Ladies and gentlemen, good day and welcome to Sona Comstar Q4 FY2025 Earnings Group Conference Call. Please note all participant lines are in the listen-only mode as of now. There will be an opportunity for you to ask questions after the presentation concludes. Please note that this call is being recorded. We request that you place your lines on mute except when asking a question. Some of the statements by the management team in today's conference call may be forward-looking in nature, and we request you to refer to the disclaimer in the earnings presentation for further details. The management will also not be taking any specific customer-related questions or confirm or deny any customer names or relationships due to confidentiality reasons. Please refrain from naming any customer in your questions. Now, I'll hand over the floor to Mr. Kapil Singh, the Head of Consumer and Digital Commerce Research India and Lead Auto Analyst at Nomura. Kapil, please go ahead. Thank you.
Good day, everyone. We'll take us through Q4 FY2025 results and answer your questions. We have with us Mr. Vivek Vikram Singh, MD and Group CEO, Mr. Vikram Verma, CEO Driveline Business, Mr. Sat Mohan Gupta, CEO Motor Business, Mr. Praveen Rao, Group CTO, Mr. Rohit Nanda, Group CFO, Amit, Head, Investor Relations, and Prateek from Corporate Strategy and Investor Relations Team. I'll hand over the call to Vivek for his opening remarks and the presentation. Over to you, Vivek.
Thank you, Kapil, and welcome everyone to the earnings call for Q4, in which we once again achieved the highest-ever net profit, and this is despite weakness in revenue. As we highlighted in the last call, one of our large customers transitioned a major model to an upgraded version in the last quarter. This change affected our supplies to these customers in Q4, and it did impact our revenue, particularly BEV revenue. The good news is that the new model production has been ramping up since March. As is always our policy when talking to our shareholders, we will begin with the challenges. First, what is on top of mind for everyone? The tariffs announced by the U.S. administration, including on automobile and auto component imports, the details of which are obviously changing fairly dynamically.
In our opinion, they will adversely impact the demand for cars and light trucks, although we believe our competitive positioning will actually improve further if tariffs persist. Because as a supplier to automakers globally, we may not be—we in fact are not immune to the demand and supply disruptions. If you can look beyond the short term, I think there is also a lot of opportunity. Second, global automotive production—and this I include every market—may see disruptions due to supply chain complexities and high dependence on China, especially for rare earth materials. In India, while we're working with the industry and the government and the Chinese embassy to speed up the process of importing magnets from China, we're also evaluating alternate materials, including ferrite, different grades of magnets, different technologies, as well as different supply sources.
To sum up, in a fairly confusing and uncertain time, we believe this trade war to be disruptive and adverse in the short term for the entire global auto industry. However, in the medium to long term, we expect many opportunities to emerge from this chaos. We firmly believe that many weaker players may not survive this disruption. This should lead to further consolidation in the hands of companies with strong technology needs. Indian companies like ours that can provide world-class product performance and quality and have robust margins and healthy cash balances should emerge from this period much stronger than before. We've had this kind of disruption in COVID times also, and we enjoyed a period of very high growth and a lot of order book additions even in that time.
There is this ability, I think, we have as a company that when Brownian motion or random motion increases, we tend to benefit far more than our peers. As usual, we also have some good news. We ended this year with a few large order wins, which has taken our net order book to its highest ever. In the last week of March, after the announcement of proposed auto tariffs, we received a large order for an upcoming new electric car in the U.S. We also commercialized the new product, the steering bevel box, which leverages on our strengths in forging and precision machining to develop the solution for a new application outside our traditional area of trial. We are also planning to enter a new area, which at this stage may be where EV was in 2016.
As AI, 3D perception, and control technologies advance and compute costs keep going down, we expect a rapid adoption of humanoid robots over the next decade. These robots have potential applications in a lot of industries, services, as well as households. Like all other mobility segments, motors, drives, gears, and reducers constitute more than 50% of the bill of materials for humanoids. We will be leveraging our core capabilities to develop components for humanoid robots, which Praveen will explain later in more detail. Now, coming to the numbers, as we had explained last quarter, this was expected to be a weak quarter, and our revenue and EBITDA have declined by 2% and 5% respectively because of that model transition at one of our larger customers that I spoke about. However, we did well on net profit, which increased 10% to our highest-ever level of INR 164 crore.
Our BEV revenue, despite this drop in revenue from our large EV customer, grew by 8% in absolute terms, and the BEV revenue share for this quarter was 35%. For the full year, like every year, we like to report our performance scorecard as managers to you on our five KRAs: financial, electrification, business development, diversification, and new product development. I'll start with the financials. Our revenue, EBITDA, and PAT are up by 12%, 8%, and 16% respectively, despite our large challenges in this year. ROCE and ROE were around 18%, which is obviously lower than last year, but this is due to the capital raise or QIP that we did in September 2024. On a side note before we move forward, and please forgive me for a moment of self-indulgence, but I recently, in early April, completed 10 years at Sona.
When I joined Sona, BLW standalone revenue for FY2015 and its net profit were around INR 346 crore and INR 29 crore respectively. In my first decade here, we've seen the company grow 10 times in revenue and over 20 times in profit, which is only and only due to the great work done by Vikram, Sat, Rohit, Balaji, Verdi, and thousands of people who work in our team. I just want to express my deep gratitude to them for helping me have a fulfilling first 10 years. As we look to 2035, I'm confident they'll help me deliver an even more amazing and transformative next decade. Our strategic priorities, as you know, have been constant for the last 10 years, and you would have also seen us report on these four priorities each quarter. The first one of them is electrification.
I'd say we remain as convinced as ever in its inevitability. There have been recent breakthroughs which may have been missed in all the noise around EVs. A couple of things worth noting are that average battery charging speed has nearly doubled, and the fastest speeds have actually tripled in the last five years. If you look at BYD's Super E platform, which has a charging speed of 1,000 KW , it is possible to charge a battery for 400 km of range in less than five minutes. These advancements in charging speed solve three critical challenges for EV adoption: affordability, range anxiety, and long charging times. At the same time, in a concurrent manner, battery pack prices have also been declining due to innovations in both battery chemistry as well as the economies of scale in manufacturing.
The global average battery pack price has decreased by 35% in the last five years and is expected to fall by a further 30% in the next five years. What that means is that faster charging times will allow the OEMs to use smaller battery packs in the cars. There is an example, the new slate that is being talked about. This is very similar to the trend seen in ICE cars in the 1970s and 1980s when smaller engine and fuel tanks came about, and that actually increased the size of the car market by a lot. Now, this trend, if you combine it with the decline in battery pack prices, what it eventually means is battery electric vehicles should achieve price parity in all the key markets, China, Europe, and U.S., by 2030.
Coming to our electrification performance, our BEV revenue has increased from 29% in FY2024 to 36% at the end of last year, and BEV revenue in rupee terms has grown by 38% to over INR 12.2 billion in FY2025. For us, the growth in BEV revenue is actually more than 25 times the growth in non-BEV revenue. We continue to build on our EV order book also. In Q4, we added a new EV program to supply driveline components to an existing customer in North America. Overall, we added four new EV programs and two new EV customers during the year. At the end of FY2025, we have 31 EV programs in production, of which 15 are mature and completely ramped up, while 16 are in the ramp-up phase. The remaining 27 programs are not yet in production and will start during this or the following years.
We've got a new EV order from an existing customer, like I mentioned. It's a North American OEM of EVs. We will supply the rotor-embedded differential subassembly as well as the epicyclic gear train for an upcoming electric SUV. We received this order in the last week of March, which was after the announcement of automotive tariffs in the U.S., which should also tell you a lot. The supplies for this program are expected to start in the last quarter of FY2026. We also commercialized a new product, which was in white in our tech roadmap. It has come into blue now, the steering bevel box, which has applications in commercial vehicle steering systems. We received this order from an existing customer, a global OEM of commercial vehicles. The supplies for this program will also start in the current financial year itself.
Our next KRA, business development, we added INR 47 billion worth of new orders during the year. This came from 37 new programs, which were won, and seven new customers which were added. The year's revenue growth came primarily from the consumption of INR 31 billion from the order book. Hence, the net addition to the order book was INR 16 billion, which brings me neatly to our net order book, which at the end of FY2025 stands at INR 24,200 crores or $2.8 billion. The EV contribution to this order book remains pretty high. It is at 77%. With that, we come to our fourth KRA, diversification. The trend of increasing electrification and decreasing ICE dependence continues unabated. This year, we have seen the ICE dependent revenue share shrink to only 9% of our revenue.
The slower demand in Europe obviously meant that the revenue share from hybrid and micro-hybrid vehicles has been lower than in the previous year. Geographically, pretty much similar to last year, North America was our largest end market, contributing 41%. However, if we factor in the railway business that we announced the signing of on a pro forma basis, India is now the largest market with a revenue share of about 43%, which will be followed by North America at 33%, Europe at 19%, and others at 5%. The fastest growing segments for us this year from a product perspective have been EV traction motors and EV differential assemblies, and this is reflected quite well in the product mix change. The weakness in commercial vehicles demand has resulted in the share of revenue from this segment declining from 14% last year to just 11% this year.
If you look at it broadly, auto to non-auto today stands at 90% - 10%. If you look at the pro forma basis, I think it's already 70%-30% as we stand today. With this, I turn to our Group CTO, Praveen, to update us on technology. Praveen, over to you.
Good evening, ladies and gentlemen. I'm very happy to present our latest technology roadmap and technology priorities. As you all know, our technology is at the core of what we do at Sona Comstar, and therefore it's important to represent and communicate our evolving roadmap. In this representation, at the apex of this truncated pyramid is our strategic priority that is epic mobility, electrified, personalized, intelligent, and connected.
As you would notice, we have expanded our market from automotive to drones, EVTOLs, AGVs, AMRs, industrial robots, and humanoids, which I will talk about. The base of this pyramid is represented by our legacy products shown in black. As the products scale the pyramid, they move from components to subassemblies to assemblies. In the process, continually adding value to the customer. The color representation, black, blue, white, indicate the journey from legacy to current to future products. As we continue to add new product lines, our goal is to play a larger role in the rapidly evolving epic mobility space, thereby growing our wallet share with the customers. An example here is the steering bevel box using our high precision bevel gears and low friction torque of the gearbox, providing exceptional steering accuracy, driving comfort, and ease of installation on the vehicle.
This map also represents our vision to evolve from a component supplier to a full system supplier, encompassing our growing capabilities in materials, system engineering, embedded software and hardware, and functional safety. This roadmap has intentional wide open spaces, and these are to be filled up by new product lines, which will be part of our future communication. Next slide, please. From Star Wars to CES 2025, the excitement around humanoids was palpable. Names like Optimus, Walker, Digit, Atlas have become part of common lingo now. Humanoids in our day-to-day life is closer to reality than most people agree. From industrial and logistics to commercial applications and finally households, these all-pervasive humanoid robots are going to play a dominant role in our very lifetime. One estimate puts the total of 10 million humanoids by 2035. It's a very important mega trend not to be missed.
Sona Comstar, with its strong capabilities in gears, sensors, motors, controllers, embedded hardware, and software, is uniquely positioned to ride this wave. At the heart of these humanoids are actuators, which control practically all aspects of motion, linear and rotary. They also contribute to over 50% of the $35,000-$50,000 bill of material cost. We have begun exploratory work in components and systems that will get us into this field faster. We will also leverage our capabilities across our driveline, motor, and sensor divisions to offer integrated products like rotary, linear actuators, and vision systems. On that note, I will hand it over to Rohit to cover the financial update. Thank you.
Thank you, Praveen. A very good day to you all. It's my pleasure to share our fourth quarter and full year results for FY2025 with you. First, the fourth quarter results.
This was a weaker quarter compared to the fourth quarter of last year. We've clocked a revenue of INR 868 crore, which is a drop of 2% from Q4 of last year, whereas underlying markets in North America, India, and Europe grew by 1%. Our BEV revenue grew by 8% to INR 294 crore, and it constituted 34% of our quarter's revenue. This quarter, we've also accounted for PLI income for the full year FY 2025, and going forward, we intend to do so on a quarterly basis. Our EBITDA adjusted for ESOP cost for the quarter was INR 240 crore, which is a drop of 6% from the last year. Adjusted EBITDA margin was 27.6%, which is a drop of 1.3% compared to fourth quarter of last year, and it's primarily on account of change in the product mix.
Our profit after tax adjusted for ESOP cost and exceptional expenses was INR 170 crore, which is a growth of 10% over last year. Our PAT has grown despite lower EBITDA, and it was primarily because of the net interest income, which has come from the deployment of cash surplus and QIP proceeds. For the full financial year 2025, our revenue grew by 12% to INR 3,555 crore. Compared to this, the underlying light vehicle sales in our key markets of North America, India, and Europe grew by only 2%. Our BEV revenue for the full year grew by 38% to INR 1,224 crore, and BEV revenue as a share of revenue increased to 36%. At the EBITDA level adjusted for ESOP cost, the growth was 9% to INR 1,003 crore. This is the first time we've crossed the landmark of more than INR 1,000 crore in EBITDA in one year.
Our adjusted EBITDA margin was 28.2%, which is 60 basis points lower than the last year. While we had positive impact on the margin from the lower input prices and operating leverage, this was more than offset by a change in the product mix. Our profit after tax adjusted for ESOP cost and exceptional expenses grew by 19% to INR 636 crore. Profit after tax growth was higher than EBITDA growth due to higher net finance income from cash surplus and QIP proceeds. This brings us to the cash flow slide, which we present every six months. During the full year FY2025, we have generated INR 775 crore of cash from operations, and we have deployed about INR 415 crore in CAPEX that has left us with INR 360 crore of free cash flows. We also raised QIP funds in September of 2024, so net of expenses, that amount is INR 2,370 crore.
Besides this, the bigger items were dividend distribution of INR 190 crores, which is a cash outflow. There was a reduction in the borrowings by INR 220 crores, and we invested about INR 60 crores in Novelic and Clear Motion income. At the end of the year, we had cash and investments balance of about INR 2,673 crores. Part of these funds, as you may know, would be used for acquisition of railway business from EKR. Next one, please. This brings us to the last slide. In terms of the key ratios, I'll just go through the highlights. Our value addition to employee cost ratio continues to be strong at 5.8 times. It is slightly lower compared to the last year because of higher ESOP cost. Net debt to EBITDA continues to be negative. Working capital turnover ratio has further improved to five times.
On the other hand, the fixed asset turnover ratio has declined to 3.4 times because we had a very high capitalization this year of around INR 400 crore. The operating results of these capitalizations we'll see in the following years. Our return ratios have come down a bit compared to the last year. That's primarily because of the capital raise we did in the year. With this, we've come to the end of our Q4 earnings presentation, and I'll now hand the proceedings back to Nomura team.
Open the floor for the Q&A session. To raise the question, use the raise hand function located at the bottom right of Webex. We will unmute your line and promote you to speak up. You may submit your question via Q&A chat box addressing to all panelists. Please be reminded to keep your question to a maximum of two questions.
If you have more questions, please return to queue. Thank you.
Hi, Vivek. One of the questions you bring is, I'll just take one question, which I would say not only me, but a lot of investors have also been worried about or wanting to know that from, you know, because there's been a lot of uncertainty relating to tariffs, how are the customers reacting to this? What are you seeing in, you know, not only in terms of schedules, but also in terms of their long-term thinking? Is there a need for you to evaluate setting up facilities outside India in the U.S.?
You know, I know there is a lot of uncertainty, but as they say, risk can be modeled. Uncertainty is not modelable.
Very interesting is in the last one and a half months or so since this started, I've had 20 times the calls from investors and journalists than I have from customers. Actually, apart from one customer, nobody has really called us. It also shows, I'd say, how much short-term events impact what kind of thinking. Most of our customers have been with us for, you know, greater than a decade. You do not and cannot uproot or change supply chains as quickly as people assume. It takes years. Anyway, I'll try to answer or try to bring some certainty, although, I mean, it's not like we have any better information than anybody else. Last night, we also found out what everybody else found out. It is this.
If you look at the announcement last night, and 85% of MRSP, which means everybody in a way gets 3.75% for next year and 2.5% for the year after that. For most of our customers, that's actually then we don't have much of an issue. Second, USMCA exemptions are also there in this circular. Net net, we have 40% of our total revenue to the U.S., in which we have identified 3% where there could be some risk of either revenue loss where they could look to somebody local, which somebody can come at a better price than us. That is the extent of the impact that we know of. Almost everything else seems to be, at least for the two-year period, near to low risk. That's the long and short of it.
I actually believe this is a massive opportunity wave for people who know how to take this opportunity. Our competitors in both our major product categories tend to be from China. In an event in which tariffs are imposed on every country, it is basically then your relative pricing that comes into place. It is. There the gap has actually widened much more. If you look at 2018 and the first tariff cycle in which China was tariffed at 10%, I think at that time, that gave us a huge window to increase our market shares in the U.S. This one is far bigger in that. Second, they are also closing, I think, backdoors like Southeast Asia, Mexico, etc., where people could just reroute goods. I think those have also effectively been closed because now they are talking about U.S. content.
Almost, not almost, actually all the customers we have in the U.S. are doing the final assembly there. We are, in fact, fairly well positioned. There is one thing that everyone should keep in mind, as I started in my opening comments itself, that regardless of where you are, who you supply to, we may be relatively very well positioned, but there is going to be impact on demand. There is also going to be supply chain stuff. You have seen semiconductor chip shortage. You do not have a thing like a 99% car, right? Even 1% is blocked in some country that has a demand impact. That we cannot really model right now because it is not really known. The tariffs actually have not yet kicked in. We do not know what we do not know, but we are fairly agile.
Tactical agility is, I would say, one of our greater strengths as a company. Yeah, I hope I've shed more light, but 3% of our total revenue is what we would say is at medium risk in the next 12-18 months.
Yeah, just wanted to also hear your thoughts on, is there a need to set up manufacturing in the U.S. or that has ruled out?
You know, it's a tough question to answer, but in this one month, there have been three or four changes already. We will wait for the dust to settle before we make any committed investments anywhere. As you well know, we have a plant in Mexico. We have a plant in the U.S. We are actually in the process of another plant in Mexico.
Yeah, if really required, we can put up a final assembly plant in the U.S. It's not like it's something we can't do. It is not something that will happen in the next 12 months, obviously. It takes 12-18 months to do any of those, but we will wait for dust to settle, more clarity to emerge around how this plays out. We have received zero requests from any customer to do anything so far.
Okay. I think the question queue is also built up, so I'll pass on to Linda to start taking the questions.
I know that you're utilizing your privilege of host by jumping the queue.
Thank you. Okay, first question is from Gunjan. Hi, Gunjan, your line is open. Please go ahead.
Taking my questions. Just a couple of questions from my side. Firstly, could you clarify the PLI accrual for this quarter and full year so that we can accordingly look at the F2026 margin as well?
Sure. PLI as always is Rohit's subject, so I'll let him comment on this.
Gunjan, we would not be disclosing the PLI number separately because of the customer confidentiality and commercial reasons. We've decided not to disclose it separately, but we've recognized the full year PLI income in the fourth quarter. If, let's say, if we had to take out the first three quarters' impact, that would be about INR 19 crore.
Okay, first three quarter impact would be INR 19 crore. I mean, only that. Yeah. Okay, got it.
Basically, look, eight motors have received certification and approval. The CapEx, etc., for all of those have been done, and the approvals came at various dates.
If you net off the expenses which are associated with getting said approvals and the audits done, that number for the three quarters is around INR 19 crore.
Okay, got it. While we are at this, Vivek, if you can also talk about the whole traction motor opportunity, you know, while there is a lot of uncertainty in the other parts, like you mentioned that, you know, India is going to be big with railways, traction motors. Could you just talk about, you know, some of these segments as well?
Yeah, I mean, India opportunity, as you know, is actually, you know better than me what the India automotive segment and opportunities are. We continue to have [crosstalk] fairly good.
I meant more from traction motors perspective.
Traction motors. Traction motor, right now we are in two-wheeler and three-wheeler.
Of course, we want to expand to light commercial vehicles, buses, passenger cars, but that will happen in due course. Nothing we foresee, at least for this year. It is growing quite rapidly on its own. We are developing high-voltage traction motors because to approach the bigger weight segment for larger vehicle category at low voltage is not a sustainable way of doing it. We want to get it first time right. We want to go with high voltage. As you know from, well, grade 10 physics, power is voltage into current. The higher the voltage, the lower the current, which means lower wires, lower wire harnessing, so lower the cost of doing that motor and inverter set. That is where the efforts are right now.
Okay. You know, going to this humanoid opportunity that you talked about, is there any timelines to it?
What stage of development we are at? You know, if you could talk more in terms of, you know, what is the competitive landscape here? From my understanding, a lot of this is China-focused at the moment. I am just trying to understand, you know, how do we, you know, stand in terms of competitive positioning and what, you know, what stage of product development we are at?
Excellent question, Gunjan. In a way, the answer to your question is also there in your question. Currently, this supply chain is pretty much dominated out of China. Now, if you look at what is happening in the world, it is not a tariff and everybody looking at one segment. It is actually a global trade reset, pretty much. That supply chain has to shift.
When that supply chain shifts, people who are capable and who have the competence to develop parts around gears, reducers, and motors have a far higher likelihood of success. However, as you know, in any technology readiness level, even if you go to level seven, which means you have the prototype ready, it can be installed in a vehicle. If the customer doesn't give you an order, it doesn't mean anything. We are at a certain technology readiness level, but success, as you know, in these things is binary. When we get an order, we will make that white circle blue, and we will tell you what we have won. Tell you when, it means nothing. If you have the greatest product in your lab and you can't sell a single unit, it doesn't have really any meaning.
But we've been working on it for, let's say, almost a year now. We are fairly confident, but commercial success is the only success that will matter. That remains, as always, binary.
Okay. All right. I'll join back. Thank you.
Thank you, Gunjan.
Yeah. Vivek, we have a few questions from the question box. These are from Dinesh. One is, how do you think about your ongoing investment in Mexico for compliance with USMCA? Would this plant be more of an assembly plant with a large part of value added in India? What is your investment in the Mexico plant?
Wow, a lot of questions rolled up into one question. We are going ahead with phase one. It is currently in progress. Our first few customers are actually Mexico companies producing there. It is not for USMCA, for us at least.
If that customer re-exports to the U.S., that would be their thing. The first customer is actually not in the HS codes in the auto tariffs. As you know, heavy trucks, off-highway vehicles, etc., are not included in the auto tariffs. That is the first set of customers. Investment, etc., Rohit, you can talk about.
At this moment, we are looking to invest a number which is below $10 million. That is the first stage.
Okay. The second question is, are we largely done with the inventory restocking at the key customer? When do you expect normalized sourcing from the customer?
Good question, but a little early to tell. As Dinesh, I mean, Dinesh is fairly well studied on this subject, so he will know. It has only been a month since the new model launched.
How much time it will take to go to ramp up and go back to what the earlier model run rate was? We do not know. A little early. I think we will know by the end of this quarter, by the end of June, that how much time it will take to get to the run rate of previous production.
Third question is, how should we think about margins? If you have FY2025 adjusted for INR 19 crores, it is around 25%. Should this be back to over 26% as the key customer production normalizes?
Two things there. One, INR 19 crores is just one thing that has been taken. There were also one-time costs this quarter, which were fairly significant also. That we have not netted off. If we net that off, Rohit, that would be even a smaller number, right?
Yes.
Okay.
Not disclosing that number, but the thing is that I hope you are adjusting INR 19 crores both from revenue and profit. The margin is actually more closer to 26% if you were to do that anyway. Yes, there are a few one-time costs which are in the P&L in this quarter.
How it will go forward will depend on how each different geography does. Again, we are only at the end of first month, and tariffs still have not kicked in in the U.S., so we do not know what demand outlook will become. Second, railways, as you know, will start adding from first June. Now, the moment you add an 18% business, 18% EBITDA business to a 27% EBITDA business, obviously the numbers will not stack up to the same 25%-26%. End of next quarter, we will give you a date.
If you just do the math, that you take 27% is what we did, 27% into 80% and do 18% into 20%, you will come to somewhere closer to between 24%-25%. That's fairly logical and mathematics.
There are a few more that have come in on the question box. This is from IAM. Is there any impact of China's restriction on rare earth magnets on production of traction motors?
I did cover that in the opening statement itself, but happy to do it again, IAM. We have inventory right now, so nothing yet. We are working with our suppliers to get them the export licenses. Sat, you can give more details on other efforts also we are trying to make.
We are also working on alternate raw material and the magnets, both which are not having heavy earth. On many fronts we are doing. I mean, we are working with the government officials. We are working with suppliers, existing suppliers, new material, new grades to ensure that, I mean, we have the continuity of production in our lines.
Thanks, Sat. Just to give everybody context, magnetization can also be achieved with lower-grade magnets. They can even be achieved by ferrite magnets, to be honest. It just makes the motor much heavier. It is not very efficient. There are different grades. Some things, heavy rare earths may not be available. Some are. There could be compromise on the product bit that you let go of certain weight restrictions in which we are working with our customers. This is not an unsolvable problem. It can have some short-term impact.
If we can solve it directly and get the supplies started in the next four-five weeks, the impact is pretty much nothing. If not, also we are working on, like I said, plan B, plan C, plan D, all sorts of plans. We are also exploring other sources and other suppliers who are not in China.
Okay. Another question we have from Rithuraj. With respect to non-BEV business, our revenues have consistently declined for the last three quarters on a year-on-year basis. I just wanted to understand the challenges that companies are facing in this business. How do you expect this overall business to evolve in the next 18-24 months?
Non-BEV revenue, there's no challenge as such. Non-BEV revenue is basically starter motors, which, as you know, although a lot of people would tell you that EV is not growing and ICE is growing, ICE is actually declining. So starter motor revenue is on a natural decline path. As EV penetration goes, starter motors will decline, especially the ones which are pure diesel and gasoline, which obviously we share in our product distribution. In driveline, it's actually not anything to do with our thing. We have a large market share. However, if the industry, the underlying industry does not grow, it is obviously challenging to grow when you already have high market share, especially in India. It can be explained by last year was not so good for commercial vehicles and off-highway vehicles, and hence that bit is there. There's nothing, I'd say, at the company level.
Okay. This question is from Karthik. Who do you think is likely to absorb the tariffs?
Okay. As tariffs are taxes on whoever imports it, right? We mostly do either Xworks or DAP. We are exporters. We are not the importers. Tariff is paid by whoever imports it. Now, 25% tariff is not something that can be absorbed by anyone because nobody makes 25% net margin, which is why eventually the consumer, the end consumer pays for it in the form of higher end product prices is what eventually happens. Again, there is no such thing as like 5% you take, 5% I take. I saw some analyst who had done a 25%, half the EBITDA and say 12.5%, 1% will take 12.5%, which is the most simplistic way to look at it and perhaps the wrongest way to look at it.
It is going to be binary because what will happen when you have something that was, let's say, INR 100, now it became INR 125? You can either ask the person who was at INR 100 that, "Hey, my price has become INR 125. You give me a 25% discount." The answer to that is, of course, not. What do you do then? You try to find someone who is lower than INR 125, right? If you have done this to every country in the world, effectively the new price is INR 125. Hence, either you find someone, in which case you will switch to the next guy, which is why I said that in 3% of our total revenue, there is medium risk, but the risk is not a margin dilution. It is actually that that business might just disappear. They will give it to whoever.
Even if it's 5% less, it will just go. That's how it plays out in real life. There is no distribution. Unfortunately, as has been observed over the last 100 years, whenever tariffs have been done and tariffs have been done in many countries, eventually the consumer pays is what the net conclusion is. One example very close to home is if you've ever bought expensive cars in India, I can guarantee you BMW or BMW suppliers are not absorbing the tariff. You are. You buy a car at double the price of what it would cost in Germany or U.K. because Indian governments put those tariffs. Same thing. This is where it plays out. Of course, what is the impact?
That because the prices are high, far less numbers in volumes will be sold because the prices have become higher and demand is not completely elastic. It is inelastic. How much inelasticity is there in the system? We will all together find out over the next six to nine months. Why was I being asked all these economics questions? I took one elective in my final year of engineering, and I had one semester in my business school. My total knowledge of economics is just that.
Okay. The next question is from Jay Kali. Hi, Jay. Your line is open. Please go ahead.
Yeah.
Hi, Jay. Please proceed with your question.
Yeah. Thanks for taking my question. Am I audible?
Yes, yes. Loud and clear.
Yeah. Good evening.
My first question is, we have seen some of your US customers speak about in the last two, three months refocusing on some of their ICE projects given the softness in EVs over there. In that context, are you seeing any green shoots for your traditional ICE business in the coming years, which was expected to steadily decline?
Strangely, yes. That has been one of the, I would say, weird second-order impact of all of this which is going on, that we are now suddenly getting starter motor RFQs, which had kind of dried up pretty much completely. Last couple of years, we were not getting any starter motor RFQs. We have suddenly have a lot of starter motor RFQs. In fact, last quarter, we won a couple of large starter motor orders. Different and again, excellent question, Jay, because what does it also speak?
Because nobody will set up new capacities for a declining product. It would mean people who are relatively better positioned, which means they are outside China and maybe outside Europe, which pretty much means you have to be in India or U.S., you will get a lot of new orders is what I think is a fairly visible second-order impact.
Great. My second question is regarding your gear motion and your suspension motor. Now you had an order win, and probably the supplies would have started. Any conversations on this technology with other customers in advanced stages? How is this technology getting adopted by other customers? We had mentioned about very big TAM. How is that progress going on with new customers?
Sat, do you want to update on the launch?
This one is the one exception we'll make because it is disclosed, and the customer, end customer is new. We can talk about that.
CMI launch or the new launch happened in the last quarter. The vehicle, which is 89, is doing pretty good. We are getting good reviews from customers as well as from CMI. So far, it's looking very great, I would say. There is a lot of opportunities. We are in discussion with the customer on other vehicle applications. It's very nicely taken by the industry, and it's doing a pretty good job.
Yeah. Jay, if you can get some videos or any feedback from the Shanghai Auto Show where this was displayed finally to the public in full, you'll see that it was quite well received.
Okay. Vivek, there are a few more questions in the queue.
I'll just read those out. This one is from Ajay. Are there any plans to open offices or factories in China as they seem to be needing EV vehicles?
We have a plant in China where we do these suspension motors. We have a team there. That is already there. Anything more? Of course, we are always exploring new opportunities. I do not think if you want to succeed in automotive from a supply chain perspective or a market perspective, you can do it by ignoring China. I do not think ignoring China is a wise option. We will continue to work. We are not political or ideological. We are a company. We will continue to work with our friends and customers in the U.S. We will continue to work with our friends and customers in China. If there is opportunity, certainly.
There is nothing concrete for a second plant, but if it happens, of course, we'll let you know.
Okay. There is a question from Dinesh. A clarification, the one-time cost that is significant and not disclosed, is it related to acquisition of railways or something else?
Rohit, would you like to take that?
Acquisition-related costs anyway are separately disclosed so that we've shown as an adjustment to PAT. This is some other one-time cost.
Did you indicate adjusted margins would have been 27% without this cost?
I think Vivek has broadly answered this. I think the thing is that, like I said in my commentary also, there is a change in the product mix also this quarter, like we informed during our last quarter call also, because of certain model changes.
There is one part of the business which was adversely impacted in this quarter. Suffice it to say I would add that basically the margins were lower in this quarter primarily because of the change in the product mix. Going forward, the margin obviously will be a function of how the product mix changes. I mean, if it reverts back to the original product mix, yes, we revert back to the original or earlier defined margin limits, which we say like 25%-27% is the range which we give. Finally, that's the range it should be in. We do not want to be pinned down to a specific number, whether it is 27% or 28% or 25%.
Okay. There is a question from Rishi. Sona was planning to develop a magnetless motor. Do the constraints on rare earths push them to accelerate this development?
I would say yes, that would be the wise thing to do, that we should accelerate. There are limits. I think we have updated on this before. It was not reaching the required efficiency. The technology is very sound. The efficiency was not coming to that. We will continue to work on that. It is good to accelerate that for sure. That is on magnetless. As you also know, I think in 2021 itself, we had announced the development of non-rare earth or rare earth-free motors. Those we already have. As I mentioned, we can do them even as of today. That requires a customer acceptance. Like I said, it does increase the weight of the motor. We need customer approvals for those. Maybe customers will have more urgency, and hence they will approve.
I have to say one conclusion we have to draw is that if any material supply can be used as a geostrategic negotiating tool, we must find ways to counter that threat in the future. It is a good wake-up call that anything from anyone that you depend on totally, you should not. It is a less dependable world now.
Sure. Vivek, I had a couple of questions on your products.
There is another question which is actually quite good from Srivath. Let me just answer that because I can see the Q&A box. I saw the software have adjacency for humanoid robot because it is a really good one. See, Novelic's specialty is in radar sensors.
As of today, not really because the first wave of humanoid robots that are being developed, we've explored this at great length, brother, are not going to be used in situations that are very hazardous. Radar comes into play when cameras are not enough, like you are going in rain, snow, where visibility can be restricted. Currently, that is not the case. There is limited applicability of radar, which is why motor and driveline is what we are focusing on. Also, as a part of the BOM, it is just much, much bigger.
Actually, that is what I was going to ask. One more question is on the other new products. What will be the content for vehicles for these products, if you can give some indication?
Would it be fair to say that one of the reasons that you have also won these orders despite the tariff changes is because there is no competition for these types of products?
Less competition. There is never no competition, my friend. Competition is what keeps you good. Competition directly causes excellence. A lack of competition is actually a very sad state to live in. There is limited competition on that scale of precision and top delivery capability. As Praveen very nicely depicted in the technology roadmap, the goal is to continue going from component to subsystem to system to ensure our customers get what they want and their pain points are addressed. We really do not.
I know it might sound ideological or philosophical, but what we're trying to do is solve the customer's pain and give them that solution rather than say, "This is the value per vehicle that is." The customer doesn't decide because of what we want. The customer needs to get. Who do you put first? I know it's a philosophical point, but for us, it's always going to be customer. What they want, we should be able to do and give the best solution we can and not think of how much value do we get. If your capability sets keep increasing and you solve bigger and bigger problems for your customer, the value you derive from that will obviously and naturally be higher and higher. That's our answer to this.
Any indication on the value per vehicle for both of these, actually?
No, no, no. There is no point. Why would I give up? I mean, you are asking me to give price while I'm saying it is competition-sensitive. That would be pretty self-goal type event.
Sure. I think we've run out of all the questions in the question queue. I do see one raised hand. Linda, will you take that question from Jay?
Thank you. Okay. The next queue from Jay. Hi, Jay. Your line open. Please go ahead.
Yeah. Thanks for taking my question again. Just one question. Now with EV two-wheelers present in the market for quite some time, from an EV-specific components like motors, strategy of OEMs of insourcing versus outsourcing probably now would have been more evolved.
Are you seeing one way the OEMs are going that either incrementally they're thinking of more of insourcing, or you think that most of the OEMs will continue to have outsourcing of EV-specific components?
I think there'll be a mix. As it has been in every component over the years, some will insource, some will outsource. Whoever is outsourcing at some point will think it is a great idea to insource and vice versa. The guys insourcing will realize that their technology is falling behind. They will then move to outsourcing. This is a wave that's been going on in automotive for a very, very long time. When we started making differential gears, at that time also, most people used to make their own. Even now, a lot of OEMs actually make their own. There has been most people shifted from make to buy.
There are people who in the middle go back for some model, they'll try to develop on their own, etc. That continues. I do not think the total market is so big, which is the one good thing about working in a large industry, that you will always have room to grow despite all of these waves.
Great. Thanks and all the best. That is all from me.
Thank you, Jay.
Thank you, team. I think we have run out of the questions. I will just pass it back to Vivek for any closing remarks.
Oh, nothing. Thank you so much for listening. I know uncertainty is a terrible feeling for most of you. Most of you might be feeling worried or not knowing what answers are.
I think one comfort that we can give is, regardless of how much uncertainty there is, companies who do well are not the ones who sit in the middle of this fog and wait for this fog of uncertainty to pass, right? You have to try and move as close to the edge of the fog that whenever it starts dissipating, you're the first out. We are fairly cognizant of that and try to move fast. That is where we will leave it. Amit is always there to answer your questions. Please keep calling him. That is all from us.
Ladies and gentlemen, on behalf of Sona Comstar, I would thank you for joining this call and also thank the management of Sona Comstar for giving us the opportunity to host this one. Have a good day, everybody.
Thank you.
Thank you.
Thank you.
Thank you, Kapil.
Thanks, everyone. Bye.
Bye.
Thank you, everyone, for your time. You may now drop off the line.