Q1 23/24

Aug 11, 2023

Ladies and gentlemen, good day and welcome to Sharda Motor Industries Limited Q1 FY 2024 conference call. This conference call may contain forward-looking statements about the company, which are based on the beliefs and opinions and expectations of the company as on the date of this call. These statements are not the 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 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 Chief Financial Officer. Thank you, and over to you, sir. Thank you. Good evening to all. A very warm welcome to all the participants on this call. On the call, I am joined by Mr. Aashim Relan, our CEO, and our investor relations advisors, SGA. I hope that you have seen our results and our investor presentations by now. The presentation is also uploaded on the stock exchange as well as at the company's website for reference. Before touching upon company's financials, I would like to provide an overview of some key highlights in the industry. Buoyed by surge in domestic demand, the automobile component industry is poised to undergo a resilient upswing in revenue throughout the fiscal year 2024. This surge is emphasized by the notable trend of vehicle premiumization, focus on local manufacturing, and strides in enhancing exports and regulatory standards. Suppliers within the automotive component sector are anticipated to showcase growth over the medium to long-term horizon. The forthcoming fiscal year 2024 is anticipated to witness capital expenditures primarily channeled towards the introduction of innovative products, the advancement of existing product portfolios tailored for specialized platforms, and the driving force behind the development of cutting-edge technologies and components for electric vehicles. In addition, the industry's growth trajectory is substantiated by a consistent and stable demand for replacements attributed to increased mobility and upstream in economic activity and the strong movement of freight. These factors collectively serve as catalysts, propelling the industry's expansion. On the passenger vehicle segment, this segment grew by around 9% year-on-year in Q1 FY 2024, largely driven by utility vehicle sub-segment growth. The growth can be attributed to a blend of elements, including increased production for high-demand models with substantial order backlogs, enhanced semiconductor supplies, the introduction of fresh models to the market, and a favorable outlook from both customers and the economic standpoint. A favorable monsoon conditions have resulted in increased farm income, leading to notable improvement in rural demand. All these factors have played a pivotal role in continuous expansion of PV sales, solidifying the PV segment's position as a prominent catalyst for growth within the automotive industry. Coming to the commercial vehicle segment. In Q1 FY 2024, there was a 3% decrease in sales compared to the previous year. This decline can be attributed to several fleet operators opting to accelerate their purchases in March 2023 due to impending transition to BS6 Phase 2 regulations with an associated price increase. Despite this contraction, the prospects for the commercial vehicle market remain optimistic, with growth trajectory projected to persist. This positivity is underpinned by ongoing infrastructure expansion and sustained economic activity. Furthermore, improved e-commerce and advancements in last mile connectivity are poised to strengthen the commercial vehicles, supporting their demand going forward. Two-wheeler segment sales volume increased by 11% in Q1 FY2024 compared to Q1 FY2023. Although sales figures have not yet fully returned to pre-COVID levels, there are promising indicators of a resurge in rural demand, aided by availability of more accessible financing options, the introduction of new vehicles, particularly in the premium category, and a robust replacement demand. A key catalyst driving recent momentum in electric vehicle segment was the FAME subsidy, which resulted in a substantial surge in consumer purchases during May 2023. With the subsidy taken away, it temporarily impacted the demand for e-two-wheelers in June 2023. Despite this, the overall prospects for the EV two-wheeler segment remain optimistic given the favorable policy measures, technological advancements, and the ongoing introduction of novel models. Having shared my thoughts on the industry, I will now move to operation and financial performance of the company. On the consolidated basis, we registered a revenue growth of INR 654.1 crores in Q1 FY2024, which is a growth of 4.2% as compared to Q1 FY2023. Our EBITDA for Q1 FY2024 is INR 68.2 crores as compared to INR 60.8 crores in Q1 FY2023, which is a growth of 12% on a Y-o-Y basis. The EBITDA margin for the quarter grew by 75 basis points from 9.7% in Q1 FY2023 to 10.4% in Q1 FY2024. Our PBT for the quarter was INR 74.1 crores after accounting for shares in profits in JV and its associates. Our JV reported a profit of INR 0.28 crores in Q1 FY2024 as compared to a profit of INR 0.52 crores in Q1 FY2023. Our PBT grew by 23% compared to Q1 FY2023. The PAT for Q1 FY2024 was INR 55.2 crores, which registered a growth of 22% as compared to Q1 FY2023. On a full year basis, our revenue, EBITDA and PAT grew by 20%, 24% and 40% to INR 2,700 crores, INR 282 crores and INR 208 crores respectively. On the balance sheet front, we continue to maintain a healthy liquidity position for more than INR 572 crores in cash and cash equivalents, including investments and land balances as on June 30, 2023. With this, we can open the floor for 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 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 Rahul Aggarwal from 91 Capital. Please go ahead. Hi, sir, my name is Gaurav. Sir, just a couple of questions. One is on this latest SUV from Honda. Are you present in that model? Hello. I cannot hear you clearly. If you can just repeat the question, please. Sir, there is a new SUV which is getting launched in the month of September from Honda. The model name is Activator. Are we present in that particular model? Okay. We do not give customer or model-specific details. There's no disclosure like that, just the general guidelines. Can't comment on specific models and customers. Okay. And sir, on this INR 560 crore cash balance which we have we decided or looked at any other inorganic opportunities? Are you pursuing any? Any guidance you want to give on that front? Yeah. So for our cash surplus, the preference is always utilizing it for M&A opportunities in powertrain-agnostic products. We don't keep any fixed timeline as we want to be very careful with the deal and the valuation specifically because we are on the conservative side and we want to ensure that it could create long-term wealth and value for the company as well as shareholders. We often are having many talks, interactions, but nothing has materialized. There could be some possibility, but as we know more, we'll keep you updated. Further to that, we've established a robust dividend policy. In fact, last financial year was the highest dividend we've ever declared by a significant margin. And we'll continue to return back additional surpluses to shareholders via dividends and other options as they come. So that is on the cash balance. Okay. Thank you so much. Thank you. Thank you. The next question comes from the line of Sonal from Bowhead. Please go ahead. Hi, Aashim. Congratulations on good numbers. I have a couple of questions. First on the employee cost seems to have moved quite significantly Q-on-Q. Can you throw some light on what is the reason for it and whether there's any one-off or this is a sustainable number? Then last year, the remaining questions later. Sure. Good evening. Good evening and thank you. For employee cost, our increment cycle has started from the financial year. I think the increment cycle has been adjusted to match the financial year, so that would have a quarter-to-quarter impact. In addition to that, we are hiring in quite a decent way due to upcoming expansion. I think across all departments, we've been hiring as we're expecting good growth and expansion plans coming with regulation shifts and as well as our foraying into the international market. So this includes hiring for your tractor business possibilities or is that also a decent part of the reason why there's a jump? Yeah. We are expecting a good growth, and we are just building the team across the domain. For all the growth aspects, and one of them definitely is tractors as well. There is RDE, export expansion and so on. We are building the team and strengthening it for the future expansion. Can you be benefit of RDE norm started occurring because there was no call last quarter. Started happening to the company fully in Q4 itself, or was it largely in Q1? How has been the experience so far? Sure. RDE got implemented from this quarter. There has been a gradual ramp-up, and we have established new lines for some of the products. In general, there has been some benefit in Q1, but of course, there are things like the startup costs and the products maturing. As the production lines mature through the year and next year, there will be further improvement that we will see from RDE. Also for the new RDE products, we are implementing the policy where we will do the valuation part. We will not procure the catalyst so that there is full transparency, so we have applied that as well. In general, I think we will see some benefit this financial year for sure from the RDE norms kicking in. If I understood you correctly, very little benefit of RDE norms is reflected in the Q number reflected so far because of the startup costs and other costs, and some costs related to that. Is my understanding correct? Yeah, your understanding is correct. That has just started and new lines are there. As they mature, the benefits will improve. That of course, will be caveat that the overall business environment, passenger cars, LCVs, et cetera, continue to remain the same. But given that, definitely that we are expecting improvement as these lines mature. They just started this quarter early. This will be what, Q3, Q4 or beyond that? No, hopefully if you look at it on a FY 2024 basis, hopefully we will see some tailwinds that are coming from RDE, and that will improve as we move forward. We are already seeing some improvement, and we expect it will keep improving as things mature. Great. Two more questions. Firstly, on the expansion side, you mentioned that you have got aggressive expansion plans. Whatever is possible for you to tell us, whether it is international market or new customers or when you say expansion, are you referring broadly to the same customer, same model? It seems from your language that you are talking about some aggressive expansion. Some light on that principle. Sure. And then on the dividend policy, is there any specific dividend policy? You mentioned about a dividend policy. You meant in general, you have been increasing dividend while there may not be any specific payout policy as of now. Sure. First I will take the point on the expansion plan, and second I will come to the dividend policy. Talking about the expansion plan, number one, we want to maintain or increase our market share also in the LCV segment as well as the 2W domestic exhaust. With RDE coming in, it's further become a good market and we want to increase the market share here itself. Our next goal is to attain market leadership in the domestic tractor market, which will become very, I would say, large as soon as TREM V kicks in. We are working very hard with our teams across to ensure that we have a leadership position when it comes to market share in tractors. We have also built a vertical, which is nascent still, but people are being added for the export of sub-components as well as emission systems for tractor gen sets on the smaller side, and that is our play on the China Plus One. That is also that we are now preparing a little bit more to build one or two verticals which we already have internally or buying from the powertrain-agnostic side. The vertical that we already do have is our suspension vertical, but it is not as mature as our emissions vertical, but we are adding people there as well as other possibilities on some adjacencies that we see in powertrain-agnostic products. This is largely on the expansion side. In terms of dividend policy, we do have a policy that is set out to have a payout ratio between 10% to 30%, I think. We would try to maintain on the high side of that dividend policy as we go forward. You have a very valuable piece of land which has must have appreciated very significantly in last one, two years. I mean, I hear crazy stories about land parcels in Dadri in last six months versus last one, two years. Will you look at unlocking the value considering these kind of boom and the appreciation in that huge land parcel you have to shore up your cash for further future acquisitions because the prices have really gone through the roof. First question is this. Sure. We do have two pieces of land in the NCR region which have been there, non-operational plants, free land for some time and that's where the land prices have really gone up in that region. We don't have an estimate right now on what they are, but that is part of our, let's say, excess capacity for creating shareholder value. Of course, we may be a bit conservative on the M&A front, but with the right opportunity and specifically at the right valuation, we would be more than happy to deploy that part also if required. If for some time we do not see any attractive opportunity, then we would unconditionally unlock the value of the land at the right price and then have a plan on giving back more to our shareholders. Thank you so much. My last question, any clarity on PLI policy and, if yes, then when do you start seeing benefits of PLI? What is your CapEx plan for this year as well as next year? Thank you. Sure. The PLI policy, lot of changes in terms of how to calculate and guideline shifts that have happened. We are working along with our internal team as well as an external consultant to align to all the guidelines. It's still too early to say what the benefit of PLI will be. We are not considering any benefit as of now for PLI in our results, but of course, anything that would come from that would likely to be additional. When we look at the CapEx plan, we have a moderate CapEx plan for the year. But it could get enhanced a little bit in case we see the kickoff start for the off-highway industry. We would be in approximately a range of INR 40, INR 45, INR 50 crores in case it is just a standard year. But in case off-highway market kicks in, as in we call it a tooling kickoff, as we received, then there could be an additional INR 30 crores that goes into that INR 30 crore-INR 35 crore. Is anything planned already for next year? Similar range that we are planning for next year also. It would really be when the norms kick in, it could be linked to that. So it could either be next year or this year, but a very similar pattern as what we are planning. What would be cash and cash equivalents as on date, 30th of June? Cash and cash equivalents as on 30th June. I don't have the number. I think Puru Aggarwal, he's mentioned in the opening, maybe it's around INR 572 crores in cash and cash equivalents. On 31st March or 30th June? Puru Aggarwal, if you could just see the exact number. On 30th June, we have INR 572 crores. Thank you so much. All the best. Thank you. Thank you so much. Thank you. A reminder to all participants that you may press star and one to ask a question. The next question comes from the line of Chirag Shah from White Pine. Please go ahead. Yeah, thanks for the opportunity. Sir, I have two, three questions. The first question is, on the presentation side, sir, can you indicate what is the volume growth on a consistent basis in your presentation, sir? Because it's very difficult to figure out how much is the volume growth for you and how much is the revenue growth, point one. That is the first question. The presentation needs some changes because it's a very standard presentation without any additional information, even on quarterly basis. If you can look into that side. That is the first question. On the volume side, if you can give us what was the volume growth for the quarter versus 4% revenue growth that you had. Sure. Thanks for the question. On the first mark, before the part also, thanks for the feedback, and we'll definitely take that on the presentation and maybe connect offline for more detailed feedback so that we can incorporate that into the quarterly presentation. Regarding volume growth, we don't per se disclose volume growth, but the way the movement happens in our mix as well as our component, all the catalysts. In general, our volume growth has been higher than 4%, but it's just indicated on the catalyst prices, et cetera. But it has definitely been on the double digits side when it comes to volume growth. Sir, if you can make us understand what versus a 4% revenue growth and a double-digit volume growth. How does the mix change for you? If you can make us understand, it would be helpful. Because you indicated that there could be certain changes in the mix which could have an impact on the volume growth. Okay. Our products are first cross-used across platforms and they are also cross-used across industries. Our products are used in passenger cars. The same product might be used in an LCV. Now we are seeing that the same product is now being used in minivans as well as now it's going into off-highway. It is an engine-based product, so it is a little bit difficult to correlate in terms of volume to the market. Right? We also have a component called the catalyst which is mostly a pass-through kind of an item, which we buy for some of the customers and for some we do not. That kind of also distorts in terms of correlating with volumes. We've been working with our customers to either disclose the catalyst or to make it free of cost. As a positive move towards it, we have reached an agreement with key customers to minimize the buying of this catalyst and go towards the FOC model so that it is more apple to apple. All our new products which have come in this year or which will be coming in also, again, really without this, it will become clearer as we move forward. That is probably the best way that we can look at for the time being. Volumes standalone, that is something that we do not share. Sir, does it mean you are looking to go back to the earlier way of disclosure, where your revenue, your margins will be significantly higher because the bought-out goes out? No. Earlier that was not the case. We have always been in the same way only. But earlier, I am referring to before the transition, we used to have a double-digit margin and half the revenue, right? Then the transition of emission norms happened, where you had to increase the bought-out component to make it as an assembly, and where revenue doubled and your margins kind of half, in a very crude form. I am just referring to. Sure. Before the regulation changed also, it used to be the same thing only. At that time, the bought-out component, the catalyst was much cheaper. As a percentage of overall sales, it used to be much lesser, right? It was exact same way. In fact, previously, we were buying more of it, right? We did not have agreements with all our customers around at least more than half or even larger than that, we do not buy it for. The change that you saw pre-regulation change and now is only that catalyst prices shot up because what is required in BS6 is a much more expensive catalyst, and that is why it appears to be a higher part. Optically, that is why our margins look at whatever, 10%, 11%, but of course, they are much higher if you remove that pattern. Okay. But sir, if you can indicate in the presentation what is the bought-out component revenue and what is the normal revenue and give the volumes. It would be helpful for us to understand how is the value curve moving in the existing product also. Otherwise, it becomes very difficult to understand your quarterly results. Absolutely. The point is well taken, and in general, we have tried to do that, but because of customer confidentiality, we have not been able to disclose in that pattern. Best is to look at our results more on a long-term basis, and there it correlates very well. In general now, as a policy going forward, we are not taking many products with catalysts, right? This, very shortly will be fully transparent as a result. Because legacy products, our customers want us to continue the model, but new models are being on a value-added sales basis, so then it will become clearer. We are working on the same, and we will definitely go towards that. Sir, second question was on the dividend policy that you had. In fact, a related question, but before that, I wanted to understand when you are looking for M&A, one, what is the sweet spot of revenue that you are looking to acquire, and what are the capabilities that you are looking to acquire, either product capabilities or business capabilities, and the sweet spot that you have in your mind to acquire? Yeah. We have a range, right? We do not have a disclosure on the range for it, but maybe to help you understand better, we want to utilize it for powertrain-agnostic products, right? So we are really looking at products which do not shift with changes in powertrain, and also companies which either have a strong presence in India or are likely to have a strong presence in India as we move forward. The range is something which is, without sharing numbers, which is big enough for it to be valuable to spend the management bandwidth as well in it, yet not too big as we are not very well-versed in M&A yet, given that the company has never acquired a company before. We would of course want to start with a medium scale. But this is just a range-bound kind of look that we are having on M&A. Sir, why I am asking is because your cash pile is just increasing given the business that you have and the strength that you have. So if you have a particular amount in mind, maybe 20% of your current revenue or something like that, the excess cash could be returned back in terms of buyback or dividend, right? Because every year you are going to have a significant cash pile. You already have more than 20% of your market cap in terms of cash. Given our conservatism, I am pretty sure that you are not going to go out and spend, write a check of INR 1,000 crore or something like that, unless it is very, very, very lucrative kind of a thing. Okay. Without commenting on the numbers, as we said, there is no number as such in terms of what could an M&A look like, but the philosophy which you just mentioned is well-recognized, right? I think there is no doubt that we recognize that this is a very significant cash built-up, and we do need to have a more straightforward policy on it. We also do need to cap it, and we also do need to, in case above a certain limit, return back to shareholders in the formations that you spoke about. So I think the philosophy, we are completely aligned with. But do not want to state an exact number or exact kind of range also. But the direction is exactly what you mentioned that we are thinking in, and actions would also be made on that direction. Thank you. The next question comes from the line of Kartik from Suyash Advisers. Please go ahead. Yeah. Hi, Aashim. Hope I'm audible. Yeah. Hi, Siva. Yeah, thanks. First is, of course, I'm going to belabor the same point that Chirag made, which is, I would appreciate if you can be slightly more proactive with communication, especially under exceptional circumstances. The break has been a longest one, and there's been no communication. If you can consider that as an input, that will be helpful. The second, of course, is a long-pending request for some kind of an index for volumes. The sooner you do, the better. Otherwise, your presentation is like reading the same novel a third time. There's nothing really in terms of details in the results. Kindly think about that. The PPT can be slightly more self-explanatory. Otherwise, the table is anyway shared with the exchanges. Just by way of feedback, it helps because, I think the value here is too great for people not to be left in the dark as well. That's the point I'm making here. Sure. Point well taken, and yeah, well taken. First question, one is can you talk in terms of what specifically is the letter and spirit of this change that you have communicated with reference to the JV? This is regarding the ETPL JV, right? Talking about the Eberspächer joint venture. Okay. Yeah. The JV scope is only amended for simplification. The language has been changed on the scope of the JV, making it engine-focused now rather than category-focused. As you know, mentioned before that OEMs have started using the same engine in commercial vehicle, gen sets, construction equipment, tractors. It is very tough to now bifurcate in terms of category or segments. We thought it is much better to do it in terms of engine, right? Because then there is no gray area. This will become very important. We wanted to be proactive about it because as we know that the construction equipment market in India is becoming emissionized. Gen sets will require products, tractors will require. Then it was very important not to have any kind of ambiguity there. We are also approaching international markets, so we wanted to be clear on the scope side of it. It is simply to make the language simpler and crystal clear to you in terms of changes. Just to clarify, when you say that it is engine-focused versus category-focused, does that mean that they would also be addressing some of the categories that you were earlier addressing as the parent company? How should one think about that? Do you still say anything above 3 liters they will do and anything below 3 liters will do, irrespective of category? Is that a way to understand? Yeah. It is, the liters might not be exactly three. It is higher than that. But yeah, but the way to look at it would be that it would basically be status quo as of now, right? But all the changes that are coming into the market, that products will be required and off-highway and procedures and all, there will be no overlap, right? So our addressable market remains the same. It becomes slightly larger. And there was one category, probably, which we could not have addressed before, which is a niche category of higher engines in the segment of gen sets, marine, and things like that, where we did not have the technology. But now with the simplification, if the opportunity presents itself, then we can also utilize that technology for those kind of applications also. So the parent entity or rather the listed entity can use the technology to address that opportunity? No, that will go into the JV in case. That will go into the JV. Very large kind of engines and all. That's like a very niche technology which we don't have. JV partner has. From looking at it as a standalone entity, there is virtually no change apart from just making it engine-focused and also clearing out any ambiguity for the emission changes that will be coming domestically and also giving a clean slate for looking at international opportunities via exports. The chairman and the CEO to be appointed, is that a time-bound thing or how exactly would that be? Appointment by Eberspächer on the JV? Yeah. I think all other terms are exactly the same. That management control remains with them. That's why we don't consolidate. Everything else remains the same. It was a very simple distinction to the scope only, which as I mentioned, nothing else has changed in the Sure. While we are on the topic, can you just update on the performance of the joint venture? Has there been any improvement in the volumes at all? Yeah. This quarter, in fact, has been very slow and I think in general, the CV industry we've seen has been slow. Even when we look at it on a Q1Q basis, Q1 is a slow quarter for CV, but even on Q1Q, I think the industry has not done very well. So the sales have not been great for the quarter, but nevertheless, we still remain profitable and our capacity utilization remains to be around 50%. We have taken the initiative to make some of the products to be cross-used across engines. That could become important maybe a year later because then whenever the opportunity presents itself, it would be slightly faster. We are working with the customers to increase share of business and get into some of the higher runner products. But goal was to stabilize. That's what we have been able to stabilize the CV quite well, and that's indicated that even in a low volume quarter, we remain to be profitable. But of course, lot of work has to be done in terms of increasing market share. You would want to give us some kind of a timeline for when we can see meaningful upsides? I think it's totally dependent on the CV industry and also the customers' preferences on how they're going to move. So it's very difficult to give any timeline on this kind of a thing. CV, in general, is very concentrated the volumes on just a couple of engines, right? Sure. The market share shift when it happens, it won't be incremental, it'll be dramatic. Sure. If you were to even get one engine, you could see a substantial increase. But of course, given that it's so concentrated in engines the competition also defends it as eagerly. We are in that and we are working towards that, but tough to give a timeline given that there are only, I think, three, four engines in the entire market that are really out there when you look at it from a value perspective. Sure. On the parent entity, in your respective listed entity, one question would be on the sourcing part. In what time frame do you believe the old models would have completely phased in, phased out and business would be entirely based on the newer model? I'm just trying to understand, in what time frame would manufacturing be 100% of your reported revenues? There's no time frame because we don't know when models would exactly expire. Either way, it has absolutely no impact on EBITDA, on profitability and overall performance and numbers. It's only the optical change that would happen and that's it. Sure. The only change that would happen is literally optical on the sales number and then it will be correlated. But there are some benefit of cash flows is what I understood. Would that be correct or no? No, there is no benefit as such on cash flow side also. Okay. Because it is neutral. That working capital anyway shifts here and there based on other things also. Regarding this change, the change will largely be optical in nature from the sales perspective, but the benefit is then it will be much more correlated, I guess, on a basis to industry and all that. But still, I do not think quarterly it can be correlated, but definitely annually it is something that will be much simpler to correlate. Sure. One quick question on the breakup of other income. That was a- Okay. I- substantial number this quarter. Yeah, I do not have that offhand, but we will share it with you offline on the other income side. No worries, I will share that. Right. One last thing, then I will let you go. Can we meet sometime, please, just to engage you a bit more in detail? That would be useful. Sure. We will definitely set something up and we will share to you. That would be greatly appreciated. Thanks. Definitely. Yeah, thanks and best wishes. Thank you. Thank you so much. Thank you. Thank you. The next question comes from the line of Ankur from Quasar Capital. Please go ahead. Yeah. Hi, sir. Thanks for taking my question. Sir, I was just trying to join the dots on your comments about volume growth. You mentioned that it was a double-digit volume growth and considering the RDE norm setting in where the minimum expectation of content per vehicle is going to go up by 10% or 25% depending on the engine which it applies to. So sir, I am not able to join the dots on the revenue growth of 4%. Can you just help me understand that? Sure. The RDE norms have just been implemented. There's a gradual ramp up in this quarter. New lines have been established. As indicated before that the gasoline content per car is going to be a 10% increase, diesel will be 20%. There are, of course, other parts of the business also that come into the sales numbers. On a blended basis we'll have a tailwind of roughly 10% plus for the overall volumes given that everything else goes well. That is the guidance when it comes to RDE. No, exactly the question, sir, that why didn't it happen during the quarter? During the quarter you're saying that there are many cars which were still manufacturing without the new RDE norms. We actually supply in terms of engines. The ramp up was gradual on this basis. RDE norms have an impact on mostly the hot end of the car. We also manufacture the cold end of the car. We also manufacture other parts of the car. It's more like a blended impact that we'll see. I think more will come in Q2 onwards. Okay. Sir, then second question is, again, slightly linked to the cash generation and the business plan that you have. Considering that we have been hearing from you about the M&A part, which you rightfully explained that you want the right mix, since it's your first time, you don't want to go aggressive. That is understandable. From a business perspective, why don't we try and start something on our own and depend on M&A to go through? You have the customer connects, you can just go and ask them what is the requirement, and you can do some R&D. I'm just thinking out loud from a business angle, because we have been waiting for this since a long time, and the cash is piling up, and it is going to pile up by INR 200 crores every year. Just your thoughts on this will be very helpful. Sure. First, we as a company have grown substantially in the last couple of years, and lot of bandwidth got consumed in terms of where we are in the emissions industry also. It was not a very easy task to take market leadership position in India for BS VI and now for BS VI RDE, and then we have a few more emission legislation that are coming in. We definitely wanted to focus on the core, when we're talking of the organic side of it. Then now that maybe one, two emission norms are there, definitely a similar philosophy to what you're mentioning is what we are charting towards. But we are on the conservative front. We'd rather not do an M&A than do an M&A at a valuation that will not create that. We just want to be careful on that front. We have also very recently only come up with a dividend policy. It would be on the higher side only that we will move forward on, which would ensure that there is a good return also coming back to our shareholders and not a very excessive pileup in terms of cash earnings. But point well taken, and the philosophy is exactly what you've mentioned on the organic side as well as on the inorganics. Sure, sir. Last question, just a follow-up because there was no follow-up on announcement on the raids. Is that matter settled or there is some litigation which is pending with regards to that? It is as per what was disclosed. It was a search and survey. Business operations are continuing as per normal and there is no update beyond that. It is just these kind of matters are routine and they take time. There is no litigation per se. Okay. Thank you, sir. All the best. Thank you. Thank you so much. Thank you. The next question comes from the line of Nirvana Laha, an individual investor. Please go ahead. Yeah, thanks for the opportunity. Hi, Aashim, nice to speak to you after a quarter's gap. A couple of feedback points also from my side. One was echoing the same thing that the last gentleman said about a meeting request. We have been reaching out to your IR quite a number of times. If you can probably give us some time to maybe multiple shareholders to meet face-to-face, that would be really nice. Sure, absolutely. Point well taken, and we are fully consumed with this RDE implementation personally. But now that RDE products are implemented, I will definitely take the time out and to meet in person. Sure. Will look forward to that. Another thing is, often when financial questions are asked on the call, for example, the other income question that the gentleman asked, we do not seem to be ready with the answers. But Aashim, to be honest, these are standard questions where shareholders only get a once in a quarter opportunity to clarify them. Since the CFO is also on the call, I would request you, if possible, from the next quarter to be ready with the numbers so that these are the inputs that we can get during the year. Otherwise, we have to wait for the annual report. If you can please take that suggestion on board. Sure. Absolutely, to the best of our ability, we will try to be ready. Unconditionally, you can always reach out to the IR advisors for specific points. Sure. Okay. Thank you. So coming to the question, there was a INR 330 crore increase in other financial assets during H2, during the second half of the financial year. Could you comment on what this was exactly? What were the assets? I think this would be part of the overall investments in cash surplus, but maybe, Puduchan, if you are aware of this number, is this just a reconfiguration of that cash investment? This detail is not handy. We would be happy to supply this information offline. Okay. All right. The next question is on, in March, I think you commissioned a new plant for emission systems with a 5.25 lakh capacity. So two questions. What kind of capacity increase would this 5.25 lakh constitute? And towards what purpose is this exactly? Is it targeted towards one particular segment of your emissions business or is it generic? Okay. So we have expanded capacity in the West for a couple of reasons. One, we did some existing, let's say, space for R&D. Then we are expecting a few of our customers who will be adding capacity as well in the western region. So that's in the news. So we are preparing for that and as well as some TREM IV as well as TREM V will also be, west region will be a pivotal part of it. So we'll be utilizing this capacity over the next couple of years. Okay. And as a percentage of your existing capacity before this came online, what percentage increase would this be, roughly? Yeah. So we continue to augment our capacity because it gets augmented fairly easy on a CapEx light model. So I don't have the percentage number, but in general, whatever that you mentioned will be capacity we would have in cumulative products. So this is hot end as well as cold end. Okay. All right. And on your Eberspächer or the Purem JV, would you be able to tell us what the Q1 revenue was? Suppose we get into one of the engine program that you just mentioned while answering to somebody else, what kind of maximum revenue potential could we be looking at? Because we understand that COVID was there and there was a lot of disruption and since then it seems like you're ready with the product, but waiting with the OEM. So just for us to get a sense of how this could ramp up in terms of a number, what could be a potential yearly number if things work out favorably? Like would it be as large as our LCV or would it be much smaller than that? Some idea would be helpful. Sure. In terms of the revenue, we roughly in this quarter did between INR 80 to INR 90 crores, and that is including catalyst. In terms of increase, it could be substantial. You could imagine double or tripling in case we get one or two good engines. Nevertheless, it would not be as big as the standalone entity. I think we address a much larger market than the standalone entity. For the time being it would be significant, but not like anything that you can compare with a standalone entity. Okay. The INR 80 to INR 90, am I misremembering or did this used to be INR 40 till about two, three quarters back? Or was that without- I think that was without catalyst, which we had mentioned. This is with catalyst. Without catalyst, number would still be trending at the same INR 40 crore, INR 25 crore? On a Q1Q basis, it is roughly the same. I think there has been a decline of 5%-7% on a Q1Q if you look at the quarter-on-quarter results, but it would be the same number, very similar number. Okay, got it. On TREM V, any more visibility? Is April 2025 looking the likely timeline? Any update either from the government or what you are picking up from the tractor industry? The tractor industry is preparing fully for it. There is some delay expected. It was originally, I think, planned for April 2024, but if you look at the trend that we saw in TREM IV, there is some delay expected, but not too much. There has been no formal notification of it, but preparation by all the tractor makers is on full swing and prototype development, testing, et cetera, is happening as per normal. But it is up to when the notification comes, so some delay could be expected. Okay, got it. Final question on your battery JV. What is happening here? The last time that I asked you this question, you explained how this was more going to be a BMS family, a low value add initially, where you would be learning first, understanding the ecosystem, also changing regulatory needs, et cetera. You explained the whole go slow approach. Have we seen any revenue from this JV in the last quarter and this quarter? Where are we right now? Has our thinking changed at all on this? Are we speeding up or how is it going? Yeah. The last time that we spoke, we are largely same in terms of the philosophy that we will be very cautious and we'll go slow. What the updates probably are that we have built our prototypes and the first phase of testing has been completed for them and we are applying with the agencies for approval which is required on the battery cell. This is again, battery assembly cell. We of course, want to be 100% sure of these products because there's a very high field quality risk that batteries, especially in this segment, have as well as warranty and servicing. So be very careful. Of course, the subsidies have been reduced. That has increased the cost pressure quite substantially in the market. We are making some changes in the configuration to be more competitive on the cost side and also the AIS amendments also which came in. While the batteries are compliant to it, they have become more expensive, so we are reconfiguring that. In terms of revenue, there is no substantial revenue from this and we don't project. We will be going very cautious and slowly in this segment. Right. Your presentation still says that the plant is under consideration. What I would like to understand it is what milestone do you have to hit for the plant to be sort of a greenlit. That would be helpful to understand. Sure. The batteries prototypes to be approved by the agency and to be within the cost target range of the customers. Okay. All right. Thanks, Aashim. I wish you all the best. Thank you. Thank you. Thank you. Due to time constraints, that was the last question. I would now like to hand the conference over to Mr. Puru Aggarwal for closing comments. We thank you for your participation in our earnings call today. We hope we have been able to address all your queries. However, if you have any other further questions, you can get in touch with our IR advisors, Strategic Growth Advisors. Thank you and have a good evening. On behalf of Sharda Motor Industries Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.