Ladies and gentlemen, good day and welcome to ASK Automotive Q1 FY25 post conference call hosted by ICICI Securities. 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 touch-tone phone. Please note that this conference has been recorded. I now hand the conference over to Mr. Basudeb Banerjee. Thank you, and over to you, sir.
Thanks, Amit. Thanks to the management of ASK Automotive to give us the opportunity hosting the call. Management is represented by Mr. Prashant Rathee, Executive Director; Mr. Aman Rathee, Whole-Time Director; Mr. Naresh Kumar, CFO; and Mr. Sanjeev Arora, SVP Financial Strategy and Investor Relations. Before the call begins, I'd like to let the audience know that Mr. Kuldip Singh Rathee, Chairman and Managing Director, is suffering from fever for the last one day, and that's why he's not able to join the call, unfortunately. Without wasting any time, over to the top management of ASK Automotive. Thanks.
Good evening, ladies and gentlemen. I'm Prashant Rathee, Executive Director of ASK. It gives me immense pleasure to connect again with all of you today to update you on our business performance for the first quarter ended June 30, 2024. I would like to begin by giving summary on the Indian economy, followed by the industry update, and thereafter our business performance. I continue to firmly believe that we are in the midst of exciting times both as a country and as an industry. Amidst the prevailing global uncertainties, the Indian economy continues to exhibit remarkable resilience. The Indian economy has grown steadily at a rate of 7% in the last three consecutive years and is forecasted to grow at a similar pace in FY2024-25. The RBI recently projected a GDP forecast of 7.2% for the year FY2025.
The recently announced budget by the government is a growth-oriented budget reflecting policy continuity and stability. We see several positive initiatives which are aimed at strengthening manufacturing, infrastructure development, and employment creation in India. Some of the initiatives which are significant to auto and auto component sectors are: allocation of INR 1,111,000 crore towards capital expenditure for development of infrastructure. This is likely to have a multiplier impact on economic growth and employment creation. Similarly, allocation of INR 266,000 crore for rural development is likely to increase rural per capita income and rural spending, thereby positively impacting the two-wheeler industry. Allocation of INR 3,500 crore for the production-linked incentive for auto and auto component sectors, and retained allocation of around INR 2,700 crore for FAME India incentives is likely to support the growth of auto manufacturing, especially two-wheeler EVs in India.
Also, exemption in the customs duty on import of lithium and cobalt, etc., is also likely to lower the battery production costs and help in making EVs more affordable, which will indirectly propel the growth of the EV sector. In a nutshell, a combination of strong domestic demand, particularly abounding in the rural sector, improving private consumption, and government's continued thrust on capital expenditure is expected to bolster the economic growth of the country. This we see as very positive news for businesses across all sectors in India. We at ASK are committed to harness these opportunities to drive our business growth in the future. On the industry update, India has positioned itself as a global automotive hub, and the automobile industry is one of the primary drivers of the growth of the Indian economy, accounting for 35% of the manufacturing GDP and around 6% of the total country GDP.
Notably, India is the largest producer of three-wheelers, the second-largest producer of two-wheelers, and the third-largest producer of passenger automobiles. As per the SIAM Report, the automobile sector across segments grew at 16% in Q1 of FY25 against the same quarter last year. Among all sectors, the two-wheeler segment was the star performer, which exhibited considerable growth in vehicle production of 19.6% in Q1 of FY25 on a year-on-year basis. The two-wheeler industry registered a robust vehicle production volume of 5.9 million in Q1 of FY25 against 4.9 million in the same quarter last year. The strong demand momentum in the two-wheeler segment was fueled by positive market sentiments, pent-up demand from the rural sector, and enhanced model availability from two-wheeler OEMs. Overall, a positive outlook on the country's economic growth, growth-oriented budget, and revival of rural spending is buoyed by better-than-normal monsoon forecasts and the coming festive season.
The two-wheeler segment is expected to maintain the growth momentum in the remaining part of the year. This, in turn, is likely to provide significant growth opportunities for ASK in FY25. Moving on to ASK's business performance, we continue to deliver robust performance in our business in Q1 of FY25, and I'm delighted to share some good news with you today. First, during Q1 of FY25, we delivered a strong growth of 31% in revenue, 59% in EBITDA, and 63% in PAT on a year-on-year basis. This is the highest-ever revenue and PAT earned by us in any quarter in the past. Secondly, we have yet again outperformed the two-wheeler industry growth on a year-on-year basis in Q1 of FY25.
Thirdly, as I guided you in our last call on our target to deliver 11.5% EBITDA margins, we have achieved an EBITDA margin of 11.9% in Q1 of FY25, which is 210 basis points higher than Q1 of FY24 and 100 basis points against Q4 of FY24. Such improvements in the margin are mainly driven by better economies of scale due to higher volumes, benefit from the ramp-up of production at our new Karoli facility, and our continued focus on cost optimization initiatives. As we move forward, our aim is to sustain this level of EBITDA margins and improve gradually in the subsequent quarters.
Let me now go into further details of the performance on both the revenue and margin side. In Q1 of FY25, we recorded a consolidated total income of INR 865 crore against INR 658 crore in the same quarter last year, thereby posting a 31% growth year-on-year.
All the three product segments continue to perform well in Q1 of FY25. We have sustained our market leadership position in advanced braking systems with 26% year-on-year growth. In line with our strategy, the aluminum lightweighting precision solution segment recorded significant revenue growth of 39%. The ALPS segment is now our biggest segment, contributing 45.3% of the total revenue of our company. Our third business vertical, safety control cable, also posted a strong growth of 33% in Q1 of FY25 with increasing revenue in all three channels, namely OEM, OES, and independent aftermarket. On the profitability side, we have a strong start of the year with EBITDA in Q1 of FY25 at INR 103 crores against INR 65 crores in the same quarter last year, thus posting a growth of 59% year-on-year.
We have achieved a PAT of INR 57 crores in Q1 of FY25 against INR 35 crores in the same quarter last year, recording a significant growth of 63% year-on-year. As a result, our EPS for the quarter has increased to INR 2.88 against INR 1.77 in the same quarter last year, depicting 63% growth year-on-year. Our credit rating by CRISIL has been reaffirmed to A1+ for short-term and AA- for the long-term. The good news is that CRISIL has revised our outlook to positive from stable. This is a testimony of the strength of our business and its future growth prospects. A quick update on the status of the expansion plans of our production facility: our CapEx spend for Q1 of FY25 was at INR 80 crores, including investment of INR 35 crores in our upcoming solar plant in Sirsa, Haryana.
We are waiting for the last-mile approval from the government authorities for commissioning of this solar plant. Our Karoli plant is now ramping up well and has started to reap the benefits of economies of scale with increased production. Regarding our new upcoming plant in Bangalore, the construction work at the facility has started and is progressing well as per plan. We expect the new plant to be operationalized in Q4 of FY25. We are hopeful of outperforming the industry growth in the subsequent quarters of FY25. We are committed to keep contributing towards the value creation for our stakeholders and investors. Now, with this, I 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 the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use headsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Kunal from Kitara Capital. Please go ahead.
Sir, congratulations on a good set of numbers. I have two questions. One, regarding more than 30% growth in sales. As the industry has grown on about 15%, we've grown this much due to growth in individual segments, I agree. But I just wanted to ask, is it due to the increase of share in business of some players, or have we onboarded new players?
So, yeah. So first, I would like to - this is Aman Rathee. So just to give you a brief, the industry has also grown at 19%. But yes, you are right. We have outgrown the industry, and the main contributor has been both with the existing customers also. There were some pipelines which have started the business and also acquisition of new customers. Both have contributed. And the major growth, which we always mentioned, is that aluminum is our sunrise sector. So there, our growth has been more than the other segments.
Hello, Kunal. Please go ahead.
Yeah.
So, Kunal, is it okay? Or anything else you want to know?
Yeah. I wanted to ask the share of revenue of the top five customers last year versus this year.
Actually, the share of revenue, the top three customers are actually contributing a huge percentage in the overall industry also. So as you can see, between Hero, TVS and HMSI, the industry itself is a big portion of that. But yes, we have also grown in the same lines. And we have.
How much was it last quarter, same quarter last year versus this quarter? If you can share.
Yeah. That's something we have to come back to you on.
Okay. Thank you so much. All the best.
Thank you.
Thank you.
The next question is from the line of Jyoti Singh from Arihant Capital Markets Limited. Please go ahead.
Yeah. Thank you for the opportunity and, sir, very congratulations on the good set of numbers. As we interacted last on-call Q4, and now we are a very good set of numbers. So very much congratulations on that side. So, sir, my question: now we have done very well, but what are the expectations going forward from here onwards? We will maintain this EBITDA margin, but on the growth side, that we exceeded the expectation. So what are the expectations for the upcoming quarters and year?
Thank you, Arihant. Thank you for your wishes. As you mentioned in the last call also, we are very optimistic that the positive momentum is there in the industry. We had mentioned in our last call that we will be improving the EBITDA margin by 100 basis points. This has been a very good quarter for us, and we are very hopeful that with this momentum, we will maintain and sustain the current EBITDA levels, which are inching towards our historical EBITDA numbers of 12%-13%.
Okay. Thank you, sir. And, sir, any active discussion in the pipeline to add more customers?
Yes. So already, as we told you in the last call also, we have a very strong focus on the export sides also. And we are moving in the right direction, and we have also already established some products and some orders from our customers, which will come in the pipeline as it goes into mass production.
We keep looking for new customers. With the existing customers, we keep on adding our baskets of new products. This is how we are able to beat the industry growth.
Okay. Great, sir. But, sir, if I can see, so currently, we are only approximately 4% on the export side. So are we targeting to increase it further?
Yes, surely. As we told you in the last call also, we have a very strong focus toward exports. Exports is one area where we are focusing very closely. We are moving in the positive direction. We hope that, as we told you last time, that exports, we want to be 10% of the total revenue over a period of five years. That is our target, and we are moving in the right direction.
Okay. Great. Thank you, sir. I will come in.
Thank you. Thank you.
Thank you. The next question is from the line of Dhvij Patel from FinTrust Capital. Please go ahead.
Hi. Am I audible?
Yes.
Congratulations on a very great set of numbers. I actually had two questions, but one on the export side, which is already answered by you. There's something else I wanted to understand. Since we are setting up a 9.9-MW power plant for solar consumption, so how much of an electricity cost will we be saving?
So you are right. With our focus on ESG, this is a group-captive plant which we are setting up in Sirsa. It is in the final stage of commissioning, and we feel that we will reap the results of this. It will not only contribute in terms of cost savings, but also it will make sure that our ESG score is also good. And during the investment period, only we were very clear that we are looking at a five-year payback for this investment.
All right, sir.
The investment that has gone is INR 48 crore in this.
Correct. Correct.
Okay. Thank you very much.
Thank you.
Thank you. The next question is from the line of Sanidhya from Unicorn Asset Management. Please go ahead.
Yeah. So, sir, firstly, on the margin side, can you guide me on what led to the higher margin?
So basically, Sanidhya, the results which have come are also leading by the economies of scale which we have achieved. So there were economies of scale which have directly impacted the manufacturing cost as well as the manpower cost. And also because of the growth momentum, we saw the economies of scale accelerating at that growth. So these were the numbers. And also because of the Karoli plant, which has now become operationalized, and that is another reason for better margins.
Sir, in the last con-call, Kuldip sir was highlighting that the aluminum segment has a slightly lower margin, and export has higher margins. But if I look at the current quarter's market share, so export has gone down, aluminum has gone up. Still, we are able to maintain a higher margin. And the only thing I see has really changed is the OEM ICE market share in the total revenue. So is it that the ICE market has a higher margin whereas the others, and therefore the margin?
It's not the case. However, if the exports have gone up the same way if it had gone up, then the results would have been even better. That is all I can say.
Okay. Any particular challenge you are facing in terms of export? Because the number is not really, by year-wise, the number is down. Quarter-on-quarter, the number is down. If you compare to last year, the number is down.
Yes. So that's a very good observation. And here, I would like to highlight that it has gone down as compared to the Q1 of last year. However, we have grown from Q4. And this was already anticipated because two of our prestigious customers from the U.S., they had already informed us that they are in the process of inventory correction. So as per our budget, it has gone according to our budget. However, we were already told that they are going through that correction phase. That has already happened. And now, from the last month itself, we have seen the volumes picking up again.
Okay. Also, sir, could you guide me regarding margins in the particular product segment and also on the domestic market margin versus export margin?
On the product side, it is very difficult to do that.
Yes, on the segment-wise.
On the segment-wise, export is surely a much better margin than the current domestic margins.
So I wouldn't need the absolute numbers. Maybe you can just guide me on a broad basis that ABS has particular margins or what kind of margins and whereas aluminum products have different. I guess it's good to guide a little.
I would love to do that. But again, it is very specific to customers, very specific to product lines, the criticality of the product, the engineering involved in the product. But yes, I can tell you that it is better than the domestic one.
Okay. Any new clients we are acquiring on the electric vehicle side rather than? Because I could see clearly the ICE contribution is significantly higher in terms of the end usage of the clients.
In EV, actually, if you see, there is no new entrant in the market. But what we are doing is increasing our content for vehicles with our existing customers.
Any new products we are developing?
Sorry?
Any new products we are developing for the EV?
Yes. Yes. So just to give you a brief idea, in EV, as you know, the aluminum usage is increasing. And the lightweighting and heat management are very, very critical in terms of the overall efficiency of the battery of the EV vehicle. So there, through our engineering, we were able to do a lot of migration of some of the products and do a lot of critical products because of which our content per vehicle in EV is higher. So that has resulted, and that is why we see a good potential in EV.
No, sir. Exactly. Going by what you have said, I agree completely. But that's why I'm saying that the aluminum products contribution has increased, but the overall EV segment contribution has decreased. So what led to that? Couldn't understand the discrepancy in.
What is that?
Should I repeat?
Please, one more time.
Yeah. Yeah. No problem. So what I'm saying is, if you see the ALPS segment, the aluminum product segment, the contribution from that overall in the product segment has increased. Whereas if you see the electric vehicle segment, the contribution from that has decreased. So I couldn't understand because most of the aluminum products would be going to the electric vehicle segment, whereas the electric vehicle channel share decreased the percentage share.
Some developments are actually in the pipeline, which we are mentioning. They will further enhance, and you will see the changing with the numbers.
In the next quarter and the other quarter, you will see that actually, EV as an industry is also evolving. You will see some new models also coming from some of our very prestigious customers.
The developments which we have for those models will materialize in the coming quarters.
Okay. So should we see this number more on a year-on-year basis versus a specific quarter basis?
Yes. That can be one of the conclusions.
Okay. Okay. Thank you so much. Thank you.
Thank you.
Thank you. The next question is from the line of Joseph George from IIFL. Please go ahead.
Hi. Thank you for the opportunity. Just a couple of questions. One is, you know that aluminum prices have moved up substantially. It used to be about $2,100 per ton for a long time, six to eight quarters. Now, it's moved to the band of 2,400-2,600. Just wanted to understand how that has impacted your business in the first quarter. Did you have low-cost inventory from the past, and hence, are we likely to see any impact in the second quarter? Or is it that the high-cost inventory has hit the P&L, but you got price escalations from customers, and as a result, that was mitigated?
So hi, Joseph. Again, a very good question. I would just like to mention that, first of all, inventories are very low in our case. We do mostly on JIT basis, just-in-time basis. When it comes to the increasing alloy rate, as we had mentioned before also, that we are fully hedged with our customers, and we are doing back-to-back. So there is no impact of the increasing aluminum.
Understood. Thank you. Just one follow-up question. Could you give the CapEx guidance for this year?
In terms of CapEx, as we mentioned already, that the Bangalore project is underway there, we are anticipating.
By the fourth quarter of 2025, we are planning to make it operational.
Right. Yeah. Just wanted to understand how much what is the amount of CapEx that you expect this year from a cash flow perspective?
Approximately INR 250-300 crores.
For the whole?
For the whole year.
Understood. Thank you. That's all I have.
Okay.
Thank you. The next question is from the line of Naveen Kumar from Narnolia Financial Services Limited. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity, and congratulations on a very strong set of numbers. I have a couple of questions. First one is that in your press release, you mentioned that the auto two-wheeler industry grew by roughly close to 20%. So is this momentum going to continue, or are we expecting 20% growth in FY25?
So the industry has grown by 19%, but yes, it also includes a base of the last year, which has been less. But yes, the industry is growing. There are positive signs in terms of that momentum, in terms of monsoon. But in the long run, we feel that the industry will grow at around 7%-8%.
Okay. 7%-8% in the long term?
Which is the usual trend in the past also.
Okay. Sir, one more question. On the export side, we have seen that revenue has declined in this quarter, and that you already mentioned that this is because of inventory corrections. So how are we seeing the next couple of quarters panning out?
So the next couple of quarters, again, you will see, as I told you, that it was a particular case of two of our prestigious customers who wanted to correct their inventories. June onward only, we have seen the trend coming back. In the next quarters, you will see a growth there in that segment. Plus, a lot of things which are in the pipeline will also come into mass production, which will further enhance the export growth. Export is a very strong focus area for us. You can expect good growth in exports in the coming years.
Okay. Great, sir. And a couple of questions related to our JV. If we see our share of JV, it has come down to INR 1.3 crore in this quarter. That was close to INR 10 crore in the third quarter of last financial year. So is this number going to increase, or it will remain closer to that?
No. So JV also is progressing well. However, in case of joint venture also, the same phenomena happened that because of the exports getting little impacted, that was because of, again, the same thing, not just the customer, but also availability of the shipments which were because of the supply chain disruptions and Israel-Gaza war. So because of that, there were some concerns. But we are progressing very strongly in the OEM segment where our share of business is also increasing. So we are seeing those momentum, and I feel that the end of the year will be as planned.
Okay. And sir, one more question related to basically the update on Aisin. In April, you have done that contract with the Aisin for aftermarket. Any update on that?
We have applied. We have got the name registered. The company is under the incorporation. We are progressing in the same way as per the plan. We hope to have something ready in the Q4 of FY25 where we will be launching under the ASK and Aisin brands.
Okay. Okay. That's perfect. Thank you, sir. Thank you so much.
Thank you
Thank you.
Ladies and gentlemen, just a reminder, anyone who wishes to ask a question, may press star and one on the touch-tone telephone. The next question is from the line of Jainis Chheda from Spark PWM Private Limited. Please go ahead.
Good evening, sir, and congratulations on the good set of numbers. I have a few questions. One is on how much of the current margins I mean, how much of the Rajasthan benefits are taken into consideration in the current margins, if any? So no margins have been taken in terms of the subsidy from Rajasthan in this quarter. Right. And what will be our current capacity utilization next, the new plant and including the new plant? So Karoli plant has come to almost 40% capacity utilization. And then every quarter, you will see better and better utilization. Okay. And overall, what will be the capacity utilization on the organization level?
So organization level, I would say all plants are almost full except for the Karoli plant where you will see those quarter-on-quarter increase in terms of capacity.
Now, with our new Bangalore plant also coming in the Q4 of FY25, there also, you will start seeing some capacity utilization from Q4 of FY25.
Understood. In spite of dip in the exports, our margins are at roughly 11.5%. So once exports again start picking up, do we see a margin expansion going forward, or it will be somewhat at current levels only?
So as I said, yes, if the exports were as per the last quarter, if exports were good, then the percentage would have been even better. But yes, our focus is to sustain these EBITDA levels and come to our historical trends of around 12%.
All right. Thank you so much. I'll join the queue.
Thank you.
Thank you. The next question is from the line of Jayp rakash from Korman Capital. Please go ahead.
Hi, sir. Just a couple of questions. What is the two-wheeler contribution in your revenue?
Two-wheeler contribution.
Could you repeat the question?
Two-wheeler contribution.
What is two-wheeler contribution in the revenues?
It's about 80%-85%.
About 85%?
About 80%-85%.
Okay. Thank you, sir. The second question is, sir, on the order book side, do you have any order book which you have in terms of revenue visibility? And in terms of capacity, when you set up a plant, how do you really visualize the capacity required?
In terms of order books, we have a little bit of clarity in terms of our customers and their growth and the product line. When we set up the plant, typically, our turnover ratio is 1:2. For any kind of growth of around INR 600 crores, we always look at a CapEx of about INR 300 crores, and that is how we plan our project. That is why this year also, you will see a CapEx of around INR 250-300 crores for this year, which will take care of our growth for the next year with our Bangalore plant as well as full utilization of our Karoli plant.
Okay. And Bangalore plant will be fully utilized by FY26?
Bangalore plant, we are very hopeful that the customers in the south will be catering to. We are hopeful that it should reach the capacity levels very fast.
Okay. Okay. That's it, sir. Thank you.
You're welcome.
Thank you. The next question is from the line of Sanidhya from Unicorn Asset Management. Please go ahead.
Hi, sir. Sir, just a follow-up. What's the inventory level for the current quarter?
So the inventory level, Sanjeev can answer.
Yeah. So historically, we have an inventory in the range of about 23-24 days of time, and that's the way we have been managing our inventory. So for the quarter, we have been at about 24-25 days only.
The working capital has also.
Working capital overall has been in the range of about 19 days or so for the quarter, which is one of the best in the industry.
Can I get the figure in INR, Karoli?
Of course. Yeah.
At this time, because quarterly numbers, balance sheet numbers are not readily available here. Sorry?
Overall, working capital is close to about INR 170 crore.
Okay. Including the inventory. Okay. Thank you.
Yeah. That includes inventory, receivables, net operations.
Yeah. Thank you. Thank you.
Thank you. The next question is from the line of Jyoti Singh from Arihant Capital Markets. Please go ahead.
Yeah. Thank you for the follow-up opportunity. My question is on the promoter holding side. Currently, promoter is holding 85%. So what's your view on that side? I mean, are we planning in the near term to reduce it, or how we are focusing on it?
So hi, Jyoti. Yes. So basically, we have diluted 15%. And for the next 10%, as per the SEBI guidelines, we still have around two years to dilute it. We will keep in mind our stakeholders and others in view, and we will surely inform you as and when we decide.
Okay. Thank you, sir.
Thank you.
Thank you. The next question is from the line of Shubh from RatnaTraya Capital. Please go ahead.
Hello?
Yes.
Yeah. I have just one question, sir. On the 12% or 13% EBITDA margin guidance that we have at a sustainable basis, do you also consider the government subsidy in those margins, or it's over and about that?
First of all, I would just say that yes, we are committed to sustain a level of around 11.5%-12%, which we promised you. This currently does not take into account any of the subsidies. However, we do foresee the subsidy to start around November for the year.
Understood. Thank you.
Thank you. The next question is from the line of Riham Goel from Spark PWM. Please go ahead.
Hi. Am I audible?
Yes.
Yes.
Okay. So I have two questions. One is, what are the current debt levels, and are they expected to go up?
Our overall current level as on 30th June is INR 378 crore, including short-term and long-term.
Okay. Are you planning to declare dividend by the end of the year?
We declared the dividend last year, of course, when we declared our results for the year 2024. We will look at our position as and when we close this year.
Okay. Okay. Are the debt levels expected to go up, or we should not expect?
Debt levels will.
They remain almost in similar range.
In a similar level.
Okay.
They still actually end up slightly lower than this year.
Yeah.
Okay. Thank you.
Ladies and gentlemen, just a reminder, anyone who wishes to ask a question, may press star and one on the touch-tone telephone. Just a reminder, anyone who wishes to ask a question, may press star and one on the touch-tone telephone. The next question is from the line of Basudeb from ICICI Securities. Please go ahead.
Thanks, sir. Sir, just wanted to know that in this two-wheeler alloy wheel project, what you are planning. Minda Industries has been seeing success in that now for many years. Many other players are also trying to enter that space. So from our HPDC alloy wheel perspective, what's the progress of the product? And any specific orders you are looking at and any comments on the competitive intensity in that space impacting profitability, how do you look at that?
Basudeb, this year, we are very bullish on this segment. We are taking the first mover advantage on coming through the HPDC alloy wheel way, whereas others are in the GDC where there are a lot of benefits also in the HPDC. We are very hopeful that the customers will gain confidence, and we will start the initiative. On a concrete basis, I think near to the Q4, we will be able to give you something on the concrete side because one or two customers, we are in advanced stage of discussion, and things will shape up by then.
From product quality perspective, going through the Indian road conditions in rural markets, the HPDC alloy wheels are tried and tested, no issue?
Yes. So this is a proven technology. It is not an R&D because it has been successfully running in other countries also, in the developing countries as well as in the advanced world. So this is a proven technology. And now, like you rightly said, so that's why I'm saying this will take slightly little time because the customer will also do all their testings internally. And once they are satisfied, then only we will move ahead. So that's why I'm saying by around Q4, we will definitely get much more clarity and the way forward.
Sure. And as Aman said, that November onward, the Karoli plant subsidy from Rajasthan government, you will get. So how are you planning to account that? It will be a lumpy accounting the moment you get, or in future, you will distribute it across quarters uniformly? How will you account that?
No, no. Mr. Basudeb and Naresh decide. We will account for it as it accrues because it is linked to the state GST deposited by the company. As and when we deposit, we will recognize it as another operating income in our profitability.
Okay. So basically, these margins are devoid of that potential benefit, and it will be lumpy in nature whenever you are getting it?
Yes.
Okay. Thank you.
Thank you. The next question is from the line of Bismith Nayak from RW Advisors. Please go ahead.
Yes, sir. So do we have plans to get into disc braking as well?
We are already in the business of disc brake pads. So we are increasing our share and increasing our customer base in that. So we are focusing on our own friction material business.
Because in your question, talking about the complete assembly, so as you have seen that our biggest customer is HMSI, and we also told in the last call that when we went to HMSI for the development of the disc brake system, then their own company Nissin is present. So that is why we are focusing only on the friction part, and the brake system completely is done by Nissin.
Understood. But what I understand is a lot of EVs, they use mostly disc brakes only. So we are not exploring that opportunity?
So that's why I said our biggest customer, HMSI, has its own subsidiary Nissin, which is doing it. But at the same time, on the EV side, I would like to mention that it's not the case. They started with disc brakes, but a lot of them are now moving towards drum brakes to make it more cost-efficient because disc brakes are very expensive also.
Okay. And sir, in Aluminum Lightweighting Precision Solutions, can you give us a sense of what kind of two-wheeler mix, what kind of OEM mix we have there?
Can you repeat the question?
Yeah. In the ALPS, Aluminum Lightweighting Division, what kind of OEM mix we have there? I get what kind of PV, two-wheeler, and other mix?
I don't know. Can we specify?
We are catering to all the customers.
On the two-wheeler side, we are catering to most of the customers. On the EV side, we are catering to 80% of the industry.
I think we have a good presence in the EV sector. I think the two-wheeler OEMs who are already having a share of about 80%+, they're all supplying the majority of our parts to them. We have a good presence across the.
We are also present in the non-automotive segment. We are exporting also. That's the mix.
That's the kind of mix that we have, I think.
Understood. Thank you.
Thank you. The next question is from the line of Megha from Pi Square Investments. Please go ahead.
Yeah. Hi. Congratulations on a good set of numbers. Just a breakup on R&D, if you guys can provide, how much do we spend on the R&D on a yearly basis?
Actually, our business is well established, and we have in-house everything. So we don't keep track of any expenditure on the R&D. Rather, we have a big engineering team, but we account them in the normal expenditure. No special categorization is done.
Just to mention that all our lines are backed by a very strong technology and requires a very strong R&D in-house. For the friction material, for safety control cable, we are completely equipped with world-class R&D technology in India. Not only that, on the aluminum side also, our engineering is very well equipped to handle very critical products. I think that has been our USP of taking more and more critical products and delivering a better margin than the industry in terms of aluminum.
Any ongoing expense that we have to incur in order to keep ourselves updated?
It's a continuous process and an ongoing expense. As Naresh said, we are not capturing it separately, but it's an ongoing expense where we are continuously doing R&D. On the friction side, we have dynamometers where we are virtually simulating actual vehicle conditions. On the safety control cable, we have to do a lot of R&D and testing. So because these are all critical marquee products, safety is involved, and that is why their entry barriers are also very high. That has been our differentiator in terms of the company.
Perfect. Just one question on the long-term growth strategy. As you mentioned that you see the industry growing at 8%-9% in the longer term, how do we see ourselves growing?
Principally, yes, you are right. We continuously focus on outgrowing the industry. To outgrow the industry, we keep looking at new customers. We keep looking at existing customers and add more and more products. All these products, which we focus on, are well supported by our engineering and our R&D to make sure that the complete value addition is there. We are looking at better margins, better markets, more criticality involved so that we not only grow our top line but also ensure that we are growing positively on the bottom line.
All right. Thank you and congratulations once again.
Thank you. Thank you.
Thank you. The next question is from the line of Jayp rakash from Korman Capital. Please go ahead.
Hi, sir. Thanks for allowing me for a follow-up question. So just on the aluminum lightweighting cell, so I understand overall industry growth is 7%-9%, and I believe aluminum weightage in the vehicles is going up. Is it true for ice as well, or is this true for EVs?
It's true for both because eventually, we are seeing that trend that lightweighting and EVs becoming lightweighting and thermal management is becoming the future of the industry. So it is applicable to both. And also, what is happening is with more and more electronics coming into even passenger car and other segments, we also see a growing need for more heatsinks and other things. So this will grow.
Okay. And sir, the Capex which you have done, is it for aluminum, or is it for the other ABS brakes you have done, Karoli as well as Bangalore?
It's majorly for aluminum because, as you see, the growth is also coming. At the same time, all our plants like Karoli plant also has safety control cable, is also doing friction material. Basically, all three verticals go into that.
You're correct. Majorly it is for ALPS also.
Okay. Okay. Just last question from my side. Sir, can you tell what is the right to win here in terms of the products we have?
Sorry, come again?
What is the competitive advantage we have in terms of the products?
You're talking about aluminum, or should I give you an overview of the whole company?
Overall will be really helpful for both the products, brakes as well as the ALP products.
See, on the friction side, as I told you, that because of our R&D, there are very high entry barriers. It involves safety. So it has to go through a lot of testing. And we also, over the years, after so much of R&D and so much of testing, we are able to develop 52 proprietary formulations. So those are the things which kind of ensure that we are fully updated and also creates an entry barrier for any other people. In terms of aluminum, again, it is backed by a very strong engineering. So engineering, there are a lot of design migrations which we are doing. There are a lot of critical parts which we are doing which require special engineering skills. So those are the things which we do to ensure that there is a lot of value addition.
There is more margins there on that side, and that is how we are maintaining our position.
Okay. Who are our closest competitor in India?
Again, it depends on.
Segment to segment.
Segment to segment.
Okay. Anyone on the aluminum side?
See, so on the aluminum side, Endurance is also doing aluminum for and then Sundram Clayton is there. Then in the north, Rockman is there. Rico is there.
Okay. Okay. Thanks a lot, sir. Thank you.
Okay.
Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the conference over to the senior management for closing comments.
Again, thank you very much, everyone. Thank you very much for your time and for your very good questions. Hopefully, we have been able to address all of them. Again, I would like to repeat that we are quite happy with the results, and we will make sure that we are able to sustain this, and we will work very hard towards continuing these positive results and creating value for our shareholders. Thank you very much again for your time.
Have a good evening.
Have a good evening.
Thank you. Thank you very much. Thank you. Thank you, everyone. Bye-bye.
On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.