Thank you. Ladies and gentlemen, welcome to the Q2 results of Motherson Sumi Systems. Very briefly, the conditions globally are, you are all aware. I think all the team members of Motherson have worked very hard to bring in these particular results. The board congratulated all the associates and the management. I think what was very interesting was that it's the last year of our fifth five-year plan. All the teams are very focused on growth, on improvements. The timing is such that they are able to do or deliver some very good results in that. I know you have a lot of questions, so I hand it over back to you with that. Warm welcome to all of 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 the touchscreen telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
While the question queue comes in, I'll introduce the people who are on the call. We have Pankaj, we have Gauba, we have Mahender, and myself. This is for your information.
Thank you. The first question is from the line of Kumar Rakesh from BNP Paribas. Please go ahead.
Good evening, and thank you for taking my question. And congratulations on good performance on the margin front. My first question was around your customer feedback, especially on their production plan going into December quarter. Have you heard anything from some of your major European clients that are they looking to cut down their production higher than usual in the December quarter? Any feedback in that regard?
Hi. No, as of right now, we haven't seen any major change specifically for the quarter or anything like that. Everything is as per schedule. We really haven't seen any customers coming back and saying that anything will be reduced or something like that. No, we haven't seen that.
Great. Thanks. My second question was around the greenfield and SMRC part of your business. That continues to report EBITDA losses of around 8%. By when do you see that to start turning profitable?
Yeah. Just to clarify, SMRC is a positive. So greenfield is a negative contributor. So partially, that gets offset by the positive contribution coming from SMRC. Since we are giving it data to make like-for-like comparisons, so SMRC is also excluded from the existing plants. But to make the facts clear, SMRC is positive.
Noted. So your greenfield plant, by when do you expect that to start turning profitable?
There's still going to be some time for that. We are making a lot of efforts right now to make sure that we can secure the ramp-ups and the productions. We spoke about the two main plants which contribute to this. One is Kecskemét, and one is in SMP Alabama. The Kecskemét plant is a little bit further ahead, so we do expect it to hit a break-even fairly soon, and then the focus will always be on improving the profitability. SMP Alabama is still in ramp-up mode. The last time we spoke, we were about 700, 600, 700 cars a day. That has now increased to more than 1,000 cars a day, so numbers are ramping up quite significantly over there, and there is still a little bit more to go in the next two quarters.
The focus will continue to be to make sure that we can deliver up to the customers' volumes and expectations. Following that, we will make a big effort towards improving the profitability and pushing it forward. There's still a little bit of time for that to happen. At the current time, we're always focusing on making sure that we can deliver the volumes.
I think with so many plants, one plant in that kind of thing, we always have had that particular situation. So I think the other plants are really supporting the startup plants and all that. So I think in that sense, it's very, very positive. As you can see, the results.
Right. Thank you for that. My final question was around the standalone business in India. With the prices increasing for BS6, do you see a risk that customers can be downtrading during this time? And hence, the mix and value-add benefit which you have historically seen could come under some pressure. And also, OEMs may push back into not moving into more premium products, at least for a year's time. Are you looking at that mix risk in the next year or so?
Not really. I mean, the Euro 6 products are already into the market. And we see that not just Euro 6, but the market movement has been over a period of time for more features. And we have seen the trend as to how vehicles have moved up the value chain.
So my question was around India business. So you expect a similar trend to be in India, but the transition could take some hit on the mix. Is that understanding correct?
I mean, the car makers could. How are we going to get affected? We didn't get to connect. The car makers could get affected, but I don't think we would get hit, unless the numbers come falling down or something.
Okay. Thank you for that. I'll fall back in the queue.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, request you to limit your question to one per participant. If time permits, you may join the question queue for any follow-ups. The next question is from the line of Priya Ranjan from Antique Stock Broking. Please go ahead.
Yeah. Thanks for taking my question. So just continuity of the last question on the growth outlook across the segment, plus how the ramp-up, etc., in Tuscaloosa is going to happen, and how soon we can achieve the profitability given the. I mean, can we achieve the. I mean, the break-even level is like 1,000 per car per day, or is it going to be like 1,500 or 2,000 car per day kind of scenario?
Look, the Tuscaloosa has been a special case. There is very little availability of manpower. So really, the skilled manpower that we are getting is not up to the mark. And frankly, the unemployment level is practically zero for all purposes in that region. So it's very difficult to get people. What we pictured it is quite different to what the situation is. We've had to hire a lot more people than for the same job that we would be doing in a plant in Mexico or in Germany. So that quality mindset, being able to drive in the efficiencies, we still haven't been able to do that as per our expectation because the customer is still launching and the numbers are still going up. So in the short run, at least, like I said, we have added on a lot of people.
So we have added on more cost to secure the customers' volumes. But moving closer towards March is when we will make a much bigger drive towards improving the profitability once all the launches and everything is completed. It has taken longer than we expected, but that is, again, due to the unavailability of the specialized manpower and skilled manpower, which is lacking in that region and has caught us in an area where we would need to make a decision to drive once the launches are complete.
Overall, we are seeing an improvement. We can't be telling you when we are going to hit break-even or something. Every day, the improvement is there. The ability to train the people, make them understand what are the nuances of making such a premium product. All that particular thing is happening. We are very proud of the people that are there in Alabama. They're doing a fantastic job. It's just a matter of time. It could have been last quarter, but now we have Christmas, and that's coming up. All these particular things play out a bit. As Laksh said, probably the next quarter would be a great time to talk to you about how all of the people at Alabama are doing a great job.
And second question is on the overall order book at SMRPBV level. So I mean, we have seen quite flat this kind of net order book for quite some time. So is it because of the market weakness? How do you see or how do you read about this?
No, the order book is very high level. If you remember that the order book, we take the entire full order out as soon as an order starts. So the point of the order book showing is that there is still a very healthy level of virgin order book that has not started yet. If you see the sales are increasing in SMRPBV, we.
About 15%.
Growth. So the growth is still intact, and it continues to grow. So we don't see any issue with the order book level being met. It depends on the launches. If the launches that are simultaneous launches, a big portion of that order book will come out because we extract the full five-year period of that order book out of that number that we show you. So that depends on timing of when the orders are starting. This is just an indicator of how much virgin order book we still have to execute.
I mean, the reference number you're talking about is more of a middle kind of scenario. I mean, because there will be a scenario where there will be less ramp-up than what even OEM might have thought of. And then there is an optimistic kind of scenario. So these are the average kind of order book you are.
So definitely, I mean, we will keep you informed. God forbid if such a thing happens. We have never seen it happening because new cars, actually, the ramp-up is much higher and the quantities are higher. But I don't know why a customer would be giving a new car and then reducing the number. It doesn't make sense what you're saying. But anyway, if God forbid such a thing happens, we will guide you. Thank you.
Thanks. So I'm talking more in terms of, say, if the product becomes acceptable or.
Well, you have to restrict your question, sir. Give everybody a chance. Come back in the line. We'll answer your question, sir.
Thank you.
Thank you. Before we move to the next question, I'd like to remind the participant to limit their question to one per participant. If time permits, please join the question queue for any follow-ups. The next question is from the line of Mahir Parkeria from Wealth Managers India Private Limited. Please go ahead.
Good evening, sir. Thank you for taking my questions. Am I audible? Hello?
Yeah.
Yeah, you are.
Go ahead.
Yeah. So Rahman, now that you have got fair, I'd say relatively fair visibility of how the plants are shaping up, the new plants, and the production schedule, it is there. So while this is a financial question, would you like to put some number on where we will see the debt levels in a year's time from now? Given that the CapEx is behind and the cash flows, there will be some fair visibility post the high cost which is there. So what could be the debt levels which we could see in a year's time? Look, as we spoke about that, we've done the majority of the CapEx requirement has already happened. So there are no more new greenfields that we are currently assessing for that to come in.
So all the greenfields and the production plants, as they're now coming up and the existing businesses continue to perform better, they will start to generate the free cash flow, which will significantly reduce the debt levels. But to give you an exact number may not be possible because there are always new opportunities and things that are coming. But if you already see it, we've reduced it significantly from the same year period a year ago.
It was more than INR 2,500 crores. And we'll continue to do that.
Right. No, what I was just looking is, obviously, subject to the inorganic or any possibilities or opportunities, on a like-for-like basis, could we see a substantial fall in the next 12 months, or will it be just a gradual situation? Can we see INR 2,000 crore kind of fall? Gauba, sir, was it possible?
Sir, you have seen how the debt levels are being maintained in spite of increase in the working capital. Our debt levels have remained similar to March level, and we exercise a high level of financial prudence, as well as the cash flow is produced in September this year for both standalone and consolidated, so I see no reason why the debt levels have not come down, but to put an exact number may not be a right thing for us to guide you on the call.
Okay. So last second question from my side is, what can be the full year SMR SMP sales growth look like given that first quarter was a very high number, second quarter has marginally come down. Obviously, it's a good growth, but it has come down from the quarter. So where do we head by the end of Q4?
Look, we have guided you in the annual report that we will be an $18 billion company. Now, sir, what more do you want me to guide you, sir? I have guided you that five years ago.
No, no, sir. I was talking more specific about FY 20. What could be the SMP growth look like by the end of the year?
Sir, as I said, sir, as I said, we normally don't make any forward-looking statement or something like that. We've guided you when we came out with our five-year plan that we will be an $18 billion group in Motherson Sumi Systems. That's the whole good thing at 40% growth. So now you want a specific number? I can't give you that, sir. It depends upon what you're thinking, what's happening. There could be a lot of acquisitions. Anything can happen, sir. So allow that to happen and just enjoy the show.
Thank you. The next question is from the line of Kapil Singh from Nomura. Please go ahead.
Yeah. Thanks for the opportunity. Rahman, you mentioned that the production at Alabama plant is about 1,000 cars per day. May I know what is the peak potential over there? And also the manpower shortages which you are facing and related costs, how do you plan to address these over the next few quarters?
So look, it's still to go up from here. I don't know if I'm allowed to disclose the exact number, but definitely, there is still a good double-digit growth from here in the next quarters with Daimler and Yachiyo. So that's something that we have to make sure that our lines are capable of delivering. In fact, on the tests that have been done on the lines, if the people are all working in sync, the lines are definitely capable to deliver those numbers as well. So we do not see any further investment required to deliver any of those numbers. In fact, we have well covered for the increases that Daimler may ask us as their volumes start to do well and as the car picks up. So we are totally geared for that. The manpower shortages is a concern.
There are things that we're also doing, working with the state, working with the government to get more and more people do their VR lobbying as well to get support, and of course, in the short term, also, we are trying to get support from outside to train and teach the new people that are coming in to make sure that they are ready to jump on the lines and work through the shift for the increased production, but again, that's a challenge that we are currently facing every day. We are confident that we will overcome it. We just need some time. It's taken a little bit longer, but the people of Alabama have shown a lot of hunger for growth and to be able to do this, so we do not see that it should be a problem in the long term.
It's just taking a little bit more time, but we should be on top of it.
Thanks, Laksh. One more question on the India business. I just wanted to check in terms of content for diesel vehicles, for commercial vehicles, SUVs, etc. Is the BS6 content going to be much higher than in case of gasoline vehicles? Related to that also, if you could comment on the fact that while the car industry did see a sharp drop, we did hear that festive sales have been very good, and there is a significant correction in inventory. Are we expecting the production numbers to improve significantly in the second half?
This is something to answer your first question. Yes, the content in the BS6 commercial vehicles is much higher than before, and also, because of the festive season, yes, the inventories have got adjusted, and the production demand was much more. To say whether we see a much higher demand level in the next half year, I mean, it's everybody's wish, and we all hope that the demand will continue to keep improving.
Sir, could you indicate what kind of improvement in content is there for SUVs and commercial vehicles?
Sir, it is from model to model. So there is no one particular percentage number which I can specify. But yes, I can very clearly say that it is a double-digit improvement in terms of the content. Thank you. Mr. Singh, the questioner joined the question queue for any follow-up. We'll move to the next question. That is from the line of Kashyap Zaveri from MK Global. Please go ahead.
Hello. Hello.
Hello.
Yeah, go ahead.
Yeah, just one question. You mentioned that volume at Alabama plant is up from 700 to 1,000 cars. But I heard the news in Greece plus SMRC seems to have declined about 10% Q1Q from EUR 380 million to about EUR 351 million. So how do I reconcile this number?
Please also mention that Europe also has a summer holiday. So you are comparing with the previous quarter immediately?
Yes, sir.
So the previous immediate quarter is not comparable because of the fact that Europe has a holiday. So the Hungary plant, as well as SMRC, which has large operations in Europe, could be lower than the previous quarter.
Mr. Zaveri, is the question answered?
That's it from my side, sir. Thank you.
Thank you. The next question is from the line of Shyam Sundar Sriram from Sundaram Mutual Fund. Please go ahead.
Yeah. Hi, sir. Good evening. Thanks much for the opportunity, sir. Sir, approximately what would be the current utilization levels at the Hungary and Alabama plant? Just ballpark.
So, there's the again, utilization levels is not something that really restricts Motherson because we don't have to increase the lines, we just have to increase the shift. But like I said, because of the current inefficiencies that we have, we are currently running the plant six days a week and having one-day maintenance. But even as we move forward, I think as the efficiencies come, we will be able to do that in five days a week. So that's the current situation as of right now. The Hungary plant is further up, so they are hitting their required levels. They're hitting their peak levels as they are a little bit ahead in time and are going as per their numbers. So no issues there either.
All right, sir. So just a question linked to that, sir. In the last call, you spoke about the rejection rates being higher in Alabama. Has that as a metric, has it been coming down? Are you happy with the way the Alabama plant is shaping up? And on the Hungary plant also, despite being a fairly ramped-up situation, you did mention there's still some losses there at the data level. Can you comment about if there are any concerns on the rejection in the Hungary plant as well? Thank you.
Okay. So for the Alabama plant, definitely, there have been steady improvements that are happening. I always feel that we can do better, but that's there. But definitely, the things are improving day on day. We've also, like I said, added a whole number of people. And also to be able to supply this number, which has gone from 700 to 1,000, we definitely have made some improvements. There's still a while to go. I would not like to convey the picture that we are completely out over there because we have more launches that are coming up and numbers that also we have to increase. But yes, we've added direct and indirect people. We've also got a new operating team that is over there.
We've also hired people from Mercedes through their support to our plants that they can guide us because they have a lot of experience in Alabama. We've hired them also on our team to help us through this time. So we really have the best team there right now. We still need to hire more people as the launches are coming up. But yes, there is definitely a lot more improvement since we spoke. On the Hungary side, I think the management team over there is a lot more stable. They do not have the same issues that we have in Alabama. They're a little bit more mature as well. And the availability of manpower is more than Alabama for sure. But also, because of the heavy investments of automotive in Hungary, it's also getting difficult to find people over there. But the team there is quite mature.
They are working on efficiency improvements. And hopefully, also in the next couple of quarters, we should see them push forward as well. And I can tell you that once we reach there in time. Currently, right now, the focus is to make sure, again, that we protect the customer, we can deliver to their volumes, and continue to deliver the new programs that they are launching from these plants. And in the shorter term, then pushing forward towards these efficiency improvements.
Right. Thank you very much, sir. If I may squeeze one last question. On PKC, we are hearing Europe's truck market suddenly falling off since September, but we have continued to show very good performance on the PKC, sir. Are we gaining incremental market share there which is aiding us to show a better revenue trajectory than the underlying market? If you can add some color on that, sir, please.
We have been doing incremental improvements in our operational performance, which is helping us to get to a better performance. And as you have seen, our revenues have also grown. So this includes all our regions, Europe, South America, North America, as well as in the Asia-Pacific, China region. And it also includes the rolling stock side. So we have seen also our operational performance improve in the rolling stock side by a very good way as they also imbibed good practices which are there in the group. And also on the China side as the businesses are maturing. And in each of the regions where the teams continue to perform very well and derive better results by eliminating the waste. So definitely, we are getting more trust from the customers and getting new orders for which we are also expanding our facilities.
We are expanding our facilities in Serbia where we already have a plant, and then we are doing a brownfield expansion there. As well as for the future, we are also setting up a new facility in Ras Al Khaimah to support the expanded new businesses which will come in PKC.
Right. Sir, where are they setting up new plants for the future, sir? Sorry, I didn't get that.
We are expanding our plant in Serbia and also setting up a new plant in Ras Al Khaimah.
UAE.
UAE.
Khaimah. Okay. Okay. Got it. Got it. Got it. Thank you, sir. Thank you very much, sir.
Thank you. The next question is from the line of Suraj Cheda from IIFL. Please go ahead.
Hi. This is Joseph from IIFL. My question is in relation to Alabama plant. I just wanted to understand whether there's been a significant improvement in the rejection rates because that's one reason that I was quoted in the past for the losses. And the reason why I'm asking is because if the rejection rates have held steady in the next one or two quarters when you ramp up revenues as the customer ramps up, you might actually see higher absolute losses. So from that perspective, do you really think that the worst in terms of rejection rates and losses is behind us?
Look, we have had to also add a significant number of people. So that cost is also there. Again, there are improvements being made in every aspect of the business, but there are also offsets of more people that we have had to hire for this increased volume that was not envisaged earlier. I do not think that the losses can be more because as we move forward, we are planning a lot of improvements, like I said, in driving those efficiencies, and that's not envisaged. But to think that it will continue as is is also not going to be possible because we would not be able to continue to run the plant in that state if it's at that volume and making those losses. So the improvements have to come.
That's a big part of the focus of the management team to bring in those efficiencies, reduce those things. I'm personally there in Alabama spending three to four days every single week over there. I just came back, did before yesterday, and I see marked improvement. But sometimes, to improve the situation, you actually have to increase the cost by bringing in additional people so that we can train the people while people are working rather than trying to train them on the line, on the job. So again, it's a question of a couple of quarters till the launches are really done, and then we will really push through with the efficiencies which are happening as we speak.
I think as a corporate governance of the company, we can't be sending people on a holiday and then going over there and working and all that. So we have to follow the law 100%. And there's no compromise on that. So these are things that are the first plant that we have set up in the U.S. we are facing. And this will augur very well because in the future, we will be that much more knowledgeable. So it's a learning experience. And I think the commitment is very clear. The plant chief, the company chief, and Bauman himself spends about two to three days every week in the U.S., in Alabama. So I think the focus of the company is very clearly on getting this plant getting profitable very, very quickly.
So we are sure and really not worried about it, but we wanted to take the right steps, the right direction, and follow the law.
Got it, sir. Thank you. Thanks, Robert.
Thank you. The next question is from the line of Deepan Mehta from Elixir Equities. Please go ahead.
Yes, sir. My question is more of a macro nature, sir, so it does appear that apart from OEM and, of course, overall automobile industry improving its volumes, there's no major trigger for bottom-line growth rate.
There's also a thing called acquisition. The SMR that sometimes people forget. We were paid to take over this acquisition, sir. And it was EUR 500 million. Now it's about EUR 2 billion and has a +40% growth approximately. I don't know. Gauba, we'll get you on that.
Also, as analysts and fund managers, we cannot. It's an event-based thing. So whenever it happens, it takes its own time to actually come into the numbers and show growth. As PKC has shown, it took almost two years before we got a full return on it. So I mean, that acquisition is in your DNA. I understand that. But on a present operation basis, apart from Alabama plant and, of course, overall automobile industry, whenever that improves globally, there is no real trigger.
Sir, Gauba this side. I think one of the things which you should find in these results is the resilience which the company or the group has shown in the challenging market conditions, so take a case of standalone results. There, the markets are down by 18%. Markets are down by much higher amount, but the standalone revenues are down by 18%, yet we have maintained a healthy EBITDA. You look at SMR, while the markets have been almost constant in spite of giving the cost down, everything, inflationary conditions, the EBITDA levels are maintained, and more importantly, please look at the cash flows or the debt levels the company has, so in a challenging market like this, it is very important to conserve the resources.
We have conserved the resources, reduced the cost, eliminated the waste, and reduced the debt level, maintained the healthy cash level so that we are better prepared for the growth. Absolutely right. We are an OEM supplier, so we don't have any other than the inorganic part to grow our revenues. We will supply exactly what the OEMs require. But how do we manage our cost? How do we run our operations is something very important which we think differentiates us.
One last question. So any timeline or guidance for turnaround of the Alabama plants? Have you given the Q4 or next year? Any timeline have you had the management disclosed?
So what we are thinking is that hopefully within this quarter should be fine. But listen, if something extraordinary happens next quarter, maybe, probably, but you are asking for something which really I can't decide. I really don't know how the government of USA will work. There are so many moving parts, sir.
Because we have 350.
Too much to expect that we can guide you exactly on when to expect.
Let me put it another way. Let me put it another way. So I think from slide number nine that at about EUR 3 of turnover, we are looking at a EUR 22 million of loss. But what point of turnover do you think that you can break even? I'm looking at slide number nine and doing an arithmetical calculation, 1400 minus 1049 and 104 minus 82.
Yes, sir. I think Mr. Vaaman already emphasized that turnover is one part because there is an improvement which is coming in Alabama. However, the improvement does not fully translate into the improvement on the bottom line because of various reasons, because of the ramp-up which is happening or the new launches which are happening, and we have also said that this is the one quarter which should be the last or we should see the improvement in the next quarter, so surely our job is to first come to the break-even point and then start building on the profitability.
Okay, sir. Thank you very much and all the very best, sir.
Thank you.
Thank you.
Thank you. The next question is from the line of Hitesh Goyal from Kotak Securities. Please go ahead.
Yeah. Thanks for taking my question. Sir, just wanted to get a sense on the revenue outlook from the new plants in the SMP business. So basically, we had once guided that these new plants can reach a peak revenue of EUR 1 billion. Now you are giving us numbers of SMP and these greenfield plants. So can you tell us what is the revenue of a Tuscaloosa Hungary plant and what can we achieve in the next two years?
There is no change in the guidance. So our earlier guidance of EUR 1 billion from the new plants once fully ramped up stays.
Yeah. So sir, can you just break up this revenue of the new?
No, sir. So we can't, sir.
Because it's very difficult to then project where we are right now and what could happen in the next two years. Or you can give us some understanding on the capacity utilization on Tuscaloosa Hungary.
I mean, from next quarter, SMRC will be common in both the quarters. So you will have clear distinct. And last year's numbers are also there in public domain on SMRC. So I think we give enough of the data for people to get a clear visibility of that.
Okay. Okay, sir. Thank you.
So is the question answered, Mr. Goyal?
Thank you.
Thank you. Move to the next question. That is from the line of Chirag Mehta from Edelweiss Financial. Please go ahead.
Yeah. I said Chirag here. Thanks for the opportunity. Sir, so my first question is with respect to CapEx. Can you indicate how much we are looking to spend this year and also any ballpark number for next year? Has it been frozen or finalized?
Sir, for the CapEx, we had given guidance for INR 2,000 crores initially, taking the exchange rate wherever there are new acquisitions without that. We have a cash flow statement also published. You can see that as compared to the last year, CapEx is lower. We will stay with the same guidance as of now.
And how do we look at next year? Because some part of your CapEx program would be running out. So what kind of reduction can we expect assuming there are no other business opportunities that come across?
That assumption would be under question because we don't want to make that assumption. Okay. So we will come out with a guidance somewhere with the March results. And we will also have a next five-year plan coming up. So let's wait for that.
Unless, Chirag, you're thinking that we should not guide the market on the five-year plans because four five-year plans we've met already. This is the fifth one that we will try to meet. So you don't want the sixth five-year plan to be there, is it?
We definitely want, and we also would like and pray that you achieve those guidances as you have been in the past.
Thank you so much. Thank you so much.
Sir, second question is on this additional order book that you have announced, 3.8 billion. Is it possible to get some color on that? How much of that would be coming from U.S.? If I'm asking this question is we have been putting in a lot of effort to diversify and penetrate U.S. as a geography. So what kind of success we are seeing over there if you can help us understand?
I mean, on an overall basis, I can guide you on 3CX15. None of our customers is more than 15%. I think we had also given customer-wise breakdown in some of the presentations. Geographically, also, we are getting quite widespread. U.S. is now second-largest country contributing to the overall pie. Germany continues to be the highest. But the order book visibility, then it will happen which year they are launching. So we'll get into a data point which will be too voluminous. But in terms of guidance, I think we are right on the track.
Is it right that in this new order win, PKC order wins are also there? Or is it possible to broadly indicate?
I draw your attention to the slide number five which states order book status at SMRPBV level.
Okay. Thank you. This is helpful, and all the best, sir.
Thank you, sir. Thank you. The next question is from the line of Rikin Gopani from Infina Finance. Please go ahead.
I just wanted to understand how is the.
Sure. Gopani, can you be a bit louder, sir?
Sure. Am I audible now?
Yes.
Yeah.
Sir, I just had one question with regards to the working capital situation at SMRPBV. If you could throw some color in terms of how are we seeing the situation and how do you see the whole year's situation pan out?
I think overall the working capital has improved at the consolidated level. I think tomorrow SMRPBV will also upload their interim financial statements and their results. You can have a detailed working capital breakdown into SMRPBV at that point of time.
Okay. Sure. I'll have a look at the numbers. If you could maybe just give a flavor in terms of how are you seeing the is it getting extended or are you seeing over the full year things should remain fairly stable on the working capital situation? Your qualitative comments would be helpful.
I mean, qualitatively, you can see that the working capital there is a significant improvement in the working capital, both at MSSL consolidated level and standalone level. Consolidated SMRPBV constitutes almost like 45% or so of the overall and a bit higher on the working capital side. So the improvement which you are seeing should be more forthcoming as the new launches are completed. But I would like that we give specific questions on that once we have SMRPBV data in front of me. I don't have those numbers in front of me as of now.
Okay. Thank you.
Thank you. The next question is from the line of Prateesh Chera from Lucky Investment Managers. Please go ahead.
Yes, sir. Two questions I have. One, the ramp-up is there at the new plants in terms of cars per day which you mentioned. But SMP revenues QOQ have declined. So one comment there I wanted to know. And second, we were trying to figure out from Daimler's presentations, the GLC, GLS, and GLE numbers are about whatever, 38,000 for the quarter, which is quarter three calendar for them. If I try to break it up in cars per day, it's about 500 cars. So just wanted to know at these plants of yours which is Tuscaloosa, do we make other than these GLC, GLS, and GLE?
Sir, are you sure your numbers are correct?
Yeah. I tried to.
No, no, no. Are you counting CKDs? Because they're assembling these cars in other places. So are you sure these numbers are correct?
So I have three quarters data. I am hoping that whatever way I could collect. So if you can.
No, sir. You can't do that. I would love to meet one company which can give you the car makers' numbers in exact numbers, sir.
Okay.
This is misleading because they're also making the old version. So which version are you talking about?
Okay.
So there are a lot of things over there, sir. I mean, if you ask a question like this, it's almost like mistreating, sir. My revenues in SMP is up 20%, sir. Why do you think it's up 20%, sir?
No, no, sir. I was looking from.
No, no, no, sir. Come on, sir. You answer my question, sir.
Sir, I was.
It was $840 million, and now we've gone to $1.011 billion. That's 20% up. How did the numbers go up, sir?
So my first question was from QOQ side. From QOQ perspective, not from YOI. So is there anything which I'm missing? That was the first question, actually. And second, I was trying to figure out from Daimler's numbers. So that's how I asked you, sir.
Sir, on quarter on quarter, I answered in relation to the other question that both the quarters are not comparable. Because what happens is in the July to September quarter, there are summer holidays in Europe. A good part of the business of SMP as well as SMRC is originating from Europe. So there will be an impact of summer holidays, which are about one, one and a half months nearly. There is always there. So the right comparison is year on year rather than on quarter on quarter.
Perfect, sir. Perfect, sir. And sir, second on that second question, at our plant, do we make GLC, GLS, GLE, or do we make some other models also?
Sir, we can't tell you what all we make. We are just telling you what we are doing just so that it helps you to understand. I can't be disclosing the car makers' numbers and models and things like that, sir.
Okay. Sorry, sir. Thank you very much.
Thank you, sir. Thank you. The next question is from the line of Mahir Parkeria from Wealth Managers India Private Limited. It's a follow-up question. Please go ahead.
Please go ahead. Sir, thank you again for taking my question. I just wanted to understand that SMRC run rate which you had given historically remains the same, right?
Almost quite similar.
So 240, 250, right?
I don't have that exact number, but this period is a summer month. So to take an average of enterprise may not be a reason to.
Okay. Okay. Fine. And sir, secondly, just you mentioned that the PKC growth has also been driven by the rolling stock. So are we and the China growth? So just subpart to this is, is the growth excluding that Bombardier is also growing, or is it because of that which has grown in this quarter? And secondly, does the China improvement also help SMR growth?
Sir, what I explained to you was in relation to the improvement in terms of profitability of PKC. That there has been an all-round improvement, and in that sense, I explained that even rolling stock has improved, and the Chinese joint ventures have also on a consolidated basis improved. So that was my point, and definitely, you are right that whatever numbers we report, it will also include the acquired entity which has whatever has been consolidated in the company.
Yeah. But excluding that, would organically there have been growth in top line?
In PKC overall? Yes. And to come back to your question on SMR and PKC, both the companies are addressing different market segments in China. While the SMR business largely comes from the passenger car market. And also, please note that SMR has a joint venture which is 50/50, which is not consolidated on the top line line by line into SMRPB, whereas PKC is more catering to the commercial vehicles.
Right. Okay. Thank you.
Thank you. Thank you. Next question is from the line of Nishant Vas from ICICI Securities. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. Sir, first question on PKC. Now we've had the company for a few years, and we are seeing a significant cost improvement that you're also showcasing on the margin. So am I reading too much? This seems to be moving in a very surprising fashion because when we acquired the company, it was at around 7% EBITDA. It's now hitting close to 12%. Is this a gap right now from the business perspective, or you're seeing more cost levers that we can unravel in the next couple of years? First on PKC?
Sir, our job is to continuously keep improving, and that's what we do.
Okay. From a more end market perspective, because we all investors have this concern that PKC is at the forefront from an end-use perspective in CVs. But do you think that the variable cost structure or the breakevens have come down to the level where you can manage the cost in a much better manner than this company did in the past, and the variability of margins will be much lower?
Sir, we never guide on the margins as such. So our drive since the acquisition of PKC has been on return on capital employed. And as you know, that in return on capital employed, nearly everything gets captured, whether it's better inventory management, it's removal of wastages of all kinds. And that's what has driven the company from a 7% ROS to now nearly 28%-29% ROC in the company. So with that drive, everybody in the company, the management and the associates of the shop floor, they have embarked good practices, which is resulting in improvements.
Thanks. Sir, if I can please one question. Obviously, we have had a long, long question queue for the greenfield. But just looking at your organic numbers, except SMRC greenfield, there seems to be a good cost control and improvement. Could you highlight some of those things that you have done over the last year for SMP, the organic business, where you're seeing this margin improvement? What has led to that?
Sir, it's not something specific for the quarter. Of course, some of the erstwhile greenfields are getting more mature. We are also making sure that the management has continued focus on delivering improvements. A lot of the CapExes that have been done and a lot of the new plants that have been commissioned in the past are also moving towards peak volumes. So a lot of things are happening. There's no single aspect, as you can imagine. It's so diversified within geographies, within product lines, within customers, which programs we are on, which variants are being pulled by the customers. But there are a lot of things that are really going on. Our focus is to make sure that each team, each unit is standalone, profitable, and is improving the profitability as it keeps going and winning business.
And there are also places where businesses we will not go after because if they're not giving us the required returns, we will not go after them. So it's a mixture of all those things. That's exactly what my father was saying, that the board congratulated the team on the performance with the market conditions as it is, to still show improvements in such conditions. And we continue to drive more quarter on quarter as we go along.
Sir, just a small suggestion, if I may. Considering the return on capital improvements that we are seeing across other lines of businesses, when in year-end we are talking about the five-year guidance, if it would be possible to kind of break down the return on capital for the organic piece of SMP as well as obviously the ones in greenfield, that would be really helpful to see the.
Sir, it will also be very helpful to the customers, sir.
Okay, sir. Thank you.
Be careful, sir, for what they are saying. It will be very helpful to you, but also helpful to the wrong people, sir.
I understand. I appreciate it. Thank you.
Nishant, I think one of the important aspects is that today the entire group is standing behind the greenfield which requires support. So they want to make sure that they extend the support and ensure that the house, the SMR house, is doing better so that we can all contribute towards that. Yeah. I think a lot has been said, but I would again want you to think about something. USA is special. USA has some peculiar, very true to USA kind of challenges. And this being the first big plant of ours that we have set up over there, we are facing those problems, and we are facing it very bravely. We are not doing anything wrong. We are catching the bull by the horn, and we are trying to solve those particular issues. But I think one thing is very clear.
If we have to grow future, the next five-year plan or the ones after that, mastering USA is very, very important. So I think if you will allow me to say so, yes, we are learning USA by setting up this plant, and we call it baptism by fire, so yeah, we've gone through so many of these things. If you remember in SMR about seven, eight years ago when we were doing the Hungarian plant, we've gone through Oldenburg. We've gone through so many plants all over the world, and everything has taught us a lot. So I'm sure the lessons learned from Tuscaloosa, Alabama, is going to be something very, very crucial for our groups this year. Because the kind of numbers that we have already started hitting and will hit in the future, America cannot be ignored, and we have to be in USA.
So we have learned our lessons. We're learning more. And every second, we are learning more. And that, I think, augurs very well for the future of our group.
Thank you so much, sir, and best of luck.
Thanks.
Thank you. The next question is from the line of Arvind Sharma from Citi. Please go ahead.
Hello. Good evening, sir. And thanks a lot for taking my question. Two questions, sir. First, again on PKC, strong growth in terms of margins. Just wondering what's the capacity ratio over there where we can know exactly how far revenue growth can be. And my second question would be more of a data question on the standalone that is the India business. Will it be possible to share the split between commercial vehicles and passenger vehicles in the Indian business in terms of revenue contribution? Thanks.
I'm sorry, we have not understood clearly the question on PKC.
PKC, sir, the question would be, what is the current capacity utilization so that we can know how far the revenue growth can go even from these levels?
So in all our plants, this is something which I would like to tell everybody. We don't have anything like capacity. For example, if we see we are not producing cement or something. Whatever we produce is exactly what the customer is asking us to produce. So if you really want to know capacity-wise, technically, if you hit 80% of the so-called capacity in your imagination, I will halve it. I will open a second plant because the customer can ask to improve immediately. So really, we don't work as a capacity because there is no plant that is churning out cement or something like that. It's basically based on what the customer is asking. But Pankaj, would you want to add on?
Exactly. And in some places, as we already told you, that we are expanding our plants where we see that the future demand of the customer is going to be bigger as the new models are kicking in, which are not being produced earlier. So we are setting up new plants for that as well.
On the second question, the domestic sales breakdown, we are currently not going into that as of now. So.
Thank you. Thank you, sir. So just on PKC, essentially, we can go much further from the 300 million kind of level as well.
Watch the space.
All right. Thank you so much, sir. Thank you. Thank you.
You're welcome. You're welcome.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Vivek Chaand Sehgal for closing comments. Thank you, and over to you, sir.
Thank you very much. I think what's important is to understand this is the final year of our five-year plan. A lot of effort is being put in by the companies to improve our condition, bottom line, efficiencies, inventories. Every single thing is being taken care of on that. We are also working on our next five-year plan, which we'd love to share with all of you somewhere around in May, April, May, something like that. We are vindicated when it came to a lot of the things that people said are going to change the face of automotives. We can see strong traction in the numbers of cars. I think even now, people are still worried about the 18%, 20% drop.
I keep telling them, "Please deep dive and see which cars are not selling." And then you will understand that actually the cars that are selling, the 80% that is selling is high-value cars. And that's something which is very, very encouraging for a company like Motherson. Thank you very much, and have a great week ahead. Thank you.