Ladies and gentlemen, good day and welcome to Q1 FY20 Results Conference Call of Motherson Sumi Systems Limited. As a reminder, all participant lines will be in a 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 phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Laksh Vaaman Sehgal. Thank you, and over to you, sir.
Thank you very much. I welcome everybody to the call. I'm joining the call with Mr. Gauba and Mr. Pankaj Mital. I will present key highlights of the quarter and then open up the floor for questions and answers. Overall, revenues grew by 14% in the last quarter, as compared to the same time year on year. We crossed INR 16,000 crores for the third consecutive quarter. There was strong revenue growth of 35% at SMP level, and this was contributed by the new plants and as well as SMRC. There was strong performance demonstrated by PKC with growth in revenues and profit. There has been gradual improvement in performance of the new plants in SMP, but the profitability is still impacted by adverse ramp-up costs at SMP Greenfield projects and tough market conditions. I apologize that my father is not available on the call today.
He has other commitments, and we were unable to have him on the call due to conflict in schedule. Now I'll open up the floor for questions and answers, please.
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 handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Anyone who wishes to ask a question may please press Star and One. The first question is from the line of Raghunandan from Emkay Global. Please go ahead.
Good morning, sir, and thank you for the opportunity. Sir, first question was, the losses in the new greenfield seem to have reduced QOQ in SMP. How do you see this trend going ahead over the next two, three quarters?
Yeah, thank you for the question. As you rightfully have pointed out, definitely the quarter has been in the right direction. We still feel that there's a lot of work to do to improve that, to bring it into break-even situation. There are tough market conditions, as you all know. But apart from that, the teams are working very, very hard. And definitely in the next one or two quarters, this trend should continue, as long as the market conditions, you know, get better, and there's no further deterioration in the market. But other than that, our efforts seem to be in the right direction, and the trend should be better and better every quarter.
Thank you, sir. Can you share a bit on the utilization level of Greenfields at SMP? Do you still maintain the thought that it will reach optimal utilization levels over the next two, three quarters?
Yeah, definitely. I think there's still growth that is to be had in the Alabama plant. Utilization levels as such for us is not something that we really go by because, as you can imagine, we don't do static products. We have diverse products, but there are still launches that are happening at the new plants, so we expect that the utilization levels will further increase from where we are right now. Whereas we believe that definitely in the next couple of quarters, as that happens and the new launches take place, those numbers should further improve in SMP.
Thank you. If I may, just one more question. Europe PV production was lower by 7% in the June quarter. How do you see the impact of the upcoming RDE norms? How do you see Europe market, Europe car market shaping up, in the next few quarters, and by when do you see a recovery? Your thoughts. Thank you.
Thank you. Look, I think there's a lot of uncertainty in the market right now. We, together with you, are only informed as much as the customers are telling us. Definitely, I think the all the markets are working in ways to improve the situation over there. But really, our guess is as good as yours in the lo new launches and everything that are happening, like you said. These are not affected by any of those norms and only on the existing models. So that continues to be the uncertainty over there.
But even with that, if you see, Motherson has been the impact has been less due to our focus on diversification of the customer, and making sure that, you know, no country is also more than, you know, 15% of our business with 3CX15, mantra that we use. So we have been less impacted with our diversification strategy, which is paying off in these times of uncertainties. I think everybody understands how important the auto market is, how good it needs to be for the economy to push forward. So I think a lot of efforts are being done, but yet we are to see them totally pan out in the quarter that we just had. So hopefully, this improves in the next coming quarters.
And I think that's all that I can really comment on that.
Thank you, sir. I'll come back in the queue for more questions.
Sure.
Thank you.
Thank you.
Thank you. The next question is from the line of Jinesh Gandhi from Motilal Oswal Securities. Please go ahead.
Hi, sir. My question pertains to SMP.
Sorry, Mr. Gandhi, can I request you to be a bit louder, sir?
Yeah, is it better?
Yeah.
Yeah. My question pertains to SMP. If you look at the adjusted margins for Greenfield, Ind AS 116 and SMRC, there is a decline of about 110 basis points YOY. So is it just the reflection of negative operating leverage witnessed due to decline in volumes, or there's something more to it?
Yes, Jinesh, as Raman was just explaining, there are uncertainties into the market. So some of the plants had a lower utilization, and it is also a question of a product mix because further we had also informed that we are also having an expansion on one of the plants that are in Germany. So therefore it is very difficult to pinpoint a single factor, but surely there is some drop in the revenues with these plants, as you can see.
Okay, and for SMRC, this quarter run rate would be about 150-160 million EUR, or it would be lower than that?
It should be higher than that, but it, we are not, as of now, disclosing separately numbers because that is now almost like getting fully integrated into SMP.
Okay. Understood. Understood. Great. Thanks. And all the best. I'll come back in queue.
Thank you. The next question is from the line of Kapil Singh from Nomura Securities. Please go ahead.
Yeah. Hi. Thanks for the opportunity. So, just on SMP, I wanted to understand regarding Tuscaloosa plant. Any indication you can give that from a, you know, revenue potential level of how far below are we right now? And what is it that we should look for, for margins to improve? What are the key challenges there? Some insights there.
Okay. I think that information we cannot really disclose as we are bound by confidentiality norms of the new product launches with the car makers. But definitely, if you have been on the calls with Daimler as well, they talk about further launches, and they have given more color on that. As far as we are concerned, we have the full team in place. We have also made sure that we have sufficient training put in place for all the people over there. The issues that we have talked about before, with proper processes and disciplines being followed over there due to non-availability of manpower. We have also reinforced the teams like I just said. So we believe we have the right team there now.
And all the new launches, definitely that are coming up, we should be much better prepared than we were in the past, due to the problems that were highlighted. And I think every single month there should be improvement going forward. That said, definitely there are still a few more launches yet to come. So I don't want to jump the gun too much, but I feel that the team is not sufficiently prepared to do over there. And we are tracking it very closely, and we have a lot of actions in place to bring in the improvements, like I've said on the last call. But the first most important thing is to make sure that we deliver to the customers' expectations, and then look at really improving the efficiencies over there.
So I think now is the time that we really push forward with our improvements, and, you know, we've put on a detailed action plan with the new team over there. Now it's a question of execution, and that should show colors in the next one or two quarters, and should show improvement as we can already see, which in the right direction with the numbers that we have disclosed in this quarter. And that should continue.
May I ask Vaaman, from when you look at your business plan, and you see these losses, which is the key area where we are missing our original estimates? Is it that the revenues right now are lower, or and whenever they increase, we should see the profitability improving, or there are some other parameters where the losses or costs are higher than what we had originally estimated?
Yeah, of course. The costs are higher than estimated. Definitely in the new car launches, you know, the car makers get pretty close to the numbers that they want. But Daimler has also said of the issues in the ramp-up. So, like I said, that's something that I can't comment on further. There is still room for us to grow in terms of the numbers. But there are inefficiencies in our cost. So definitely we're having more manpower, like we said. We have to make sure that we reduce some of the inefficiencies that are happening over there. We have to improve the production efficiencies as well, the number of rejects that we are having, the number of scrap that we are generating over there.
In the painting also, we have to make sure that, you know, we reduce the rejects in that. So these are all inefficiencies that we have. There is scope for tremendous improvement over there, and like I said, we are, you know, putting a detailed action plan with the right people now finally, and having the training that we should have had a while back, but due to the visa issues and things that we could not have the right manpower in place. But it's improving continuously. This is, again, as I've maintained in the last call as well, that we'll take some more quarters to bring it into a break-even level, and then from there, we will then further push on to move into the profitability, and get back to where we had anticipated it.
Okay. Probably, you know, we'll look for that happening over the next few quarters. Secondly, just one accounting question to Mr. Gauba. What we can see is, when I look at the Ind AS 116 impact, it's around, for SMRP, it's around EUR 7 million, and for India, it's roughly around INR 5 crores, whereas on a consolidated basis, it is INR 89 crores kind of impact. So can you just highlight where the bulk of the impact has come from?
$7 million will be INR 56 crore.
Yeah.
This will constitute like $3 million, which is again INR 24 crore approximately.
Okay.
I'm taking 80 as well. So, yeah, I mean, you have sufficient disclosure on the presentation.
Got it. Okay, sir. Thanks. I'll come back in a queue.
Thank you. The next question is from the line of Puneet from HSBC. Please go ahead.
Yeah. Hi, good morning. You know, while you did mention that, you know, market's been tough, are you seeing, you know, similar slowdown in the new ordering side as well?
No. I think definitely in the order side there is no slowdown as such whether canceled orders or anything like that, but definitely some of the new programs the car makers continue to reject in the current market conditions, but none of the programs that we have been awarded have changed. There could be programs where the car makers are saying that future RFQs that are coming up they could be postponed or changed due to difference in market, that definitely is there. There is more ambiguity, but in terms of the order book that we have won that is strong, and if you look at the numbers that we disclose every six months and we will disclose in the next quarter.
But the last one that we did, there was a $18.2 billion order book that we spoke about. That's strong. That's one of the highest order books that we have had. So, in that sense, we continue to win the confidence of the car makers in the new orders. But definitely, in the current market scenario, again, the numbers that the car makers are thinking about in further launches from here, that's definitely in thinking mode, that they continue to react to the market conditions.
Okay, so for the existing orders, there is no risk of pushback in the timeline of the launches?
Nothing that we have seen in the new orders because they're again all compliant, and they have no pushback over there.
Okay. Okay. That's great, and on the SMRC side, how has your experience been in terms of margins? Are they living up to, you know, the margins that you thought they would when you actually bought it, or is there some difference in the way they are behaving versus what they were reported to have done?
Thank you, sir, for that question. I request it to be the last question because a lot of people are in the queue.
Okay.
And the question will come back into the queue. But, to answer that question, we are very well pleased with how SMRC is integrating. It has definitely helped us, with the different customer, excuse me, with the different customer focus. The customer has been quite happy with us taking it over, and our expectations have been matched, and it's positively contributing to SMP. So we are quite pleased with that acquisition, and it has seems to have integrated very well with SMP, and has definitely contributed in a positive manner.
Great. Thank you so much. That's all from my side.
Thank you.
Thank you. Next question is from the line of Mayur Parkeria from Wealth Managers India Private Limited. Please go ahead.
Good morning, sir, and thank you for taking my questions. So, Raman, when you said that, you know, the substantial improvement in the new plans are subject to, you know, market conditions, you know, further deterioration if any, what, if you have to look at, how much of the current worry is a little more prolonged in terms of two, three, four-year situation, and how much of it is just because of the current impact of maybe, you know, some regulations or launch delay or, you know, specific issues which can be dealt with in the next two, three quarters? If you have to just break that probability of further deterioration, just a qualitative outlook, how do you see that?
What can be further, how much of it is maybe, you know, a little more prolonged situation, and how much of it can be really addressed in the next two, three quarters?
Okay. This is, again, my personal opinion on that. I think most of these things are short-term impacts. I don't see any fundamental long-term impacts. I think all the car makers are quite focused on the new launches that are really happening. They want to push the cars out, as you know, as fast as possible. As we know, there's also the focus coming on more towards electrification that is that continues, and we being a supplier that is not affected by the type of engine that is in the car. We greatly benefit from that. I think the so most of the macroeconomic environments and those are mostly in the short term, we believe. And, again, I can't speak for our customers, as you know, that we can only produce as much as the cars that they make.
But we believe that mostly these things are short term in the next couple of quarters, and things should look up from there.
Okay. That's happening, you know. The second, again, on a little bit. I mean, Mr. Gauba just wanted. I was just wanting to ask on the same analogy which somebody asked before also. So if we understand the gap between the reported SMP number and numbers excluding SMRC and new plants, there is approximately EUR 400 million, approximately, give and take, you know, 10, 15 here and there. And if we see the run rate of approximately, I think EUR 220 million should be the quarterly run rate for Reydel, SMRC. So will it be right in the opinion that, you know, the new plants are would be at around, you know, closer to 50%, 55%, 60% utilization?
If we just do the reverse math and try and understand that, you know, around $170 million would be the, you know, for from these new plants on a quarterly run rate, and we were supposed to add a billion-dollar revenue from that. So, will it be the right analogy to look at?
First of all, this is EUR 1 billion, not.
Yeah. Sorry. Billion EUR. Yeah. I am.
There is, in this exclusion, there are two plants. There are three plants because the third plant already started about two years ago, so which we have not included in doing like-to-like comparison.
Okay.
Okay. But it would not be fair to infer the utilization rate from this, though. I mean, by and large, you could be there.
Right. Okay.
Definitely, you know, we have to understand that as these new plants are coming up, and they're taking some of these new orders, you know, some of the old plants are also finishing some of the program cycles. While these new plants will add that, it won't, you know, be exactly 1 billion because of the timing, right? There are different plants coming on at different times. That's the scope of the growth that these plants do give. You won't see it exactly in one quarter for the math to add up like that because the new front launches continue, and the U.S. also continues to launch, and the other plants as they're coming in, you know, they go through their own cycles.
But directionally, it is what we have told you.
Right. Right. Thank you. And just one small observation, and, you know, I, I would request you to take it in the right spirit and this. So whether it was the WLTP, which was, you know, the impact which we had, and then now the, you know, the European new greenfield plans, issues which we had, I think in terms of setting the expectations for investors, we have told only once the event has happened. And directionally, it would be appreciable if there are certain, you know, even a quarter before that, obviously the outlook is there in terms of that.
So, you know, in terms of if there are issues on the order side or because of the current impact, if there is furthermore, you know, while you have rightly indicated about the profitability aspect for a few more quarters, but if there are further impact which can come on the top line, we would appreciate if there are, you know, some in setting up the right expectation for, you know, from the entire investors situation if on the top line also if it happens. Thank you.
Surely, just a comment on that. And, you know, if we are aware, we will communicate to you. But, as things are happening in a very dynamic market, you can imagine, presence is now in 41 countries. We are present in every single car maker. Believe me, we also find out, you know, simultaneously, like all of you. So if we are privy to any more information, that's really not the case. You know, we, like you, get call-offs every single day. And that's how we produce our parts. So, you know, our intention has always been to be as transparent, and give you the information as we receive it. But, we take your suggestion in the right spirit. If we can improve further, we will definitely do so.
But please, do understand that, we at Motherson, are a very transparent company, and we try to give you information, in the clearest manner as soon as we get it. Thank you. Next question, please.
Thank you. The next question is from the line of Priya Ranjan from Antique Stock. Please go ahead.
Yeah. Thanks for taking my question. A couple of things. One is on the debt side. I mean, if I look at the quarter on quarter, the debt has slightly increased. And number two is on the Ind AS 116 impact on the you have told about the EBITDA level. What is the impact on the PBT level if you can just clarify?
Okay. Gauba just said, I will take this question. If you will look at traditionally, there is an increase in the debt level compared to March, always. And it is partly also because of the exchange fluctuation, e.g., because of Euro weakening. And further, if we will compare it same period last year, then our revenues are growing. We have also taken over SMRC. In relation to the impact on the PBT and PAT, the impact is insignificant. And most of the accounts we have given, the impact on EBITDA as well as the increase in depreciation and interest. So you will check from there that the impact on PBT is very big.
Okay. So it's, I mean, that's quarter on quarter jump on the debt is primarily because of the exchange rate fluctuation.
Also, yeah.
Yeah. And one thing is on the PKC side. I mean, you have been doing a commendable job in that business for quite some time. But I mean, that business is also exposed to U.S. Class 8 trucks and all, so which is kind of slightly, I mean, the outlook is going to, is slightly weakening there in terms of new order books and all. So how do you read that business going ahead? I mean, you have got some new orders. You have got diversified into other categories. But if a sudden slowdown in the U.S. Class 8 happens, then how do you see that is kind of upsetting your the new orders?
We always remain prepared that as of now, as you see that there has been a lot of talk for the last many quarters, we have been hearing that there is a slowdown and the volumes are coming down. Contrary to that, the volumes have gone up so far. So we remain prepared as the volumes can't be predicted exactly when what will happen to bleed with the market. All the teams around the world remain prepared to handle that situation when it comes.
Mm-hmm. I mean, just for your information, Vaaman, for the just reported number, I mean, they are also quite exposed to that, and they have quite weak number there. But that's fine. I mean, so, typically the order book and, the actual number starts, trending down by, let's say, six to eight months, so.
So we are reporting what we actually executed in the last quarter.
Okay.
And their numbers were higher. And of course, we all know that there have been reports that the fresh orders bookings have been lower than what there have been in the past. But there have been very strong backlogs with the truck makers so far.
Yeah.
In the coming months, if the bookings increase, then, you know, there can be a lot of possibilities, and that's what they talk about.
Okay. Okay. And just lastly on the SMR, so how do you see, I mean, the key customers, I mean, what kind of outlook, you are seeing there? Because that business has been kind of steady and has been steady in terms of profit as well. So can we see some kind of bump up in terms of growth in next two, three quarters or based on the new orders, etc.?
Yeah.
For your key customers.
Yeah. In SMR, I think, you know, the real growth, for a bump up in those numbers will only really come through a big acquisition or something like that. We are well placed in that product. And definitely, we want to make sure that we maintain our margins. So we are in no rush to increase the top line, and, you know, start taking orders where we cannot execute the same level of profitability. The real jump up in SMR revenues, as the cameras become more mainstream, will probably come at that time. But still, it's a fraction of the number that we are really seeing in the market for camera replacement. But the teams are geared up.
We have, you know, starting to execute small orders that are more electronic focused on with camera systems. We continue to see that company does well. We are really in a good zone with that. The ROCE with that company is reported +40% as well. Again, you know, for this five-year plan, you know, we want to make sure that we are focusing on the ROCE as we come to the end of the five-year plan. The next five-year plan, we will perhaps provide some more color to you as to how we plan to increase the revenues over there going forward, and what opportunities that presents itself in the next five-year plan with SMR.
But the team does phenomenally over there, even in tough market conditions. They are maintaining their revenues and the profitability, which is a great feat.
Okay. Thanks. That's all from us.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your question to two per participant. If time permits, you may join the question queue for any follow-ups. Thank you. The next question is from the line of Sonal Gupta from UBS Securities. Please go ahead.
Hi. Good morning. Thanks for taking my question. Just wanted to understand, I mean, like, clearly, you talk about breakeven with the market and, like you're saying, the conditions are challenging in some markets, some as of now, maybe US autos, it's not. But I just want to understand, I mean, what can you change in terms of your cost structure if your top line, because of lower demand was to drop 15%-20%? So could you tell us, I mean, like, how would you be able to partly mitigate that impact?
Sonal, always there are plans which are in place with each of our businesses as to what costs which are always being incurred when the markets are going up. So we eliminate those costs. So there are a lot of things which are there when you're gearing up for new plants, new launches, new increases and enhancements. And when you see that the market is tipping, then you have to contract. And that's what we do. So we don't see that there are any issues in that because we see that most of the things are variable. That's how we work it out. There can be, of course, certain fixed costs. But we try and ensure that as much as in terms of our mindset, we try and see that how we can overcome those and bring them down.
You would have seen in the past also, even during the Lehman crisis, how we all reacted and acted well. Our company basically is always into a reaction mode rather than kind of trying to predict as to what will happen. As it happens, that's the time when we react to the situation in the best possible manner.
Right. And any update on the Capex numbers for this year? And how do we see that?
Sonal, we had guided for 2,000 crores. And, as you know, we don't keep on revising our guidance or the vision. So, as the year passes, we will get to know the actuals.
Okay. No, I thought there was some, like, SMP or SMRP, they were relooking at the Capex plans. So that's why I was checking if.
No, that, that is an ongoing process. So our focus is clearly to conserve cash and manage our working capital as well as CapEx better, and which is reflected in the lower CapEx as well as on the lower debt level.
Okay, sir. Sure. Thank you so much.
Thank you. The next question is from the line of Raghunandan from Emkay Global. Please go ahead.
Thank you, sir, for the opportunity again. One clarification. Two greenfields which have been excluded from SMP. What would be the peak revenue from these plants?
See, I think it is better to stay with what we have already guided. It will not be possible to keep on adding each element separately. Let's stay with the overall guidance. Our priority is to more stabilize these plants as of now. Okay.
Fair point, sir. On the four new plants, three in India and one in Thailand, can you please provide some update on, you know, like, the commencement of operations, utilization levels, how are things progressing there? Thank you.
I mean, Thailand was, I mean, it is riding on a plant where we had a small plant and we built our own building, so there has been a shifting. Similarly, there were other plants which had, Chennai was another for SMR. So, as we said that, we have already established facilities, large facilities, which were required to be for 2020 organic growth. This is the reason why we are not giving plant photographs this time because we had given, and they are as per the schedule what we had given in the last presentation six months ago.
One last question. Given the continuous, continuing weakness in industry, are there acquisition opportunities at better valuations? How do you see that? And, do you still remain confident of $18 billion revenue target? Thank you, sir.
Yeah, thank you for that question. Definitely, if you look at the multiples and everything in the auto sector, we see across the board that they have come down in the markets, and Motherson is a company that's always open to acquisition. So, definitely it makes the probability of something happening that much greater because the valuations are that much more palatable. But again, we have reached a point where we can disclose something that we see is on the cusp. But we are positive. We are confident, and you know, we are guided by the customers in our acquisitions. So we believe that, you know, till the 31st of March, we are not going to give up on that dream. So, we are optimistic.
And again, our focus remains to make sure that the Greenfields launch well. If an acquisition comes and we see a good synergy in that acquisition, definitely we will pursue it. But, like I said, our focus right now remains to make sure that the Greenfields launch well. We remain optimistic that we can hit our targets before the end of the year.
Thank you. Next question is from the line of Jay Mehta from Edelweiss Financial Services. Please go ahead.
Yeah. So this is Chirag here. Sir, two questions. The first one, PKC.
Chirag, can you be a bit louder, sir?
Yeah. Hello. Are you able now?
Yes.
Yeah. So first question on PKC, is it possible to indicate our revenue mix in terms of geography? How much would be U.S., how much would be Europe, and even China? And also, how big is the rolling stock business? Because we were expected to get some new business on the rolling stock side.
Yes, Chirag, this is Pankaj here. In terms of rolling stock, it's approximately 10% of PKC revenues. It has grown very well. Also, if you recollect, we also acquired assets of Bombardier in the U.K. in Derby, which is now known as Motherson Rolling Stock, MRSS. That was done from 1st of April 2019. So taking that into account, the overall rolling stock is approximately 10%. The other question which you asked was that how much is the revenue regionally? Well, ballpark, if I remember correctly, it will be about 40-45% coming from North America and around 10% from China and balance from Europe and South America. That's how we are restructured.
Is it also possible to indicate any new business wins? Because generally, the cycles on the truck side are quite longer than cars. When do we expect that process to start if it has not started, where we start participating in new orders?
Of course. I mean, we have been very strong with our customers, and we have had a lot of wins around during this period, so we are on a good growth path, and that's why we are also enhancing our capacities as well, and PKC Group is also going for a new plant, so we will continue to grow, and we are very strong with our customers, so it's a very good relationship.
So, just clarifying. So, has this new business flowed in our revenue, or will they? Yeah, they are yet to happen. We may have won the business, but it may not have started flowing in the revenue.
A lot of wins are relating to replacements because some of the models go off and the new models come in. And some of the wins are completely new. So the businesses which we were not doing earlier, they will come in.
Okay. And just one last question, and if I can squeeze in, this is Vaaman. So this is, you. Given that we have traditionally been very good at managing costs or turning around the hotspots, let me use the word. So how different are the current hotspots for you? And would it be a right statement that over a period of a year or so, at least on the cost side, be it rejection rate, be it manpower issues, we will be able to sort t out and it will become business as usual for us?
Thanks, Chirag. I think, you know, if you look at the number of companies and number of stuff that we have done over the last few years, that the record really speaks for itself. So, where SMR was when we took it over, where SMP was when we took it over, you know, a very different situation to when a greenfield is really started up. We spoke about how many Greenfields that we have really started in the last few years. And, you know, you really haven't heard many of those Greenfields except for the couple that are right now in the hotspot zone. So, you know, when you are building plants, when you are taking over companies, always, there will be some issue or the other, whether it is, you know, customer-specific or whether it's country-specific or a macroeconomic issue.
You will always see that there are some plants that are, of course, you know, there is a scope to do much better in those. For me, it's been a wonderful experience. You know, luckily, I've been blessed to see startups of Greenfields, as well as, you know, acquisitions where, you know, existing plants have been needed to turn around to operational efficiencies have to really be improved over there. Like we say, at the end of the day, you know, we are making, you know, engineered car parts. So if we follow good production disciplines, we have financial discipline also to make sure that we're not quoting at bad prices, as we get, you know, even stuck with those for five years.
And just make sure that, you know, you have good operational excellence being put into those plants, you're able to get a good result. We believe that we make all our money on the shop floor. So, that focus remains. Whenever we look at a turnaround situation or a greenfield, we definitely do the best of our abilities and all the lessons that we have learned try to inject, you know, the Motherson way of doing things. But sometimes, you know, not everything clicks. But if you really look at it from where Motherson was in the 2015 time, you know, 5 billion top line to already about, you know, 12 plus. So, if you look at it in that perspective, you know, we have more than two and a half times the group, and we continue to grow.
So, you know, overall, amazing learning experience for me. Definitely the size of the plants now are getting bigger and bigger. So any mistakes that are happening, in terms of efficiencies and things like that, they have a much greater number. So that much more careful we have to be. And we continue to learn. So, you know, I believe that, even with this launch of these new plants, we've learned significantly a lot that will help us to do even better, as we continue to build new plants and do acquisitions. There's a, you know, a lot of experience that we have gained in this journey. And definitely, the focus is that, you know, in a year's time, that we push the profitability and the ROCE deliverability of these plants as per what we envisaged.
But, you know, you have to keep in mind that at the end of the day, we only supply to the car makers. There are only so many car makers in the world. So the priority remains to make sure that we continue to run their lines, as a first priority, and then look at our improvements, to make sure that we can deliver to that profitability as what is expected from that plant. And we continue to do that. So I'm confident that as we move on, quarter on quarter, the improvements should be there, and further opportunities to continue to grow and build new plants. But like I said, that's a directional way. In the current CapEx cycle, we have already set up all the new plants that we need for the order book.
I'm quite excited as we move into the next phase of getting these plants to the expectation that we had set when we had first planned them.
Great. This is helpful. All the best.
Thank you very much.
Thank you. The next question is from the line of Anup Lal from Mount Intra Finance. Please go ahead.
Okay. Thank you for taking my question. This other question has been answered, but, just I want to know first, could you advise me regarding the market share of SMP in their products, specifically both panel installation, instrument panels and bumpers, and in, in some SMR for its rearview mirror? Hello?
Hi, sir.
So, sir, please go ahead.
Sir, as a policy, as a group, we don't focus on the market share. Because if we are going only by the market share, then what we will lose is the bottom line. And being an OEM supplier, the market share is really not very relevant because then we will be chasing each order. You don't know which car will sell how much. Surely we focus on the performance and growing content per car. And as you can see, SMP was under focus only on the more on the luxury car as well as more on Europe. And you have seen now we're diversifying, getting into the North America, U.S. market, as well as the acquisition of SMRC. We cover a broader range of the vehicles which are there onto the market.
Similarly, SMR also is one of the largest player or the leading player on the mirror side, exterior mirror side, and there also we are focusing on maintaining or improving our profitability in spite of cost pressures as well as cost down to the customer. Hello?
Sure.
Excuse me.
Hello?
Ruslan, may I request you to repeat your sentence again, please? You're not audible.
Hello?
Yeah.
I just want to say that, I'm getting used to maintaining 24% market share in rearview mirror. So are you maintaining it, or it has gone down, or just to, or it is at that point?
Sir, again, we don't judge ourselves based off market share. Again, our focus has always been to look at diversification strategies to enter new customers. So those are kind of things more that we look at. So we look at 3CX15, that no customer, no country, no component should be more than 15% of our business. And those kind of things is something that's more relevant to us. Because just looking at market share is more relevant for companies where the product is static and there's only one product that we are doing.
We're a multi-product, multi-country, multi-customer sort of a company, where market share doesn't really guide us or give us any relevant information in that sense. There are customers where we maintain, you know, more than, you know, significant market share or the best, and there are also customers where we have 100% of their business. So, you know, market share for us is not really something that we believe is the right measure for our performance or something that helps us to go for our gains. Because again, like Mr. Gauba said, you know, if it's something that we are just chasing in market share, then we remove the focus of our group companies into making sure that we deliver, you know, top line growth and maintain that 40% ROCE at the bottom line.
If market share becomes the key, then we lose the focus on these other two, because not everything, you can't have everything in that sense. We have very different drivers here at Motherson, and market share is definitely not one that gets discussed or is a key driver for us. I hope you understand what I'm saying.
Yeah, yeah, yeah.
T hanks.
Thank you.
Thank you. The next question is from the line of Joseph George from IIFL. Please go ahead. Mr. George, your line is unmuted. Please go ahead with your question. Seems there's no response from the line of Mr. George. We'll move to the next question. That is from the line of Deepak Jain from IDFC Securities. Please go ahead.
Hi, good morning, sir. Just a question on the governance related to SMRP BV. Okay. If I look at them, you know, on the gross leverage, I'm assuming that this is, debt by EBITDA. That's what my, assumption would be. The gross leverage, you're allowed 3.5, and it's gone up to 3.35. So one, I mean, are we confident of not breaching the governance, you know, given the situation, the market, even if it's temporarily? And, secondly, yeah, are there any penalties or what, you know, if it gets breached on a temporary basis, are there any penalties or anything involved with that? Thank you.
I'm from [Deepak Rana Pessi]. This is not a maintenance covenant. This is an incurrence covenant. But I would like this question to be addressed by SMRP BV. This is at SMRP BV.
Okay.
Sure, sir. Sure, sir. Thank you. That's all.
Thanks.
Thank you. The next question is from the line of Ronak Sarda from Systematix Shares & Stocks. Please go ahead.
Hi, sir. Thanks for the opportunity. A question on the standalone business. I mean, it's a pretty decent performance there, you know, when the industry has declined almost 18-20%. Can you highlight the reasons for outperformance and whether they are sustainable going ahead in FY20?
Yeah. See, we have multiple products and different kinds of, you know, all the customers and all the models around. So it depends on which models do well, which models don't do well. So primarily being an OEM supplier completely. These are in line with what the customers' uptake from us. So, we continue to breathe with the market, as I said earlier, even in India, and continue to focus on maintaining our costs.
Thanks, sir. Okay. So any significant order wins in the India business and across wiring and NA and some of the following products, which could, you know, show some strong growth in this weak demand environment?
See, there are this is a continuous business, and there have been many orders, and these orders are always there. So we have been doing fairly well if you look at our history. We are not giving details of order books for all our businesses. We started with giving order books when SMR SMP came in because that was the time when there was a requirement, in the sense there was anxiety that how will these acquired entities will do. So this is a matured business here in India, and we are quite happy that our customers are satisfied with our businesses, and we have very good relationships with them. And we continue to work with them on most of the new things which they are bringing out in the market.
Sure, sir. Thank you and all the best.
Thank you. The next question is from the line of Pramod Kumar from Goldman Sachs. Please go ahead.
Yeah, thanks a lot for the opportunity. My question again pertains to the India business in particular. I think as Ronak was highlighting asking about the outperformance, just want to understand there are a few new launches which are hitting the market. If you can just provide some color as to how do you see this new entry, especially from Kia? We do understand you already do kind of have some kind of a relationship with them. If you can just throw some light as to are we exposed to the new Kia rollouts in India? And also, is there anything else which you're doing with either MG Hector or any other name which you can confirm in terms of the launches going forward?
Yeah, we are. And as a company and as a group, we are involved with most of the new launches as you mentioned. So when these vehicles come in the market, you will see a lot of Motherson in them in different ways. And yes, with Kia also, we have a joint venture, Kyungshin Motherson, which is supporting them. All these new products, as they come, it creates an excitement in the market. We hope that they all lead to growth for everyone.
Pankaj, with this new trend of internet inside and connectivity which is becoming very important for incremental launches, does it, what is the implication for our business there? Because there is far more connectivity which is being offered by these cars with the EE, with a SIM inside the car. So what does it do to our electronics, the wiring harness business here? Does it increase our content?
Yes, any kind of connectivity, any new feature definitely leads to some sort of an enhancement. So you're right in that sense.
Sounds good. And final question on the overall group level on the commodity side. That's been probably one silver lining in terms of some sort of a correction. So if you can just throw some light as to whether have we started seeing improvements on the raw material side. Some of this is visible in the India business this quarter. But how, how much more benefit can you expect on the commodity side going forward?
Yes, the commodity has started to come down. But then, you know, in India, again, it will depend on how the currency was as well. So, internationally, if you look at copper, especially, it had come down a bit, but then in India, because of the currency, the benefit was negative. And most of it for us is a pass-through. So in terms of optics, then you will see it as a percentage. It definitely gives a reflection out there. But otherwise, most of it is pass-through. So if there will be any benefits, we'll pass them on to our customers also.
So they, in a way, there couldn't be any material upside from the current level on the RM correction side. Is that, is that fair to understand?
Yeah. So it's the same. Like when the RMs go up, we get the corrections done from the customers, and when it goes down, we pass it on to them. So it's a very transparent system with them.
Sounds great. Thanks a lot and best of luck. Thank you.
Thank you.
Thank you. The next question is from the line of Jay Mehta, Jay Mehta from Edelweiss Financial. Please go ahead.
Yes, sir. Thanks for the opportunity again. So I had, again, a question on India business. So, how do you, how does the order flow from the OEMs or from the customer look like? Because we have been hearing that there have been continuous downscaling of their production. And in that scenario, it, how does the pressure on margins or the negative operating leverage hit us?
Is it Mr. Mehta or Chirag?
Yeah, Chirag is.
Okay. Yeah. Well, as I said earlier, that volumes which come from the customers are on a very short-term basis, actual numbers. Because car makers would make those numbers which are actually deliverable at that point of time in the market, and that's what we deliver to them. So from an overall order level, it's one thing, and then it's a delivery basis. So we breathe with the market. As I mentioned earlier, we are always synchronizing ourselves. We are always aligning ourselves in terms of what each of the customer for different models wants and how we work through those plants which are supporting them. So there are multiple plants in different geographies which keep aligning themselves with the car makers or other OEMs.
Okay. And just a small clarification on SMR. So, if I understood it correctly, Vaaman, were you alluding that, for us, the next level of growth in SMR is likely to come from new products like the camera systems? Is that the right way of looking at it, or we have reasonably well penetrated the market? And apart from premiumization, the next level of big growth is going to come from newer products like camera systems or something else?
Look, the efforts are definitely there to also increase some of the penetration that we have, in some of the customers. But the products was a different aspect of growth for SMR. I was only giving a different flavor as to how, you know, we can further grow through SMR. But definitely, our penetration, for example, in the Japanese customers, in markets such as Japan, are still very low at the moment. So those are opportunities also for growth, but they're quite sticky markets that are also possible of acquisitions that we can do to grow over there. And hopefully, with that good performance, the car makers will continue to grow our business, which is more in a slower manner.
So again, I was just throwing out ways and means that we as a team look at our growth in SMR and how we can continue to grow the top line. And you know, the camera systems that I was alluding to, you know, replacing the mirror systems, which everybody thought was going to come very fast, but it hasn't come as fast as we perhaps envisaged as a greater market for it to come because you know, some markets still have not legalized it for complete mirror replacement. And some markets have, and even in those markets such as Japan, where they have completely legalized you know, complete mirror replacement cameras, the RFQs that we are seeing for complete replacement are still at a very small fraction level.
So, that's what I was trying to say that, you know, if some of these things kind of change, definitely you will see us also grow, as these camera systems become more popular. Again, the trend is still kind of staying with integrated cameras and mirrors and mirror systems, and in that sense, you know, we continue to deliver strong results with our existing customers. So, that's what I was trying to say on that piece.
Thank you. The next question is from the line of Aditya Bapat from Equentis Capital. Please go ahead.
Hi, good morning, and thanks for the opportunity. If I refer to your presentation on page number 12, pardon me, my voice is really bad. On page number 12, I can see that your consolidated gross debt is more than INR 118 billion. So while our debt equity ratio may be within our reach or within our targeted goal, this is still a large number in absolute terms. So do you have a plan, say, X number of years from now that you will be bringing down your absolute debt levels to a certain level? Thank you.
I think this is also to be seen in terms of our ability and the revenue growth or the turnover what we have. So I think while it is good to see the absolute amount, but at the same time, if we look at the interest coverage ratio or the net debt to EBITDA ratio, which is much below two, to more closer to 1.6, 1.7, the debts are at the comfort level. But having said that, as we always focus on the return on capital employed, our job is always to get the right mix of debt and equity, because we also have a very transparent and a consistent dividend payout policy of 40%.
Having a really clear focus on the shareholders or the stakeholders, as well as the credit rating what we have, and clear focus on maintaining a very conservative financial policy, we make sure that our debt levels remain far superior in terms of services and levels.
Okay. So does that mean that we do not have any plans of bringing down the debt in the near term?
It's not a question of bringing down because debt is a question of cash flows and clear revenue growth. We have grown by 14%. Our debts are mostly outside of where we have done the international financing of the international business. And they are serviced by those subsidiaries by themselves. So it is a question of choosing the right capital structure. So definitely we will maintain our healthy capital structure, low leverage ratios, strong balance sheet. But it would not be fair for me to guide on absolute amount of debt because we are a growing company.
Okay. Okay. Thanks a lot and all the best. Thank you.
Thank you. Thanks a lot.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Laksh Vaaman Sehgal for closing comments. Thank you. And over to you, sir.
Yeah. Thank you very much for being on the call. As always, we are available for any further questions or clarifications, should it need be. And we look forward to presenting you the next quarter numbers. Thank you very much for your time. Bye-bye.
Thank you very much. Ladies and gentlemen, on behalf of Motherson Sumi Systems Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.