Ladies and gentlemen, good day and welcome to CIE India's Q1 CY 2025 results conference call of ICICI Securities Limited. As a reminder, all participants' line will be in 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 * and then zero on your touchtone phones. Please note that this conference is being recorded. I now hand the conference over to Ms. Vishakha Maliwal from ICICI Securities. Thank you, and over to you, ma'am.
Thanks, Shruti. Good afternoon, everyone. Thanks to CIE Automotive India Limited management for giving us the opportunity to host the call. We have here in the call the senior management represented by Mr. Ander Álvarez, CEO, Mr. Kiyath Jayaprakash, CFO, Mr. Vikas Sinha, Senior VP Strategy, Mr. Oroitz Lafuente, Business Controller, and Mr. Swapnil Soudagar, PGM Strategy. Over to the management to take this ahead. Thank you.
Yeah. Thanks, Vishakha. Good afternoon, everyone, and good morning to those who are joining from Europe. I welcome all of you on this call as also Ander, our CEO. We are going to talk about CIE India results for Q1 CY 2025. At the outset, let me highlight a change in reporting we have made. On page four, we show the legal structure of CIE India. As can be seen, the Mexican business is now a subsidiary of CIE Galfor Europe. Thus, from this quarter, we are reporting the Mexican business numbers as part of European operations and not as part of Indian operations as was the case earlier. All comparable numbers from earlier quarters have been restated. We now start with Q1 CY 2025 results for the Indian operations on page six.
Sales grew by 3% to INR 141.13 million as compared to Q1 CY 2024, in line with the weighted average market growth. Please note that steel prices have gone down, reducing 3% of our turnover. This quarter, there is a large discrepancy in market growth numbers reported for the light vehicle and truck segments, as reported by IHS and SIAM. While we have traditionally used IHS in our reporting, we have presented both sets of numbers in the presentation. Nevertheless, we understand that the growth in the India business needs to be higher, and we are taking actions to address this. In Q1 CY 2025, the EBITDA of the Indian operations was INR 268 million, EBIT INR 2,090 million, and EBT INR 2,085 million. Thus, while sales grew by 3% year-on-year, EBITDA, EBIT, and EBT were largely flat.
The one thing that we would like to highlight is the steady improvement in India margins in spite of the sluggish growth. The reported EBITDA margin in Q1 CY2025 was at 18.6%, which includes a one-off mega subsidy benefit at the Zaheerabad plant of our stampings business. Without this one-off benefit, the EBITDA margin would be 18%. This is higher than the operating EBITDA margin of 17.7% in Q1 CY 2024 and 17.1% in Q4 CY 2024, both year-on-year and sequentially.
Please note that the reported EBITDA margin for India operations in Q1 CY 2024 included a one-off subsidy at our aluminum castings business, and this 17.7% that I have given you now is without that subsidy. We now move to CIE Automotive India Europe business results for Q1 CY 2025 on page seven. Sales were INR 7,849 million, which represents a drop of 19% year-on-year compared to Q1 CY 2024.
This sales drop in Europe business is largely due to the slowdown in all segments we cater to. In this quarter, European light vehicle demand is down by 7%, MHCV by 19%, and there is a continuing slowdown in the U.S. off-highway market that Metalcastelo caters to. Also, Q1 CY 2024 was a good quarter for sales in Europe, and the Q1 CY 2025 numbers look much lower in comparison due to the base effect. The extent of the continuing sales drop in Europe can be seen by the sales number in the last few quarters. Sales in our European operations were INR 9,689 million in Q1 CY 2024, INR 8,375 million in Q2 CY 2024, INR 6,650 million in Q3 CY 2024, INR 6,489 million in Q4 CY 2024, and INR 7,849 million in this quarter as we have reported.
Of course, the Q3, Q4 sales numbers are normally lower, so sequentially there is an increase, but we have to remember that Q3 and Q4, due to the seasonal effects, are normally lower. In Q1 CY 2025, the EBITDA in our European operations was INR 1,088 million, EBIT INR 761 million, and EBT INR 646 million. That is an EBITDA margin of 14%, EBIT of 10%, and EBT of 8%.
We are continuing to focus our efforts on maintaining our margins by adjusting our operations to the lower level of activity. The EBITDA margin in our European operations this quarter is 13.9%, the 14% that we said, versus 15.5% in Q1 CY 2024 and 14.9% in Q4 CY 2024. This slight drop, both year-on-year and sequentially, is due to the decrease in sales as well as some costs incurred due to restructuring that we are doing.
The pain in Europe is expected to continue for at least a couple of quarters more. Now if we go to page eight we will see the consolidated results, which are a combination of the results in India and Europe. In Q1 CY 2025, CIE India achieved sales of INR 2,1961 million, EBITDA of INR 3,716 million, EBIT of INR 2,852 million, and EBT of INR 2,730 million or INR 273 crores. While sales declined by 6% year-on-year, EBITDA declined 10%, EBIT 12%, and EBT 10%. Consolidated numbers are depressed by the performance of our European operations. But we have continued to deliver on margins in spite of the drop in sales.
If we eliminate the one-off effects, the consolidated EBITDA margin in Q1 CY 2025 is 16.7%, which is the same as in Q1 CY 2024. In closing, we would like to state that we are cognizant of the challenges in our business and are renewing our focus on growth in India business, at the same time improving operational excellence and cost structures to maintain our margins. We will continue to focus on growing with our customers to take advantage of all the opportunities that come our way. With that, we can proceed to Q&A.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question and answer 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. The first question is from the line of Pratik Kothari from Unique PMS. Please go ahead.
Vikas, just a continuation to your statement on the India business, saying that we are cognizant of the numbers which came in and we are taking actions. If you can elaborate more on that, what is it that we are planning to do, and how are we solving for this?
Now, you're talking about growth in India or like
Yes, growth in India. Yes.
As far as the margins are concerned, of course, we are quite proud of what we have done on the margin front in India, and in spite of that, it is improving. So we are quite happy with the situation there. As far as the growth is concerned, yes, we are more or less in line with the market. We need to grow faster than the market, that is the question.
As we have always highlighted, we are waiting for some of our orders to kick in. There has been some uncertainty all around. But in terms of specific, what we are focusing on, and of course, it takes a bit of time to kick in. We are making sure that with our anchor customers, we get more and more chances. The other orders we already have. As we have already said, every year we have an order book.
Every calendar year, we generate an order book anywhere close to between INR 800 crore to INR 1,000 crore. So the order book is there. It has always been in how that order book converts into sales. What we have observed is that this conversion is always better with anchor customers, and therefore, along with the order book that is already there, we are focusing our attention on our anchor customers. This is really how we are trying to rectify or bolster our situation as far as growth is concerned.
Yes. If you allow me, Vikas, just one comment from my side. This is Ander speaking. Okay? This is regarding also the organization of our company. We have reinforced the business development teams, and we have had now a business development head for all the verticals, and we are using the synergies that we have in different verticals with all the customers. We are now working on that.
We see that we are already having certain success on this new commercial activity that we are deploying. And one good sign of this new organization, and let's say the outcome of this new organization is that in the first quarter of this year, in this Q1 2025, our new orders allocation has been higher than our internal budget and our internal target. So we are talking about INR 3.5 billion of new orders that we have already allocated. Okay? This is another view of this growth strategy that we are now launching in our company.
Correct. Sir, last call when you made a statement that we have put up capacity, but a lot of orders were getting delayed, be it Hosur or aluminum casting, et c. Any signs of pickup there or that delay continues?
No. Mainly the delay is coming from specific projects that we are having from electric vehicles. As you are aware, the growth of the electric vehicles is not yet arrived, as it is still a little behind on expectations, and that is why those projects are not yet picking up. We expect that slowly, and that is what all the indicators say, that they will go ramping up in the next quarters. That is our expectation.
But right now there are still certain delays. We have also some internal combustion engine projects from some customers that they are having difficulties launching their program, their internal programs. But they are telling us that we should be prepared because they are expecting to ramp up in a very short period of time. Overall, we think that the new projects will come, the electric vehicles will come a little bit later.
The rest of the projects that we are working on, we hope that they will pick up soon. We are quite optimistic on that front. We think that in India, we should grow faster as Vikas Sinha said in his speech, and that is the expectation that we have.
Correct. Just one out of curiosity. Usually an Indian OEM will have a couple of suppliers for any product that we supply. For any of our division, you can take casting, stamping, forging. Would our pricing be in line with the peer who would be the second source or the third, or we might be the second source? Is our pricing in line with what others do? Then this 18%, 19% margin that we make is all a function of internal efficiencies?
Yes. Pricing would be in line, Pratik. We need to be competitive with our customers. In our business, there is no scope of charging a premium. We are competitive. Most of our margins comes from operating efficiencies. Ander, I will hand it to you because I am sure you have much to say on this.
Yes. No, I fully agree. That was the answer I was going to give. The prices that we are offering to the market, that we are getting from our customers are exactly the same than our peers. Of course, there are small variations in certain moments, and in certain products we can be a little bit more competitive. In certain products, our competitors can beat us in pricing.
But overall, the prices that we are offering to the market, that we are getting are exactly the same than our competitors. Of course, our task is to be competitive and our, let us say, source of competitiveness is our internal efficiency and, let us say, the best production processes that we are now trying to implement in our Indian plants, okay? In all the verticals, we are working with our European colleagues.
We have people working with us and making the technology transfer, and this is our main task. You have listened to me several times to talk about the efficiency, because that is my, let us say, my main view of how we should work in India. Because generally speaking, what I see yet is that our efficiencies in our Indian companies are below our efficiencies in Europe or in Mexico, for example. I think we have room for improvement and we are working on that. That is the task. Of course, now what we want to do is we want to get more efficiencies and offer these efficiencies to the customers to be more competitive and to gain more market share.
Yeah, Pratik, anything further?
The line for the current participant has dropped off, so we can go ahead with the next question. The next question is from the line of Nitish Rege from ChrysCapital. Please go ahead.
Hi. Thank you for the opportunity. My question is for Ander and for the India business, for the India business. We have underperformed our peers over the past six quarters, and what corrective actions are we planning to take specifically on getting the growth back? While there are negative surprises such as order delays, it is part and parcel of our business, which can impact some business vertical. But overall growth has been impacted and why won't other, let's say, stamp forgings, growth in the other parts also impacted because of this?
Nitish, Ander just answered Pratik, but I'll summarize. There are two main things we are trying to do. One is, of course, we have pointed out that we have no dearth of orders. Our order book is very good. Last year also, we did close to INR 1,000 crores in new order generation. This quarter has been exceptionally well, as Ander pointed out, INR 3.5 billion. So there is no issues around order book.
The issue has always been conversion of order book into actual sales, where many projects are delayed, especially the ones that we had for exports to EVs that Ander has pointed out. Some of them are coming back slowly. There are some ICE projects also delayed. What we have noticed is that the order book to sales conversion is best for anchor customers.
Our first plan of action has been to refocus on them and try and see if we can exploit all kinds of synergies with customers who are big with us. That's the first. How are we doing it? Ander explained that we have just made a change in our organization as far as how business development is done. We have a new business development head, Kunal. The focus is to get synergies with our existing customers, the bigger ones, as much as possible, and that's how we plan to go ahead.
The last thing Ander did mention, that our source of competitive advantage is our operating efficiencies, and we'll continue to focus on that because our firm belief is once your operating efficiencies are in place, you are competitive vis-a-vis your competitors, and the growth will eventually return as long as you are competitive. That's what we have been doing, and that's what going forward we are going to do. But the key thing is we are trying to refocus our attention on how business development is done and get as much synergy as possible in the organization. Yeah?
Okay. Secondly, any progress on M&A now that you're sitting on INR 1,300 crore to INR 1,400 crore of cash?
Nitish, you know that we keep working on M&A. At any given point of time, we are always looking at opportunities. But M&A, we will publicly announce whenever we are at a stage where there is something to announce. But as I said, M&A is an integral part of our strategy, and we keep looking for M&A opportunities. Yes, we are aware that there is cash on our balance sheet, and it's a good thing. The reason why we keep some cash is because we are a foreign-owned, foreign-operated company, and therefore, we cannot take debt for doing M&A activities in India. Some cushion of cash is there for that purpose. Yeah?
Okay. Thank you. I'll fall back on the queue if I have any more questions.
Yes. Thank you so much.
Thank you.
All right. The next question is from the line of Devang Shah from Asit C Mehta Investment . Please go ahead.
Yeah. Hi, good afternoon, sir. Sir, you addressed right now for our last participants about growth-related aspect. Sir, I just want to understand first thing, the root cause. That is, the order book is not transmission into revenue, the execution delay or decision-making delay? That's one thing. Sir, then I will go to my next question. Just make me understand about this thing, sir, first.
Yeah, sure. Look, most of it is program delays. It's not an execution problem from our side. Most of it is, for example, there have been some EV orders that we have for exports. Some of those EV orders, the project itself has been pushed back because as you know, that there has been a little bit of loss of momentum as far as the EVs are concerned across the world, not just in India, across the world. You are seeing that in Europe, where the EV penetration is stagnating around 12%-13%.
In the U.S. also, it is stagnating a little bit. Even on normal orders, there have been a lot of uncertainties. Also, you see in India, the passenger car market, which was doing exceptionally well, has come down to in the range of 4%-5% growth, which it was growing. Of course, some companies are growing much faster, including Mahindra, which is good for us. But most of this order book delay is due to program delays, not from our side. Okay?
Just to, my understanding is correct, it's some kind of deferment by your client.
Yes.
So that's why it is being delayed. Although you have been given an order book, but they are differing because of some kind of their demand or some kind of thing is delayed. That's why, sir. My understanding is correct, sir?
Absolutely. Your understanding is correct.
Sir, what you perceive to be as far as demand environment, as you already highlighted in the last quarter, that we may see some kind of pickup in second half in Europe. What as far as India is concerned, we may see some kind of growth trajectory is concerned because last year there was no negative we have seen. What you perceive, sir? Any candidate you can see?
No, India, we are seeing good traction in the tractor market. Two-wheelers continue to do reasonably well. The base is now higher, so the growth is But it is a reasonable growth that is available. Passenger cars have fallen behind a little bit, but still there is growth. So in India, there is growth opportunities. It will keep coming back. It will come back. But as I said, our key thrust area is, if the order book is not turning into sales, can we get more orders, especially from our existing customers? That's the reason why. The strategy is simple. If my order book is not turning into sales the way I want it to be, let me go and get some more orders.
And that you will get quickly only from customers that you know well. That is why Ander did mention that the business development head has been tasked with exploiting these synergies. That is about India. Europe is a very different story, and Europe, the pain will continue for some time. On Europe, I will ask Ander to give a more detailed answer. Before he gets into Europe, I will request Ander to talk about why these orders have been delayed, and it is more on the programs and not on our execution to assure everybody that it is not our execution that is the issue here. Ander?
Yes, absolutely, Vikas. The reason of the delay of these programs is not on CIE India . These delays are coming from two main reasons. One, the main reason is that most of these programs that we were expecting to launch were electric vehicles programs that has been delayed. Some of them, we were expected to export to U.S., and also now in the U.S., the slowdown of the electrification is stronger than in other regions. In Europe, electrification is stagnant and the electric vehicles share is approximately 15%. So it is growing, but just 1%-3%, no more than that. It was expected to grow up to 25% this year, and this will not happen. So this delay in the electrification is affecting us. This is one reason.
Second reason, as Vikas explained, is certain projects from big projects that we were awarded, and we invested to start the SOP in beginning 2024, were delayed, and they are now ramping up. We were expecting to sell, for example, for a particular engine, we were expecting to sell 20,000 sets per month, and we are now still at 7,000-8,000 sets per month. This is the situation. The customers are saying that in the next two, three months, they will ramp up to double the current output to 15,000, and then they will jump to 20,000 per month. So these are the kind of things that are happening. I would say that this is just a temporary slowdown that we have had, and in the meantime, we are working in new programs.
We are working in the market to improve our market share or to add new products to our portfolio, and that is the activity we are having. In India, we are quite optimistic for the future, and I think that the company, generally speaking, is doing well. I know that this weaker sales than expected is creating certain concern, but I think in the mid-term, long run, I think the company will succeed, and we will continue growing. As in the previous question, someone asked about the M&A activity. We are also working on the M&A activity. So our clear strategy is to grow in India, both organically and also inorganically. The bet of CIE Automotive India to India is, I would say probably is our main bet in all the companies.
In that sense, our stakeholders can be sure that we will continue trying to grow and to develop the business in India. Then coming back to Europe. In Europe, the situation is much more, let's say, difficult. You know that the European market is stagnant. This year, we will see a drop of approximately, in the light vehicle market, we will see a drop of approximately 5%, 5% to even 7%.
That is the expectations that we have. On top of that, we have this tariff war that is now on the table and could affect with additional drop, and probably this will have a negative effect in the total amount of car production in Europe. The situation was weak and probably will be a little bit weaker in the next quarters. That's the expectation. We still expect to have a weak market in Europe.
What we are now trying to do is to adapt our companies to this scenario to maintain and to protect our margins as much as we can and be ready when the ramp-up comes that we expect that probably we will see certain recovery by the end of the year and also for the next years. We see that in Europe, the behavior of the market is a little bit different than in India. We see that there will be a consolidation of the market in several suppliers are struggling, so we will see that we can win also from the consolidation of the market. That's our view on Europe and also in India.
Thank you. Very satisfactory explanation you have given. On that explanation, I have one question. By considering these facts, we are now just Q1 of current year, CY 2025, how we have to evaluate the growth trajectory every quarter? It would be better to get an idea as far as demand environment, and then we can get a certainty as far as growth of this particular calendar year.
Or you have anything that's been forecasted by you as far as either consolidated overall revenue growth for the calendar year 2025, or if you have a segregation of Indian-related growth, how it would be continued to unfold as a single digit, and what would be the European growth? If you have been forecasted anything for this calendar year, or it would be every quarter we have to evaluate and then conclude?
Devang, we don't make forward-looking statements, so that is a policy that we strictly follow. We have not made any forecasts or any statements as far as our overall CY 2025 numbers are concerned. We can talk about the markets. As Ander pointed out, the markets in Europe. Let's talk about Europe, because from a market standpoint, Europe is in a difficult situation. I think in Europe, you are going to continue to see this pain in the market for the next two quarters at least. Let's be prepared for that. That's why Ander has clearly stated that our strategy in Europe is to restructure our operations so that we maintain our margins. We have to match our costs.
to the prevailing volumes. That is what we are doing. In Europe, we do expect pain for the next two quarters. As far as India is concerned, now India, we know that, for example, in Q1, the car market as per SIAM grew about 5%, as per IHS Markit, about 1%. The two-wheeler market about 6% to 7%. The tractor and trucks have done reasonably well. They are double digit, but I guess they will moderate. If we are looking at a number anywhere between 5% to 7% growth in India from a volume perspective on an overall basis, that is something that we are working towards.
Of course, this quarter we had a little bit hit on the steel price. But that is how you have to look at the market in India. Say, for example, anywhere between 4% to 7% would be the growth. It is lower than what we have been experiencing in the last few years, but that is the scenario in India. In India, you still have growth. It is lower growth than earlier, and our job is to be ahead of this growth, and all that we are talking about is to be ahead of this growth. That is how I would say, but we do not make any forward-looking statements.
Yeah, that sounds satisfactory. Last question, sir, before concluding remark. Any kind of tariff-related that can affect your U.S. export-related aspects. Any kind of headwinds over there?
As far as Ander, can I take this or you would like to take this?
I can take it.
Yeah
The impact of the tariffs in our business is very low. I would say that it is negligible. Just to give you some figures on that, only 3% of our sales in India goes to U.S. That is approximately in the first quarter, we are talking about INR 400 million or something like that. In all the cases, except minimum small customer, in all the cases, the impact of these tariffs in our account is zero because our sale condition is either Ex-works or FCA, so the tariffs are charged to the customers. The customer should pay those tariffs. So the impact on our accounts is zero in India. Regarding Europe, in Europe also, both in Metalcastelo and Bill Forge México, that as Vikas has stated now is included in Europe, in our European region.
All the sales that we are doing to U.S., that in Metalcastelo is approximately 40% of the sales, and in Bill Forge México, it is also about 40%. The impact in our accounts is zero. In all these cases also, all the tariffs, because of the conditions of our sale conditions, the duties are charged directly to the customer. It is not our responsibility. Finally, in CIE Forgings, we have one particular customer that is approximately EUR 10 million per year sales.
I mean, it is a minor impact of approximately 4% of our total sales in Europe, in the CIE Forgings Europe, that we are now negotiating with the customer because this is selling directly to them, and the duties are impacting us. But as you know also that there is news today in the paper that U.S. government will not apply any duty to the car makers that are producing the cars in U.S., and this is the case in our case in CIE Forgings.
Yeah.
This EUR 10 million goes to one customer, specific customer is Ford, so we expect not to be affected. Globally speaking, the main problem we see with the tariffs in our business is the negative effect that could have these tariffs in the market. Okay? The slowdown in the market created by this tariff uncertainty that is now in the market. We can say that the impact is negligible or almost zero, and the only potential impact is the slowdown that could create, especially in Europe.
Okay. Thank you so much for giving a very good explanation, sir. Thank you so much.
Yeah, Devang, one more thing. As far as tariffs is concerned-
Yes, sir.
That.
Yes
depending on the tariffs, India's competitiveness may go up vis-à-vis some other countries. So that also we have to monitor. But as Ander explained, there is so much uncertainty around this tariff policy that we have to just wait and watch. We do not have any direct impact, but the indirect impact is something we have to worry about. The markets in U.S., Europe itself may come down, and India's competitiveness may actually go up or go down, compared to what tariffs are applied to countries like China, Vietnam, Turkey, and so on and so forth. We have to wait and watch.
But sir, just to add that in, then it will be some kind of opportunity for also to you now, because you can also sell. As you were saying, you have hired some business development head as well, so you can also look for the other market as well. Sir, will it be possible?
Yes. If India's competitiveness increases, obviously, there will be a chance to all good companies. Look, as far as our exports are concerned, if you look at our annual report also, which we have clearly highlighted, that there are certain areas like iron castings and gears where we do see our opportunities in exports going up. Exports is a complicated issue. There are many factors.
The supply chain risks are involved, which companies are very wary about all supply chain risks, which have been there in the recent past. So there is a move towards local for local, but at the same time, certain processes will have to be outsourced because of climate policies and so on and so forth. Wherever our competitiveness goes up, we will have an opportunity. We have identified iron castings and gears where we think we will have more opportunities. And if this tariff policy helps improve our competitiveness in these areas, we will definitely benefit out of it. Yeah.
Yeah.
Yes, sir. Thank you so much. Yes, sir.
Yes.
Yes, sir.
Just one comment from my side, because there is also an additional trend that we are now perceiving in the market, especially due to these geopolitical tensions that we can see in the market, is that some of our American customers, they are trying to move, or they are analyzing to move the production they have in China to other countries like India or Korea. This trend is also there. This can be also an opportunity for us to increase our business. We are analyzing that, and some of the customers are already studying and requesting the quotations for this movement too.
Yes, sir. That's quite satisfactory. Thank you so much, and wishing you all the best, sir.
Yeah, thanks very much.
Thank you very much.
Thank you. The next question is from the line of Jyoti Singh from Arihant Capital Markets. Please go ahead.
Yeah, thank you for the opportunity. Sir, my question is basically on the tractor side. How is the overall industry doing and what are our outlooks overall on the tractor industry side, and how we are doing it? Also earlier question on the tariff. Also we are going to benefit on the tractor side because of the tariff going forward.
As far as tractor forecasts are concerned, they are looking reasonable for this year. Tractors have done very well in Q1 overall, and so has Mahindra. Going forward also, we clearly see, not as good as the 11% number that we have seen in Q1, but we would see a growth. I would still think a growth around 4%-5% in tractor market going forward on an average for the next few quarters. That's on the tractor side on the market, what we expect. Do we expect anything on exports on the tractor? I think we do export a few components for tractors. TAFE Tractors is a good customer of ours. But we have to see on that. We have not fully evaluated. But the tractor market is doing reasonably well domestically.
Okay, sir. And sir, are we getting good order book on that side? If you can just talk on that.
Order book around?
Around tractors.
Tractors, as I said, domestically, it is a very reasonable situation for tractors for us. We have Mahindra and John Deere in India as our main tractor customers, and they are both doing well.
Okay, thank you. Sir, as earlier mentioned that we are seeing visibility after two quarter end of this year. Can you guide, because I gone through the Volvo call also, so they are seeing the market share increase on the EV side. Any visibility we are seeing, I know a lot of uncertainties there, but still, if you can give us little bit highlight on that side.
Highlights on the EV market?
Yes, sir.
EV market, as we have explained, I think worldwide there has been a bit of a stagnation. In India, of course, we are seeing the two-wheeler EV penetration going up. In four-wheelers, of course, we have had some very good launches, especially Mahindra, and we are looking forward to the ramp-up of those models. I think they will do well. We have very good reports as far as those two EV models from Mahindra are concerned.
I think even on two-wheelers you have some good launches. Bajaj has done so. Yes, there will be steady improvement. The point that we are making around EVs is not that it is not going up. Penetration is going up, but it is not going up as dramatically as was in the, say, maybe two years back. That's the only situation. But the EV market in India is making steady progress.
Very clearly, you are seeing lot more new models. Hyundai has put some new models. As you also pointed out, there are other companies who are putting models, and they are all reasonably good models. As long as you have good products in the market, the market will improve. That's how we look at it. We have enough orders in the EV space also. We'll be happy if the products do well.
Sir, I know you mentioned you don't like.
Sorry to interrupt, ma'am, but your audio is not clear.
Yeah. So, like you mentioned about this, you are not giving the forward outlook, but at least some visibility as per the CIE point of view, because last few quarters, nothing on the betterment side. So if you can guide us a little bit on the margin and top-line side.
No, margin is easy to guide, Jyoti.
Yeah.
Margin, we said that in India, we are close to 18% now. We will be there, and we hopefully will improve. Of course, the improvement will be steady. So on the margin side, we can say confidently about that. In Europe, as we said, if you see there has been very big drops starting from Q3. More than double-digit drops in Q3, Q4, and Q1. In spite of that, our margin is 14% this quarter. And that is the whole thing.
And this includes some restructuring costs. So we are trying to hold our margin as much as possible in Europe around this number, which is what we have said. So on margin, it is very clear. That we can state. It is not even a forward-looking statement. It is probably, as far as we are concerned, it is a reality. As far as sales is concerned, what we said that probably the weighted average market growth in India this quarter will be in the range of 4%-7%.
Hopefully, we can beat that. We have not been able to do that in Q1, but we hope to do that in the next few quarters, Q2, Q3, Q4. We hope to beat the market a little bit. As far as Europe is concerned on the growth side, we are saying on next two quarters, at least, the pain will continue, as far as the sales is concerned. This is the best I think we can summarize, Jyoti. Hopefully, that should be enough.
Yeah. Very much. Thank you so much.
Yeah. Thanks, Jyoti.
Thank you. The next question is from the line of Nitish Rege from ChrysCapital. Please go ahead.
Thank you for the follow-up. My question is again for Ander. Just wanted to get a better understanding of what specifically we are looking at in an M&A asset. Given that there have been around 10 to 12 deals in our industry over the past 18 months, most around the 10x EBITDA multiple. We have not been able to crack the M&A puzzle for us.
No. We cannot disclose the different operations that we are analyzing in this moment. The idea we would have is to reinforce our presence in the technologies where we are now working. I mean, all the gears, aluminum, castings, composites, all these businesses where we are present. That is one of our targets. Also second target that we had, and we mentioned several times, is to include some plastic company, because it is the only technology that we have missing in India.
We have presence in all CIE technologies in India except the plastic. That is also one of our targets. We are actively looking for companies that should fit strategically, should fit also in terms of, let us say, future evolution and synergies with our current businesses. Of course, the pricing is another side that we need to discuss because, in certain cases, what we think is that the multiples are too high. We will analyze, and we continue very active on this field.
Okay. Thank you.
Mm-hmm. Thank you.
Thank you. The next question is from the line of Amar Kant Gaur from Axis Capital. Please go ahead.
Hi. Thanks for taking my question. I had just one question regarding the profitability in the European business, where we have seen sequentially more than 20% kind of growth, but still the margins have gone down by 100 basis points. You talked about certain restructuring activity that is happening there. Could you quantify that a little bit more?
Yeah. Okay. Yes, in the European business, you know that we have had this slowdown in the business, so we are adapting the size of the company to the new volume scenario. We have been doing that with temporary layoffs in the last quarters. What we have done is we have put in place now additional activities, and we have early retirement programs for people that is above 60 years old, and we are trying to get a voluntary agreement with them to pre-retire with these people.
Also, we are setting up certain voluntary retirement or dismissal schemes for the people who is willing to leave the company, let's say with economical agreement, okay? So with a certain amount of money. These are the kind of things we are doing smoothly, and all these activities are going on. Especially, we have done first steps in Metalcastelo plant. Also, we are trying to do it in our forgings, CIE Forgings. Those are the activities that we have now in place, and we will see the effect in the next quarters.
Okay. Thanks. I'll get back to the queue .
Thank you.
Yeah. Thanks, Amar.
Participants, to ask a question, please press star and one on your touchtone telephone. The next question is from Rajkumar Vaidyanath, individual investor. Please go ahead.
Yeah. Good afternoon. Can you hear me?
Yes, Rajkumar ji. Go ahead.
Yeah. Thanks for the opportunity. Sir, you just mentioned recently that due to the evolving tariff situation and if India signs this trade deal with the U.S., there are still some opportunities there. I just want to know whether those opportunities are immediate or will be kind of clear in the medium term.
Rajkumar, of course, there could be. It finally depends on what is the kind of trade deal that emerges. What we are saying is, as a country, we are competing. Auto component exports is almost 20% of the entire turnover of the auto components business in India. We are competing with other countries China, Vietnam, Korea, Turkey, Brazil, Mexico, of course, which is a very large player. Depending on the tariff, India's competitiveness may go up because some other countries might have higher tariffs, may or may not have. The final deal has to emerge. in that case, there could be some opportunities.
What we have already been saying is that there are some specific areas like iron casting and gears, where there are already opportunities in exports, and if that happens, they might increase. That was the point we are making. As far as your question, whether they are immediate. Any order, it takes 18-24 months or 18-30 months in the case of exports orders, because there are a lot more development steps to be done. That is the kind it would take to hit your P&L. It is not as if you get an order and it gets into your P&L in the next three months. It takes about 18-30 months on the export side. Domestic orders might be 12-18, but that is how it is.
Because just one additional comment on that is that, due to the current uncertainty that we have with the tariff application, I think until this definitive tariff application is defined and is clarified, I think there will be no decisions from the customers. We need to first clarify the tariff environment, and then the companies will make the decisions. What we see now in the market is that, as there is a big uncertainty, everybody is waiting for the definitive solution that is not yet on the table. You know that. I think all the countries are negotiating, and every week we receive different news on that. I think in the next weeks, months, I think we need to wait until we see the definitive solution for the tariffs.
Okay. Thank you, sir. Thank you for the detailed reply. Sir, just one more question. Just on the margin part, I think you kind of mentioned that due to the 3% reduction in steel prices, the margin kind of appears to be muted. Is it fair to expect your margins to improve by at least about 100 to 150 basis points from the current levels in the upcoming financial year?
JP, that 3% is for domestic, not for overall. As far as margins are concerned, we know that steel is a pass-through. It just affects the quantum of sales. If the steel prices goes down for the same volume, your revenues goes lower by that. But the EBITDA remains the same. In fact, if your sales goes down, your margin will go up. As just arithmetic, numerator, denominator.
That's about it. The steel price has nothing to do with efficiency. It is a pass-through. What we are talking about 18% margin in India, about 14% margin in Europe, and in India, we do expect the margins to go up through operating efficiencies and nothing to do with the steel price. Steel price goes up and down. The effect of numerator, denominator would be separate. That was the point we were making.
As far as Europe is concerned, Ander has explained a lot of restructuring is going on. We are trying to hold on to this 14%, in spite of, as was pointed out, very big double-digit drops in sales for the third quarter in success. That was the discussion. The steel prices, the effect will be separate. It is not an operating efficiency issue. It is just a numerator, denominator issue because steel is a pass-through.
Okay. Yeah, I just got it, sir. Sir, so my question is, would you expect the margins to go up further? That was the question. Given that the efficiency programs are in place or you are continuing to work on your efficiency parameters. Is there a scope for improvement in margins, particularly on the domestic?
Yes, in India, there is scope for improvement, but there won't be any dramatic improvements in margins. There would be steady improvement. Just a few minutes back, a little bit back in today's conversation, Ander did mention that Indian operations, in the CIE universe, relatively, we are worse off than Europe, Mexico, et c. That's the reason why we think that our operating efficiencies can further improve. But given where our current margins are, the improvements will be steady. There won't be any dramatic increase of 1%, 1.5%, not like that. There will be steady improvement going forward. That is what we are saying.
Okay, sir. Thanks a lot, sir. All the best.
Thank you, Rajkumar.
Thank you. The next question is from the line of Basudeb Banerjee from CLSA. Please go ahead.
Thank you. Hi, Vikas. Just wanted to understand, as Ander highlighted, 5%-6% potential Europe car market decline this calendar year. But out of your European business of crankshafts, et c, catering to, say, Renault, et c, how much of those cars are exported to U.S.? Because if the tariff issue remains, there can be demand elasticity impact and subsequent production reduction other than core Europe market lower car retails.
Ander, will you take this?
Yes. The export that we have from Europe, especially in the crankshaft business, is approximately only EUR 10 million per year. So it is approximately 4% of our forging sales. So the impact is very low.
Ander, actually, I was trying to understand that what percentage of the crankshaft supplied by you to the end OEM are actually exported. I am not saying CIE actually exporting to U.S., but the end vehicle is getting exported.
Yes. It is minimum amount. In terms of the crankshaft exported to the U.S. can be approximately what I told you, about 4% or 5%. No more than that.
So bulk of the crankshaft supplied by CIE is consumed for cars sold in Europe only. That is what you mean.
That is right. So the European cars, or cars produced in Europe, exported to U.S. are only 900,000. 900,000 cars per year. So it is not a big amount. Mainly high-end cars, Jaguar Land Rover or Porsche, Audi, Mercedes, all these kind of cars that are exported to the U.S., the luxury cars. In our case, we are selling directly to U.S. this 4% or 5% of our crankshaft directly.
But as I told before, what we expect is that as we are selling to American car makers, and the cars are produced in U.S. directly, then what we expect is that the impact of the tariffs will be zero in this case, as the U.S. government said yesterday. That is the view that we have regarding the impact on sales. Because of the, let us say, drop of this potential exportation from Europe to U.S., we can say that it is absolutely minimal.
Sure. Second thing is, Vikas, in good days, annualized revenue for Metalcastelo used to be what? EUR 90 million, EUR 100 million.
Yes.
What is the level now?
No, not EUR 100 million. It was EUR 75 million.
Including the Allison transmission orders.
That is a separate matter. I am saying what they have done maximum was roughly about EUR 75 million. Right now it will be closer to 55-60, 50% of that number.
EUR 50 million.
EUR 50 million.
EUR 50 million, yes.
Okay, sure. Thanks.
Yes.
Thank you. Ladies and gentlemen, this is the last question from the line of Pratik Kothari from Unique PMS. Please go ahead.
Yes, sir. Thank you again. One on these exports from India. If you can share some numbers, how did it pan out this quarter?
Roughly exports, as far as CY 2024 number is concerned, we have roughly around from India, 13% - 14%, in that range. This includes both direct and indirect exports. Indirect exports include things that we supply to those production offices in India, which then they export. Roughly about 13% to 14% for us. It is between that amount in India.
Okay, correct. In the annual report just published, there is this auditor remark for CIE Aluminium Casting India Limited, saying that there could be an incentive or external pressure to meet expectations resulting in revenue being overstated or something. Just one comment, what is this regarding?
Which page is that? We have our annual report. Do you have the page number readily available?
No.
Which section?
This is the auditor's remark on the consolidated.
Semi results. No.
No, the annual report.
Annual report.
This is page 224 of your annual report.
Page 224. JP is here, he will answer. Just give us 30 seconds.
Sure, sir.
This is about the key accounting matter, no?
Yes. Key audit matter, yes.
As mentioned by the auditor, it is why it is a key audit matter. They arrive at key audit matter for every year and for India, they have considered revenue as a key audit matter because they think sales revenue is a key parameter for the people working in the company, and therefore they emphasize more in checking whether the revenue numbers are correct or not. There is no overstatement or a potential overstatement. It is just that in their audit procedures, they emphasize more to check on this aspect.
No. Usually, when we read revenue as an audit matter, the statements which are made are different than what has been made here, and hence the question.
No.
Usually, revenue as an audit matter, I think is across many for almost all companies.
Okay.
What has been made here seem different and hence that question.
Yeah. They have mentioned about there could be an incentive of pressures to meet expectations.
Yes.
But it seems, the auditors are stating here about the emphasis they have given for checking the revenue numbers.
Okay, sure. Thank you.
Thanks.
Yeah. Thanks, Pratik.
Thank you, ladies and gentlemen. That was the last question for today. I would now like to hand the conference over to the management for closing comments. Thank you, and over to you, sir.
As usual, I would like to thank all the participants for the interest in our company and also for the trust and the well-directed questions they made as always. My gratitude to them for their participation. Also, I would like to thank all CIE Automotive India team for the great work done in all these months and days that we are working hardly. I would like to thank all of them because of their commitment to the company, and we expect to deliver even better results in the next quarters. Thank you very much.