Ladies and gentlemen, good day, and welcome to the Q3 FY20 results conference call of Motherson Sumi Systems 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 touch-tone telephone. I would now like to hand the conference over to Mr. Vivek Chaand Sehgal. Thank you, and over to you, Mr. Sehgal.
Thank you very much. Good afternoon, ladies and gentlemen. We're pleased to announce our third-quarter results. I think you have already seen the numbers. We are willing to take your questions and explain the results. Thank you very much. Back to you.
Thank you. So we can open the call for a Q&A session, right?
Yes, please.
Thank you very much. Ladies and gentlemen, we will now begin the question-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. We take the first question from the line of Rakesh Kumar from BNP Paribas. Please go ahead.
Good evening. Thank you for taking my question. My first question is around the revenue and the performance in this quarter, and specifically in SMP and PKC. So PKC, we have seen a revenue decline after several quarters. And SMP, usually December quarter is even stronger than September quarter, which we haven't seen happening this time around. So can you help us understand what led to this underperformance on the revenue front, especially in these two business segments?
Hi, this is Pankaj. I'll explain to you about PKC both in the North American market as well as in Europe. There has been a significant decline by about 19% in heavy-duty trucks in North America and Europe by about 15.7%. In those circumstances, we have to look at the result that our revenues have declined just by about 3%. There has been a decline yet. We are doing very well in those circumstances.
This is Vaaman Sehgal here. Again, with SMP as well, the third quarter is usually the one with the biggest holidays in Europe. And definitely, the markets have also been. The performance is reflective of how the markets have been. So yes, it's slightly lower than what they usually come in at, but it's also a quarter effect because December has a lot of holidays, etc., which impact the sales.
So based on the conversation which we're having with your customers, do you think that this weakness can continue in the coming quarters as well?
Hard to really predict. It depends on a lot of factors that are happening. If you look at what's happening with the coronavirus right now, I mean, of course, that's going to have an impact. I think that's yet to be seen when the Chinese factories open up and start sending a lot of raw materials to a lot of tier-two suppliers, tier-three suppliers. A lot of carmakers have also extended some of their breaks from the lunar holiday. It is going on. They were supposed to start up last week. Some will start today. Some will even not start till the end of this week. And the real effect is really to be seen as they open up and we see how the material is being shipped out. So definitely, there is in the short term some more uncertainty that is still there.
But on our front, we are preparing for that. We are trying to assess completely from our side what is the impact, if any. But again, that will be realized in this week as those factories open up. I wouldn't in any way try to guess this quarter because this is Vivek Chaand Sehgal here. So I think that the real effect will come to know in the next eight, 10 days, and that will probably decide how this quarter will fare. So it's a very unfortunate thing that has happened to China. So we will reserve our comments at the moment.
Thank you for that. My second question actually was around the coronavirus effects. So far, based on your assessment, do you think any direct implication on your supply side or in the models which you are providing components to getting impacted? Based on your early assessment, do you think any direct impact on that?
Other than our plants and the people over there, we don't see anything much. But Pankaj, do you think anything on the component side?
Yeah, it depends on how long it gets prolonged because as a safety, some suppliers have issued force majeure letters in North America and in some other regions. But that was because they didn't know if their plants will really open on the 10th. So some of the plants have opened today in China. So this is being monitored by the OEMs also because they have some tier-two, tier-three supply bases and some raw materials or some electronic parts coming in on an overall basis.
Notices.
They have given notices to the OEMs.
Just to clarify, the notices have been given by them to the OEMs?
OEMs, that's true.
We have not got. Motherson has not got any.
Yeah.
Okay. So none of our plants as of now have taken any shutdown related to this?
No, not yet.
Understood. I'll fall back into queue. Thank you for that.
You're welcome.
Thank you. We take the next question. We take the next question from the line of Raghunandan from Emkay Global. Please go ahead.
Thank you, sir, for the opportunity. For the last quarter, you had shared on the update of how the ramp-up has been happening for the new plants of SMP. Losses for the new plants seem to have further reduced in the quarter. Any color you can share? And also, was there any change in the break-even targets given the current scenario? Thank you, sir.
Yeah, I think the Alabama continues to make progress. It's a credit to the team over there that's getting everything under control and making sure that the ramp-up also does it smoothly. Daimler continues to up the numbers of cars that they're pulling. So at the same time, we are also ramping up and stabilizing. So like you mentioned in the last call, I think the improvement should be visible every quarter as we keep going. I wouldn't like to say more than that because it's a very critical quarter for us to see how things go. But fingers crossed that the teams keep their focus and keep this momentum and keep on improving day by day.
I think the news is also obvious that some of the people almost at one time we were employing 70 people at a very high rate. That significantly has come down to almost zero, so no high-cost consultants per se, so I think that's kudos to the team that they have got rid of all the high-cost consultants that were there to help us to come on the team.
Thank you, sir. My second question was on recently there was this anti-subsidy duty of up to 10% imposed on copper wire rods from four nations. Would this be relevant for us, and how much would be the lag if there is a pass-on that has to be done to the customers?
Sorry, we are not aware of.
We are probably not buying from those countries. So our rods come from some other things. So we are not affected as of now.
Thank you, sir. Lastly, FY21 CAPEX number was expected to reduce. Would you be in a position to shed any light on possible CAPEX plans for next year?
I think next year is very important for us. We will also be coming with five-year plans. So we would rather wait for things to.
We'll have that queue in the next one.
Next quarter.
Thank you, sir. I'll fall back in the queue for more questions.
Thank you.
Thank you. We take the next question from the line of Aditya Bapat from Equirus Securities. Please go ahead.
Go ahead, please.
Mr. Bapat, you may please go ahead with your question. As there is no response from the current participant, we take the next question from the line of Vinay Singh from Morgan Stanley. Please go ahead.
Hi team, thanks for the opportunity. Now that a lot of BS6 vehicles have started to ramp up, do you have better clarity on what is the content per car improvement in wiring harness in India between BS4 and BS6?
As we had said earlier, that as far as the gasoline cars are there, there won't be much of a difference, but there definitely will be a difference and a value add in diesel vehicles as well as on the CV side and on the two-wheeler side. So that still remains correct. And it is depending on vehicle to vehicle, model to model, as there are different ways in which OEMs tend to move towards that and depending on from where they are moving towards. So again, it's model by model.
Any number you would like to share about your revenue mix across passenger categories, gasoline, diesel, two-wheeler, four-wheeler?
So the problem in that is that it depends upon the variant. And really, we would have to sit down with a great computer and try to figure out what are the moving parts of the lot. Yeah. So probably once the demand starts to come in, then we will be in a better position to say so. But at this moment, really, we can't give you any number. We know the numbers, but we can't give you because it's something related to the customer base.
And just one request, as we know, the company is going through a reorganization. So it would be really helpful if you could at some stage share the breakdown between domestic wiring harness business and the others in terms of EBITDA, revenue, Return on Capital Employed so that we get a better sense on how the business separates. In case you have that handy, then that'll be very helpful, but do share at that some time.
Absolutely. We will do a special call, and we will be telling you what the breakups will be once the board approves, which should be happening in the next 30-60 days.
Just one last question. Sequentially, we've seen a sharp 40% jump in interest cost and 6% jump in depreciation. Any comments on that?
Yeah, G.N. Gauba this side. One, the depreciation also includes the impairment of Brazil, which is done in the quarter. Secondly, when we talk about Ind AS 116, the leasing, that amount gets split into the interest and the depreciation. And thirdly, we have given a footnote as well that the interest component has a lot of mark to the market exchange loss in the current quarter, so about 39 crore in the quarter.
Okay, great. Very helpful. Thanks.
Thank you.
Thank you. We take the next question from the line of Jay Mehta from Edelweiss Financial Services. Please go ahead.
Yeah, this is Chirag here, and thanks for the opportunity. Sir, first of all, a fairly broader question. For sales in Europe, for example, is there an indirect impact because of the coronavirus issue in China? Because I presume some parts, even in Europe, for your car customers would be coming from China. So to that extent, there could be some issue if the availability of parts from China becomes an issue. Is it a right understanding or the risk is very low?
Chirag, really, we can't say anything because today is the day that China should have opened completely. And please give us some time to collect and get the information from our customers. Really, I can't give you on-the-spot news kind of a thing. We think the effect may not be so much on the car makers per se, but in the component makers, different component makers. There are hundreds of thousands of component makers. And who is affected, who is not affected, we really can't guess or come to know somehow. So please bear with us. The moment we come to know, there's something.
We haven't heard anything from our customers right now. So there's really nothing for us to report.
It is possible that optically volumes could be slightly subdued because of shortage of some parts from China, which ultimately feeds into that particular car.
Sure. If there is, then yes.
Is there a possibility in that sense?
Possibility. Possibility.
Yeah. And the second question was a reference on the PKC side. Now, if we actually observe, the U.S. class A truck sales have been weak since the beginning of the year. But till now, we have been immune. So is there some lead-like effect that we have, given the way the order book may be playing out in PKC? If you can help us understand that this is the first quarter where we have actually seen a drop in PKC revenues on a YoY basis.
Yes, it's based on the production by the truck makers. So what you are referring to, Chirag, is the order booking. And if you remember, there were backlogs, huge backlogs in the U.S., which were being met in terms of supporting the market. And then the bookings had also gone up. But so the customers start to then work out as to how much backlogs they want to keep and how they want to service the market. And this quarter, there had been a weakness, as I mentioned, in the European market also compared to the last year. So that's what we have reported to you.
Yeah. And there's one question for Gauba. Sir, just a clarification that when we look at our consolidated numbers and when we break it up into various subsegments as you share, the balancing figure which comes across as 'and others' are a balancing figure, generally on a quarterly basis, those revenue and EBITDA numbers swing a lot. Is it possible to give us how we should understand that number? Because if I look at current quarter results versus last year, that balancing figure, there is a significant almost 80% drop in that particular line item. Now, I presume there will be a lot of intercompany balancing also that would be affecting. But on quarterly basis, this number really swings a lot. So how we should try to understand this particular line item? Is it possible to give some insight over there?
Let me consider a suggestion from your side. Let me also think, and we can take this subsequently because we always felt this number is not large enough to have the impact. But surely, we will take your feedback and look into this in future.
It may not be material also for manual, but on quarterly basis, we do see a lot of swings over there.
What's the range, Chirag, that you see?
For example, when I do this balancing number, last year, same time, this revenue was almost 1,300 crores, and this quarter, when I consolidate numbers and minus standalone SMR, SMP, and PKC, the balance number that we get, it is only 215 crores.
Oh, then something is wrong. So we can discuss this offline.
Yeah, I think this must be an error.
Because on the segment reporting, this number is 995 compared to 1125. So we can take this offline.
Offline. Yeah. Sure. Thank you. I'm done with my questions. Thank you very much, sir.
Thanks.
Thank you. We take the next question from the line of Puneet from HSBC. Please go ahead.
Yeah. Thanks for the opportunity. Just trying to understand.
Puneet, this is the operator. I'm so sorry to interrupt. Requesting you to please speak a bit louder, sir. Your audio is not very audible.
Yeah. Is it better?
Yes. Thank you.
Yeah. Great. So trying to understand a bit more on PKC side. Pankaj said that the market was down 19% and you're down only 7%. So obviously, you've done very well. Yeah. So what would have been the driving factor for this? Is there a gain in content, market share? What has really been driving this outperformance?
See, there have also been some markets which have moved up, like Brazil has shown a positive movement. And it's also, when we are talking, we are talking a broad number of the total market. And then how much is the customer to whom we are supplying or the model which we are supplying has declined, they also vary product backlogs.
But I would presume you had a very, very large market share. I remember PKC talking about 60%-70% of the U.S. market and various other markets.
You are right. I mean, U.S. market, it's true that we have that kind of share. Europe, it will be slightly different. Similarly, in Brazil, it is different. Our aim is that as we do well, hopefully, we will get more.
Definitely, in Europe, we have a very focused plan to improve our numbers over there. So yeah, wherever there is a weakness, we are trying to focus on that.
Okay. So it's more market and model-driven and no significant new customer gain in that sense. Should I read it that way?
Yes, you can. I mean, and also we have some gains in the rolling stock side also. So we do have. It's not just. It's got a division. It's not a very large division. I mean, it contributes about 11-12% of the total revenues of PKC. But then everything put together comes out like this.
Yeah. Okay. Fair enough. Secondly, on the greenfield plant side, have they reached full revenue potential, or is there room for them to increase revenue based on the existing orders for those plants?
Yeah. There is still a little bit for us to grow over there. So the plants have been now scaled up to a point where we're reaching those peak levels, but there's still a little bit more to go.
Also, I think since we are now the largest supplier to Daimler on the truck producer side, all the newer models and all that definitely will get chances. I'm sure there's going to be a lot of opportunity there.
Okay. That's great. Lastly, on the impairment side, what does that Brazil impairment relate to?
Sir, as we all know, the Brazil passenger car market has not been improving, but there was some part of the CAPEX which was done over a period for the new models. So that is something which is being fully impaired to avoid any future risk.
Okay. So there is nothing more left in Brazilian part of the balance sheet?
Yes. It is a non-cash item, I think.
Okay. Okay. That's it. That's all from my side. Thank you so much.
Thanks a lot.
Thank you. We take the next question from the line of Kapil Singh from Nomura. Please go ahead.
Hi, sir. A couple of questions. So firstly, on the greenfield, just a follow-up. Could you share the updates in terms of the improvement that we are expecting in the financial performance over there? What stage are we in, and what are we working on?
I think, in general, the improvement has to be all throughout, right? I mean, we were talking about lack of people being over there, trained people. So we have running more people than we should. So improvements are put into place over there to make the operations more efficient. And also on the scrap levels, we were seeing that the scrap levels were quite high. As we have gone through the quarter, we have put special focus teams on that. That's performing better. And you can see that in the results. Also, we had a lot of external consultants since we couldn't hire local people. But since then, we've added a significant strength of people onto the team and been able to also relieve a significant number of those consultants that were there. So all these things are being worked on.
Of course, we have to make sure that we continue to ramp up with Daimler's demands. That's happening as well. And making sure that we give them better and better quality. So overall, there's a big focus on SMP Alabama. We are attacking it from every aspect, from production to financial to purchasing. Every aspect is really being worked on. And the.
I mean, also, you are getting tremendous amount of help from your existing companies in the U.S. They have really come forward and helped us dramatically in the Alabama. So SMR.
PKC.
MWSI.
That's right.
Companies that have existing plants and all that, I think they have come to a great help to the group. That's very encouraging, isn't it?
Absolutely. We've got all the people that are now on ground supporting. Also having other facilities in the U.S. has helped because of the visa issues that we spoke about. That's not there with the existing people that are working in those plants. So they've all really stepped up and helped to stabilize SMP Alabama.
So by when should we expect it to turn breakeven?
I hope yesterday. But I think this is something which we are discussing with the customers also. So just give us some time, and we hope we can give you some good news. But yeah, we are discussing with the customer. We're discussing with, as Vaaman said, every aspect of that. In fact, Vaaman personally goes for three days every week to Tuscaloosa to follow up and make sure that Tuscaloosa comes back absolutely on track and makes good money for us.
Okay. Great to hear that. Especially we remember a lot of traveling that Vaaman did for SMR as well. So hope at some point we will see the same kind of performance.
Absolutely. If you have memory of that, you remember SMR when we took over 10 years ago. My God, everybody thought that was the end of this thing. So now people think this is the end of Motherson again. But I'm sure Vaaman and his team will show that it's not the end of the world. It's actually a beginning of a great relationship.
Great. Yeah. I look forward to that. Just a couple of more questions. On SMR, we noticed that there is a YoY drop in revenues. Could you just give some color? What really happened in terms of customer demand with geographies or customers?
Look, Korea was with the Korean customer. That was one region that had significant weakness in the last quarter. Also, if you really look at it, it's kind of marginal and going with SMR's fluctuations on quarter on quarter that happens. So except for the Korea bit, which really had a bigger.
India also a little bit on the low side because of lower uptake of cars.
That's right. So even India was lower, Korea was lower. So those were kind of weak markets that we saw over December. But hopefully, next few quarters should pick back up.
Okay. Okay. And in India, just one question in terms of current quarter as well. Do we expect some kind of lower production because we are heading into BS6 and transitions taking place? So are you seeing that impact in the short term?
I think it is best left to the Indian car maker. But we don't have anything to say that they have reduced the numbers or anything like that. I think the numbers, as far as my information goes, are actually steady and up because people are trying to fill up the pipelines. But Pankaj, anything on the wiring harness side could also be applicable to the others. Can you explain something about Indian car maker?
No, I think what you said is absolutely right. So that's what.
I think February and March look a little better. But I'm personally of the opinion that 1st of April onwards, you will see a huge comeback to the market. People would have solved this confusion between BS4, BS6, and all that. And we also noticed that the aftermarket is really, really at a peak just now. So this means that people definitely want to buy cars, but it's the confusion which is causing them to resist and wait for a month, month and a half so that they can buy the new car because that would be legal every which way. I think it's a personal opinion of mine, though.
Thanks. Thank you. By aftermarket, you mean for parts or for?
Second-hand cars.
Second-hand cars. Okay.
There are no second-hand cars available in the dealerships. Just go have a look. It's amazing. It's an upward thing, which tells me people are desperate to buy new cars. That's my reading of it.
Okay. Okay. Interesting. Thank you, sir. Thank you.
Thank you. Before we take the next question, I would like to remind participants, if you wish to ask a question, please press star then one on your touchtone telephone. Next question is from the line of Suraj Chheda from IIFL. Please go ahead.
Hi. Thank you. This is Joseph from IIFL. I'm just looking at slide number 11 of the presentation where we have given the quarterly trend of SMP both on a reported basis and excluding the greenfields and Reydel. What I noticed is that when I move from Q2 to Q3, I'm just doing a simple exercise, which is deducting the organic business, which is excluding greenfields and Reydel from the total revenues, and looking at the difference both in terms of revenues and EBITDA, which obviously is the sum of greenfields and Reydel. What I noticed is that compared to 2Q, 3Q is hardly different in terms of both revenues as well as in terms of EBITDA.
So the improvement that you talked about in terms of lower rejection rates or in terms of getting the expats off the books, etc., is that something that you expect in 4Q, or is that something that you already achieved in 3Q? Because when I compare 3Q versus 2Q, it's hardly visible in the numbers.
Joseph, just to put the facts numbers right, of course, Mr. Sehgal and Vaaman will answer or help us. We had a reported EBITDA of 36, and whereas the gross excluding greenfield and India is 116, whatever, comparable to 36 plus 65. So the gap becomes 29, which has become 24 now.
Yeah, I see that. But typically, the European plastics business is something that sees QOQ improvement because September has got shutdowns because of the summer, etc. So even in Reydel, you have seen some improvement. So are you saying that there's been a significant improvement in the greenfields or?
We come to the rest of the discussion. Of course, Christmas and Thanksgiving months holidays also impact the U.S. sales, but to say that there is no improvement on the EBITDA is not a fair statement because though small amount, but there is an improvement.
Yeah. I think we also have to understand that we are also building a team over there. So while we've got rid of the consultants and things like that, we have also added people from different parts of the U.S. to come in and take some of those positions that were empty that were being filled with consultants. So the cost doesn't completely go away. It improves. And then these people are tasked with making sure that they drive further efficiencies, which, after the plant is stabilized, we will see. So definitely in the next upcoming quarters with the full effort of the team, it should be much better. I think the direction is good because, again, the volumes are going up. The plant needs to stabilize. We were running at a very high level of scrap and inefficiencies, which is getting better.
But also to fix that, we've also added in a very high-caliber team over there that is also, of course, added on to the cost in that plant. But again, moving forward, this trend should continue. It should improve.
Got it. Thank you. And do you have a target? I know it's difficult to pinpoint a particular quarter, but do you have a particular target internally on hitting maybe EBITDA breakeven on a full-year basis next year or something like that? Some kind of indication that you can give us, help us understand this greenfield issue better.
No, absolutely. 40% growth. See, one would love to fix these targets and things like that, but a lot of moving parts. But again, I would only request a little bit of patience because it's a brand new plant which is coming up over there in a big way. It's the largest plant that Motherson has. So that's why because we have to be very steady in the improvements and things like that. We don't want to take any shortcuts. So secondly, the key thing, Joseph, which you have to remember is that in USA, there are no shortcuts. We can't send 30 people from India go help out over there and then that way reduce the cost. We cannot be in any way seen to have broken any law or any guidance from the government. So we are going the right way.
We are absolutely sure that we will do it. But for us, whether it's a quarter here or a quarter there, it's of little consequence. The key thing is the confidence of the customer on us and the confidence of the government on us. I think that's crucial in USA. So I hope you understand what I'm trying to say.
Joseph, thank you. Thanks for the response. I'm done.
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. Sir, actually, I also had a similar question on the lines of the previous one was when we look at the difference between the reported SMP numbers and revenues excluding greenfield and SMRC. So while and the EBITDA, you spoke about the EBITDA improvement, which is clearly there. But on the revenue side, the number broadly is the same, around EUR 350 million. So when we say that the production ramp-ups are happening, shouldn't be that also visible on the revenue side?
I don't know what you mean, but if you're talking, there is a freeze of 350 million, as you said rightly. But the market generally is on the weaker side. So have you taken that into consideration?
So you mean to say SMR, the Reydel revenues may be a little lower in that sense, and hence the.
Yeah. Absolutely, so that's why we become very difficult for us to explain, because different cars, different markets are behaving differently, so very difficult to try and put color as to what happened, why it happened, and things like that, but actually, you hit the distinct. SMRC is down a bit last quarter, and actually, SMP is on the higher side.
Sir, now that Vaaman mentioned directionally, you have pointed out about all the improvements which have happened. And clearly, just the reported EBITDA numbers over the last sequentially four quarters is a clear sign of that from 2% to almost 5% we are now clocking on the SMP margins. So if we look at historical SMP margins, they were in the region of EBITDA margins were in the region of 5.5%, 6%. So are you hopeful that that can be reached in FY21 again?
Yeah, absolutely. Again, we don't guide on the margins. We guide on ROCE. But definitely, our effort to improve the ROCE is EBITDA improvement, and we believe that we should do better than that.
Okay. That's a positive encouragement. Thank you, and all the best.
Thank you.
Thank you. We take the next question from the line of Raghunandan from Emkay Global. Please go ahead.
Thank you, sir, for the opportunity. Just one query on Alabama plant. Last quarter, you had indicated that there has been a ramp-up, and from 700 cars, it has gone to 1,000 cars per day kind of production. So just wanted to understand, has that number further increased? And on an exit basis, would Alabama plant be running closer to full capacity utilization in case you are able to share? Thank you so much.
Look, I can't give you exact numbers, but further from there, numbers are being pulled by Daimler another 10%. And we are contracted for a further increase from here as well, while it's a margin of another 10%-20%. But that just depends on how Daimler ramps up as well and how the other suppliers do. So yes, we have moved up a little bit further up the rank. That's why, like I was saying before, that while stabilized, they're also going through a ramp-up. So we're having both sort of effects of the plant. You can really drive through efficiencies once the number has stabilized and Daimler continues to pick up more. So we're working on both ends, trying to deliver the results.
Thank you, sir. That was helpful.
Thank you. Reminder to the participants, if you wish to ask a question, please press star then one on your touchstone telephone. I would like to remind all participants connected to this conference, if you have a question, please press star then one. We take the next question from the line of Prateek Poddar from Nippon India Mutual Fund. Please go ahead.
Yeah. Hi, sir. So just one small question. Any thoughts on CAPEX for the next year or yeah, that's.
Prateek, as Gauba said, we will give a clear guidance on our CAPEX for next year. The plan for the next five years is also coming up in May, June, when we have the investor conference. We'll give you the number of CAPEX also at that time, plus also the new order book and what's happening to that. So.
Great, sir. Great. Yeah, great. And sir, just on Alabama, if at all possible, obviously depends on the car maker, but is it fair to say that in the next six months, the full utilization would take place?
Oh, sure. Three months.
Okay. Okay. That's great. That's great to hear.
May, June will give you the flavor on that also.
I would love to see that. Sir, and lastly, thanks. Thanks for this and all the best, and I hope you achieve your 3CX15 as well as $18 billion guidance by the year. Looking forward to it. Thanks.
Watch the space.
As we speak. As we speak.
Thank you. We take the next question from the line of Iqbal Khan from CRISIL. Please go ahead. Mr. Iqbal Khan, your line is unmuted. You may please go ahead with your question, sir. Mr. Iqbal Khan, you may please go ahead, sir.
Hello.
Hello.
So you need to please speak a bit louder. Your audio is unmuted.
Hello, everyone. I have a question on the order book. You guys didn't mention about the order book in this quarter. Can you just draw a picture as to how much the order book currently?
So we give a guidance every six months. As of now, the old guidance of 18 point what was the number?
18.4.
EUR 18.4 billion. That's the order book as of the last guidance that we gave last quarter. And we will update that in May, June when we come out with our results so that every six months we do that because every three months it becomes really a waste of time.
Okay. Thank you so much, sir. Thank you so much.
You're welcome.
Thank you. We take the next question from the line of Jay Mehta from Edelweiss Financial Services. Please go ahead.
So my question is answered. Just a clarification, but on this BS6 transition that you indicated, so is it right to assume that the confusion around whether there could be some production cuts post the transition happened is largely behind and OEMs have a reasonable ballpark on what kind of order book that they are indicating? Is it a fair assumption that confusion or that uncertainty is behind?
I think the consumer is quite confused. What will be the status of the cars of Euro 4 that he's buying today? What would be the resale value? So many questions are there in the mind of the buyer. So my personal opinion is that people's confusion will die down once the Euro 6 happens. All concerns about fuel because most of the cars are okay to work with either of the fuels and things like that. So all these confusions because everybody who's buying a car or a motorcycle is not so, how to say, literate to understand the differences, the nuances. So I personally think that 1st of April, all these particular issues that are doubts in the mind of the people would have gone, the government would have moved on, and everybody would have moved on. That's my personal opinion.
I really can't say what the industry is thinking or saying, but I believe the market will bounce back quite well from 1st of April.
Similarly, I don't know whether you would be able to address the point. In Europe, over the last two, three years, we have seen a huge anti-dieselization drive, which has affected volumes to some extent for a good amount of players.
I'm sorry. Anti what drive? What drive?
Anti-diesel drive. In a sense, people have to.
Anti-diesel drive.
Diesel vehicles, yeah. Diesel cars. Is there an indication coming across that that phase is largely behind and reception or acceptance to at least the latest Euro 6 diesel engines is improving over there?
Thank you very much for making this point for me because this is a pro-Motherson point. We are agnostic to the engine, and I said we can't answer this question, so for me, whether it's a diesel car, petrol car, or electric car, my parts are still the same, so honestly, we don't get feedback from the customers to whether the plastic parts that we are supplying, is it going into a diesel engine or it's going into a petrol engine, so I hope you appreciate that point, but we are seeing that the last two, three months, we can see generally the demand is moving up.
Thank you. Thank you very much. And all the best, sir.
Thanks.
Thank you. We take the next question from the line of Harish Advani from Yes Securities. Please go ahead. Mr. Advani, your line is unmuted. Please go ahead with your question. As there's no response from the current participant, we take the next question from Sandeep Kumar Varma from Axis Bank. Please go ahead.
Hello. Sir, this is Sandeep Varma. Just wanted to understand what would be the impact on Motherson Sumi because of this coronavirus outbreak in China? A significant portion of your revenue, as in 7% revenue, comes from China. And even Korea contributes around 4% of the revenue. We have seen Hyundai has stopped the production for six, seven days. So.
Yeah. So Mr. Varma, the thing is that 10th of February was the finishing of the Lunar New Year. So you're asking me today what happened. I really can't give you a feedback on that. But definitely, some car companies have extended the holiday. Some city areas where they apprehend that the contagious atmosphere is there, they have shut down that whole particular thing. So really, we'll come to know as the time passes, 11th, 12th, 13th, we'll come to know more and more. We have already set up a command center, which is there in Shanghai, and we are getting daily updates from there as to what is happening. And in fact, whatever help they want. So for example, in some of the places, they wanted masks and all that. So we are actually now sending masks from Dubai, airfreighting them and all that.
So whatever we can do, we are doing over there. But you'll have to bear with us because it's a really unknown kind of a situation there. We've never been here before. And our thoughts and heart goes out to our compatriots there, people who are working for Motherson. So please bear with me.
Okay. Sir, another thing, the government is also talking about bringing this scrappage policy within the next 30 days. Mr. Nitin Gadkari told this. It was in today's newspaper. Obviously, it is going to be positive for the company.
Go ahead. Go ahead.
So probably since you people are very close to all these developments, how much likelihood do you see this Scrappage Policy actually being implemented?
One thing is sure that whatever this government says, they do. So if they have promised you that in 30 days, they will come out with this policy, I'm sure the policy will be out. I think they will be very appreciative of the fact that it affects some of the lower or not too well-to-do people. So they will be very considerate. But yes, it's anybody's guess as to how the implementation will go through. But definitely for the pollution's sake, since that was the only reason why they wanted to bring scrappage policy, I'm sure those areas where pollution is on the higher side, they will definitely be very, how do you say, strict. The rest of the world, the rest of India, I don't know how it will go. But I definitely think it's needed and it will.
Okay. Thank you so much, sir.
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 the questions again. Gauba, sir, this is for you just on the accounting and financial side. Sir, when we look at the segment assets and segment liabilities, right, and when we net off that, it is broadly the net worth which comes as a resultant and not the overall capital employed, right? And the segment results which we have, that is PBIT, right? Sir, right? So the segment results are PBIT. Now, if we look at PBIT and calculate those percentage, the net worth is a denominator which is difficult to match the PBIT. It should be either PAT or the PBIT can be compared to capital employed. So what I was trying to understand is SMR, SMP, PKC, and others, the performance of those subsidiaries in relation to their assets is not very clear from this statement.
Sir, will it be a right way to look at?
Yeah. Apart from, I mean, this will not necessarily show the net worth because there are intergroup transactions also. So there will be balances between SMR and SMP as well as between PKC and other part of the business as well as we have a shareholder. So it is a bit more complex than what we think on the face of it. So unfortunately, my first reaction is it may not help you. I will again look at what it is.
Sir, even at the total consolidated entity, even if we remove the inter-segments in between, the total consolidated also, the PBIT figure will be there, which will be compared to as a percentage of net worth, which will be very difficult to draw a conclusion based on the trends. So sir, if you can just look into the presentation, it will help us, sir.
Okay, sir. I will look, but I mean, on a half-yearly basis, we produce a balance sheet. We also produce a cash flow. SMR P BV produces cash flow balance sheet every quarter. I think there is, and we also give debt levels at each quarter. So I think there are a lot of disclosures being made, obviously, as part of the next investor meet or we would like to see how we can simplify or rationalize these disclosures because that will help you as well as help us to save on time as well as give you the relevant information.
Do you think the spread of Motherson Sumi would help in this?
Yes, sir. In that sense, it will help. At least there were many questions on the minority interest or those things. They will get a little...
They will all disappear.
They will all disappear.
Okay, sir. Thank you so much.
Thank you, sir.
Thank you. A reminder to the participants, if you wish to ask a question, please press star then one. That was the last question. I would now like to hand the conference over to Mr. Vivek Chaand Sehgal for his closing comments. Over to you, sir.
Thank you very much. I think this was one of the toughest quarters that we have faced. The company, I think, has done a phenomenal job. Their focus on growth, their ability to reduce the debt, even the debt, if you look at it, has actually come down over the last quarter, though marginally, but it has. Everything is looking good. We are on the verge of trying to look for the opportunity to complete our target. One and a half months, our teams are very focused on the top line and the bottom line. And I wish you all the very best and be safe. And please take care. Thank you very much. Bye-bye.
Thank you.
Thanks a lot.
Thank you.
Thanks a lot.
Thank you. On behalf of Motherson Sumi Systems Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.