yes. Go ahead.
Yes, sir. Congrats on good number and tough times. My first question pertains to the SMR business, where we have seen a very good improvement in margin in fourth quarter. Is 14.6, is it a normal margin, or there are any run-ups in that? If you can throw some light on that.
Look, quarter four is always the strongest quarter that we have. If you look historically, all our plants, all our companies always try to cross the finish line with the strongest set of results. But again, with the COVID situation and things like that, what will come up in the first quarter will not be comparable to what we have done in quarter four. Obviously, with two months plus of no production and then June only being when things are starting up again, it will not reflect how we have done in Q4. So please do keep that in mind that Q1 will be a tough quarter because of no production in any of the plants, and it will not be comparable to what we have achieved in quarter four.
But yes, SMR continues to improve, continues to be the mature organization that's holding on and improving profitability even in these tough conditions. And the rest of the group is also demonstrating that with their numbers. So there are no one-offs. It is the effort of the entire team to finish the five-year plan with extremely strong. And unfortunately, the COVID situation has helped. Otherwise, that would have been the new benchmark.
Okay. Okay. That's quite heartening to know. Secondly, you alluded to Alabama plant reduction of people. You indicated it's reduced by 500-600 people, or I missed that point?
That's right. 5,000 people in the plant, and we have reduced 5,600 people before COVID hit and during the shutdown period to improve the efficiencies. So definitely, that improvement is being seen in the numbers in Alabama. But again, Q1, because of the complete shutdown, will not be reflecting any of the improvements since there has been no production and only the cost.
Sure. Sure. And when you say Kecskemét plant has hit break-even, you're referring to PBT break-even, right, or EBITDA break-even?
EBITDA. EBITDA.
EBITDA. Okay.
Next step is now PBT.
Okay. That's great. And lastly, given our track record of making every adversity count, are you very actively looking at opportunities in this kind of environment? And if you can throw some light on what kind of options you'd be looking at, it would be very helpful to help us to see what next buyers can give to us.
Sure. We have a lot of opportunity, but it's not what you would imagine for the simple reason that the governments all over the world have given or virtually thrown money to help out companies. So even companies which were almost on the verge of being taken over around February, March have got a kind of a new lifeline. So we think it's probably going to get consumed in the next three, six months. So for the moment, we have not for the last five-year plan, it's already over. We're probably at about 12 billion. I think you guys can do the maths on the dollar and the turnover.
But I think we are not going to extend that five-year plan, but the next five-year plan that we will come out will definitely give you an idea that we will try to cover up for this particular five-year plan because of this very crazy circumstance. I mean, nobody ever believed that such kind of a thing would happen. Just to give you an experience, in February, March, when China was opening up, we actually exported something like, I don't know if I'm not wrong, 120,000-130,000 masks because that's the time that we got the thing that we had to supply masks because the masks are not available. So we have a huge learning that has happened in this particular thing.
I think that is the advantage of the group that if something is going wrong or something is short, then the whole group comes to know about it much faster and can take corrective actions. But again, I won't hold back. I will go against my team, but I will tell you the number would be anywhere between 33-35. But we still need a little bit more work to be done. The moment that's done, we'll come back to you. Probably we will do an investor conference somewhere around e-conference or whatever, but somewhere around August, September, or near about there somewhere. And by that time, we would have given you a clear target for the next 2025. I hope that helps.
Sure. So thanks and all the best.
Okay.
Thank you. We take the next question from the line of Puneet Gulati from HSBC. Please go ahead.
Yeah. Thanks for the opportunity and I hope as well. Just wanted to understand on your new orders execution. It seems $6.4 billion of orders got into execution in the second half. Can you give some color on what these orders are and which new plants are executing these?
Okay. Look, the order executions, again, are all our plants that we have run at the entire SMRP BV level. So that includes all the SMR, SMP, SMRC. I mean, the entire company that we have over there. The new orders means that the first part of that entire new order has been delivered. So the entire five-year order comes out of the books. So yes, because of the numerous plant construction that we have done, G.N. Gauba said we had launched more than 40 plants in the next five-year period. So all those new plants have all started their orders. And hence, you see a big chunk of that new order book that is coming out because all the new plants have all started up.
Correspondingly, the new orders or the lifetime order that we have won, they don't correspond exactly with the new order started because the launch times and, of course, the COVID situation, etc., all has perhaps also affected delay of some of the quotations, awards being given out, and things like that, so it doesn't mean that we are winning less or anything like that. In fact, all our targets of winning new businesses were achieved, but some of the programs which we were counting on, the nominations haven't been received yet because of the COVID period, and also, I think, Vaman, a lot of the models are being continued as well. They're going ahead more.
That's right.
They're continuing, prolonging some of the volume ends or the model end have been prolonged in this five-year period. Yeah.
Okay. So these new orders is going to really major new plant indicators, right? I mean, they all came in on the existing earlier plants which were running in early FY20.
That's right. And all the orders that have run can be serviced from the existing plants. There is no need for a new plant to service any of these orders.
Okay. That's great. Secondly, can you give some more color? So the support from the government has come in for our grants.
I'm sorry to interrupt, but your audio was not audible. Could you please repeat yourself?
Yeah. Can you hear me better?
Yeah. This is better.
Yeah. Sorry. Yeah. So.
Mr. Puneet Gulati, I'm sorry to interrupt again, sir. Your audio is not very clear. I would request you to please join back from a different number, and you may join the question queue. Thank you.
Okay. Can you hear me better? Hello?
Yes.
Yeah. So for your new, the support from the government was in form of loans only, or was there any grant also for the employee salary-related stuff?
Gauba, can you take this, please?
See, Puneet, this varies from country to country. So it is in both forms. And some of these are also under discussion or negotiation. So we will have to basically wait for it. Secondly, it may not be prudent for us to share some of these details which may be specifically for some reason. Okay. And once all these plants have started, have these?
moment, I had already answered another gentleman who had asked me this question. Almost about 5% of this is kind of a loan availability. Because of our condition, as Gauba would decide and his colleagues will decide, if we need, we will take that loan. Otherwise, we will not. But the loans can be a huge amount. I mean, the grant portion of it would probably Gauba would be about 5-7%, approximately.
Yes, sir. It could be higher from country to country. So that is why.
I'm just saying on the overall, would it be 5%, 7%?
Yes.
That's what we have in this quarter. It's not really in the last quarter, isn't it?
Yeah. Yeah. It will come only in April, June quarter finally.
Yes. Yes. Of coruse . And when these plants have started, do you still get the support, or have they taken back the support?
So the support is not to start a plant or something like that. It's generally, as I said, it's available as a loan. The loan is for one year to three years. So I don't understand which way the plant operation gets counted in that. Unless you're talking about the grant.
Okay. Okay. Great. That's helpful. Thank you so much.
Thanks.
Thank you. We take the next question from the line of Amyn Pirani from CLSA. Please, go ahead.
Yes. Hi, sir. Thanks for the opportunity. So my first question is on the cash flow performance. Obviously, fourth Q is a quarter where you do reduce your working capital significantly. And I think that has definitely played out. But going forward, is there a risk that payment terms in terms of receivables could get extended? Or on the trade payable side, you may have to pay your suppliers faster? I mean, how is the liquidity situation on both sides of your customer as well as on your own suppliers? And how should we look at working capital going forward?
Gauba can answer that. But generally, we've never had any issues on this particular thing up till now. So unless something is bothering you, which you think that the customer or the supplier won't get paid or the customer won't pay you, I don't think there's going to be much different. But Gauba, if you think differently, then go ahead and.
No. Absolutely right. We are 100% OEM supplier, and all our customer ratings are better than investment grade and all that. So all payments have come in time, and we also pay our suppliers on time. So there is no question of customers delaying payment or we delaying the suppliers' payment.
So Gauba, you can confirm that in March, April, May, Motherson has not delayed any supplier payment or anything of the sort like that. Wherever they needed help, in fact, we've provided help to them, isn't it?
Absolutely.
So my concern was not whether you will delay. In fact, we expect that you may have to support your suppliers. They are smaller companies. And hence, does that impact your working capital? But I get the point. Secondly, slightly unrelated thing. Does this situation of COVID delay the restructuring? Can you just give some update on whether this is on track or you have delayed it for the time being?
I think, if I'm not hearing your question very clearly, can you say it again?
No. So the restructuring that you had announced in January earlier this year of the separation of the wiring harnesses, is that on track, or is there some delay because of the current situation?
On track. But the most interesting thing that's happening, we have a lot of banks. Some of them are also probably on the call here. But the weekly number change of the automotive production estimates that we are getting from the authorities, we have to go back to the board again and again and again. So it's not an easy stop. And then a lot of ability has to be there to come up with as close to the accurate number as possible. So the board was also appraised of the situation. Normally, we were supposed to have come out with our predictive thing this time. So I think in the next one to three months, we will come out with the right way how we have to proceed. And I think more stability would be better.
To understand that the numbers that are coming from, what is it, IHS and LMC, what's the other one? LCA or something?
LMC Automotive.
LMC.
So all these things are sort of creating confusion. But I think somewhere down the line, we will have to take a call when the numbers start to become more steady. That's the time that we will come back and discuss this. But yeah, all processes are on. We are very sure that we are going to go past this particular thing. But yeah, maybe three months, six months delayed. I don't know what the real situation will be.
Sure. Sure. Thank you, sir. I'll come back in the queue.
Thank you. We take the next question from the line of Sahil Kedia from Bank of America. Please, go ahead.
So thank you for this opportunity and congrats on your results. Sir, I have two questions. The first is, you've given out a new order book that you have. When should we see or how should we think about execution of that in the sense that in financial year 2021 and 2022, the next two years, how much of those orders are likely to go into production? If you can give us a sense there, that would be great. And the second question, not relating to the quarter, but slightly longer term, what does COVID-19 do to global procurement and supply chains? Clearly, the world has got a big shock in that regard. So how do you think that pans out, and how is Motherson's position in that?
Okay. Thanks, Sahil, for those questions. This is Vaman. I'll take the question on the supply chain and everything first. The supply chain for automotive is complex, especially us being just-in-sequence suppliers. We're not sitting on huge amounts of inventories and things like that. So because we get information from the customer just-in-time, just-in-sequence kind of suppliers. So we obviously have to be really close to the customer's demands and means as they're opening up. But they have multiple supply levels, Tier 1s, Tier 2s, Tier 3s. And for example, a labor issue is happening with migrant workers in India, but that's really not an issue outside in the Western countries, so different places are dealing with different issues. There are places in high containment zones.
For example, one of our French plants was the last to open up because it was in a containment zone where the others opened up two weeks before that. So the only way that Motherson can really react to the situation is being closest to the customer and reacting on a day-to-day basis as the things are coming. Even in places where we've started up a plant and an employee has come in and perhaps has some symptoms of COVID, there has to be immediate action that has been taken to disinfect, sanitize, make sure that the people that they've been in contact with are sent home.
And we're trying different things like not loading up the plant 100% completely, putting people on a roster basis where every day there's a different team that comes in so that, God forbid, even if one team is exposed to a COVID infection, the other team can take over while continuing to maintain smooth supplies to the car makers. So everything has been changed in our plants from assembly lines to where people are going to the canteens or how they are entering the lifts to how the buses are acting. So a lot of changes are really happening, which will make sure that we can continue to supply the car makers, but of course, maintain all social distancing and disinfection, sanitization, which becomes a real need of the future. And those have already been started to be implemented globally.
Management was in an advantage because we saw the learnings that came from China because they were the first to shut down, so we saw what were the mistakes that they made, the right things that they did by opening up what worked, what didn't work, and correspondingly, that information was shared very quickly with the rest of our plants globally, which enabled them to open up in a much more responsive and careful manner and avoid the mistakes perhaps that were made from the first timers that were opening up the plants in China, so we're grateful to our plants over there that shared all those learnings that could help us really open up. Sahil, you had a second question. I'm sorry. I've forgotten it. It's my age.
So thanks for that. The question was more that of the total order book that is today outstanding, how much of it is likely to get going to production in financial year 2021 or 2022? You can give me a number combined. If you can help me with a number individually, that will also help. Just getting a sense of how much should go into production over the next two years.
So by definition, the entire order book will be zero in two years' time because any order that we have won, the number that you see today, that number within two years will be zero. It would have started, and the whole thing will come out. Now, the new order that we have won right now, this again, the timer starts now. So within now to the next two years, that order that we won today would have started and hence will come out. So every quarter, things are getting added, and every quarter, things are leaving as those programs start. But by definition, the number that you see as a total order book as of today, that has to be zero for these orders in the next two years because they have had to have started.
We have not heard from any customer, any cancellation of any new order or anything like that. Of course, in this uncertain period, like we said before, they are maybe continuing something which they could have discontinued or delaying nomination of some new programs for a couple of months till the situation settles. But there has been no cancellation or big change in any such order and order book.
And just on this order book itself, is there any programs that you have repeat orders that have won? Do you put them in this order book, or that is treated separately?
No. That also comes in the repeat order book. So that number is reflected as a new order in the order book, and a new order just means an order which hasn't started yet. It doesn't mean whether it's a repeat or a completely new order. There'll be a mix of both of them in the new.
So, can you give us a sense of?
Are we just five years old? Yeah. So our orders are all new orders.
I'm just trying to understand what is the proportion of your book then to new, say, potentially orders or which are programs that you are already supplying to?
Yeah. Look, I can give you a rough estimate, maybe 70-30, 60-40, somewhere around that. Because sometimes with the company that we have taken over, there are some orders which we choose not to go after because they may be loss-making, or there may be a change in the customer strategy to change one big model. Because if they have three or four different models, they do switch around the models between their suppliers just to keep everybody on their toes. So one program can be replaced by another program which would technically not be a repeat, a new, but is actually filling up the last program.
So sorry, so 60% being new and 40% being repeat, or was it the other way around?
I'm giving you rough numbers, Sahil. That's what tentatively it happens. But again, that keeps changing. Sahil, we can't. Every time the order comes, the platform remains the same, but the body completely changes. So how do you classify it? There's a lot of confusion on that. So what we are trying to give you is just some rule that normally 30, 70, or 60, 40 could be that. Yes.
Okay. Thank you so much, sir, and all the best.
Thank you, Sahil.
Thank you. We take the next question from the line of Mayur Parkeria from Wealth Managers. Please, go ahead.
Good evening, sir, and thank you for taking my questions. Am I audible?
Yes, very audible. Thank you.
So, sir, you have always been a proponent of the theory of sales, profits, and cash. And probably you can just add one more thing that when the going gets tough, the tough gets going. So it's a heartening performance in terms of the way the numbers have come out. Some of the back of the numbers, when we see the Q4, the SMRP BV and other subsidiaries appears to have reduced the fixed cost by almost INR 500-600 crores for the quarter. Will it be a right number to look at, Gauba?
Boss, the challenge is when you are looking at the consolidated number. It may reflect. But should we really look at unit by unit? So to draw that inference to consolidated accounts becomes a bit of a challenge. But as we emphasize that this was our last year, we launched a lot of projects, Project Victory, in terms of reducing the cost. And Vaman sir already explained how on the greenfield scene the improvements are happening. So I think this has been one of the toughest years because of uncertainties around the full year. I mean, today we are too much carried by COVID factors. But believe me, last one and a half, two years have been very challenging for some reason or the other. And in those circumstances, the teams have done a lot of cost-cutting, a lot of conservation of cash.
But to put a number, because we say that you should look at the cost at zero base, not thinking that this is a fixed cost, this is a variable cost. So I would not like to comment. But surely there are much more substantial savings than the number what you are arriving at because there was a whole amount of preparation for ramp-up.
Right. So as an analyst, we are still struggling to understand that fixed cost, which kind of companies will be able to reduce fixed costs in this year. In fact, in Q4 itself, you have demonstrated this. It may be a function of many things, but sir, great number on that side. On the gross margin side also, we see a lot of improvement both on standalone as well as on the subsidiary side. So just on the subsidiary side, again, on the SMRP BV side, especially, we earlier used to mention that there were some legacy orders which were there. So while we have maintained that there have been improvements in the plants also, which must have helped, what is the kind of now the proportion of the legacy orders? Has it been reduced? So has that impact also started playing out?
Is this a more structural trend of gross margin improvement, or is it just because of raw material costs coming down for some? That can change if the prices come back.
I cannot tell you. I will take support from G.N. Gauba and Pankaj Mital to add on. It's a mixture of a lot of things. Of course, as the time goes on, for example, SMR probably doesn't have any legacy orders at all. SMP has probably also reached the end of that. SMRC are still having those legacy orders which they have had. Plus the new plants that we have set up, they're moving from startup phase to getting into maturity. That is there. Also, our initiatives in vertical integration are also paying dividends on that front. Of course, our Project Victory, which we had started as a group-wide thing where we had made all the investments for these new orders. Now the job was on all the team members to deliver the returns. All of them are bearing fruit.
We've also, in this last five-year period, done management changes, brought inside the fold, elevated those people that have performed well and are delivering all those returns, so it's really a combination of the entire team's hard work, and it's really chipping away at each one of those costs and not only any one thing which we have done. It's really a team effort that has led to this result.
Okay. So just one more thing on the cost side and just trying to understand. So while we know Q1 is going to be on the domestic side, it will be definitely a very challenging quarter. But when we look at the whole year, and Sehgal sir, you may want to just add a line here is how do you see because we have almost INR 2,000 crores of annual fixed costs on the domestic side on the standalone entity. And given our sales, a 30% drop would mean that we would be broadly break even. I'm just trying to understand that. Do you see any kind of situation where we will be having a tough on the standalone side, or do you think we'll be able to pass through this?
So one thing that Motherson does is we don't take bets. We will come to the situation. We will look at the situation. We will find a solution and respond very fast. So when we were going through all the tough times one year ago, we had already clearly understood that this is the first year, and we have to really focus on our ROCE. And we have to have clear focused drives which are going to make sure that our costs are in control and things like that. So we then came up with a clear plan, clear assignment of whose responsibility to do what. We dug up all those things which were stuck up for whatever reasons in different car companies, and each one brought one home. And that's the reason why the results have been very, very strong.
So I think I would not want to guess what will happen in this year and what my fixed cost is and what the whole thing is. But yeah, I think we are very well aware of our fixed costs and things like that. And barring the first quarter and the second quarter, I think the third quarter and fourth quarter will be phenomenal. You guys can't imagine how the third quarter and fourth quarter will be. Because in our belief and what we are seeing, I mean, if you see the numbers that are going to come out, you'll be surprised yourself. Because at the end of the day, this whole concept that I'm safe using anything, that whole case has gone out of the window. So I think the shared vehicles are really going to have a tough time to come out of this.
So for me, the shared vehicles are always an opportunity because they were always increasing the cars. But the good thing about this particular crisis is that you will see A, B, C, D segment, all segments are going to do very well. So I think we should not write off the year or something like that. I would just say that first two quarters are going to be tougher. But definitely, the third, fourth quarter will outdo all your imagination. That's my take. If you like it, sorry.
Sir, last question on my side is given the kind of political developments happening on the U.S.-China side, and we'll keep the elections and everything aside, but is there any kind of what kind of thinking currently we are having in terms of any repositioning or any kind of based on OEM situation or any strategic changes which comes to the business model because of this in terms of whether advanced preparation or any kind of directional? If you would like to say what kind of discussions or strategy changes can it bring to the table, and how are we looking at it?
So look, I'm not very educated like what you guys are. You can go and do geoplanning of political structures and things like that. But in my thinking and the way I will lead the group is more towards being more responsive. Whatever will happen, we will find a solution to that then. If you have to just only visualize and strategize, Motherson doesn't believe in strategy. We believe in responsiveness, and we will take it when it comes there. I think our clear direction that we are going 3CX10 or globally local and things like that is paying really rich dividends to the group because in 41 countries, we are dealing with a lot of people. The most important thing is that the local people are running the plant.
So I think that particular thing gives tremendous amount of security and, how do you say, local knowledge that comes up to the group. So I think we will continue to do that. Yes, there are a lot of standoffs. There are a lot of things that are happening in different countries all over. But one never forgets that in 1947, 563 countries became India. So what a great teacher. What's another 40, 50 years? It's a joke.
Thank you, sir, and wish you all the best. Thank you so much.
Thank you very much.
Thank you. We take the next question from the line of Basudeb Banerjee from Ambit Capital. Please, go ahead.
time with a set of numbers. Just a couple of questions. If you can qualitatively explain the contours of this Project Victory, which helped you to reduce fixed costs, if you can highlight various aspects under that project.
Very simply, improved growth is equal to victory. Everybody can plan whatever he has achieved, how he can achieve a growth of 40%. If he's already achieved that, then can he do 50%? If he has done 50%, then can he do 60%? If he just go on, just do better than yourself, or what the people think about it. Look at every cost. Look at every single thing. And I can't tell you how proud I am of my team now. What a great job they have done! What a great job!
So can you highlight, sir, a few of the features, how they have done that, and how well it is getting ahead?
What did you want to know? You want to know about Vaman in Narak? You want to know about SMP?
More from SMR, SMP side, sir.
Okay. Vaman, go for it.
So again, if we have gone into it on a unit-wise basis, the unit head identifies a complete fixed cost. They identify the variable cost, the people that they have, and the CapEx space, what they're investing in. They went through these blocks and for them took a target. And it was monitored from our central teams on a monthly basis. We'd be happy to show you some of these reports in person. And each one of them set themselves a target to reduce that fixed cost base and reduce the CapEx this year. Again, each unit has individual ideas of low-cost automation where paybacks were less than one year. They put those in. Even though we had to make some investments, but the paybacks were there. We were able to use groups working much more closely together to share capacities.
And instead of buying new machines, if there was one unit that was sitting on an idle capacity, those things were shifted around. We also had different units piggybacking on each other to win orders without making significant investments. I can go on. I mean, it's really, you can imagine a report coming from every unit of our plant around the world for every month. And all those reports being shared with all the other plants so that they get ideas of what the other plants are doing. And that's how we really achieved it.
So, will it be possible, Vaman, to share with us some ballpark long-term of the sustainable fixed cost reduction in SMP, what you have achieved? So that one can get an idea post Q1, say, for SMP business comes back to pre-COVID levels from Q2, Q3. So in this new normal of fixed cost, one can imagine the quantum of margin it can operate. So just from that angle.
Sure. So let us look at that over and come back to you in the next quarter. If we can see, we can show you some answers to that. We can come back. But of course, right now, the whole focus is to see how the things are opening up and how the comeback after the COVID is going to be there and how much of those costs that we saved in the start of the pre-COVID can be sustained. We'll give you more color on that in the next quarter.
Sure. And my second question was, as Sehgal sir in the earlier part of the call explained that it might take three months, six months for the merger announcement for India Wiring Harness business because predictability of production is a question mark. What about the transfer of residual stake of SMRP BV to the listed entity that was also announced? So any color on that from a timeline perspective, or it is also uncertain from a three- to six-month perspective, or that's going to happen earlier?
No, no. Everything will happen at one time. You have to understand that Sumitomo, our JV partner, is there in the listed entity. So if we bring the rest of SMRP BV without giving them the bifurcation in the domestic wiring harness business, their share will come down below 25%.
Surely.
Very difficult to come back, and then, of course, when the demerger happens, they're not able to. They'd have to do an open offer, so whatever will happen will happen once. We are giving it our best effort. You can imagine in the times of uncertainty how many different questions there are, and of course, we are working through all these challenges to come to a good way. And the teams are working, and we're reacting to the situation, so again, like I said, if June is coming back to normal and things like that, we should come back to market very quickly because things are playing out as we have anticipated, and we've done all our valuations and everything etc. on that basis.
And if there's a change, of course, we will plead for some more time to get it right because, of course, in a volatile market like this, somebody has to put the pin on the board and say, "These are what the numbers will be." And we can only have more clarity on that as the things kind of settle rather than them being a little bit volatile as they are right now.
Sure.
The shareholders are very wild. So we cannot give any number to the quantity of cars which are going to be produced in the world. So that whole thing has to be acceptable to a lot of people. So once that changes, again, we have to go back to the drawing board again to do the numbers and do this whole particular thing. So please understand it's a challenge. But we think within the next month, two months, you will see steadily normalization happening. And that probably is the right time to do it because otherwise, every week, the numbers are different.
Surely, sir. Congrats again for good results and all of this for Fiscal 2021. Thanks.
Thank you. Thank you.
Thank you. We take the next question from the line of Keshav Binani from Temasek. Please, go ahead.
Hi. Thank you for the opportunity. I just have a couple of quick questions on the cash position. I see the number of INR 10,000 crores in terms of the liquidity that's available in the company. Just want to understand, I believe that this is spread across subsidiaries, right? So is this fungible? And is this fungible? And if not, is any of the subsidiaries in somewhat of a tight cash position?
Sir, what was that?
Yeah. See, most of the cash is fungible. I mean, of course, we have a capital structure which is SMRP BV and the 100% owned businesses. What is important is today, the cash is not needed at one place or somewhere. Because of the COVID situation, it is all across that they are having lockdown as a result of which the cash is needed as the operations come to normalcy. So while there is a good amount of flexibility and fungibility, and this will not impact one unit to another. So to be sure, there is enough of a flexibility. I hope that answers.
Right. And my second question on this was on the undrawn limits. Are these readily drawable, or are there any considerations as opposed to considerations for drawing them?
So whatever time guarantees and everything that is required, the board has given the approval already. G.N., you want to add anything on that? We can draw it anytime if you want.
Yeah. Larger part of these limits are committed. There are some uncommitted lines also. But given the relationship the company has with the banks, there is no going back. At the same time, we don't think we will require to use 100% of that. I mean, that's also a fact.
Right. Thank you. Those are my questions. Thanks again.
You're welcome.
Thank you. Next question is from the line of Nishant Vass from ICICI Securities. Please, go ahead.
Yeah. Hi, sir. Thank you for the opportunity and congratulations on closing the five-year plan on a strong note. Sir, first question, you continued to surprise on SMR profitability. Sorry for harping on this again. Vaman, could you just break it? Is my thought process clear? This is largely, is this productivity-driven and very limited product mix driven, or is there any product mix angle also to it? Just a broad thought.
Yeah. Definitely, as the models become more mature, more towards feature content, which it helps our margins as well. And of course, it is also the improvement on the productivity side and the lowering of the costs. And of course, again, the last quarters are always the strongest quarter. So finishing on a very strong wicket there with the SMR team. But we do see a trend towards more content-rich mirrors that's happening. So that helps SMR. But Vaaman, do you remember seven, eight years ago, everybody used to tell us that everybody's going to go into cameras? And we used to say, "No, it's not going to happen." The cameras are still a fraction of a fraction. I was probably one of those proponents that said cameras would come on more. But as always, Papa's always right. So it has taken longer.
In fact, the cost advantage of the cameras is still yet to be seen to come in in a way that there is a high take rate from those cameras. And we are seeing that the first usage of high level of take rates will probably come more in the commercial segment where it becomes that much more of a necessity because of the wider angles and things like that. So yes, we are still seeing a very, very low take rate of the cameras. But as we have stated before, we are prepared for that eventuality. We are already supplying to some programs which are now 100% camera as well, but they are a fraction of a fraction. And Vaman, I think we are getting tremendous amount of traction in SMR this year.
We are winning orders which we had lost five, seven, 10 years ago, and yet we are coming back onto them very strongly. I think SMR definitely has done a phenomenal job. Hope that answers your question.
Yes, sir. Sir, I have questions related to the five-year plan, one which is gone by and one which is possibly coming forward. So in the gone by, could you just give us some sense in terms of what are the finally, what are the ROCEs across the, let's say, various parts of businesses where we have likely closed that in SMP, SMR, and PKC? Some color on that would be really helpful.
Goba. More in the commercial segment where it becomes that much more of a necessity because of the wider angles and things like that. So yes, we are still seeing a very, very low take rate of the cameras. But as we have stated before, we are prepared for that eventuality. We are already supplying to some programs which are now 100% camera as well, but they are a fraction of a fraction. And Vaman, I think we are getting tremendous amount of traction in SMR this year. We are winning orders which we had lost five, seven, 10 years ago, and yet we are coming back onto them very strongly. So I think SMR definitely has done a phenomenal job. Hope that answers your question.
Yes, sir. Sir, I have questions related to the five-year plan, one which is gone by and one which is possibly coming forward. So in the gone by, could you just give us some sense in terms of what are the final, what are the ROCEs across the, let's say, various parts of businesses where we have likely closed that in SMP, SMR, and PKC? Some color on that would be really helpful.
Goba, do you want to answer that, or do you want to? We normally don't give that, isn't it?
We'll show up on the annual report once we have all those calculations. But we always give two numbers. One is a number of the plants. My kids have just run into the room. The perils of working from home, not being able to stop the four-year-olds. So sorry, as I was saying, the numbers, just on a very high-level basis, I can tell you the total group number is somewhere around that 10%. But that's including all the new greenfields and acquisitions that we have done that have not been with us for the five-year period. So we usually give two numbers. One is that is without the greenfields and any acquisition that have not done a five-year period into Motherson or any greenfields that have started up in the last couple of years. That number is closer to 25%. Standalone is at 31%.
But again, these numbers will finalize and will come up in the annual report. So I'm giving you my estimates. Perfect. And if I could try my luck with Sundar, sir, on the next five-year plan, you mentioned something close to $33-35 billion. So could you throw some light in terms of any new segment opportunities that will embody this kind of revenue trajectory? And what are your thoughts on possibly the ROS as well? Broad sense.
So ROCE doesn't change. We will always stay with 40% ROCE because that puts a discipline in the group. However, you started the question asking me, but I think this question is more for Vaman because he'll tell you better about the new verticals and what are we expecting from there.
Don't worry. Papa is going to be with me right throughout, so it's not that there's any change or anything like that. Listen, I think the next five-year period, we have decided that we will diversify the group even further while the focus will always remain on automotive, and we will continue to grow over there and have an aggressive growth target for the automotive. But we believe that the group is now strong enough and has built enough, let's say, synergies and expertise in things such as engineering, manufacturing competencies, information technology, and in general, being able to contract manufacturer, etc., that we believe that all these expertise will help propel us in the next five-year plan to go after industries and set our mark in places like aerospace and defense. A full team has already been set up. We were looking at opportunities of expanding that business.
There is a complete team there for healthcare. We have some existing business that are now looking to grow that, that become an independent vertical in itself. In fact, our own IT company as well, we have a management change that has come into place over there, takes over from the last management to now grow the IT side of our business as well. So these are some places that we are very focused on. We have a joint venture which is a little bit more on the group side. We have a new joint venture on the logistics as well. So we believe that all these learnings that we have had in the automotive world will help us propel these new verticals of Motherson forward. And again, in the next five-year plan, we will give you further color as to what ambitious targets all these verticals will have.
And of course, they are all part of that 30-35 number that Papa has said. It will encompass that.
Thanks a lot, Vaman. And stay safe and best of luck. Thank you.
Thank you.
Thank you. We take the next question from the line of Sandeep Pattnaik from Axis Capital. Please, go ahead.
Hello. Good evening, sir. Congratulations on a good set of numbers. Sir, my first question is I just wanted to understand. First two months would be very insignificant for all the companies. But given the kind of employee cost that you have, around INR 1,250 crores per month, so how the company has dealt with it, especially in terms of.
Very difficult question to answer. I think the results actually tell you how we have dealt with it. We have taken every help that we could get. But we are very grateful that all of us realized that these are tough times. So we didn't sort of lay off anybody or anything like that. But we maintained close contacts with them. The HR departments in the different groups have worked. In some countries, we've got some help from the government also. And voluntary pay cuts also. So a lot of things have been done, which is, I mean, I see a lot of companies going about saying, "We've done that. We've done that." We don't normally believe in that. We are very grateful to everybody. Everybody checked in. Everybody acted very, very responsibly.
I think that is probably the biggest tribute that we can give to the entire workforce all over. I can confirm that we haven't laid off anybody or we've not stopped our supplier payments or anything like that. We've all worked together to solve the issues.
Okay. Sir, in terms of your debt, what would be your expected FY2021 debt?
Gauba, can you take that off, please? I'm thinking of numbers from my head, yeah.
Sandeep, Jay, it is very difficult to guide on the 2021 number because, I mean, debt is a matter of cash flows. So we can only say that we continue to follow a prudent financial policy. We are very conservative as far as the debt is concerned, or the criteria of return on capital employed makes us more accountable for respecting the capital. So therefore, I will not be able to guide you. Today, nobody is able to guide what will be the volumes for 2021. So I think we will have to wait for some time. As the situation develops, then we come to a normal situation.
Also, parent company, we have reduced the debt, isn't it?
Yeah.
Whatever dividends we got over things, I think we have reduced our debt in the parent company also dramatically.
And sir, from various industry reports, we've come to know that the sale of high-end cars will be impacted the most. And the low-cost or mid-range cars will be boom maybe in Q3 and Q4. So how is your reading of the situation, sir?
So I think that is a matter of personal choice. However, all I can tell you is that if you start thinking like that, then let me just tell you a very simple fact. If you go just now to book a Ferrari or a McLaren or anything of the sort, any of the sports cars, sir, you have a waiting list of two and a half years. So sir, you aap log sochte because the total number of these cars on the higher end is very, very small. It's a mere fraction of the total 100 million cars or 80 million cars, whatever the new number is, depending upon the other thing. So they go much faster than what you can imagine. I think the good news is not whether the big cars are going to sell or not. I know they will sell.
However, the good news is that actually the A segment and B segment will sell like hotcakes. So that particular thing, I think the market has still not realized it will come back very quickly because definitely people are going to do a lot of work from home, but whenever they have to go to the office, they're going to figure out something or the other and get their own car and all that. So I think the post-effect of this particular unfortunate virus is that the automotive sector is going to go through a huge bump because you will have the two-wheelers going. You'll have the three-wheelers, four-wheelers. You name it, everything will go. So I would not agree with what people are saying. They're just being very pessimistic.
All right. Thank you, sir.
You're welcome.
Thank you. We take the next question from the line of Sundar Sridhar from Sundaram Mutual Fund. Please, go ahead.
Yeah. Hi, sir. Thanks for the opportunity and many congratulations on the wonderful cash flow performance. Given in the post-COVID world, given the cost focus for most OEMs, do we see any supplier consolidation happening with the OEMs? And can Motherson benefit from that sort of a trend? Definitely. You're right. The one particular thing that I would leave you with that thought for all of you, a lot of the smaller and medium companies are going to get into a real situation. I don't know about the world, but India, definitely they will. In the world, the governments are coming out trying to help them as much as they can. But I think they are going to the kind of burn rates that they have, they will have three-to-six months, nine months, maybe a year max, and they will get into trouble.
We are anticipating that there is going to be a tremendous push from the carmakers to us to look at what company, whichever is shaking, to have a look at them. Secondly, I think the whole design of the car has to be different now because in one car, you have one AC and four people are going to sit in it or five people or three people, whichever way the social distancing in that country works. The driver's air vent has to be filtered and then brought back into the car, so a lot of things are going to happen. We are all of us kind of thinking how we are going to solve a lot of the problems that the carmakers have; all these things will need major changes.
So, I think a lot of people thinking that cheap cars are going to come back and all that. I think those days will be we still have to wait maybe 10, 15 years for that. So, I think there is a lot of opportunity for innovation, and the carmakers are going to be requesting us to really look deep into that. So, definitely, a lot of consolidation is going to happen. We ourselves have looked at this particular thing, and we think in the coming five years, almost about 75% of our turnover is going to come from automotive. And that's where the bulk of the next five-year target will be achieved. And then, of course, the new segments that Vaman just talked about.
Great, sir. Thanks for the detailed reflection. We are hearing a lot of specific directed auto-stimulus measures being announced by countries like Germany and France, specifically the Western European countries. What are your customers being telling you on this? Will that lead to a substantial jump in volumes? Are they telling you to be prepared maybe six months down the line? Is that something you're hearing from customers? And in that light, you also spoke about some new model launches also probably getting delayed. Are they getting deferred by a year or so, or is it more of a few months delay until the carmakers get on their feet in terms of resuming normalcy on both of them?
I think the delay in the models is not going to be by years. It's going to be probably by three to six months max. So remember, the new cars means sales for the carmakers. All the tooling and all that is all going on. The orders are still going on. So various orders, different levels of fulfillment. But Vaman, can you order the other one?
Yeah. I think, look, every single carmaker is interested in catching up what they have missed in the last couple of months. And of course, there is pent-up demand. Like we talked about, the personal mobility case becomes more relevant. So there is inherent demand that is going to come up very quickly in the next quarter or two once the supply chain is stable and the carmakers are able to produce the cars in a safe and stable environment.
Vaman, we've also heard from a lot of our customers, Pankaj, bear me out on that, that they are all determined that they will try to catch up these particular numbers. Isn't it, Pankaj?
That's right, sir. So like I was saying, they are requesting us to be prepared to move back to pre-COVID levels in a very short period of time. Again, Motherson is well placed to do that because we are locally supplying, locally sourcing, locally purchasing, locally supplying most of our components to supply the carmakers. And we are present with them locally. We do not do a lot of exports, etc. So we have been told by the carmakers that be prepared, come back June once their things are starting. Depending on the carmaker, some are already being very aggressive for June itself. Some are saying that by July, and perhaps the most conservative I've seen latest by start of August, that they want to be back at that COVID level. So it depends on geography. It depends on customer. It depends on the location.
But yes, the overall theme is that each and every customer is very eager to get back and try to recoup some of the lost sales that have happened in the last couple of months.
Thank you, sir. That's it from my side. Thank you.
Thank you. We take the next question from the line of Raghunandan from Emkay Global. Please, go ahead.
Thank you, sir. My questions are to Gauba Ji. A couple of queries on the results. Firstly, on the tax rate, it has been on the higher side due to deferred tax of INR 197 crore. What does the item relate to? And secondly, the other income standalone is on the higher side. What has led to that? Thank you, sir.
Okay. On the other income, we have given in the presentation what is the amount of dividend which has come, so in the year presentation, if you go to slide number, I would say 23, you'll find that the dividend income is increased to INR 310 crores compared to INR 123 crores in the last year, and a good part of it has come in last month, as well as some portion would have come in July, August, September quarter. Coming back to the tax, first of all, it is very important to focus on the current tax because that is where the cash outflow happens. Of course, from EPS or from a CAGR point of view, deferred tax is something which is there, but deferred tax has a lot of assessments in terms of some subjectivity of, I would say, certain revisits which are done year on year.
This should be taken more for the full year than for the quarter. Therefore, there are some benefit of deferred tax which has gone into the current tax. Deferred tax will be looked at for the full year rather than just for the quarter. I would encourage everybody to look at the deferred tax for a full year basis rather than just for a quarter.
Thank you, sir. That's all from my side.
We take the next question from the line of Vishwanath Darbala from JM Financial. Please, go ahead.
Yeah. Thank you for taking my question and congratulations for a good set of numbers. Sir, I have two questions around the debt. Firstly, if you could tell us to quantify how much of debt repayment is scheduled for the next two years in FY 2021-2022 from our H2-H1 presentation and annual report, it suggests that it's around $400 million, if that is correct. And if it is so significant, then what is our plan for the repayment? Have we arranged any refinancing for that? And my second question is, in these tough times, are we under any threat of breaching any debt covenant in the near term?
First of all, we have to focus on the 2021. In 2021, there are no significant repayments which are there, hardly any amount, which you will have seen in the Clause 41 results also because the amount is within one year. 2021-2022, yes, you are right that we have a bond of $400 million which comes for refinancing, repayment, whatever we can say, and by that time, you will find that the company operations or the company, because of Greenfield coming on track as well as no COVID impact, the situation will be far more comfortable than what you are seeing today. The action for refinancing these start closer to a period and in more certain markets than in uncertain markets, but surely, the company has enough of a liquidity and enough of an ability to raise a fund on a bilateral basis if so required.
Coming to your question on the.
One thing which you might add, the last board meeting that we had, we had taken approval for GBP 300 million from the Bank of England, isn't it? What was the rate of interest for that?
It is sub 1%, sir. So.
Sub 1%, isn't it?
Yeah, below 1%.
That goes, I think, for one year to three years. So I think the options are huge that we have, isn't it?
Yes, sir. So we are not worried, and that is why we also said that when we wanted to raise INR 500 crore, we did in a period of just three, four days, the NCD in Indian market. So I think given the relationship we have and the creditworthiness we have, the relationship is not, I mean, kind of any other distinct. Relationship is there because of the credibility and the trust and the commitment we have shown since inception. So that is the talking point. The second point in respect of covenants, I mean, at MSSL consolidated level, we don't see that as an issue. Covenants are tested only in half-yearly basis. At SMRP, we will have to check when it comes to the June quarter end, and if the need be, we will decide whether to support from the parent or go for a covenant waiver.
But it is more likely that it will be.
Yeah. I think we have to see this June month being out. It will be very critical to see how the supply and demand is coming back. I think you have to also understand that the covenants that are put on our bonds are in relation to the debt. We clearly don't have any debt issues. It is an EBITDA issue, which, of course, if the plants are shut and not producing for two months out of the three in the quarter, there is very little that we can really do to maintain the ratios. But of course, a lot depends on how June plays out. We will do our best to not go for it. But in a situation like this, I think banks and everybody is very understanding.
When you haven't had production for two months, I think a lot of companies have been in the same position as ours because, frankly, you can't generate EBITDA without having any production.
Okay. Thank you, sir. That answers all my questions.
Thank you. We take the next question from the line of Siddhartha from Edelweiss. Please, go ahead.
Thanks for the opportunity, and sir, congrats for a very elaborate answer on various aspects. I have just one housekeeping question. Most of my questions are answered, and apologies if I'm repeating the question. To the gross margin that we have seen across the board improvement, how should we look at it? Is it a primary driver of a better mix or improving in efficiency in terms of lower rejection rates in some of the plants which are not as efficient as some of the other plants are? Or it's more to do with the pricing and the short-term issue or timing mismatch where you may have got some side arrangements from your customers which are spending and which are coming this quarter, and how should we look at going ahead given a lot of new programs that are coming into your P&L, especially SMRP?
Sir, I think you answered the question while asking the question itself. It's a mix of all those things. Definitely, we have not got any pricing changes in the quarter. That's for sure. It has all been an effect of the hard work put in by the teams and the product mix. And generally, the fourth quarter being the strongest in terms of sales as well. So it is a combination of all those factors. Gauba sir, Pankaj sir can add. But definitely, there's been no change in any of the pricing or a one-off situation that is there. It's the hard work of all the teams and, of course, the blessings that we've got that our models that we are on and the product mixes that we are on have performed better in this last quarter.
And just a digging thing there. In SMRP, how does the raw material price have to work for us? Is it a contract period arranged over a five-year, or it gets looked at annually? Obviously, there will be a benchmark, but beyond that particular benchmark, does it get relooked at annually, or it is fixed for a period of five years or whatever the time duration of the order flow is?
Right, so first thing, there is no price pass-through. We do that all at our end when we take the orders, and of course, these are very highly engineered plastics, so as the oil prices drop, it's not a one-to-one correlation that you see which allows us to have more stability in the supplies. Of course, with the carmakers, if there is a big change in any one of those commodities, we sit across the table and we adjust it in a delayed period, so sometimes it takes six months for that to happen, and only if it is a material difference do we sit across the table and really go back and forth and change that, so usually, like you would see in these highly engineered plastics and things that we do, the effect is not one-to-one. It's more muted.
And that also helps us when the prices spike in the short term. You see a little bit more consistency than the high volatility movement. But of course, generally, the commodity prices coming down, you do see that effect of it helping your numbers after a six-month period. But things moving up. But things are so volatile right now. Things are moving up and down in that six-month period.
One question if I can ask on China. We read a lot of reports that April was very strong and May have seen a drop in volume in China. Is it a normal expectation or the drop is in line with your expectation or it is slightly better or slightly worse than what OEMs or what customers were guiding you?
Wait, wait, wait. What volume drops in China are you talking about?
Oh, yeah. There are a lot of media reports which say that industry level, the volume after a strong April in China, in month of May, there is a decline in volume. So I presume there will be an element of.
Sir, going 80%, 100% plus, yeah?
Yeah. We still haven't seen that in our industry.
Pankaj maybe will be able to tell them better on the wiring side. Pankaj?
No, on the commercial vehicle side, it's going very, very strong, and actually, we are expanding.
Yeah. Yeah. So yeah, that doesn't help. Doesn't help.
May has been down or something, isn't it?
No, not yet. We've only seen the strength coming in and possibly also because during the tough times, sometimes the smaller companies and the weak companies become weaker. So we see still there is a growth coming in and the market is strong.
Okay. Thank you. This is helpful. Thanks for the clarification.
Thank you. Well, ladies and gentlemen, that was the last question. I would now like to hand the conference over to Mr. Vivek Sehgal for closing comments. Over to you, sir.
Thank you very much. I know at this time we have exceeded our time, but we thought it was necessary to allow you to ask as many questions as you wanted. We have been forthright and trying to tell you in these uncertain times. But please don't use that as a precedent. We will try to give you as much details as we can. But we have tried to reassure you to tell you that, yes, the last two months were tough, but we feel that the bright days are going to come very, very quickly. And I can see globally the trend that every country wants to open up as quickly as possible. So wish you all a safe day, safe week, and safe time ahead. And see you at the next either winter conference or the global - sorry, to have this talk on the results. Thank you very much.
Bye-bye.
Thank you.