Q3 24/25

Feb 5, 2025

Summary

Q3 revenue was ₹690 crore, with 9M gross profit up 14% and EBITDA up 13% YoY. New suspension, emissions, and export programs underpin expected growth ahead of the industry, while TREM V timing and demand remain uncertain.

Ladies and gentlemen, good day and welcome to the Q3 FY 2025 Sharda Motor Industries Limited conference call hosted by Equirus Securities. This conference may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions once the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Mihir Vora from Equirus Securities. Thank you, and over to you, sir. Thank you, Albert. Hi, good afternoon, everyone. On behalf of Equirus Securities, I welcome you all to the Q3 FY 2025 post result conference call of Sharda Motors. From the management side, we have Mr. Aashim Relan, CEO, and Mr. Puru Aggarwal, President and Group CFO. Without further ado, I now hand over the floor to Mr. Puru Aggarwal for his opening remarks. Over to you, sir. Thank you, Mihir. Good afternoon, everyone. A warm welcome to all the participants on this call. I am here with Mr. Aashim Relan, our CEO. I hope you have had a chance to go through our results and the investor presentation. You can find the presentation on the stock exchange and on the company's website. Before going into the company's financials, I would like to give a brief overview of some highlights of the industry for the quarter gone by. In Q3 FY 2025, passenger vehicle production volumes registered modest growth of approximately 3% year-on-year, reaching around 11.7 lakh units. Within PV segment, passenger car were down 10%, though utility vehicles saw 11% growth in production. The Q3 sales growth of 7% indicates the expectation of recovery in PV segment with gradual clearance of inventories driven by strong demand, a surge in SUV launches, and effective marketing strategy by OEMs. In Q3 FY 2025, the commercial vehicle sector recorded production degrowth of approximately 2%, reaching around 2.46 lakh units. The subdued production activity was primarily due to a slowdown in industrial activity, delayed government fund releases, and slow financing approvals, leading to many customers postponing purchases to the final quarter of the fiscal. However, optimism is rising, particularly in the regions benefiting from infrastructure projects. Additionally, the sector may witness a gradual recovery driven by an accelerated pace of infrastructure development and government incentives, which could support fleet renewals and expansions. In Q3 FY 2025, the tractor segment recorded a production growth of approximately 12%, reaching around 2.2 lakh units, up from 1.95 lakh units in Q3 FY 2024. This expansion was driven by strong growth in the agricultural sector and a favorable monsoon during the year. Given the positive outlook for agriculture, this momentum is expected to continue in the final quarter of the fiscal year. While the industry remains closely linked to agricultural trends, increasing mechanization, rising farmer income, and improved access to financing are expected to drive steady volume growth over the next three years. The two-wheeler segment registered a decent year-on-year production growth of 8%, reaching around 59.2 lakh units, driven by a 12% increase in scooter production and a 6% rise in motorcycle production. In contrast, the three-wheeler segment experienced production degrowth of 3%, indicating a market slowdown. The segment continues to remain positive, supported by improved supply, new launches, and stronger rural demand, though financing constraints may continue to pose hurdles. Additionally, a revival in export markets further strengthens growth prospects. Overall, the Indian automobile industry registered a year-on production growth of approximately 6% in Q3 FY 2025, reaching around 75.9 lakh units, primarily driven by the two-wheeler segments with 8% year-on-year growth, fueled by new model launches, a revival in rural demand, festive season sales, and OEM discounts that boosted sales. PV and CV segments performance was subdued. However, given the sales growth and clearance of inventories in Q3 FY 2025, it is hoped that numbers in these segments will improve going forward. I will now shift the focus to operational and financial performance of the company. On the consolidated basis, we registered revenue of ₹690 crore in Q3 FY 2025. For nine months FY 2025, our revenue stood at ₹2,087 crores. Our gross profit was ₹181 crore in Q3 FY 2025, which is a growth of 5% compared to Q3 FY 2024. For nine months FY 2025, our gross profits stood at ₹549 crores. 549 crores, which is a growth of 14% to nine months FY 2024. Our EBITDA for Q3 FY 2025 was ₹95 crores as compared to ₹94 crores in Q3 FY 2024. The EBITDA margin for the quarter was 13.7%. For nine months FY 2025, our EBITDA margin was ₹296 crores as compared to ₹262 crores in nine months FY 2024, which is a growth of 13% on a year-on-year basis. The EBITDA margin for nine months FY 2025 was 14.2%. Our PBT for the quarter was ₹101 crores after accounting for our shares in profits of JVs and associates. For the nine months, the PBT stood at ₹309 crores after accounting for our shares in the profits of JVs and its associates. The PAT for Q3 2025 was ₹75 crores. Nine months FY 2025, PAT stood at ₹231 crores. Our balance sheet front, we continue to maintain a healthy liquidity position of more than ₹863 crores in cash equivalents and investments as on December 31, 2024. We are excited to announce a new order win for our lightweighting vertical. The order is for suspension control arm product with annual business of USD $4 million and lifetime business of USD $22 million. The SOP is expected from Q3 FY 2026 from our new plant in Pune. With this, now we can open the floor for Q&A. Thank you so much, sir. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone 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. The first question comes from the line of Chetan Gindodia from PGIM Mutual Fund. Please go ahead. Hello, sir. Sir, congratulations on a great set of numbers in a challenging environment. Sir, I wanted to understand that our revenue growth for 9 months or for this quarter is more or less mirroring the industry growth as of now. Given the tough macro, but for coming year, do we have any significant orders or any new products that can help us grow ahead of the industry? I know we were working on a bunch of new products because it looks like TREM V is consistently getting delayed, especially on the tractor side. Are there any growth verticals available for us where we can inch up our revenue growth at least to double digits? Hello, Mr. Arvind, please go ahead. Hello? Yes, sir. Please go ahead. Am I audible? Yes, you are. Okay. Good afternoon. I think I was on mute. Good afternoon, and thanks for the question. I'll just take it in a few parts. First, regarding the sales being flat, I think better to look at our numbers with the gross profit growth. For this quarter, we've had a 5% growth versus the PV industry, which is growing at 3%, and LCV is actually de-growing at approximately 1%. For the nine-month basis as well, our gross profit has grown by roughly 14% versus the PV industry growing at under 7% and LCVs at 2.8%. Now, coming to the question of the immediate year ahead of us, which is FY 2026. There we have couple of things coming up. First, we have the CEV V norms coming in, where we have successfully won the business on the adjacency, which is the temperature control pipes. That's something that will additionally come probably mid of Q2 next year. Then, of course, our new plant, which is a lightweighting plant for suspension control arms, that is just about starting up, and that'll have its full year next year. In addition, we have just won a very good order, which Puru San announced, which luckily is also for an existing running program. So we have in fact managed to take business, and that is also going to start within financial year 2026. So that should be coming in the revenues from Q3. Then the export business that we had announced last quarter, which is a very significant win that we made. That also is scheduled to start in January 2026, so we will have revenues for that in Q4. And of course, there are some small LCV PV launches as well that will be coming in our next year. We should be able to outperform the industry with these additions. Now when we move forward on a 5-year basis, that of course the strategy which we had noted is well under. One, the export business is going to be growing fast. We have already won our first business in CV emission components. In addition to that, we will be looking at the temperature control tubes, which we are going to start production next year for the domestic market to export that. Third on the genset emission side and fourth on the under 100 horsepower tractors. Then the lightweighting vertical which has started with the control arms already showing very good growth. We are also working to add technology organically plus inorganically, to increase our content on that side and that will be a very good growth area. Then of course the upcoming emission norms, whether it be BS7, TREM V will be great drivers for content as well as revenue. Then M&A is of course something that we are actively working on. Does that answer your question, Chetan? Yes, it does. Since these new programs that we have run and also the new products for our temperature control pipe and the new lightweighting plant. On this, would the margin profile be any different from what we are doing right now? If you can give any light on that. Sure. These are newer products. We are hoping for similar margin profile and though it is too early to take a call on that. As we move forward and we really start producing them at scale, I think we will know more. Definitely anything that is an adjacency is very similar in margin profile. Lightweighting, as we start production, we will learn more, but we are hopeful to have similar margin profiles. Got it. Thank you so much, sir, and all the best. Thank you. Thank you. The next question comes from the line of Amit Hiranandani from PhillipCapital. Please go ahead. Yeah. Hi, thanks for the opportunity. Sir, just wanted to confirm if the TREM V implementation date is confirmed from April 2026? The government has notified the date for April 1, 2026. There is always possibility of time adjustment from the government side. However, the government has not changed the date. As of now, we are looking at the date April 1, 2026. However, as we learn from the government, we will keep you updated. Just similarly, if it is confirmed, you must be having orders in hand for the date, right? Yeah. We have most businesses already awarded for TREM V. We have all the LOIs. However, the norm is something that the government leads, right? The current notified date is April 26, right? And that will be based on the government. That is why it is difficult to guide. So far there are no changes, but most of the orders for this segment have been acquired. Right. Sir, any order wins in the export side? If you can also let us know what is the contribution coming from the international markets now. Right now, the contribution from the international markets is very less. In terms of exports, it would be like 1%-2% only. However, we won a very good order, which we announced last time. In fact, it was our main target order for commercial vehicle components. That's something that will start production on January 26th, and that is going to be for the U.S. market. Their annual business is roughly $7 million and lifetime business is about $40 million. This is also only few components for that particular customer. It is the leading engine and emission vertical company in the world. Balance, we have a very good RFQ pipeline. We've added a strong team which is focused on exports, which are working on various segments. As and when we have significant additions like the one we had, we keep updating. We're quite positive on the export side. Right. Sir, I wanted to understand what is the capacity utilization for the exhaust system at present and in case demand surges for exhaust then do we have the sufficient capacity in hand? Yeah. For exhaust systems we can augment capacity very easily, right? It's kind of a very high-volume, low CapEx kind of business. We can augment very easily and that's why we are well prepared on the exhaust system capacity side. Anything on the utilization currently for this one? We are at about 80% plus but we don't share utilization numbers just because we can augment it very quickly so it's not as relevant in this exhaust system product as it is to other components but we are of course always at a high utilization. If we need to augment capacity it can happen very easily in emission vertical. My concern is basically in case the TREM V implementation date is April 2026, are we very much having the capacity in place to service demand? We have the capacity in place. However, we will trigger CapEx, et cetera, once our customers commit to triggering CapEx as well. It is going to be linked to customer. But we have ample capacity available and we can augment at a very short period. Right. These last two questions, if you can help us with the CapEx outlook for FY 2025 and annually for the next two fiscal years, please. We will consistently have a similar run rate as we had last year and this year. From the CapEx perspective, we anticipate on a gross level to be around INR 60 crores, INR 50 crores to INR 60 crores, and might be going a little bit higher this year and early next year because of our new plant. But generally, we will maintain a very similar run rate. And of course, if there is any inorganic opportunity that comes that is additional or any substantial order win that comes in the lightweighting vertical, which is not to do with control arms. Right, sir. In your opening remarks, you have mentioned something on the M&A. In which areas are we looking for M&A? Powertrain-agnostic products. Anything that is powertrain-agnostic, and first focus is things that can strengthen our lightweighting vertical. Otherwise, any product that is powertrain-agnostic and which is recommended by the customer, of course, to us. Right. Broadly, if you can give us some outlook on the PV and the small commercial vehicle industry for FY 2026. Any color on the same, please? I think the PV industry, the budget was very good. The budget was very good, and hopefully that now really drives consumption and higher demand for PVs. However, given the global environment right now, it is hard to really forecast the next year. But we are quite optimistic about the industry reviving. And I think the festive sales that happened were really good and, hopefully next year will be even better. My question next is on the bookkeeping side to Puru, sir. Basically, sir, wanted to understand there is a jump of 18% in the other expenses line item on a year-over-year basis. If you can help us understand the same, please. Sure. I will take that. So our other expenses, they include various headers. There are various semi-fixed things like high labor charges, which are in line with minimum wage and wage inflation, plus there is power, fuel, et cetera. And then we have also had some development expenses. That is one of the additions that have happened. Just a mix of all these things, I think. Nothing major on the other expense. And it is not all first fixed. There are a lot of semi-fixed headers also that come into other expenses. So there is no one-off and this will be a sustainable number, right? No. Difficult to guide. There are some small one-offs. It is difficult to guide because this particular header includes fixed, semi-fixed as well as one-time expenses. There are some one-offs on R&D, new plant and so on. But difficult to guide because of the combination of the expenses that come into this item. Right. Sir, anything to read on the QoQ basis? There is a small drop in the EBITDA margin side. Anything you want to highlight here? In what two ways, sorry? On a quarter-on-quarter basis from Q2 FY 2025 to Q3 FY 2025, the EBITDA margin looks a little bit lower. Are you saying sequentially? Yes, sequentially. Sequentially. Q2 versus Q3. Generally very difficult to look at sequential in the auto comp industry. There is a lot of seasonality, the long value chains and so on. But definitely on this little bit product mix, addition of employee cost that has happened. We are adding teams for our global business, lightweighting, new plants, margins and so on. Plus these other expenses to some degree. But it is very difficult generally to look at sequential. But these factors are definitely feeding to that. Great, sir. All the very best. Thank you so much. Thank you. Thank you so much. Thank you. A reminder to all participants, please restrict yourselves to just two questions. In case if you have any more questions, you may rejoin the queue. The next question comes from the line of Rishabh Shah from BugleRock PMS. Please go ahead. Yeah. Hi. Thanks for the opportunity. My first thing was- Sorry to interrupt, Rishabh. You are not audible at all. Yeah. Hi. My question was, in the suspension business, in the PPT you have written that you have a market share of 10%. What differently have we done in this business that we command this type of market share of 10%? How big is this market? Can you please repeat the question? I think your voice is coming very muffled. In the suspension business, in the PPT you have written that we command a 10% market share. How big is this market and what differently have we done so that we command this 10% market share? Sure. Thanks for your question. One thing, we update the market share on an annual basis. In the next year's presentation, you will be seeing even a better market share than 10%. For the time being, one, we have a really good R&D for emissions. We have worked to augment it for control arms. When we utilize the word suspension, I think in the industry it is used in various ways, right? Various other products also call Suspension because it's more like a category. Most of our revenues are coming from control arms, which is suspension control arms, as well as the overall suspension and axle assembly. In these products, the range really differs and the content differs from car to car and LCV to LCV. Currently, the products that we offer, the range is quite big. It's between INR 2,000 to INR 8,000 per part, per LCV that we have. There are various factors on the design of the suspension and so on that lead to that. However, we are also working on increasing the content, on how we can offer more content in this. For the time being, we are doing INR 2,000 to INR 8,000, and that's roughly what the market says. Just a follow-up. What led to gaining market share in so less time? Sorry, your voice. It's just as we just won a good order right now also, so it's work in progress, and that's why we update annually. So once we update annually, we'll have, of course, an uptick because this order also is quite good, and this is the second or third order now that we've won this. No, sir, I'm asking the reasons what led to gaining market share in so less time. Oh, okay. The reasons we set up a new facility, we augmented our R&D and started offering control arms only. We do have a very good knowledge as well as prior experience in stamping because we are backward integrated, and especially stamping and welding parts which are sensitive. And sensitive because emissions is, of course, sensitive to emissions. Suspensions are sensitive to safety. It is a safety item, so it involves a lot of parts. A lot of these parts, the industry in India as well as globally, try to shift it to casting aluminum and so on. However, there were a lot of failures that happened previously, and there were a lot of imports from China and other countries. I think OEMs took a strategy to go back into sheet metal, but to go into higher tensile steels and also to really work with larger players so that they can take care of the safety angle of it as well. I think us being prepared from before and doing some R&D investments from before, as well as having very good experience in this product, of course, directly, we were doing some of it, plus indirectly also through our backward integrations and exhaust system. We were well fit for this, so we benefited a little bit from that. My next question is in the PPT you have mentioned- If you have any further questions, please rejoin the queue. No, this is my second question. I guess you are done with two already. Yes. It is fine. If you want, go ahead. Yeah. In the PPT, you have mentioned that the total export market size is $48 billion, with an addressable export market size of $2.2 billion for Sharda Motors for its current product range. Which products are we talking about, and why the addressable market is so less? Which product can gain the highest share out of our range, sir? If you can just repeat the number. Your voice is coming very muffled. In PPT, the number is USD $48 billion is the total export market. The addressable export market is $2.2 billion for Sharda Motors for its current product range. Which products are we talking about, and why is the addressable market so less for us? Which product can gain the highest share? Sure. I'll just focus first on not going into exact numbers, but the larger picture that we want to start with a focused area into exports, of course, because we are new to exports. The four sub-segments where we are focusing on is commercial vehicle emission components. That's something where we've now already had a major success, where we have got the order for these components for the largest engine maker in the world for commercial vehicles, plus their emission vertical. That's the first focus area that we've had. We'll of course try to increase our volume share with the same customer, as well as add more customers in this scheme. Here, there is also a trend happening that the CV emission norms are shifting in U.S. and Europe, so it's a great time to enter and add content and business for us over here. Second is on the adjacency or the emission adjacencies of the off-highway market. This is the temperature control tubes, which we've just developed, and we'll be starting production first domestically. This is focus for us to, of course, cater to the domestic market. However, for this product, there is a much larger market outside of India, especially U.S. and Europe, and that's a focus area. Third is on genset emission systems. We already have exports where we do emissions and mufflers for generators, those power generators. There is a big boom going on in the power gen market. Reason for that is varied from data centers to all these fires we just saw to various outages that have been happening in the U.S. We are just trying to utilize our prior experience and cater to customers who have much higher market share in some of the growing markets. Last is emission systems for under 100 horsepower tractors. These are our four focus areas for exports. Awesome. Fine, sir. Thank you. Thank you so much. The next question comes from the line of Paresh Agarwal from Taurus Asset Management. Please go ahead. Yeah. Sir, as you have mentioned, the company holds over INR 800 crore in cash and cash equivalents. What is the capital deployment strategy you have in your mind for this amount? Are you looking for an M&A or some upcoming CapEx plans or some special dividends going forward? Sure. Our first preference is to utilize this for augmenting our lightweighting vertical through M&A and through, of course, organic investments as well. Second, to do M&A in the powertrain-agnostic products, where we can have a JV, TA or acquire a company to add content to cars, trucks, tractors and so on. That is the first preference. However, for this, there is no fixed timeline because, of course, when it comes to acquisitions, we want to be very careful with deals, valuations, and we won't do anything that is not of the correct value for the shareholders. Plus JVs, TAs, there is always talks ongoing with multiple companies. It really depends when they materialize. In the meantime, we last year, of course, really accelerated the returns back to the shareholders. We had initiated a buyback and that was a very large size buyback. It was about INR 230 crore gross. We will continue to return back in other forms. We have established a dividend policy. The dividend policy right now is roughly 10%-30% of PAT and CAP. That is really our plan going forward. Yeah. Sure, sir. Another question. How does the company plan to mitigate the high customer and product concentration risk? Are there any strategic initiatives to diversify the product portfolio or expand the customer base in the medium term? Yeah. I will first take maybe customer. We have added multiple new customers. It would be a very large number of customers in various segments in the last 2 years. Of course, when you add a customer, the beginning is always small, right? However, once the relationship strengthens and mutual trust is developed, the growth is exponential. I think we are very good with the number of customers that we have now as a company, and that will grow over time. Of course, the good part is that the current customers also grow. That is a good problem to have. I am sure with all so many new customer additions that we have had over time, that will grow and that will take care of itself. Now coming to product concentration. Of course, right now most revenues comes from emissions. Our focus is to first get into the adjacencies. The adjacencies which I just mentioned within emissions and to cater more to the power generation, commercial vehicle, tractor, and off-highway industry. Outside of emissions and outside of adjacencies, we are investing into the lightweighting vertical, which is right now the control arm business, where there is a lot of work going on and I think that work is now also showing results. That lightweighting vertical of course adds control arms and assemblies business. But over time, there are a few more products that can be introduced into the similar theme and that will have a much higher percentage of revenues in the future than we see now. Third will, of course, as I mentioned, we will use the M&A route, JV, TAs, acquisitions to add more content other than this and more products, which over time could also reduce the product concentration. Okay. All right, sir. Thank you. The next question comes from the line of Ankur Poddar from Swan Investments. Please go ahead. Hello. Am I audible, sir? Yes, please go ahead, Ankur. Thank you for taking my question, sir. Sir, I have two questions. I will start with the margin. Gross margins, we have seen it has stabilized to around 26% odd last three, four quarters. So from here, do we expect this is the stable run rate of gross margin and it is going to remain at these levels? Or, with the introduction of new emission norms, in the construction equipment segment post 2025, will there be some increase in the gross margin as what we have seen in the CEV emission norms, which helped to improve our gross margin levels six, seven quarters back. Will we see some kind of improvement in gross margin with the construction equipment emission norms as well? Can you throw some light on that? Thanks for the question. I'll just first go back that the improvement that we saw is also from our strategy change from buying the catalyst or buying the catalyst on behalf of the customer, to a more directed by free of cost model. It got reduced from our top line and bottom line accordingly. That, of course, mathematically as a percentage also improved the gross margin. Gross margins as such would not be the best way to look at, and it's very difficult to guide because some still non-catalyst and catalyst business mix is there. Product mix can always change that. Now, coming to your question on the CEV norms that are coming in. As step one, we are getting into the adjacency product, which is the high temperature control pipes. Those pipes anyway don't have that, so they are going to be as per normal only. There is no base effect there as well, right? Because as on date, don't serve to this or very little we serve to construction equipment. Whatever little revenues will come from this adjacency will come fresh. There won't be any base effect. Okay. Because you always guided that gross margin is an important parameter to look the improvement in the efficiency level for us because as we migrated into new norms, the bought-out component will be lower. Hence, and since we don't share the percentage of what our- I just clarify here that it is gross profit growth, right? That is what we have been sharing, gross profit growth. It was going tandem with margins also. It's kind of the same, but what we had guided is on gross profit growth. That would be the best way to look at it, rather than that percentage margin. If you see all the commentary also, it's on gross profit growth, and since we've been sharing that and then you look back also, it matches very well, the gross profit growth. Okay. Fine. Any inputs on the follow-up orders of the last quarter we got in emission products from U.S.? It was $7 million USD order. You shared that we are pitching for follow-on orders in this market. Any input on that and what strategies we are developing to scale up this export business? Because we have been trying to scale this business for some time now, can you throw some light on that as well? Sure. That export business takes time. However, the trying what we've been doing for a while, that has shown good results. I think this order win which we've had is very significant, I would call it, because it has given us CV emission components for new emission norms for the largest customer in the world. I would say that's quite significant. Of course, we do have a very good RFQ pipeline also. What are we doing about it? Number one, maybe now it's been more than one year that we added a completely new vertical for exports with a separate CEO who has now built a team under him, including people who are working on the U.S. and the European market. Plus, we want to, of course, utilize this order to build trust with the customer as well as to build trust with the other potential customers. This is regarding the CV emission segments. The rest we work on the other fronts are also on, and as we have significant business wins, then we'll keep updating on that. Okay. Just one suggestion from my side. Since now the lightweighting vertical is scaling up. In your reporting structure, it will be really great if you can provide segmental information of lightweighting and emission products. That will be really helpful for us to analyze. That's all from my end. We'll look into that, and we'll see the possibility of separating. Thank you. Thank you and all the best. That's all. Thank you. Thank you so much. Thank you. Thank you. The next question comes from the line of Aryan Dadich from Taurus Mutual Fund. Please go ahead. Hi, sir. Am I audible? Yes, please go ahead, Aryan. My first question is, what is our current capacity for powertrain-agnostic products? If you can give a percentage of that in our revenue. Who are our main customers for powertrain agnostics? Mainly, as in the ICE vehicles or EV vehicles? Sure. We don't give capacity numbers as such, and I would say that they're different also, right? Powertrain-agnostic might be a very, let's say, large bucket, right? To be talking about just in terms of capacity. We can focus on the control arm side or the suspension assembly side, right? There, a new plant is coming up, or it's now come up. It is going to start with roughly 300,000 capacity. We do have additional capacity in other plants also. We are even catering to this segment a little bit from the south as well. Now coming to the customer profile. We have three customers. One is newly developed in this segment. As you see from the market that mostly all customers have all kinds of vehicle and powertrain offerings. This product is cross-used between ICE, CV, CNG, hybrid, and so on. That's what it's agnostic to. It's cross-use. Even our products are going into all different powertrains because they're agnostic, these products. Got it, sir. Sir, one last question. Given our company's limited bargaining power in the OEM supply chain because we are dealing with players like Mahindra and Hyundai, I mean, how do we expect to enhance our cost efficiencies? Because the raw material prices are fluctuating a lot, considering steel prices and other metal prices. How can we improve our price pass-through mechanism to maintain our EBITDA margins or maybe improve them? Sure. We won't go name any customers as part of these calls. But in general, I will take a general question on how, if you can just reframe the question, how can we improve our I didn't understand it. If you can just reframe the question a little bit. Sir, my question is, because the raw material prices is fluctuating a lot, how can we enhance our cost efficiencies and how can we be safe and resistant from that cost, I mean, price fluctuations, to keep our EBITDA margins stable? Sure. With all our customers, we have a mechanism called indexing. It is index based on fluctuations. Sometimes raw material goes down, sometimes it goes up. It is volatile, it has always been. For some time now, we have with all customers this agreement. Sometimes when raw material prices even go down, we have to pass through to the customers and we are back to back with the entire supply chain largely. That is the mechanism we use, which is called indexing. Right. Do we also use any hedging instruments? That happens, it just pass through. It just neutralizes. It is a pass-through agreement. Mm-hmm. We do not use any hedging instruments, right? No, we don't use any hedging per se. There may be some small here and there that we use, but nothing much. Sure. Thank you, sir. Thank you for your time. Thank you, sir. The next question comes from the line of Sanket Keluskar from Ashika Stock Broking Limited. Please go ahead. Thank you for the opportunity, sir. What is the revenue potential from the existing CEV V norms? As in, what is the market size and what is the revenue potential from the largest customer for this segment particularly? Sure. Thank you for your question. I will segment this answer into three. One is the revenue potential from high temperature sensitive pipes, which we are just starting with domestically. With this customer we have now a good amount developed, plus we are hopeful that with the balance industry also over time that we will be able to develop this business domestically quite good. However, the volumes domestically for construction equipment are not that much vis-à-vis other segments like PV, CV and so on. Overall, the size is modest. But the next part is that most of these customers are going to localize even their after-treatment or emission systems once these norms come in. They are waiting maybe for a year to pass by before they actually localize it, given that they already have similar systems available somewhere in the world and they are importing mostly. In most cases, they are importing them. That localization theme that will happen here, that will expand quite a lot this segment or the addressable part of it domestically. That is the second part, that when they localize their emissions, we want to participate on that, and developing these customer relationships help us in that. That is something which would probably happen with a lag from the emission norms as they first want to stabilize by importing mostly. Then third, all these customers and the ones we have developed, the ones we are working with, have a very large wallet for similar products globally because globally the construction equipment market is very large and as well as it has a good amount of content for our products also. We want to harness these relationships that we are developing and really go for that export opportunity. This is in three areas where there is opportunity. Thank you, sir. My second question is what is the value of business which you have received from the control arm segment? For the one which we just announced right now, the new one? Yes, sir. The lifetime value is $22 million and the annual is $4 million. Okay. This is just with respect to export or domestic as well? The control arms is domestic. The control arm business is a domestic business which we won, which we announced as part of this call today. Export is commercial vehicle emission components. That's a separate business. Okay, sir. Thank you, sir. That's all from me. Thank you. Thank you. The next question comes from the line of Mihir Vora from Equirus Securities. Please go ahead. Yeah, thank you for taking my question. Sir, my question was on the suspension and lightweighting segment which right now would be roughly around 7%-8% of our revenues. Going ahead, what is the aim here? Do you have any internal targets you have to reach? Because the way we are seeing the order book building up and even new orders. What's there in the store for next 2-3 years in the suspension and lightweighting segment? Sure. Thanks for the question. We have a new plant coming up, of course. There's a slight echo from the moderator, sir? Yes. Actually, there was an echo, sir. I have taken care of it. Okay. Thank you. Thanks for the question. There is a good amount of traction in this segment. The control arm business, we are gaining market share, and now we have won another good order here. First focus is, of course, to strengthen the control arm and axle assembly business. This we have done organically. At the same time, we are also looking for partnerships. Partnerships in the form of JVs or TAs, where we can further strengthen the control arm and axle assembly business. More importantly, that we can add content and offer more content, because right now the content range is only 2,000-8,000, and this entire segment has lot of opportunity to add content. There are a lot of changes going on globally as well as domestically, which makes this a more technology-enabled segment rather than the traditional stamping segment that it was. We are focused on that, and we are quite hopeful for this to be a significant contributor for us moving forward. However, giving a firm percentage number, I think is too early, and there are a lot of other moving parts as well. This is a focus area which we will be working on organically and inorganically as well. Just to follow up on that part. We have a 1.8 lakh units capacity annually for the suspension part, but with the Pune plant coming in, would that be a substantial addition to our capacities, or how can we look at it? Yeah, that's going to be substantial. That plant alone will have about slightly less than 300,000 capacity. That's all from my side. I'll fall back in with you. Thank you. The next question comes from the line of Agastya Dave from CAO Capital. Please go ahead. Am I audible? Yes, please go ahead. Thank you very much for the opportunity. Sir, a lot of the questions that I wanted to ask you have been asked by my fellow participants. Thank you very much for answering those. Sir, again, there was a question on the gross margins and how the previous changes in emission norms contributed to higher gross margins. Can you provide some understanding of the scale of the opportunity again, in terms of, let's say, absolute EBITDA or absolute gross profit once Ramp V is fully operational and all the opportunities related to CEV V are also something that we are actually addressing that entire market. So the timelines, I understand, are uncertain. But again, the magnitude of the opportunity, sir, can we double the size of the company based on these opportunities plus the lightweighting plus the export opportunities? Is that possible, sir? Are these opportunities big enough? Yeah. Without going into specifics, because there are laundry list of various markets that we are addressing. But if you look at it from the perspective that currently the company's revenues are, of course, as on date, coming largely from emissions. There is barely from exports, tractors, construction equipment. I think all of that put together, we had shared, is less than 5% of our revenues as on date. Very true. And so there is a huge opportunity. Now, different segments, different numbers. But if we were just to list out our focus areas, to begin with, the largest opportunity is exports. And within exports, also the four sub-segments of CV emission components, then emission adjacencies, then the genset emission system market, as well as the under 100 horsepower tractor market. So put all of this together, it is a very large addressable market and, of course, much larger than the Indian market per se, because it's the U.S. and Europe. Then our lightweighting vertical where we have just started off, and we are already seeing very good kind of traction. So there just contributes to 8% of our sales. And with additions, that will definitely contribute a higher percentage. In addition to that, the CV norms, the Gen V norms, as well as the export tractor market, all of that will significantly increase it. And all of that is on top of the possibility of us adding content to our existing customers and new customers via M&A route. So overall, yes, we are quite hopeful to be growing significantly and to be outperforming the overall market. Sir, have you discussed publicly the timelines associated with the M&A opportunity? Because we have been discussing it for about a year now. But when do you see realistically the M&A opportunity materializing? Yeah. Number one, when we look at M&A, there are three parts to it. Of course, JV, TA, and then acquisitions. So the acquisition front, we are going to be very careful there. And that really depends on the deal. There's no fixed timeline for that. We won't just do an acquisition for the sake of doing it. And we, at any given time, are exploring various opportunities. We have a separate team, in fact, now that we've created only to look at M&A. So there are a couple of people who just look at M&A opportunities. When it comes to JVs/TAs, there are various talks that are always ongoing, and as something material comes up, we'll keep updating. However, there's no fixed timeline per se to any of this because this is also really dependent on various other factors including. Understood, sir. Sir, final question, again, going back to the exports and including all the core segments that you mentioned. Is the traction. I want to understand the nature of the traction that you're seeing with your clients. Are we going to see a slow and steady, by steady, I mean, let's say, the exports growing at, let's say, 25%-30% CAGR, or will there be a quantum jump in your exports once an inflection point is set? How do you expect the growth to pan out? I am not talking about the numbers here, sir, just the characteristic of the growth. Suddenly, will we see a huge jump, or will there be a slow and steady increase, or fast and steady increase? Sure. One, it is of course, difficult to forecast and CAGR per se can be very high because the base is so low. Export base is so low right now, so CAGR is very high. In some ways, if you look at just the order we won, the CAGR number that you shared would already be met by that. However, it is very difficult to time what we have learnt in the export market so far, that getting the first order and really getting that trust going takes longer. But once it is done, then it opens up a wallet that is 10x or 20x bigger. That is what we have seen so far. I think we have made one significant move already and one significant win. That should open up lot of more opportunities, and we are in similar stages in the other segments also that we spoke of. Some customers, which are very large export customers, are heavily focused on also producing out of India because of the geopolitical situation that is happening. We are actively also working to develop those customers, even if they are small in India, so that we can access the wallet shares that they have globally. So difficult to guide per se as a timeline. However, we have seen progression generally to be in this. Understood, sir. Sir, thank you very much. Again, excellent performance. Operationally, you guys always deliver irrespective of the macro environment. Sir, thank you very much. All the best, sir. Thank you so much. Thank you. Thank you. Ladies and gentlemen, due to time constraints, we would take that as the last question. I would now like to hand the conference over to Mr. Puru Aggarwal for the closing comments. We appreciate your participation in our earnings call today. We trust that we have addressed all your queries. Should you have any further questions, please feel free to reach out to our investor relations advisors, Strategic Growth Advisors. Thank you, and have a pleasant evening, and happy prosperous new year. Thank you, ladies and gentlemen. On behalf of Sharda Motor Industries Limited, that concludes this conference. You may now disconnect your lines.