Ladies and gentlemen, good day and welcome to Q4 and FY25 Sandhar Technologies Limited's earnings conference call, hosted by MK Global Financial Services Limited. 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 this conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Chirag Jain from MK Global Financial Services Limited. Thank you, and over to you, sir.
Thank you, Amshad. Good morning, everyone. On behalf of MK Global Financial Services, I would like to welcome you all to the Q4 and FY25 earnings conference call of Sandhar Technologies Limited. Today, we have with us from the management team, Mr. Jayant Davar, Chairman, Managing Director and CEO, and Mr. Yashpal Jain, Chief Financial Officer and Company Secretary. We will begin the call with opening comments from the management team, followed by a Q&A session. Over to you, sir.
All right. Good morning, ladies and gentlemen. Let me welcome you all to the Q4 and 12-month earnings conference call of Sandhar Technologies Limited. I want to thank MK Global for putting this together. On the call with me from our company is my colleague, Mr. Yashpal Jain, who is the CFO. To begin the call, let me talk about how the world is for us, for our sector. You are aware of the geopolitical situation and what kind of challenges they are bringing to the world. The automotive world, on a global level, is surely facing headwinds and with a lot of uncertainty because of the tariffs and so on and so forth, as well as insecurity on the part of a lot of the population. There has been a little bit of a drag on the auto sector.
I do believe that both the United States and the EU will continue to have some turbulence, not just this year, but in the continuing years as well. You have seen marquee brands like Tesla and all also face challenges in the sales. Also, the quick ramp-up of several competitors who entered the field of non-IC engines to bring up competition. Where India is concerned, I do believe that India is comparatively stable, and we are seeing a decent demand. We do expect that the industry, as most are saying, will continue to grow in high single digits even in this year. As for Sandhar is concerned, Sandhar, under the circumstances of what I have mentioned above, has continued to perform well.
We have achieved a total income growth of 11% compared to Q4 2024 and 10% compared to the full year of financial year 2024 at a consolidated level. We anticipate sustaining this growth momentum. Of course, this is subject to geopolitical conditions, market demand, the performance of the auto sector, and other related factors. The India business for us has achieved a growth of 13% compared to Q4 of financial year 2024 and 13% growth according to the full year of financial year 2024. The consolidated EBITDA grew by 9% in Q4 to INR 109 crores versus INR 100 crores, and grew by 14% year on year in financial year 2024 to get to INR 400 crores of EBITDA in 2025 versus INR 351 crores in financial year 2024.
The EBITDA for India business grew by 12% in Q4 2025, which is INR 97 crores versus INR 86 crores, and grew by 21% in 2024-2025, which is INR 357 crores in 2025 versus INR 294 crores in 2024. I am also very pleased to share that all our joint ventures are experiencing strong growth and consistently improving performance. Further, pleased to share that all our joint ventures are PAT positive in Q4 and for the full year financial year 2025. The success is driven by focused cost control, localization efforts, and enhanced business synergy. We remain confident that this growth trajectory will continue and grow. Collectively, our joint ventures have recorded a total income of INR 303 crores, with an average EBITDA close to 13%.
We are also thrilled to announce that Sandhar Ashcraft Private Limited, our wholly-owned subsidiary, has successfully acquired the high-pressure and low-pressure aluminum die-casting business of Sundaram Clayton Limited at their Hosur plant for a total consideration of INR 163 crores. This strategic acquisition marks a significant milestone in our growth journey, allowing us to diversify our operations and enhance our manufacturing capabilities. By integrating Sundaram Clayton's legacy with our expertise, we are poised to drive innovation and expand our product portfolio, tapping into the new markets. We took over and took over the operations on the 1st of April 2025. For us, the key benefits of this acquisition include entry into the low-pressure die-casting market, enhanced production capacity with higher tonnage machines, broadened product offering, including essential components for automotive and industrial applications.
We are excited to welcome the talented team from Sundaram Clayton and look forward to achieving new heights together. On the overseas business, the performance of the overseas business has been a drag for us in Q4 as well as for the full year of operations. We sustained losses marked by low demand and slowdown in Europe. We are closely watching the situation over there. As per preliminary indicators, the volume should increase in financial year 2026, not so much from the growth in Europe, but from the addition in the wallet share of the components that we have. The company's expansion project in Pune for cabins and fabrication and die-casted are expected to commence commercial production by the end of March 2025. Should start to happen now. Our EV business has started commercial production of battery chargers and is getting a very positive response from the market.
The customer base is gradually increasing with more and more customers added. With that, I will conclude my opening remarks. In fact, I should also mention here that that is a question that we have been having from all of you for a long time, is the smart lock. You would be happy to know that Sandhar Technologies received the EV Best Part Development Award from Suzuki Motorcycle during their annual supplier meet. Now, this particular product line is ramping up, and we do expect a gradual, but sure-footed growth in this particular year. On the CSR front, we dedicated ourselves to sustainable business practices that address economic, environmental, and social challenges. Our efforts go beyond just business concerns. We want to create a positive impact on the communities that we serve. We are focused on diversity and equal opportunity.
As we go forward, our focus areas are working towards ESG and SEG, diversification of product portfolio, expanding customer base, and increasing content per vehicle, which we've been doing, improvement on ROCE and ROI, consolidation of operations, and generation of more free cash flows and deleveraging of our balance sheet. Those are the agenda items and KRAs for us that we must continue to improve and achieve as we go forward. With that, thank you all once again. We are open to questions.
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 touchstone 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 is from the line of Tushar Gupta from Sagun Capital. Please go ahead.
Hello, sir. Am I audible?
Yes, you're audible.
Yes.
Thank you for the opportunity and congratulations for a good set of numbers.
Sir, I want to know about what are the CapEx plans for the financial year 2026? What is the market for EV chargers? How much can we expect a revenue from this segment?
The CapEx plans for 2025-2026, largely like we have a CapEx policy in case like that it is equal to depreciation at the group level. From the normal, the maintenance CapEx and the growth CapEx, we are expecting around close to INR 180-200 crore in this financial year 2025-2026.
Sir, how much large this EV charger and controller market can be and how much revenue we can expect from this segment?
Tushar, to just give you this, we have a three-year plan for the EV business. This will be the first full year of operations where we have targeted numbers which are comparatively smaller in the range of INR 10-15 crore, but it's ramping up very quickly to an INR 100 crore level within the next three years.
Sir, one more thing. We have acquired a Sundaram die-casting unit. So how much we can expect from that? Revenue, potential, and all.
Yashpal, do you want to give the numbers?
Yeah, yeah, sure. Sundaram Clayton, we have acquired the ongoing business on a slump sale basis. This year, we are expecting a revenue of around INR 400 crore to INR 425 crore, which is the revenue expectation from that business. It is again subject to the demand in the Indian market as well as the overseas market because it is highly dependent on the customer's shoulders also. We are expecting this revenue to range between INR 400 crore-INR 425 crore. It has, I would say, potential to grow further. Yes, that has to be seen in the coming years. Ideally, we maintain a return ratio of two and a half to three times in the long run. We would like to achieve it going forward in the next two to three years of time.
Okay. Sir, one more thing. As we see in Q4, we have increased our margin, EBITDA margin. So it can be going forward or it can be stable. It will be stable. Please highlight.
Yeah. In the last two to three years in the calls, we have been emphasizing that we are on the task of improving our EBITDA margins also as well as the earnings before tax also, including the ROCEs. You can expect another improvement of 30-40 basis points in this FY 2025-2026. I think that is the upper level that a component industry can achieve given the market situation. 30-40%, we are expecting a healthy improvement in EBITDA in FY 2025-2026.
Okay, sir. Thank you.
Thank you. Before we take the next question, we would like to remind the participants to press star and one to ask a question. The next question is from the line of Sakeet Kapoor from Kapoor & Co. Please go ahead.
Namaskar, sir, and thank you for the opportunity. Sir, just to recreate what you mentioned in terms of the EBITDA margin trajectory, can you specify what I missed your number? You mentioned some 30, 40%. Can you come on?
No, yeah. We expect an improvement of 30 basis points to 40 basis points, means 0.3% to 0.4% in EBITDA margin FY 2025-2026. Again, that is dependent, as you know, on the industry challenges also and the demand pattern also.
Correct. Sir, in terms of the Sundaram unit acquisition, sir, what are the current metrics for the unit in terms of the revenue and the profitability?
As we mentioned in the filing, currently the unit was operating close to a revenue of INR 390 crore something or I think INR 376 crore because it keeps on fluctuating. For this financial year 2025-2026, we are expecting a revenue fall of around INR 400 crore to in between INR 425 crore. The reason is that we have started the operations in their premises. During the intermittent period during the financial year, we will be shifting the entire operations to our own premises. That is the reason. Considering all those factors and a little bit of disruption, we expect our revenue to be between INR 400 crore-INR 425 crore. In the long term, as you know, we keep our financial metrics that any business should deliver an asset turn of two to three times, two and a half to three times largely.
In the next two to three years, we would like to scale up to those levels.
Okay. What are the current margins and the profitability for the unit, if you could mention, sir?
Largely, it is with the die-casting, like single higher digit or at the most 9.5% to 10%. I mean, in the ADC segment, 9% to 10% is a healthy margin if one can achieve. I do not think anything would be changed. That could continue.
Correct. Sir, in this point.
Yeah, please.
Please, no, sir, you continue.
No, no, that's what I was saying. Because we are not seeking to expand on a larger CapEx base. That's the reason we are more focusing on improving the return on capital invoice once the investments are through. So largely, the EBITDA came between 9-10% in ADC. That is also a very good EBITDA margin, one should say.
Sir, even we have disposed of one of the units. Correct me there. If you could just explain the rationale for that, which is sell one of our units during this entering period only.
You are referring to one of the residential lands or exit of joint ventures? Can you elaborate further?
Joint venture, yes, sir. I'm referring to the joint ventures.
Yeah. There was one of our old joint ventures, Jinyoung Electro-Mechanics. The expectation with which we formed this joint venture with our Korean partners and the level of activity was not up to the mark. We are reviewing our JVs also in the sense that we want to scale up the business. Jinyoung has been, I would say, financially and operationally not performing well in the last five to six years. There were serious troubles within the organization also. Management was of the view that the long-term objectives of our organization as Sandhar might not be fulfilled while continuing the joint venture. We plan to exit the joint venture.
Sir, when we look at the control numbers, although there is a significant increase in terms of the revenue profile, the margins and the contribution to the profitability is flat, as you have already alluded in your opening remarks. If you could just give us some more understanding on how, at a consolidated level, especially the margins are going to shape up. I just wanted to highlight a point that on a revenue top line of INR 1,014 crores, we post PVT of INR 50 crores for the consolidation. Whereas in the standalone on a revenue, I think it is 700. Just a second, sir. On a top line of INR 758, the profitability is INR 50 crores. The PVT number moves up by INR 5 crores on an increase in the top line by INR 225-240 crores.
If you could just explain the dilution of margins when we go on consolidation and what steps, because in your opening remarks, you did mention that our targets are to improve the margins at both the standalone and the consolidated levels. All steps are being in the angle to achieve that. If you could just throw some more light on the question.
Yes, sure. So basically, in the opening remarks, we remember our MDs also mentioned that the European business has been a big drag for us during the financial year 2024-2025. If we compare the growth between the Indian subsidiaries and the foreign subsidiaries, the Indian subsidiaries have outperformed. Basically, we have a large subsidiary at Sandhar Engineering, which is into the sheet metal business. For the last three years, I mean, we have set up three manufacturing greenfield projects in the same. Now, all those have started, I mean, the revenue has started flowing in, I would say, the right direction, and the business has ramped up. The major drag has come from the European business. We have sustained our annual loss of close to INR 21 crore in the European business. Otherwise, the rest, all other Indian subsidiaries, they are performing very well.
They have already crossed the break-even levels. In the coming, I mean, this financial year 2025-2026, they will be posting healthy margins also. As far as European subsidies are concerned, we are reworking out our strategy over there. Because as we know, the demand is fluctuating in the overseas market, whether it's the U.S. or the European markets. There is a lot of confusion also prevailing with respect to the tariffs and how the business deals will be happening between Europe and America versus the Asian countries. In a bit to revise our operations, we are taking some strategic calls. We are expecting that FY 2025-2026, we would not be facing this much of losses in the overseas business. Our first task is to ramp up the operations over there and to cut down the losses in overseas business.
This is how the strategy is there. Otherwise, the Indian subsidiaries, we are performing very well. They will continue to perform.
Last point, and I'll join the queue. Sir, firstly, in terms of, I think, with the closing capital working progress balance at the standalone and the control level, what are the new capacities that will get commissioned during the year? Also, on a conservative outlook, also on a top line of, say, INR 3,900 crores, which we posted last year, what should be the stable rate of growth in the top line? You did add it to what margins would look like, the trajectory. What should be the top line trajectory, sir, which we may guide through for this current financial year?
The capital working progress largely is INR 113 crores, which is an amount of the advance that we pay to Sundaram Clayton as a part of first tranche of payment as per the business transfer agreement. INR 113 crores is comprised of that, which we have already discussed that that business will be generating a revenue of INR 400-425 crores. Because we bought this business for INR 163 crores, and INR 113 crores was paid prior to 28th of March. The remaining was INR 50 crores, which were discharged prior to 11th of April. This is how the major CWIP is being routed. The remaining CWIP is on account of the other two, I would say, the Pune projects of CFD and aluminum die casting, which MD Sara has also mentioned. Now, I mean, the commissioning has been done. The commercial production will start within this quarter. They will be adding up.
In the first year, you know the ADC and the cabins and fabrication being a heavy industry, it takes two to three years to ramp up the production. There would be addition to the revenue, but that would be close to around INR 40-50 crores in this first year. As far as the top line projections are concerned, auto industry, as ICRA and other agencies have issued the report, would be a high single-digit growth only. We expect that we might be landing a growth of not lesser than what we have done in the last year. With the new business and plans adding up, I think we can land something around 14-15% of the top line growth in the coming with the same stable growth in the auto industry in India that we project.
Thank you, sir. I'll join the queue for my follow-up. Thank you.
Thank you.
Thank you. The next question is from the line of Resham Jain from DSP Asset Managers. Please go ahead.
Hi. Good morning, Daudi. Just on the overseas piece, we have spoken about it. Given that it is taking slightly longer, and obviously, it can test anyone's patience. From the strategy perspective, over the next two years, three years, what are the kind of guardrails you are keeping for that business? Somehow the recovery is not coming there. The overall debt also is significantly higher, being added to a bit of the overseas businesses also on a higher side. How do you see the overall restructuring? What are the three, four important steps you are planning to take there to improve the overall profile of the business?
Reshan, thank you for that question. I know it's been a thorn in the side for a while now. Just to brief you on what we've been doing, what we've been doing is that we've been replacing higher-cost capital. We've added more businesses and more products in that particular business. The effects of that have already started to show. If you even look at the last quarter, the last quarter was much lesser losses compared to the previous quarter. We do believe that with the improvement that is happening that started to happen in the last quarter, that improvement will continue. We will be able to mitigate the losses that we had. On a long-term basis, two- to three-year basis, our capacities in Romania, which got delayed because of the war, are now being utilized.
Mexico had gone down on account of confusions with the U.S. and other things, are back in operation. From a perspective of regular operational strategy, we do believe that the losses that occurred will be mitigated to a large extent in the year 2025-2026. Where the future is concerned, you are aware that we have a lot of strategic advantages of having this business. This is the reason why we could manage to get the business in India. With now this new Sundaram Clayton acquisition, we are amongst the top few players in the country from being nowhere at one point of time. This is on account of the specialized componentry that we do. We are hopeful that that strategic stay in our city has helped us.
Our job is to make sure that we not only mitigate the losses, but effect it into profits. You are aware that the EBITDA margins in our overseas business was actually higher than our India business. We are hopeful that beginning from the next quarter itself, you will see a huge amount of change coming in terms of positive direction. Yashpal, do you want to add something?
Sure. As far as said, we are expecting the business to revamp in the coming two to three years of time. We are in the process of preparing long-term plans. Also, if you remember, in India, also two years back, we were struggling with the same margins. We have taken many efforts and steps towards improving our margin base also and going with the LG product line. The same would be mapping to overseas operations also.
I think the FY 2025-2026 won't see the losses to the quantum which we have seen in FY 2024-2025. Soon, the operations will be back on the track.
Okay. Thank you, sir, for giving that confidence. That is the first one. The second is on the overall revenue. We have touched almost INR 3,900 crore this year. Given that you have acquired a new business plus several new wins, how do you see the overall revenue panning out for FY 2026? Broad numbers.
The industry, as we have seen the reports, is a single large digit growth, right? Still, we are expecting that 14%-15% of some growth should come up in our revenues. That we will be working because we know the customer schedules keep on changing every quarter. Large depend on third and fourth quarter. Still, based on the stable growth in the industry, we are expecting a healthy growth of 14%-15% of the revenue. Our more focus will be on improving the margin base. More focus on the margin base.
Sir, just to clarify, the 15% is without INR 425 crores of Sundaram Clayton, right?
Yeah, you can expect that.
Okay. Understood. Okay. Thank you, sir. All the best.
Thank you.
Thank you. The next question is from the line of Preet from Incred ANC. Please go ahead.
Yeah. Thank you for the opportunity. I would like to ask about the debt level. In previous phone calls, you mentioned that you will be keeping your debt levels below INR 700 crores. Now, obviously, for the acquisition purpose, you have to take the debt. The debt level has gone beyond that. Do you have anything that how much you can go or will you be further increasing that, or it will be now staying constant at this level?
On March 25, console level, we have a net debt of INR 740 crores, right? Largely, which includes a payment of INR 113 crores in the last week of March to Sundaram Clayton as an advance to the purchase consideration. Majority of the acquisition price we already factored in March 2025. Another INR 50 crores has been factored in April 2025. I think the debt level should not go beyond what we have seen, the gross debt levels of INR 850 crores in the month of March at one point of time. Because we will be generating EBITDA, as I have told in the previous question and answer session, that 30-40 basis points we are expecting an improvement every time. This year, we have closed at EBITDA of INR 399.79 crores on a round size. Size it is INR 400 crores.
Again, with a 15% around growth in turnover, we will be having the healthy inflows of cash from operations, which we would be using for our expansion needs. We will not be relying on a higher debt level for our organic, as far as organic expansion and organic operations are concerned. If something inorganic comes up, then that would be again backed by the revenue of that business. That I am not factoring right now.
Okay. Got it. One more question from my side. What would be your outlook? What do you expect from the subsidy business in the coming year? Will it be able to reach the break-even? If not, then in which year do you expect the subsidy to come back to the break-even level at least?
Indian subsidiaries have already crossed the break-even level because Sandhar Engineering was a new subsidiary that we floated in FY 2021, I mean, 2021-2022. That has already crossed the break-even. It was a sheet metal, three units were installed in the company. As far as overseas is concerned, as we have discussed, I mean, just before this call also, we are working on improving the operational efficiencies and the margin base over in overseas. I think this year, by the end of this year, we should be very near to the break-even in overseas business.
Okay. How much do you expect from JV, similar profit levels which we are seeing FY 2025, or it will be improved further?
Largely, the JVs, the operations have stabilized because initially, most of the JVs were formed during COVID. That's the reason they were reeling under the business losses and the other factors. Now they have ramped up, and as far as told in the beginning also, localization has been focused in the JVs. I think they should be able to maintain. Again, everything remains on the customer side and also how the political conditions prevail across the globe. There's no reason as of now that the JVs should be going back to the losses.
Okay. I'll join back in the queue. Thank you.
Sure. Thank you.
Thank you. The next question is from the line of Raghav from BNK Securities. Please go ahead.
Hi, sir. Thank you for the opportunity and congratulations for good results. Sir, your capital employed in the consolidated business stands at INR 2,000 crores if we exclude the INR 113 crores of investment in Sundaram Clayton. So this capital employed is including the working capital. Is it fair to assume that the company has invested out of this INR 2,000 crores, INR 600 crores is in the overseas business?
Raghav, investment in overseas business, the capital employed is INR 530 crore, 530, out of this INR 2,000 crore of capital employed.
Okay, sir. Thank you. Are you investing any further in the overseas business in the next two years?
That gradually we'll see because if you remember, in Romania, we were supposed to install 16 machines. We have done five machines as of now. We are seeing how the business is ramping up in overseas. Based on that, we will take a call. Right now, the priority is to break even the operations over here. Right now, we do not have any heavy CapEx plan in the overseas business.
Okay. Secondly, the Sundaram Clayton overall working capital cycle is almost double of Sandhar's working capital cycle. When we integrate this wholesale plant from next year, will this working capital cycle continue that they have, or do you think that it will be reduced to Sandhar's level?
This working capital cycle, you are telling from Sundaram versus their customers, or how? Can you elaborate this?
Yes. I'm checking the Sundaram Clayton overall business working capital cycle since I will not be able to get separately for the Hosur plant.
Yeah, exactly. Because Sundaram has another business in Oragadam also. They call it the Padi business. We have acquired Sundaram, so any connection from Sundaram is already over. They were the sellers, and we were the buyers. Now, our working capital cycle will be more or less from that business to our present profile.
Okay. Sir, just wanted to know why did the current promoters sell this plant and also a bit color on what kind of payback are you expecting? Is it set within 15% ROCE? Is it sustainable return ratios that we can expect from this business?
Yeah. So INR 163 crores we paid to acquire the business. This year, we are expecting a revenue of INR 400-425 crores. And as you know, we keep a target of two and a half to three times our effort done in the next two to three years of time that we will be scaling. We remain confirmed to our ROCE of 15% that we have discussed and mentioned earlier also. That ROCE will be coming gradually over a period of time, but not immediately in this financial year.
Any color on why did the current promoter sell this plant?
Yeah. So basically, Sundaram Clayton, again, they are integrating, or I would say they are exiting the non-core businesses. And this component went by casting, sorry, aluminum, LPDC, SPDC was not their core business. That's the reason if you never see they exit the plastic business also. They are exiting the non-core businesses, which they are not into. The reason to my understanding is the same that they want to continue their strategic and core businesses. That's the reason they are hiring off their non-core businesses.
Okay. Sir, out of the INR 113 crore and INR 200 crore CapEx plans that you have announced in this year, how much would be reinvesting for this wholesale plant of Sundaram Clayton? What is the overseas sales mix from this INR 400 crore?
Around INR 200 crores of CapEx plan that I said, we will be investing around INR 20 crores-INR 25 crores to upgrade the Sundaram Clayton lines once it is shifted to our premises. It also excludes the INR 50 crores for the balance consideration that we have discharged in the month of April, right? As far as overseas is concerned, as I told, we will be evaluating as and when required once the capacities are ramped up with the order basically expanded. Already, we have in Romania five machines installed. In other operations, we are not seeking any heavy CapExes over there except the maintenance and the very, very regulatory requirements. That is all.
My question was, this Sundaram Clayton Hosur plant, how much is the domestic sales and the overseas sales?
It's a domestic sales only, sorry. I missed your question. It's a domestic sale only. We have acquired a domestic business, the domestic sale. There's no overseas sale from this plant.
The customer would entirely be TGS?
We have an option. There is no non-competing clause. Right now, it is TGS, but we can extend to any other customer base. As far as LPDC is concerned, we are foraying into that business for the first time. We have larger customer demands also for LPDC. We might get out to other customers also. That depends on future strategies, how we plan. As of now, TGS is the main customer.
Sir, what part does this plant make? In terms of tonnage, you have mentioned that one of the rationales is increasing tonnage. What is the current capacity of the company in die-casting, and how much would it increase from this plant?
I'll get back to you because tonnage and those capacities I need to check with the business team.
Okay. Thanks, sir. Get back to you.
Sure.
Thank you. The next question is from the line of Saurabh Jain from SUNYD. Please go ahead.
Hello. Yeah. Good morning, sir. And congratulations for the good set of numbers. Sir, my question was to take it forward from the last participant on the CapEx. You said INR 180-200 crores of CapEx for FY 2026. Our maintenance CapEx, if I'm right, is roughly around INR 160-170 crores. There is no major plan for growth CapEx for FY 2026, right? This is in context of our current capacity utilization also, capacity utilization for FY 2025, which is including the upcoming ramp-ups possible in FY 2026.
First, I'm talking about CapEx. We are keeping a plan of close to INR 200 crores, more or less equal to our annual depreciation. Hello. Can you hear me?
Hello.
Hello. Hello.
Mr. Jain?
Hello.
Yeah. Can you hear me?
Yes, sir. We can hear you.
All right.
I think there's a disruption in his line there.
Should we move on to the next question too?
Yeah, yeah. Definitely.
Mr. Saurabh, sir, I may request you to return the question too? The next question is from the line of Rajit Agarwal from Nilgiri Investment Managers. Please go ahead.
Good morning, sir. Sir, will it be possible to share the numbers for your overseas bills? What were the loss in two crores? Specifically, the top line of Mexico plant?
The losses, the consolidated losses at the overseas on annual basis is INR 21.09 crores. Fourth quarter is INR 3.74 crores, sir.
Okay. Thank you.
On Mexico, specifically?
Mexico is close to INR 120 crores of annual revenue.
Okay. All right. Thank you, sir. Will it be possible to share some update on some of the products that you mentioned in Q3 that were delayed? For example, the mirrors for Hyundai and SUVs are expected to begin in July, August. Are those timelines still—will the timelines still hold? There were some new parts in seat matters which were supposed to be launched in Q4 and the ongoing quarter of FY 2026. The.
EC mirrors you are—yeah, EC mirrors you are talking of for Hyundai?
Yes, sir.
Yes, sir.
Hyundai's latest update is that by September, they will be going for this. There is a little bit of a delay of another, I think, one, one and a half months. September, they have given us the revised date because they are working on the model in which they want to fix it. That is the reason for the delay from the OE side. Secondly, sheet metal, most of the new plants are already—because sheet metal is a continuous part development process. The model keeps on changing from the customer side. It is a continuous development. There is no, I would say, closure or opening date. It continues, the part development, because the volumes are ramping up with the sheet metal. You can see we have very good growth in sheet metal in this financial year compared to the last financial year.
It's about 33% of growth that we expect that we derive in sheet metal business. It will continue with the growth momentum because the plants are scaling up. All the three plants are scaling up in Sandhar Engineering, and one plant is in Sandhar Technologies Limited, the parent company. All four are scaling up and giving us a good business.
Great. Thank you.
Thank you.
Thank you. The next question is from the line of Ankit from Adizi Ventures Family Office. Please go ahead.
Yeah. Hi. Good morning. My first question is with regard to the current inventory situation with your clients. Was that lower or higher than usual? How is the inventory set over here at the dealership level currently?
Can you come back to the question, please?
I didn't hear the question too well, please.
Yeah. I'm saying what is the current inventory situation like at dealerships and with your clients? Is it lower or higher than usual?
It's difficult for me to say. We know that there were some production issues, for example, at Hero on account of some supply issues. Therefore, their manufacturing and production went down in the last couple of months. I understand they've started ramping up now according to the orders that we are getting. With the others, again, I would say from whatever news we have, of course, we have limited information compared to what Sandhar would have. From whatever information we have, it is well within the range of the 45-day inventory target that most of these OEMs keep.
Understood. Looking ahead to next year, what is the kind of revenue and EBITDA margin aspirations that you're looking at?
Yeah. Revenue, we are expecting a growth of around 14%-15% in FY 2025-2026. EBITDA margin, we have kept a target to go for further improvement by 30-40 basis points.
What is our EBITDA margin number in that case?
Expectedly, if you add back, I think the figures can be derived now because we have closed here EBITDA of 10.20% on a consolidated basis. So another adding 10.5-10.60%. Roughly, it can be close to INR 470-INR 475 with the growth plans.
Understood. Thanks. What are the key areas of confidence that take us to this higher growth and EBITDA margin for next year?
Yeah. Sure. If you see that in the last three, four years, we were investing heavily in setting up new greenfield and brownfield projects. Most of those plants have been commissioned, and now they are scaling up the production. We are getting good responses from the customers. Going forward, there would be a neutralization of the fixed cost because the volumes will be increasing while the fixed cost will be remaining constant. Whatever the variable cost minus the prices will be coming, it will be adding up to our margin base. Secondly, we have taken many of the time in the internal exercises to increase our operational efficiency as well to integrate some of the common operations also. All these will be going to give us the desired results in this coming financial year as well as the succeeding financial years also.
Understood. Thanks for that. Finally, what has been the commodity cost outlook like, and what is the outlook looking like for next year?
Very difficult to project because commodity is something which is fluctuating, especially when the geological situations are worsening. Anytime, I mean, sometime it just pops up with a higher trajectory. I think more or less it should be within the same range during what we have witnessed in the current financial year.
Currently, it's moving in a similar range to say last quarter.
Yeah, yeah. More or less. Unless there is some massive change in the geopolitical conditions or the trade deals, that is a different situation.
All right. Thanks very much, sir.
Thank you.
Thank you. The next question is from the line of Sakeet Kapoor from Kapoor & Co. Please go ahead.
Yeah. Thank you, sir, for the opportunity. Again, sir, you mentioned that for our overseas operations, we have made investment to the tune of INR 530 crore. Is that number correct, sir?
Yeah. It's a capital invoice. INR 530, yeah.
Okay. Sir, we posted revenue for FY 2024 at INR 488 crore, and for FY 2025, it is INR 452 crore. There is a decline, and is this the number for which we have employed INR 530 crore as the capital employed?
Looking to the last year's performance, we should not compare idly because last year has not been healthy. Everyone is seeing a fall in the overseas business, Europe and American markets. I think the one-year single year's performance, we cannot benchmark it to the investment that we have done because investments are always done with a larger perspective from long-term views. The business keeps on, I mean, taking these cyclics, cycles, I would say, the ups and down cycles. Last year was a down cycle, but the situation never remains the same. The coming year, succeeding year would be the better one. You will see that the capital that we have employed does not go waste, and the plants will be generating a healthier top line as well as a bottom line also.
Sir, also on a conservative basis and taking things ahead, what should be the contribution from the overseas operations going at a two, two, three, three years down the line? Or is it very difficult to speak on the foreign operations because of the geopolitical situations as we stand today?
Yeah. If you recall two years back, or I would say one and a half years back itself, we were having an EBITDA margin of 13.5% above in the overseas business. Again, we plan to go back to the same levels. The geopolitical situations of the tariffs and other things, I think they should be stabilizing because all the countries are sitting together now to work out the trade deals. So sooner or later, they should be sorted out. The operations would, I mean, these are all expectations depending on what the forecasts are coming. We expect the operations to go back to the earlier position and contributing a healthy margin base to our overall operations.
Okay. I think you alluded to this tariff part of the story. Currently, sir, for our overseas operation, what are the current tariff trajectory and the proposed one for our overseas operations? What should the tariff look like?
Directly, we are not hit out with the tariffs because we have a pass on with the customers also. Directly, the country is not how the country behaves between two countries. Directly, there is no hit as far as overseas also concerned or domestic is concerned. Let's see how it works out and how the demand is there and what are the preferences between the countries in terms of exports and exports that we need to see after the second quarter, I think. By second quarter, it should stabilize.
Okay. Just additionally, we find the first half of Q1 to be the flat quarter in terms of the auto component or the lean period. Is there for, or what should we be considering in terms of how the first half and the second half split between revenue works out?
Traditionally, first half is a little bit weak, and second half is high because second half has festivals in India also. The demand is also there. The revenue split normally is around, I mean, it's very difficult to say, but normally we see it around between 45-55 or 40-60. This is how the split is.
Lastly, you could also allude to us the current utilization levels. If that number could be explained because we are into a lot of products and so that's functioning out on utilization levels might be difficult for both Indian and the overseas operation. The second point is that post our IPO in 2018, somehow the investing community has not been able to value creation has not happened. Have the management figure out or iron out the reasons for which the value creation journey has not happened for Sandhar in particular. What steps can we expect going ahead that may create value for your investors at last going ahead?
Answering your first question, in terms of capacity utilization, at one point of time, it is very difficult to say how all the businesses because we have been adding the capacity. We have been modifying our basis, I mean, setup also. For sheet metals, the new plants are already above 70% now, right? As far as assembly lines are concerned, I mean, they work on a different pattern. We do not have that much of idle capacity, if you say. We have available capacities also in which we can expand. We plan out our operations based on that only, and we invest accordingly. Similarly, in the overseas, 11 machines are pending to be deployed in Romania as per initial plans. Again, we will be taking the call once we get the existing investment ramped up and the volumes increases.
That is a call that we take based on the demand and based on the available capacity. If you really ask me whether we are overall based on 80, 70, for different vertical, different plants, it is a different matter altogether. We keep the facilities with us. We keep the capacities with us because the customer demand keeps on fluctuating, and every time we cannot go and start our expansions. That is the reason. It is a holistic view for the next two to three years. We plan out our expansions also and the addition to CapEx also. As per another last part of the question is concerned that post 2018 IPO, Sandhar could not create value. If you see, there have been multiple reasons.
One is that after 2019, the auto industry again went into the bad gear, and there was a degrowth in the auto industry. That was one of the reasons. I think all of us know that the pandemic has hit globally. So two to three years were, I would say, they got washed off. Post IPO, you can see the timing of these all events that coincided with our IPO timing. If you see last three years' performance, we are back on the track. We have already moved to our double-digit margins which the market was expecting. I think our growth and improvement will continue. Now, there seems to be no reasons as to we will go back to the worst times, I would say.
Yes, sir. Thank you, sir. Can you comment on the credit ratings, sir? When are our credit ratings due and what is our current cost of funds?
Our credit ratings are due next year now. We have already done our ratings, renewed from India Rating as well as ICRA. Our average cost of borrowing is like it lands something around because the rates were comparatively higher. It is roughly around 7-7.5% of the average rate of borrowing, including the movement in working capital that we found. We have kept around 7.5% in between.
7.5% is our cost of funds.
Yeah, average, I would say. Not plain. It's our average cost of funds that we deploy.
Okay. Lastly, sir, you alluded to INR 200 crore CapEx for the current year. What should be then our current maturities, and what should we be like to close the year, although we are on the first quarter only, in terms of the closing debt numbers?
I think in the earlier part of today's call, I mentioned that this year we are expecting an improvement of 30-40 basis points in our margins also. They will be sufficient enough to generate cash from operations. At the same time, we have planned for INR 200 crore of CapEx, exceeding the INR 50 crore that we have paid to Sundaram Clayton as a part of the final closure deal. I think there should not be any reasons that the debt should escalate in the normal organic for the organic business. It should be within the levels what we are perceiving right now, within INR 850 crore of the levels. I think it should not breach. We have sufficient cash flows to repay and honor our repayment commitments and schedule with the lenders.
Okay. What are the current maturities for this year?
They are close to INR 100 crore.
Yeah, it's INR 100 crore roughly this year.
Thank you, sir, and all the best to the team. Hope for the next question.
Thank you very much.
Thank you.
Thank you.
Thank you. The next question is from the line of Tushar Gupta from Sagun Capital. Please go ahead.
Thank you, sir, for giving me the opportunity again. Sir, I need one clarification that you have mentioned that 14-15% of revenue growth is excluding INR 400-425 crore from that subsidy. Is that correct? So we can expect around INR 4,800 plus crore of revenue?
We have given 14-15% in between. Yes, you are right. It is excluding the Sundaram Clayton. That is another growth we can expect from the existing business. Basis that, we can work out the figures, whatever it works out. INR 400-425 is the target we have set for Sundaram Clayton.
Good. Thank you so much, sir. All the very best.
Thank you.
Thank you. Ladies and gentlemen, as there are no further questions from the participants, I now hand the comments over to the management for closing comments.
All I want to do is thank the MK team, and thank you all for your patience. We've tried to answer your questions to the best of our ability. If anybody has anything more, you can write to the company, and we'd be very happy to give you details of whatever you seek, whatever is possible within the domain of the law. We are very excited to see that the next year we are very bullish, and we hope that with everything the way it is and with the mitigation of the geopolitical scenario that exists, we will grow even further than our aspirations that we hold today. With that, I want to thank you all for your time and patience.
Thank you. On behalf of MK Global Financial Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you.