Q3 23/24

Feb 9, 2024

Ladies and gentlemen, good day and welcome to Sharda Motor Industries Limited Q3 FY 2024 earnings conference call. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantee 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 after 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. Puru Aggarwal, President and Group CFO from Sharda Motor Industries Limited. Thank you, and over to you, sir. Thanks, Seema. Good evening everyone. A warm welcome to all the participants on this call. I am here with Mr. Aashim Relan, our CEO, and our investor relations advisors from SGA. I hope you have had a chance to check out our results and the investor presentations. You can also find the presentation on the stock exchange and the company's website for your convenience. Before going into the company's financials, I would like to give a brief overview of some noteworthy highlights in the industry. Let's start with the latest development in the automotive sector. India continues to be the third largest automotive market globally and is likely to end FY 2024 with 4.1 million PV sales and to be one of the fastest growing markets globally in the coming years. Given this, many global OEMs have set up manufacturing plants over the last 10-15 years to grab a share of this important market. In order to scale up at a faster pace, a lot of global OEMs have now solidified their plans to make India their global hub for some of their models to begin with. In the PV segment, SUV saw a strong demand. Production volumes for passenger vehicles for Q3 FY 2024 stood at approximately 11.4 lakhs, reflecting a YOY growth of 5%. Notably, significant sales were achieved during the quarter, with the passenger vehicle segment registering sales of 10.1 lakh units. The surge in demand was driven by the festive season, year-end promotions and new product launches. However, there was a slight moderation in sales volume compared to Q2 FY 2024, primarily attributed to the Kharmas period, characterized by subdued demand from December 15 to January 15, 2024. In the commercial vehicle sector, sales volume for the quarter ended December 2023 reached 2.4 lakh units, up from 2.3 lakh units in the same quarter last year. This growth was fueled by strong economic expansion and increased construction projects, leading to improved fleet utilization rates and cash flow for fleet operators. However, the tractor segment saw a 5% decline in the sales volume during the same period, largely due to subdued demand caused by a delayed harvest season. Despite this, solid order bookings and positive market sentiment indicate a resilient growth path for the sector. In the last quarter, the two-wheeler segment experienced a significant recovery propelled by festive demand. This positive trend continued through the December 2023 quarter as sales volume for Q3 FY 2024 reached 47.31 lakh units, indicating a strong YOY growth of around 23%. The increased demand was influenced by several factors such as festive expenditure, heightened rural sentiments, the wedding season, intensified marketing initiatives by OEMs and the anticipation of price hikes by January 2024. After providing insights into the industry, I will now shift the focus to the operation and financial performance of the company. Consolidated revenues for Q3 FY 2024 were flat compared to Q3 FY 2023 and around INR 689 crores. Our revenue for 9 months FY 2024 reached INR 2,106 crores, reflecting a 5% growth compared to 9 months FY 2023. In Q3 FY 2024, our EBITDA stands at INR 94 crores, demonstrating a substantial growth of 47% YOY compared to INR 64 crores in Q3 FY 2023. The EBITDA margin for the quarter also experienced a robust expansion, increasing by 434 basis points from 9.4% in Q3 FY 2023 to 13.7% in Q3 FY 2024. In 9 months FY 2024, our EBITDA has reached INR 262 crores, indicating a significant growth of 31% YOY compared to INR 201 crores in 9 months FY 2023. Notably, the EBITDA margin for the 9 months period has expanded by 247 basis points, progressing from 10% in 9 months FY 2023 to 12.4% in 9 months FY 2024. In the quarter, our profit before tax amounted to INR 103 crores, factoring in shares in profits from joint ventures and its associates. Our JV reported a profit of INR 0.9 crores in Q3 FY 2024 compared to INR 0.3 crores in Q3 FY 2023. For the 9 months period, our profit before tax amounted to INR 283 crores, consisting shares in profits from JVs and its associates. Our profit before tax witnessed robust growth, soaring by 64% compared to Q3 FY 2023. Additionally, for 9 months FY 2024, our PBT experienced a commendable increase of 44% compared to 9 months FY 2023. In Q3 FY 2024, the profit after tax amounted to INR 76 crores, marking a notable growth of 64% compared to Q3 FY 2023. For 9 months FY 2024, the profit after tax reached INR 211 crores, exhibiting a significant growth of 44% compared to INR 146 crores in 9 months FY 2023. On the balance sheet front, we continue to remain a debt-free company as on December 31, 2023, with surplus cash and cash equivalent INR 688 crores and INR 103 crores in mutual fund and bonds. With this, we can open the floor for Q&A. Thank you very 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. We take the first question from the line of Ravi Naredi from Naredi Investments. Please go ahead, sir. Thank you very much to give me opportunity. Mr. Aashim, first, congratulations all of you and your team to give the so fantastic result. Sir, can you tell how much growth we may achieve in next two to three years, and what is our aim and CapEx plan? Hello. Yes. Good evening, and thank you so much. Thank you for the compliment on the results. Regarding growth in the next two, three years, we don't give any specific guidance in terms of numbers. But we remain to be very optimistic and in a longer-term period to have similar growth pattern that we've seen in the last couple of years. But as such, in terms of numbers, we don't have any guidance that we are giving at this point. CapEx plan? CapEx will remain to be incremental, how it has been. There will be different stages, but it will all remain to be incremental for the next 2, 3 years. And similar pattern may be slightly higher or lower, depending how it has been for the last couple of years. And it will be taken care more than enough by the profitability that we are expecting. Yes, understood. And sir, we have INR 688 crore as you mentioned. So how you utilize them for immense ROCE? Yeah. So I think that is a very low-hanging fruit that is there, that we have a significant amount of liquidity and do remain to be debt-free. In addition to that, we also have a few surplus land. So our first preference has always been to utilize this for an M&A opportunity. But at the same time, we are long-term focused as well as very conservative when it comes to valuations and products. So we are working on various opportunities and there is no timeline in terms of M&A. Nevertheless, at the same time also, we want to substantially increase the returns to shareholders. So I think that already started with a revised dividend policy of between 10% and 30% of our profit. But at the same time, we are working on a higher policy in terms of returns to shareholders and maybe by the end of the financial year, we would also have that policy out. So there would be a substantial increase that we may do at that end as well while we continue to look at M&A and when the right deal comes, definitely we will execute. Right. Sir, you won't monetize property in NCR. So how you have plan to monetize them? Anything can you mention or value of the property where we receive in future? Yeah. Given that right now the liquidity position is very good as well as where those properties are located, there's a very growth area. We don't have any immediate plan to monetize it. But at the same time, if we do get a very attractive price at some juncture, we would also monetize it, but no fixed timeline Okay in terms of monetizing it, but that's something that is additional and at the same time, we don't intend to use that land also. We will at the right time and right price, definitely go ahead with that. Okay. And sir, last, this immense margin possible in future year because in quarter 3 you raised top line by 2%, but net bottom line 65%? Yeah. So I think maybe the way our numbers are, sales is probably not the right metric to look at. Yes. Gross profit is actually the best indicator in our numbers. Gross profit roughly grew by 32% year-on-year. That is something that is also indicative of the underlying sales growth. While it is not exact, it is very similar. But in the increased margin front, how it looks currently due to the sales number, we would be at a good number, which is of course better than last year. But given product mix and other things, there is no fixed number in terms of EBITDA margin or PAT that we have. But given that there is more FOC that we have in terms of catalyst as well as catalyst prices have reduced, there would be a higher number which we are seeing than before. Thank you. Thank you very much. And, sir, in future you do wonderful working also. Thank you so much. Thank you. Thank you, sir. The next question is from the line of Vishal Srivastava from Swan Investments. Please go ahead, sir. Mr. Srivastava, your line is in the talk mode, sir. Please go ahead with your question. Mr. Vishal, can you hear me? As there is no response from the current questioner, we move on to the next question. The next question is on the line of Mr. Sonal from Mohit. Please go ahead, sir. Hi, Aashim. Congratulations on another very good quarter. Just a couple of questions here. Firstly, while you don't share the track some volume data, and based on that, looks like your gross profit per vehicle has increased or almost at similar level. Last time you mentioned that your gross profit per vehicle could be one-off, because of better product mix, but it seems like it's maintaining. I'm not talking about margins here, I don't like that metric. We have a reasonable understanding of your company. Do you think this number is sustainable? Because last time you seem to be suggesting that maybe, as you are a conservative management, maybe you're suggesting that this may be a one-off. Do you think this kind of numbers may be sustainable because of the benefits of RDE norms and so forth now fully flowing in? Yeah. Thanks so much. Regarding the RDE norms, we do have a tailwind, and that's roughly 10% because our content per car increased because of RDE norms. As also part of the RDE norm, the new products that we took, in that the catalyst was free of cost, right? We did not have catalyst as part of our sales. Just mathematically, margins do improve as a result, because the catalyst fraction is not there in the newer products right now. But definitely for some of the older products, it does remain, but it has been lowered as a percentage of sales. So the margin does look better. Now, the best indicator, just because of this catalyst movement as well as now catalyst prices have come down also, is to track the gross profit company level, which is publicly available, and that's grown- Ashim, I understand. I am actually at one level ahead of that. We track your volumes through a different way. When we look at our internal metric, we track some gross profit divided by some volume, which is proxy to your volumes. That seemed to be also very high for last two quarters. When you shared Q3 numbers, you mentioned that that number seems to be quite high compared to history, and I am talking about gross profit margins by any stretch of imagination. That number is quite high, but the product mix was much better in Q2, is what you said in the last call. I was wondering, the gross profits which we are seeing, they seem to be now sustainable. Is that a fair assessment? Maybe, after the first quarter came in, you were not very sure, but now this is the second quarter trend of your gross profits and not margins, absolute gross profits or gross profit per vehicle, which you don't share, but can be backward calculated. They seem to be pretty high. Is this number sustainable number, this kind of profit? Absolute profit. Sure. I can't comment on gross profit or vehicle or the way you are tracking it, as I am not fully aware on and don't have a clear understanding of it. As a broader point, whether this is sustainable, whether that's improved. I think, one, there has been an improvement. It was there last quarter, it is there this quarter, and that is on account of RDE products have stabilized. As we saw in our results in 2020 also, when BS6 or 2021, once products mature, there is definitely some improvement. At the same time, both these quarters have also had a favorable product mix. It could be both. One is definitely some maturity of the products that have come in because these were new products. Second, the product mix has been favorable this quarter, as well as last quarter. We hope that it continues, but product mix is something that is not fully in our hands. There has been a product mix tailwind in this quarter and last quarter. But definitely some part of it can be attributed to maturity of these newer products. Margins do improve then generally because of that. All the benefits of RDE norms already factored in or some more to come because it usually takes a few quarters for them to fully flow in. More or less Q3 captures all of that or some more may be possible. You cut your costs. RDE norms in general, the products have started. Now there is growth because of RDE, and that growth will continue. It will continue as we go forward also because now all those products are live and they are in production. That is something that is- No, what I meant was, could your EBITDA further improve because of the cost-cutting? Because it takes a few quarters, three, four quarters for these things to fully stabilize. What I was trying to get at was that, obviously, in Q1 you did not see the benefit, in Q2 you saw some benefit. In Q3 we may have seen more benefit. Is it now more or less done or there is incremental further cost savings as you stabilize the RDE further and cut your extra costs, which you may be using? Or all those benefits already fully get reflected in Q3 was my question. It is very hard to say. Just being on the conservative side, I am again mentioning that the product mix has also been beneficial. It is very hard to say if there is some further improvement. It may come. It is very hard to say at this juncture. Generally, as quarters go by, products become more mature. There are some benefits, but that is contingent on various other factors also. Very hard to give guidance on that front. Hoping that there could be improvement, but very difficult to give any kind of call on that going forward. So four more questions, all very short. First question was pertaining to a lot of strategic initiatives you mentioned in the last one or two calls on the export front et cetera. When do you see expecting catchment that fit like a few years away from now or we could see some benefits of whatever initiatives you have been taking in the next year itself, and these discussions are in more advanced stages. This was my first question. The second question was, on the investor relationship side, in the last few quarters, you mentioned that now since RDE thing is stabilized, you may take more interest. So any further plans in terms of activities or hiring on that front? Thirdly, last two calls you mentioned that you are actively looking at disclosing per vehicle data, at least in terms of index terms, but we don't see any progress on that side, and I would presume six months is a very long time to figure these things out. So do we expect at some stage you share it and all that plan is off? Okay, sure. Thanks for the questions. Because there are a few questions, so in case there's a question that I missed out, please do add in. First taking the export side. We have built a team for international business development. We are very new to it. And we have a very good RFQ pipeline. We do expect some new customer additions. And we also are seeing that initial orders could be small because they do like the newer customers to give pilot orders, especially on the export front. But once the pilots are done, then the growth is literally exponential in this industry. And there is a very strong tailwind when it comes to China plus one. It's maybe much more than we also thought. But at the same time, the gestation period is anyone's guess when it comes to exports. We are working on it and as something material develops, I will keep updating. But that could be an additional growth lever that once it comes in, it would be substantial. But it will start small. We are seeing very good traction on the RFQ side. So that's on the export front. Now the next question regarding investor relation activity, definitely lot of backend work is there and we will be planning even in terms of hiring. We are hiring on the investor relation side or more on also activities on rewarding shareholders. So I think there are policies underway and as we get approval internally also, we'll be sharing that. And lastly, regarding the index that we've been working on. That is something that we thought is better in a new financial year, and it is not a gross profit per car or per vehicle kind of index, I think that you were mentioning. But it is something that would be easier to track growth in terms of sales, because it is not from the sales that are reported visible exactly how much growth has come, and gross profit is a very good indicator for that. We are just tracking on that and maybe as part of the new financial year presentation that will come. Lastly, any progress on the EV venture? One suggestion before you answer this question. The place where you have the property, as you know, has gone through a massive inflation bubble. You may not need that money, but maybe you should explore taking the money when it is available. That property must have really appreciated by multiple times in recent years, I am sure. Lastly, I look forward to your answer on the EV side. Sure. On the EV front, right now we are going slow on that, and we are still testing out the prototypes because there are a lot of changes that have come in because of the AIS-156 Amendment 3. There is a lot of cost pressure on the OEMs for EV, so they have requested us to go for lower cost battery options. Now we have developed a lower cost battery prototype, and that is again back into testing. This is something that we are being, again, very cautious. Battery packs do require a very high quality and hold a lot of field risk in the market. Till we are not fully comfortable, we will not release this product. As of now, we are definitely going to spend some time internally on testing till we do not have full confidence on that. That will take some more time to really come by when we are talking about the Kinetic Green right now. Lastly, a small further question, if I may. Sir, may I request you to please join the question queue, as we have several participants waiting for their turn. Sure. Thank you, sir. The next question is from the line of Vishal Srivastava from Swan Investments. Please go ahead, sir. Thank you for taking my question, sir. Sir, I have a couple of questions regarding our growth. Sir, we have seen the top line. It has actually de-grown by almost 10% on a QoQ basis. If we exclude the Maruti numbers from the overall passenger vehicle production, the production has de-grown by almost around 8% or 7%-8% on a QoQ basis. In the presentation, we are also seeing that we are seeing content per vehicle increase in the new norms by almost in the tune of around 10%-15% odd. Sir, just want the guidance from your side that in this scenario, we should overgrow the, in fact, outgrow the industry. I am not understanding this kind of trajectory or you can guide how the trajectory will be going ahead in this regard vis-a-vis industry growth. Yeah. Okay. Thanks so much, Vishal Srivastava, for your question. It was slightly unclear, but I think I got the crux of it. For us, sales and gross sales are not the correct indicator when it comes to tracking growth. That is surely because of catalyst prices. This quarter, even catalyst prices have dropped. I am talking YoY, because sequentially, in the auto industry, it is very difficult to look at. I am talking about quarter on quarter. If you look at our product mix, our new products which have come in have all been without catalyst for the RDE side, which you are referring to, right? A better indicator to look at growth for us is gross profit. If you look at our gross profit number, this is YoY, right, it has gone up 32% Q3 versus Q3. On a nine-month basis, it is 23% up, and that is substantially more than the growth that the industry sees. Whether you exclude Maruti, whether you count LCV, whichever blend, because different blends that it can be looked at, but the growth of the industry has been ranging between 4%-7%, while as our gross profit is up by 32% this quarter, as well as on a nine-month basis, 23% up. Our guidance that our sales would or our sales/gross profit would be up more than 10% versus industry has been there, and we will continue to see that as well as our content per car increase this time. I think just looking at the sales number for us may not be relevant because it includes that distortion of catalyst, and gross profit would be a much better indicator. Okay. Sir, in that case, going ahead for next subsequent quarters, this kind of gross profit improvement on YoY basis will continue for the year because as our model products matures and we are getting new orders also. We expect this kind of improvement? Yeah, I think the guidance has been that we would outperform by 10% versus industry. That we would do for this year because of RDE, and we are ahead of that slightly already. I think that should continue because of the content per car increase, and that is surely because of the R8 and RDE content per car increase or content per engine or because it is just not car that is increasing. Okay. Sir, what has been our R&D spend or I would say, what do we expect our R&D spend for FY 2024 full year and FY 2025? I don't have the number in front of me, but it's been relatively similar. It does grow incrementally, and we are planning to add some R&D resources, but as an overall number, it will not be a very substantial increase that you will see this year or the next year. But definitely as the package has been growing, it will continue. Okay. Sir, any update on JV for sunroof? Sorry, JV for? The sunroof systems we were planning. I do not think we have ever been planning. Maybe some other company, I think. We have never been planning. Okay. Sir, can you give information on what has been our CapEx for the nine year and what is the expectation for FY 2024? Sorry, your voice was unclear. Sorry to interrupt you, sir. Vishal sir, may I request you to switch to your handset if you are on your earphones? Okay. Yes, please. Thank you. Can you guide for CapEx for FY 2024 and what actual we have done in first nine months of FY 2024? Yeah. So roughly on a gross level, we have done about INR 44 crores for the first nine months, and in a similar trajectory, we should continue for the next three months. Okay. Any guidance for FY 2025, sir? No particular number, but we do expect CapEx to be incremental, even though we will be maybe setting up a few new facilities, but it would remain to be incremental. It would not be anything substantial in the realm of the numbers. Okay. Sir, I was asking you about sunroof because there is an information that we have some tie-up with a company called Bestop Inc. USA for some sunroof systems. Okay. Bestop is not sunroofs. It is the convertible roofs, semi-hard roofs, which is the canopies. Bestop is what we have for canopies. It is not sunroof. Okay. It is the canopies and it's a semi-hard canopy, which is a specialty product. That's continuing on, but it's a very niche product, so the application is not very wide. There are only certain models that have it, and we are supplying to those models. Okay. It's a very small business. Is this business from India or this is from international markets? This is India. This is made in India. Bestop is an international company. It is based out of Denver, Colorado. But we have that technical assistance with them for India. Okay. So what exactly, sir, you Sorry to interrupt, Vishal Srivastava. May I request you to join on the phone? It is just one question which is connected, if you can. Yes, please go ahead. Sir, what exactly the potential you see for this kind of product in India going forward next 2-3 years? I think this will remain to be a niche product. This is going to be a niche product. I think definitely if there is one or two more models that come up, it could grow, but the numbers are very small, and we don't see a very large addressable market for this particular product which we are doing. Okay. That's all from my side, sir. Thank you and all the best. Thank you. Thank you so much. Thank you. Thank you, sir. The next question is from the line of Chirag Shah from White Pine Investment Management. Please go ahead, sir. Yeah. Thanks for the opportunity. Sir, first, few clarifications. You are indicating that the product mix is improving for you. I understand why, because of RDE. But sequentially, is there a big shift in product mix? That is the first question. If you can elaborate which category you are referring to. Are you only referring to passenger car when you say product mix and RDE norm, or there is something else that has also happened on the CV side, which is also additional advantage that you have? Yeah. Thanks so much for the question. The way we look at our products is that there are various models and engines that we supply to. Some models and some engines have better profitability on a relative basis than others. When the engines with better profitability or the products, subproducts with better profitability sell higher than the ones with lesser ones sell lower, that's what I mean by product mix. It's not really segment based, but it's just how it is in terms of what models and submodels that we are selling, and that's a factor of how they're doing on the final market. Again, sir, just to elaborate, does it also mean that if, say, for example, more SUVs or high-end cars are being sold, it implies a better product mix? Or not necessary, it's more specific to based on what is your arrangement with each OEM for each model. That is what determines the profitability. What is the right way to understand this? Yeah. I think it's not even just OEM based also. Within OEMs also, there could be like seven, eight products, right? Yeah, but it is more specific to our own product mix rather than any industry level product mix. But of course, higher end cars and SUV generally have a better content, but it cannot be correlated on an industry level. It's model specific. Not only because Because there is the SUV trend change. The rising share of SUV has been happening when, in fact, the pace of change was far higher in earlier years as compared to last year. But our profitability. That was the reason I'm trying to understand. We have not seen the impact of product mix earlier. Yeah. I think it's not something that's a macro factor, which I think you're trying to It's more an internal and multi-product kind of a thing when I say product mix. But at the same time, that is only a part of it. Definitely, there are improvements because these products were newer to us, the R&D products, and now we produced them for about six, nine months. So generally, as products mature, there are improvements. So it's a mix of both, but definitely last two quarters, we've had good product mix as well. On the commercial vehicle side, the 3 to 4-liter engines, if you can just talk a bit about it, how big it is, and when it can start flowing in. Because in HCVs, the transition to newer engine has not happened in that sense. They're still using the older ones, but 3 to 4-liter engines is what an opportunity that was supposed to open up as the transition happens. How big is this opportunity? Sure. The 3-liter to 4-liter segment is something where we did not have standalone technology before. Now we do have standalone technology to cater to the 3-liter to 4-liter engine market. That standalone clearance we have only got probably about six, seven months ago. This segment is roughly, I would say, 25%-30% of the CV market, which we were not playing in or were very small in before. This is something we have started working on. It is totally dependent on business development on when we could get entry into the segment. What is good about this segment is that the products can be cross-used. We do have internal development work happening, but it is contingent on the business development cycle and being able to penetrate on the customer side. Yeah. My question was about that. So where are we in that cycle, sir? Have we submitted our products to the OEMs and they are being tested or they are still in initial approach phase? It is a two, three-year cycle there minimum. How should we look at it? It is very hard to predict these cycles, right? It can be multi-year, it can be multi-month also. We are ready in terms of the technology now. I think that was a big milestone for us. We never had the technology for this segment, but we developed it internally now. Now we are ready. It totally depends. There is no guidance as such in terms of when this can come to fruit in terms of- Anything on the four to five-liter engine? Sorry? Anything on the four to five-liter engine? Because that is also area where the transition has not happened as yet, right? Yeah. So for any engines which are above four liters, we do not do it from a standalone entity, we do it through our joint venture. From JV. Okay. Got it. We do not do it as a standalone. That we do through our joint venture, which is with Purem (Eberspaecher). Okay. Lastly, on this China plus one tailwind, you made a comment that it has actually surprised you positively, the tailwind. How should we look at it in terms of the pace of approvals you are getting and when can it start flowing in your P&L? How should one look at it? Yeah. In general, there is this macro trend of China plus one. For us, we are very well-positioned to take it on also because we have internal emissions technology for the highest end emissions. The same emission norms which are there in Europe as well as the U.S. market are there in India. Even on the off-highway sector, the same emission norms are coming in. A part of them have already come in and the others are coming in, and we have complete technology for that. In fact, we are the smallest company in the world right now with the technology for these emission norms in the entire world. Everyone else in this field is a multibillion-dollar sales company. We do have a good tailwind in terms of the technology that we have. Now, how to look at it or what I commented? We are very new to exports. We have been trying for roughly one, two years now. We have developed a team which is fully focused on international business development. What we are learning is that the gestation period is that first we have to acquire the customers, which has already started, and they begin small with pilot runs because this is also developing trust. Exports is a lot more about trust and then they give bigger orders. We are working on it. We have a very good pipeline of RFQs, but how they develop is yet to see. Even one, two customers can be a substantial increase because the market is much larger, of course, given that lot of these products are currently exported out of China, and definitely people are looking for alternatives. Is this in RFQ stage where submission will happen? Sorry, can you hear now? Yeah, just one last follow-up on this. Yeah. Basically, it is still in RFQ stage you are indicating, so you will have to submit the sample, they will approve it. It is a reasonably long process, right? I think in this, we may have some smaller customers closer to development, but it doesn't work exactly like that there's RFQ, then it's submitted, and then there's a product. It's a little bit, let's say, more ambiguous when it comes to exports. By RFQ, it means that we have contacted the customers. Customers have visited us. They have audited us. They felt that we are good enough to work with, and then they share a RFQ for pilot models and so on. It is at different stages with different customers. So very difficult to paint it with one brush. Sir, one suggestion or request on the investor relation side. Sir, in fact, even I have been trying for a meeting with you or interaction with you since now a very long time. I presume that would be the case with lot of other investors. I would request you to just allocate some of your time for this activity now that lot of things are in inflation, this is an autopilot basis. Sure. I think in general that is been there and with the SGA will work out and we'll- Yeah. Because we are trying to do it with SGA also, but we are not able to get a time slot on this. Could be a case with lot of investors. Sure. I think this with the SGA team, we will look into it. Sure Definitely, I think we would all meet in priority. Yeah. Thank you very much and all the best. Thank you so much. Thank you. Thank you, sir. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your question to two per participant. Should you have a follow-up question, we request you to rejoin the question queue. The next question is from the line of Karthi from Suyash Advisors. Please go ahead, sir. Yeah. Hi, good evening, Aashim. Aashim, couple of questions. One is, now that the TREM V timelines are FY 2027 effectively, just want your thoughts on the drivers available for growth in the interim. Given the neutral outlook for the industry as a whole, how do you see that? Could you please share some thoughts on this, please? Sure. Right. So for us, already we have been working on various growth levers from before, and hopefully in the period between now and TREM V, some of them will show good results. So one of them is definitely the export side, especially on the global small engine off-road segment, plus components, would be one growth lever that we would see some traction on before. Second, this three liter to four liter segment that has now opened up for the standalone entity. That is definitely going to be a growth lever for us. And we have also started working some additional technical work on our suspension vertical, which is a positive surprise that we are also seeing in terms of order book, and that may increase as a percentage of sales maybe as we go forward in the financial years. And of course, in addition to this, at the right time, at the right deal, if an M&A comes by, that would of course be a growth lever. Right. Just to be sure, is anything likely to happen in FY 2025, which is a new line item, effectively, that is really where I am coming from. Can something meaningful be expected in FY 2025? See, we are very optimistic of FY 2025, 2026. There are so many things globally that are going on as well as various other factors. But in terms of our efforts, we are very hopeful that some of them do come to fruition. Very hard to say in terms of timing that they are FY 2025, 2026. Any one of the things that I mentioned, if they were to come into fruition, it would be very substantial for the numbers that we are looking at. But to exactly time it and to comment on a financial year basis, that is a bit difficult. Second question would be on the exports front. You spoke about various RFQs. A, to what extent is Eberspächer helping you out in this? B, would you be at least able to share with us how many OEMs, whatever distributors, whatever model you are trying to follow, you are currently in contact with. Some center where there is some progress made. Sure. One, we are doing it as a standalone entity, right? We are completely doing it as a standalone entity. In terms of number of customers, there is no number that we have yet guided on, but it is substantial because in terms of coverage of customers, we have covered a good amount of the market, but now it has to be seen how it develops into business. But no specific number that we are sharing at this moment. Any color on geography? Anything just to keep us at least intrigued, right? Europe is exactly what we've been working on. Okay. Sure. Best wishes. Thanks for answering. Thank you so much. Thank you. Thank you, sir. We take the next question from the line of Manpreet Arora from Arora Wealth. Please go ahead, sir. Yeah. Thank you for the opportunity. Aashim, are there any opportunities for us on the defense side now that the government is opening up on defense and railways? Are there opportunities on the exhaust system source for any of these segments? Are we looking towards such a company? Sure. In the defense segment, maybe indirectly, if our customers are supplying, we would supply. As of now, we don't have any vertical or team that is focusing on the defense segment, and railways as well, we are not working on. It's not part of our plan yet. There could always be opportunities, but it's not something that we are working on. Okay. Thanks. My next question is a little technical in nature. Just to understand the RDE norm and what is the extra value add that has happened before RDE and after RDE. My understanding is that before RDE, the norms had to be fulfilled in the lab, but now with RDE, every vehicle on the road has to fulfill that, and there are some onboard diagnostics, and it probably requires more electronic components for this to be. Is that the value add that we bring with RDE? What is the value that has added to the exhaust system that brings that 10%, 15% extra? It's a little more technical, but just wanted to. Sure. I think the previous BS6 norms were the standard norms, which is the first phase of BS6. When RDE comes, in essence, what happens is that the regulation becomes more stringent, and there are various changes that have to come in as part of RDE in the entire car or in the entire truck or LCV. For our product specific, I will discuss that as part of the RDE norms, there was a little bit of addition and amendment to our products that was required to meet these more stringent norms. It is not much on the electronic side, but it is really just our product, which is more on the canning front, that was required and little bit of augmentation of the products was required to cater to this norm. From the customer standpoint, they would have to change various other things in addition to that also. We are just a part of the entire emission story. Okay, thanks. One last question. You mentioned that we are one of three companies in the world which have a product like this. Since we meet BS6 standards, does our product also meet some of the global standards like Euro 6, et cetera? Does that automatically qualify us for meeting those standards and we just have to work with the OEM there to get our product in or our product also needs modifications? Sure. We are not one of three. We are the smallest, I mentioned. But yeah. Yeah of a few company. The way this product works and the industry works, it is not something that is pick and place kind of a product. It does require to be working with the OEMs. Having technology, the BS6 norms, the BS6 RDE norms are very similar to the emission norms that are there in the developing or developed world, sorry, the U.S., Europe, and very similar norms that they have. Hence, we have the technology to meet them. Similarly, on the off-highway side, whether we talk about TREM IV, TREM V, CPCB IV, CEV IV, the various norms that have come into India, they are very similar in the European market as well as in the U.S. market. These are intense in technology requirements. This is not a product which a newcomer, even by making a very substantial investment, can just come into. For two reasons, one, that the technology is difficult or it is complicated, it requires multiple years of research and development. Second is that it also requires a lot of trust in terms of proving these products on the market. In India, it came in 2020, so now products have been out there for 3, 4 years. That again adds to our barrier or our enabler to work with OEMs outside India. Of course, because we want to be on an export-led model, we are more focusing on the off-highway segment when it comes to exports rather than traditional passenger LCVs and WWE. Okay. On the export side, our focus is more on the off-highway segment. Is it? Agriculture and the off-highway market, gensets and so on. That is where there is a sweet spot because they generally exported these products out of China so far. Okay. Is this the sub-component market that you have been referring to in the past or the- Sub-components are a little bit more agnostic between industries, so sub-components can be on other fronts also. All right. Thanks a lot. Thank you, sir. Ladies and gentlemen, due to time constraint, we take that as the last question for the day. I would now like to hand the conference over to Mr. Puru Aggarwal for closing comments. We appreciate your participation in our earnings call today. We trust that we have addressed all your queries. Should you have any other questions, please feel free to reach out to our investor relations advisors at Strategic Growth Advisors. Thank you, and have a pleasant evening. Thank you. On behalf of Sharda Motor Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.