Please note that this conference is being recorded. I now hand the conference over to Mr. Ashin Modi from Equirus Securities. Thank you, and over to you, sir.
Thanks, Manav. Good evening, all participants. Thanks to Varroc Engineering management for giving us the opportunity to host the call. We have with us the senior management, represented by Mr. Tarang Jain, Chairman and Managing Director; Mr. Arjun Jain, Full-time Director and CEO of PTI; Mr. K. Mahendra Kumar, Group CFO; and Mr. Bikash Dugar, Head, Investor Relations. So I would now like to hand over the call to Tarang, sir, for his initial opening remarks. Over to you, sir.
Thank you, Team Equirus, for hosting the call, and, good evening to everyone for joining the call. Starting with the current macroeconomic situation, the Indian economy continues to sustain its growth momentum with a GDP growth of 7.6% in quarter two, FY 2024, exceeding market expectation. The automobile production in India during quarter three, FY 2024, grew on a year-on-year basis for all the segments. Passenger vehicles grew by 5%, commercial vehicles grew by 5.9%, whereas the three-wheeler and two-wheeler segments registered strong growth of 13.4% and 19% respectively. This growth was due to the strong economy and the late festive season this year. Sequentially, that is quarter-on-quarter, we have seen degrowth in all the segments.
Commercial vehicles have degrown by 8.3%, passenger vehicles by 10.9%, three-wheelers by 8.9%, and the two-wheeler, two-wheeler saw a degrowth of 1.5%. The degrowth on a quarter-on-quarter basis seems to be mainly due to the year-end phenomenon. Our operations in quarter three of FY 2024 mirrored the industry situation. Our revenue in India grew by 20.1%, which is higher both, higher than both two-wheeler and passenger vehicle industry growth on a year-on-year basis. However, revenue from our overseas operations had a degrowth as two-wheeler production levels went down in certain markets like Vietnam and Italy. In addition, our customer concentration in these markets impacted our revenue. As we look forward in our overseas business, our focus is to drive customer diversification in the order book and hence mitigate our customer concentration risk.
We also drive cost actions through insourcing and working capital optimization. These efforts are likely to lead to a gradual recovery in the overseas markets and improve financial performance in the medium term. Despite degrowth in the overseas markets in quarter three, the overall revenue from operations grew by 9% on a year-on-year basis to INR 18,846 million. The reported PBT for the quarter was INR 708 million, which includes profit from a joint venture of INR 250.7 million. The PBT margin improved by 300 basis points on a year-on-year basis and came in at 3.7%. Last year, we created an impairment provision for the loan and equity invested in our Dutch entity, VCH B.V., for our four-wheeler lighting operations, which we divested.
We have now written off the loans in quarter three, as we have completed the FEMA-related compliances for write-off with December 1, 2023, as the effective date. This is well supported by opinions from two independent senior legal counsels also. As a result, the profit after tax was much higher due to recognition of the tax benefit from the aforesaid write-off. We continue to have strong order wins from our customers in the nine months of FY 2024. Our customers continue to trust us with sustainability for their new products. In nine months of financial year 2024, our new lifetime order wins is INR 67.57 billion, and on an annualized basis, INR 11.99 billion. In quarter three of FY 2024, our existing customers in the EV space have given us further opportunities as the market continues to evolve.
These new orders would enable us to increase our revenue better than industry, as the content remains five to six times higher than supplying to the IC variants. Our revenue from supplying to EV vehicles in quarter three of FY 2024 was approximately 5.3% of our overall revenue, against 4.4% last quarter. Now, I will ask K. Mahendra Kumar, our Group CFO, who will walk you through the presentation, which is already uploaded on our website and submitted to stock exchanges also. Over to you.
Thank you, Tarang. Good evening, everyone. I'll first take you through the highlights slide, which is slide number four. So as Tarang mentioned, the year-over-year revenue growth was 9.4% in Q3. India operations grew by a strong 20.1%. This is in line with what we have been saying all along about India operations. However, we had some challenges in the overseas businesses, largely impacted by degrowth in certain markets in Europe, and also because of lower offtake by major customers. So the customer concentration is also a factor which impacted us this quarter.
However, we have been working on action plans to achieve gradual revival, and we are hopeful of seeing gradual revival over the medium term with various actions put in place. Coming to revenue from EV customers, it was close to 5.3% during Q3. It was also helped by strong performance from some of the key customers in the EV segment. Coming to profitability, the EBITDA margin was slightly lower this time at 9.2%, compared to close to 10% that we reported in the last two quarters. But this was again the impact due to the impact of the overseas dip in growth and revenue.
So the absolute EBITDA during Q3 was about INR 173 crore, with PBT margin close to 3.7%, which is still higher compared to last year by about 3%. As our CMD mentioned, that was also helped largely by the deferred tax asset creation for the write-off of loans, which we actually gave to the divested entities last year, in the earlier year. We created provision last year, which is what we converted into write-off. I'll explain about this in greater detail in the subsequent slides. In terms of lifetime business won, in the nine months, it is close to INR 67 billion, with annual peak revenue potential of close to INR 12 billion. Coming to the industry numbers, year-over-year business growth was good for all the industry segments.
The two-wheelers grew by 19%, three-wheelers by 13.4%. Passenger vehicles and commercial vehicles also grew by around 5%-5.9%. However, interestingly or unfortunately, quarter-over-quarter saw a degrowth in all, in all the segments. Two-wheeler had a degrowth of 1.5%, three-wheeler 8.9%. Passenger vehicles also went down by 11%. So that's something to be noted. On nine-month basis also, most of the segments, in fact all the segments, registered either single digit or double digit growth. Two-wheeler grew by almost 6% or 5.7%, three-wheeler by close to 19% and passenger vehicle by close to 6%. So now going to slide number six, where we show the consolidated financials. The Q3 PBT was 3.7%.
Then, of course, EBITDA was 9.2%. Revenue growth, of course, we explained. PAT also we'll discuss subsequently. There was an increase in net debt also, which I will explain in the subsequent slides. Looking at the nine-month performance, the total nine-month PBT was coming to 3.7%, EBITDA at 9.7%. But if you really look at the cumulative year-over-year growth in nine months, the revenue grew by close to 7.4%. EBITDA grew by 24% and PBT, by almost 400+%. Moving to the next slide. This is where we are talking about the net debt number. Now, as you may recollect, in the last investor call, we mentioned that the net debt was pretty close to INR 1,000 crore. It was at INR 1,006 crore.
This quarter, it actually went up marginally to INR 1,062 crores, so an increase of about INR 56 crores. This was largely because of various reasons. One, we also invested in renewable energy, like how we explained earlier. This was meant to achieve cost reductions, which will help us in the next year. There were certain final payments to be made to the divestment related consultants, which is what we completed during this quarter. There was also a temporary increase in working capital because we had to correct some of the GST rates on certain parts. So there was some time lag between the payment to GST authorities and the collection from the customers. A major part of that has now been collected.
Part of it was done in Q3, and a significant part was also collected subsequent to Q3 in the current month. We are hopeful of collecting everything this quarter, so that should actually correct the temporary mismatch in the working capital. There are also certain arbitration costs relating to China JV, which we had to pay during the previous quarter. So because of this, there was an increase in net debt. We are hoping that this should get corrected in the coming quarter. So because of this, and also helped by the recognition of deferred tax asset and the improvement in net worth, the net debt to equity is now pretty comfortable at 0.7% net debt to EBITDA is also 1.0% below 1.5.
Return on capital employed, of course, had impact both on the numerator and denominator. Numerator because of the lower earnings, and denominator, of course, now the capital employed is more because of the net worth addition which happened because of the tax benefit. So going to slide number nine. So this is where we explain the logic behind the write-off of loans. We actually consulted a couple of eminent legal experts. We took opinion from Mr. Arvind Datar and Mr. Ajay Vora, who represent Vaish Associates. We have been working on this for some time now. We collected a lot of evidence to basically justify our case for opinion. We also consulted a registered dealer to basically complete the formalities in relation to FEMA regulations.
So we could complete all this, and based on this, we actually took this benefit in Q3. The underlying logic was like the investment which we made in the overseas entities were more in the nature of trade investments. These were not made just for the sake of earning dividends or capital gains, so that was the major underlying logic. And similarly, the Indian operations also benefited significantly in the past due to a technology sharing between four-wheeler lighting and two-wheeler lighting operations. We also derived benefits from supply chain support and also the access to global OEMs and their India operations helped the Indian businesses. In addition to that, the guarantee commission interest earned on those loans, they were actually offered to taxation in India in the earlier periods.
So that is also another reason why we think we can actually claim this deduction in India. And one more thing is the divestment. Of course, all of you know the kind of challenges we had at the time of divestment, including the macroeconomic scenario. So in a way, the divestment of these businesses also helped safeguarding the interest of India business. So considering all this, the legal experts tell that we have a good case for claiming this deduction, so based on that, we went ahead and recognized this benefit. Coming to slide number 10, which is about the revenue breakdown. The strong performance in India and, of course, the deep growth in the overseas businesses changes the business mix in respective segments.
The lighting business, of course, is now at close to 21%. It used to be close to 25% earlier. Similarly, the outside India business also shrunk now to about close to 14%, which used to be above, eighteen, nineteen percent earlier. And the strong EV performance also resulted in Bajaj percentage going to 44%, compared to 40% earlier.
In terms of new life, or sorry, new lifetime order wins, in nine months, we have close to INR 67 billion of order wins. If you really look at the breakup, Bajaj related order wins was close to 54%. And then interestingly, the EV percentage of the total lifetime revenue is now close to 50%, so which is a strong sign, for our future growth. So then we have also certain awards which we won in different segments of the business. Let me close with this, and now we can take some questions. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from the line of Abhishek from Dolat Capital. Please go ahead.
Thanks for the opportunity. Sir, you have one-time tax write-off of loans of around,
Sorry to interrupt. Your voice is a bit disturbed.
Are you able to hear me right now?
Yeah, we can. Please go ahead.
Yeah. So, as there's a one-time tax reversal on write-off of loans of around INR 2.96 billion, will this flow into our balance sheet? So just wanted to understand what is the impact on the BS and the cash flow of this particular write-off and actual provision.
See, if I understand your question correctly, you want to know the impact on balance sheet and cash flow. Am I right?
Yeah, yeah, yeah.
Yeah. In terms of balance sheet, this will boost the net worth because to the extent of improvement in PAT, it will result in improvement in net worth. And then, of course, it will also result in creation of deferred tax asset on the asset side.
Okay.
Coming to cash flow, yeah, that's the whole intention is to save cash. So that's why we are going for this.
So, post this transactions, what would be the cash in our books?
Yeah. See, this is basically about right above INR 1,350 crore. So we'll be switching over to the new tax regime, where the tax, the effective tax rate comes to about close to 25%. So then you can compute the benefit, which will, which will spread over the next two to three years, based on how we grow our profits.
Okay. So next three, our effective tax rate would be around 0%-10% or range, or what would it be?
Sorry, your voice is breaking.
In the next three years, what would be the effective tax rate, sir? Two to three years.
Switching over to the new regime, but effectively, our intention is not to pay actually tax in the in terms of cash flow for the next two to three years.
Okay, so the benefit will be flow for the next three years in terms of the tax benefit, right?
Correct.
Next question on the non-Bajaj business. We have seen a flat growth in nine months, FY 2024. So how do you see growth ahead? Because you have owned many business and around more than 50% of order in take is then non-Bajaj. ... So one of the key things we are,
Your voice is breaking too much. We can't hear you. But okay, we have little bit understood the question, so I can. Okay, can you repeat it once more?
So, sir, in segment, we have seen flat growth in nine months, FY 2024. So, what are the key triggers for when that you have very orders backlog, a non-Bajaj segment?
So, basically, if you really look at our business wins, you know, for the nine months, which is, you know, almost INR 1,200 crore, out of this, 54% is Bajaj. And it's also because of, largely because a lot of the businesses we won with high content, like EV and clusters and lighting. But the other 46% is actually non-Bajaj, which is also quite significant, which is also close to, you know, almost INR 550 crore. So we are actually growing our business wins also with other customers. And whether it's on the two-wheeler side, our focus, of course, you know, we have said always is that one is that for whatever the products we do today, including our traditional products, we are focusing on capacity utilization.
And of course, this capacity utilization is not only coming from Bajaj Auto, it's coming from, with two-wheelers, coming from all the other customers, two-wheeler OEMs in India. And on the four-wheeler side also, you know, we are focusing on the plastics and also on the lighting business, where also we are kind of, winning business, and we are also kind of, utilizing, you know, those capacities.
But yes, going forward, I think we have seen a lot of good interest, you know, from all the OEMs and also a few new startups, prominent startups, on our EV powertrain products, you know, and we had reported actually a couple of wins on the EV powertrain in the last quarter, and we are strongly engaged with a few other two-wheeler OEMs, you know, also, and we are hoping that in the coming months or coming quarters, we will succeed in winning some new, some more, I mean, business when it comes to EV powertrain. And when it comes to products like lighting and also the instrument clusters, that's something, you know, we are anyway actually driving higher and higher sales.
And so basically, whatever is the, you know, the content based, which is more to do with electronics and EV, you know, we are very well engaged with customers and we are winning businesses. So I would like to say that when it comes to the India story, you know, it's very much intact and growth-oriented. Even if you see, you know, our growth, you know, in Q3, our India operations has grown 20% year-on-year, versus 15% for the overall industry. And even in the nine months, you know, we have grown 11%, you know, as against 6% of the industry growth. So we have actually been, we have been actually growing quite well, I would say, you know, when it comes to, you know, the markets.
And yes, Bajaj, yes, is our major customer, and whatever we can do with Bajaj, we will do, but it doesn't mean that our efforts are not on with all the other OEMs. And going forward, you will see that, you know, we have won some very interesting business with the other OEMs as well, two-wheeler and four-wheeler.
Okay, sir. and, Overseas business-
Sorry to interrupt, sir. May we request you to rejoin the question queue, as there are several participants waiting for their turns?
Okay, thank you.
Thank you. A reminder to all participants, you may press star and one to ask questions. We have our next question from the line of Prateek Poddar from Nippon AMC. Please go ahead.
Yeah, hi. A couple of questions. One, you've won INR 3,000 crore of orders this quarter, right? That's a fair understanding?
I'm sorry, we couldn't hear you, well, you know. I'm sorry, can you just repeat it?
Am I audible? Hello?
Yes, now we can hear you.
Okay. I was saying you have won INR 3,000 crore of orders this quarter, right? Is that a fair understanding?
Yes.
Okay. The second question is, when I look at FY 2025, I'm on slide number 10, you say start of production from FY 2025 is around INR 4,600 crore. What is the average life of these orders, in the sense, in how many years will or when does this peak out?
That's what, in the initial speech, also CMD spoke about, that the peak annual volume, peak annual revenue of this is around INR 1,199 crore.
And by and by, when do you hit that? Like, when do you achieve this?
So, Pratik, the peaks will take place over different years, right? It depends on, it depends on multiple factors, but primarily also when the OEM will SOP. And, yeah, really when the OEM would SOP. But you could expect, I mean, whenever an order win is declared, you would expect it to be generally within, let's say, 12 to, at worst case, 30 months. So, here, what happens, I'll tell you, is that, see, when it comes to the two-wheeler market, normally, you know, you normally... It's much faster, the development cycle, so there I think it could be within a year or so.
But when it comes to the four-wheeler segment, there, it could even go up to, you know, one and a half to two years, because that's the way, you know, the order wins are. And for four-wheelers, normally, you know, they take a longer time on the development compared to the two-wheeler. So that's the reason that, you know, we are giving, okay, the lifetime, and we are also saying annualized basis. But on an annualized basis also, you're right. I mean, two-wheeler and four-wheeler, you know, if you break it up, I think how much is the four-wheeler out of the total business win?
16.6%.
Got it.
INR 1,124 crore.
That is a lifetime order win. Out of that, around 16% something.
16.6%. Yes, there in your presentation, slide 10.
Yeah. So 16%.
16%-17%.
So 16%-17% would be more the four-wheeler business win in this, and rest would be more the two- and three-wheeler.
Which would ramp up fast, right? As you just explained, the [12 months-18 months] . Okay. Okay. The second question was on your China JV. I just see, you know, the pack has increased sequentially quite strong. Could you just explain this?
Yeah. This is largely helped by the revenue growth as well as the margin improvement. There were certain gasoline price increases also which happened. All this enabled us to show a decent profit growth.
Is this sustainable, sir, going forward also, the INR 25 crore kind of revenue?
So normally what we see in the Chinese market, you see for them it's more of a calendar year. So last quarter is always very strong. And then that would mean like Jan to March would be Q1 for them. But because of Chinese New Year, you know, obviously the sales and the sales would be less in the first quarter.
In the fourth quarter.
Which is for us, the fourth quarter. So, but having said that, yes, you know, it's not that the Chinese market, you know, the sales, you know, obviously, you can see the market has not really been growing that well compared to the earlier years. But where we are concerned going forward, I think that we have had some very interesting business wins. So we are looking at a, you know, a decent growth in the coming year and years, you know. So it'll be more like, you know, more of, you know, increase in our market share in the Chinese market. So the growth, of course, is not more than 5%, you know, in the Chinese market.
Understood. Understood. That's very helpful. The third question was, sir, on your other expenses, I think we have been highlighting about, you know, reducing our fixed costs in the... And that's an exercise which has started from January, from maybe start of this financial year. But, I mean, as of now, I can't see any improvement. So how should I think about reducing your fixed costs?
Yeah, see, its other expenses are not entirely fixed costs, as you know. There are certain variable cost elements also. In fact, a significant part of that is variable cost, including your fuel, freight, packing costs as well. But having said that, some of the one-time fixed costs also we had to pick up. Like I was explaining earlier, that the arbitration-related costs and all, we had to actually pick up. So those things are more like one-time only, they are not sustainable or continuing fixed costs. So that should get corrected in the coming quarters.
Can you call that out? How much would be the arbitration costs or the one-time fixed costs which were picked up this quarter?
For example, it is close to about INR 10 crore, INR 8 crore-INR 10 crore.
Okay. Got it. You also talked about in your presentation about, you know, lowering of electricity costs by investing in renewable energy. And our understanding was that should have started reflecting from quarter three. So has there been a delay over there, or it's already getting reflected?
No, it was not quarter three. It was always scheduled for actually March kind of commissioning, commission around March. But we should start seeing the benefit, if not from April, at least from May onwards.
How much can this help us by?
I don't want to give micro level detail, but yeah.
Okay.
Numbers are quite interesting, yeah.
Sorry, sir, the numbers will be?
It will be quite interesting, you know, for you. We don't want to let you know at the moment.
Right.
I think let us first realize those numbers, which we feel should probably materialize more from the month of May.
Also, it will come in phases. It's not just a one-time kind of... There is more to do in this area also, but it will happen over a period of time.
Got it. So the other is, with this creation of deferred tax asset, obviously the cash which you save, does that mean that the repayment of debt will be quite fast? In the sense, let's say earlier, if you were planning in two years, with virtually no tax payments for the next three years, the cash savings, we can assume a very fast debt repayment, and maybe by the end of next financial year, we could be very close to net debt, I mean, zero net debt at all.
I want to give a future prediction, but yeah, that's the objective. The objective of this is to conserve cash.
Okay. So on the, just small bookkeeping question, we've seen a sharp increase in depreciation, and the idea was always CapEx will be lower than depreciation. Are there one-offs over here also, which you are writing it off?
It's not because of traditional, I would say, CapEx-related depreciation, but it's somewhat related to that. We commissioned a new plant in Chakan, here in Pune. So it was a leased facility, so the lease depreciation and interest are accounted in both depreciation as well as interest. So that's the reason.
This is despite us running at 70% capacity utilization, so which segment? Okay. Yeah, sure. Sure.
Yes.
Thank you.
Thank you. We have our next question from the line of Naveen Baid from Nuvama Asset Management. Please go ahead.
Thank you for the opportunity. The speaker before me was just confirming whether the order wins for the quarter were to the tune of INR 3,000 crore. If I look at the order wins for the past two quarters, just for the nine months, that is. If I look at the order wins for the past two quarters, they are roughly INR 4,700 crore, and for nine months, it is INR 67 crore. So the numbers are not adding up. So this quarter's order wins are likely to be INR 2,000 crore and not INR 3,000 crore. Is that correct?
This quarter, the order win has been around INR 3,000 crore. What he's saying is not adding up-
Yeah.
Compared to the first two quarters.
Or has there been some cancellation? Like, how do you explain that?
No, no. six-month number was around INR 3,900 crore, INR 3,900 crore odd, and this quarter also is for closer to INR 3,000 crore.
Not exactly 3,000, it's slightly below 3,000, but yeah.
Okay, this 6,700 obviously includes the ordering from the EV side?
Yes. Yes.
Okay. What's been the gross margin this quarter?
Sorry?
Gross margins.
Gross margins from these orders?
No, no. What's the gross margin this quarter?
Oh, that we can compare, around 30%... Yeah, it's around, 36.3%. 36.3%.
Thank you.
Thank you very much. We have our next question from the line of Jyoti Singh from Arihant Capital Markets. Please go ahead.
Yeah, thank you for the opportunity. Sir, my question is on the debt side, like, earlier quarter, we have committed, like, we were going to reduce our debt, but now it increased in this quarter. So, like, what are the objectives going forward on the debt side?
No, like how I explained in the earlier presentation, part of it was because of some temporary reasons, because of the working capital mismatch which we had. It should actually go down from hereafter, that's our intention. So the objective is still intact. We are very much working on debt reduction.
Okay. Sir, any target that we are keeping for the debt reduction that we can disclose?
We don't want to give a number to it, but like what we said, there is no reason for us to borrow more, for any of our business requirements. So whatever cash that gets generated out of business will only go to reduce the debt.
Okay, thank you, sir. And sir, earlier also we commented that, H2 will be stronger, but, somehow Q2, quarter and quarter, you know, not that great. So what are the expectations for Q4?
You're talking about the top line or bottom line?
Overall, sir, I'm talking about margin and top line.
Yeah, we don't give any guidance like that, but, yeah, I mean, normally, Q4 industry should be reasonably well, so that should also reflect in our performance. But then, like our CMD explained, recovery in overseas segments will take some time.
Okay. Thank you, sir.
Yes.
Thank you. A reminder to all participants, you may press star and one to ask questions. We have our next question from the line of [Tirth Gosar] from Swan Investments. Please go ahead.
Thank you for taking my question, sir. Sir, I have a couple of questions. My first question relating our growth. So we have seen, yes, quarter-on-quarter, almost all segments have seen a slip. Two-wheeler has seen a lot, you know, a better performance than any other segment. And in fact, if you see, EV two-wheelers have seen a growth across all your customer category. So can you explain. And we have gained some good order book also over a period. Plus, we also dwelt upon that our content per vehicle or value per vehicle have also increased increasingly with every new order. So can you explain why, you know, quarter-on-quarter, the growth is being muted, and what is going ahead? How do you see this movement ahead in next three to four quarters going ahead?
So I think, here, I think it was more to do, I think, with the season and everything, with the degrowth in all segments. So the way we see quarter on quarter, the industry, I'm talking about India now, in industry degrew 3%, but we grew 3%. And we've always maintained that we are going to be at least 4%, 5%, 6% more than the industry. So, so that is intact, and I don't-- and I think that today the auto market is still doing quite well, you know, and I don't see a reason why it will not continue to grow.
By what percentage, I don't know. But I think the growth story definitely is intact, in, in India across segments, even for commercial vehicles, because our GDP growth is, staying quite good. So I don't really see, you know, any kind of a issue really in future growth when it comes to the Indian market. We are quite bullish, and, like I said earlier, we're very well engaged with all the customers on the two-wheeler and on the four-wheeler side, and, we feel pretty confident.
Sir, my second question is, what do you expect your tax outflow percentage as we are moving towards the new regime, for the next financial year?
No, we don't give any forward-looking guidance like that. All that we can say is, yeah, our intention is to conserve cash by taking this benefit, but we don't give guidance on future profits.
Okay. Sir, any regarding about China JV plan, arbitrations, which was there, how is it moving forward? Are there any positive news there?
... So there is an arbitration on in Singapore with the partners. In between, we have been trying to have a split with the partner. As you know, that there are two plants and two entities. We are trying to go in for a split, but so far we've not been successful. I think, the order on the arbitration probably will come in, probably by July.
Got you.
By half one, so then we will probably know what the result is. We don't know what will really happen, you know, probably one partner buys the other, or in between there is a kind of a distinct conditions get created for a split. So it all depends on the tribunal, you know. So the moment we don't know, but largely, I would say all the arguments and all on this at in Singapore are basically largely done. There's probably one more, I think, hearing, probably, in the month of May or June, and after that, I think, probably there will be that decision taken. So we'll come to know probably in the first half of FY 2025, we will know, you know, the result of this JV.
Okay, thank you. Sir, what was the CapEx in the first nine months, and what is the CapEx expected for FY 2024 and 2025?
Yeah, first nine months, we spent about INR 125 crores. We may finally close the year with about 160-170, kind of. This is for India operations. Maybe another INR 20 crores for overseas. So close to about INR 180 could be the number.
Okay. And so 25?
It could be around this range only. We don't, we don't intend to take it beyond INR 200 crore.
Okay. Okay. Thank you. That, that's all from my side, sir. Thank you and all the best.
Thank you.
Thank you, sir. We have our next question from the line of Arvind Sharma from Citi. Please go ahead.
Yeah, hi. Good evening, sir, and thank you for taking my question. Sir, first question would be on the PLI incentives, if you could share any views there. Is there any accrual happening, or when do you expect that? I have a second question on order books, but first your views on PLI.
So we've not accrued anything for PLI yet, but, for certain product lines, we would expect to see.
All right, sir. The second question would be on the order wins. We see the lifetime order of around INR 67.5 billion that you've given. Are all these new orders, or how many of them would be fresh orders? And since you've shared the FY 2024 and FY 2025 onward split, is it possible to share till when, what's the order life or what's the time when we will fructify?
So I'll go one by one. This will be a combination of new programs as well as volume expansions on existing programs, right? Or let me not necessarily call them existing programs, but volume expansions where there is modifications in the program. So if we have declared X volume as an order win in the past, and there's an expansion to that, that delta differential will come in what we report now. That's one. The second one was in terms of the SOP expectation. I think we've already shared some information around when we expect SOPs to take place, right?
Yeah, FY 2025 onwards, he's saying, how long, for how long it will continue?
So, directionally, like we said, right, I think it, it depends lots of times on, it depends on customers as well, right? So two-wheelers are generally a faster cycle, passenger cars are generally a longer cycle, but I would, I mean, they would generally take place within 12-13 months.
12-13 months?
Yeah.
All right. Okay. Great. Thank you so much, sir. That's all from my side. Thank you.
12-13 months, not from now, but from the actual order win.
Yeah, fine. Thanks. Thank you.
Thank you, sir. A reminder to all participants, you may press star and one to ask questions. We have our next question from the line of Prateek Poddar from Nippon AMC. Please go ahead. Mr. Prateek, are you there?
Sorry, I was on mute. My apologies. Am I, am I audible?
Yes.
Yeah, sorry. Just profitability of these new orders, right? You've won close to INR 5,000-odd crore of orders, maybe slightly lower than that in the last six months. The profitability, is it... Can you just comment on it? How should we think about it? Is it higher? Is it lower? Because the mix is quite interesting, right, in terms of EV players versus ICE. So just trying to think about the profitability of these orders.
So I would say it's hard to comment on profitability specifically, because every product line tends to have different, product economics, right? Really based on, really based on manufacturing processes, engineering intensity, overhead intensity. So the way I would describe it is, it is sustainable profitability, right? We have strong internal thresholds based on which we quote, and that is what we expect.
Understood. Understood. Just one small question, and I'm just going back to, to what you were, I was asking earlier in terms of the ramp up. You know, the way you are explaining that it takes 12-13 months from the start of production from the orders to ramp up, looks like FY 2025 and maybe FY 2026, where we realize bulk of this INR 5,000 crore of new order wins in the last six months, it could be quite substantial. So we could see a far higher outperformance over industry growth over the next two years versus what we would have seen in the past. This is just the order book which you have just gathered. That's a fair understanding?
... Yes, I mean, it is. I mean, for sure, I mean, that's our intention, and, we are hoping that, whatever are the SOP dates, the customers have told us, if they get realized, yes, I think, you know, it will keep with the objective of actually, you know, kind of, you know, growing faster than the market. Because a lot of these products are also high in content. And next year, you know, we had, we had mentioned probably in some of the-- one of our earlier calls that our revenue towards EV, you know, it would like it to be INR 1,000 crore, and, and that is a, that's a, there's a very good possibility of achieving that in the next financial year.
Understood, sir. Thanks. Thanks for this, and best wishes for the future. Thank you.
Thank you, sir. We have our next question from the line of Mr. Abhishek from Dolat Capital. Please go ahead.
Sir, what was the operating margin ex overseas business?
No, no, we don't give those sub-segment level details.
What is the margin for the domestic business right now?
No, no, sorry. We don't share that.
Abhishek, we told you that 85% of our, you know, revenues were from, you know, from India.
Yes, sir. And, sir, this overseas business is, continue to be a drag, from last many...
Your voice is breaking. Please repeat it.
So this over is always a drag for the company finances. Can we expect some more, like, in the coming?
No, we can't, we can't hear you, sorry.
Are you able to hear me, sir?
We can't hear. We can't hear what-
It's not very clear for some reason.
Abhishek, we can't hear you.
Are you able to hear me right now?
Yeah. Please go ahead.
Yeah. So my question was related with this overseas business. Basically, that was for the company finances. So can we expect some more write-off in the coming days?
No, we don't see any need for write-offs. In fact, our intention is to actually improve profitability and also growth in all these overseas markets. We don't see any need for any kind of write-off at this stage.
So how you will achieve the 10% kind of the margin target, as there will continue to be a pressure because of these business. So what is your plan for that, to achieving 10% or 11% kind of operating margin?
So, like our CMD already said, right, we work on, we work on de-risking the customer base. We have already made moves towards, insourcing and hence, improving, let's say, some of the material margins. And also, we work, given that supply chains globally are slightly better, especially from a semiconductor standpoint, we work on working capital optimization also. Right, so-
Plus, we continue to work on cost reductions across our businesses.
Okay. My last question on the electronics business unit, where we have seen a 15% growth in nine months. So how much is incremental revenue from the EV business in this year? And what would be the target for the next year?
So, like, what we explained at the total level, EV revenue is about 5% of the total, 5.3%, and last year, I think it was pretty nearly the same. So the entire thing is incremental.
Okay, sir. Thank you, sir. That's-
It will grow as we move forward.
Thank you, sir. That's all from my side.
Thank you, sir. A reminder to all participants, you may press star and one to ask questions. We have our next question from the line of Mr. Ashin Modi from Equirus Securities. Please go ahead.
Yeah, thanks for the opportunity. So my first question is regarding the lighting, Indian lighting business. So it's a very fast-growing segment and with a lot of rationalization happening across. So how do we see that business growing and, you know, the competition intensity increasing over here, how do we see that business growing there? Nine-month performance has not been that strong in that industry.
So I think when you read the nine-month performance, that is our global lighting performance as including India, of course, as a percentage of our total sales. Right now, of course, like we have talked about, you will see... I mean, and as you also see, right, overseas has reduced as a percentage, so that obviously impacts lighting as well.
But in India, we don't see, we don't see any roadblocks to, we don't see any roadblocks to lighting growth at all. In fact, our lighting business in India continues to do well, and that is largely driven, like we said before, right, by the fact that we have been a very early mover, if not first mover, especially when it comes to LED lighting. So we continue to have program wins, we continue to see volume expansions, whether in two-wheeler, whether in passenger car, and we expect that trend will continue.
Sure, sir. Sure. And then my next question is regarding the EV-specific components. So, you know, have you added any new products over there? And where are you on the journey of, you know, adding other origins for our EV-specific products?
Today, practically in the product range that we already address and we already market, I don't think we want to add any products beyond that. In fact, we're clear we will not add products beyond that. Like we stated last quarter, we were able to add 2 customers, 2 further EV customers for EV-specific components... and we will see those realizations, we will see those realizations over the next, you know, the next 12-18 months. Of course, these components, I mean, essentially, when you make, when you are trying to supply the EV powertrain, it's extremely engineering intensive component and is also a very long sourcing timeline, kind of component. So we continue to have strong engagement with multiple other customers. Yeah, hopefully we should have over the coming quarters, we should have more to report.
And are we, do we have enough capacity to, you know, have the growth that our major customer is seeing on the EV side? Or, do we need to put in more capacity for the EV specific component?
So I think we've already given visibility around what our total CapEx numbers would be limited to, and within those numbers, we are able to support any expansion the customer would like.
Yes. Sure. Thank you. I join that, thank you.
Thank you, sir. A reminder to all participants, you may press star and one to ask questions. We have a next question from the line of Priya Ranjan from HDFC AMC. Please go ahead.
Yeah, hi. Thanks. Just a couple of questions. One is on this, the EBITDA margin. If I look at the quarter-on-quarter, the volume by when top line was flat, still there has been 60 basis points. So is it largely because of mix or, there is something more, to it?
Yeah, it's largely driven by these challenges we had in the overseas market, so that had an impact.
Okay. So overseas have higher margins, so that's right. And where is this INR 10 crore arbitration charges is booked? Is it part of the other expenses or it's capital?
Yeah, correct. Correct.
So that explains the 10, I mean the... Because if I do the INR 10 crore in the EBITDA, then I think 40 basis point-50 basis point impact is because of that, right?
No, see, there was arbitration expense in the previous quarters also. It's not that it was zero earlier, it was maybe to a smaller extent Last quarter it was close to INR 10 crore.
And-
Arbitration plus a couple of other consultancy-related expenses.
This is going to continue for a couple of quarters, or this will now, because I think most of the hearing is done, so what is the second one?
Correct. It should not be to this extent is our expectation, because like what you said, most of the arbitration hearings have been completed. But it will come down gradually, yeah.
Okay. Okay, and in terms of overall capacity utilization of different plants, so if you can throw some light on what are our operating capacity utilization and how much benefit, I mean, as we enter next year with a very good order book and the order ramp up. So should we expect meaningful operating utilization level going forward, I think by 2025, 2026?
Yeah. So I think like we stated in the past, I would... You know, our blended capacity utilization, because of course, we operate multiple different processes, would be around 65%, would be around 65%, some places maybe around 70%. But, but, but again, right, I think we have the order book. We have defined what our, what our CapEx outlook is for this year and also for next year. And within that, within that, we believe we should definitely be able to execute the order book. Of course, that will also lead to an improvement in capacity utilization.
As we move towards the greener energy, so what is our plan? So how much greener energy in terms of them in terms of our internal utilization, what should be the percentage share from that coming next year?
The proposed one, which is under implementation, we should be somewhere between 35%-40% in terms of the overall sourcing from renewable energy.
Okay. And, this will be supplied back to the grid, and then whenever you require, so you can utilize it from the grid?
Yeah, I mean, we'll bill, we'll get billed for the net, net amount.
Okay. Okay.
Net amount of consumption.
Understood. Understood. And in terms of your, the cash conversion to EBITDA, I mean, that has been not so strong. So any specific reason is, I think the only working capital related issues is there, because your EBITDA was, I think, INR 175 crore, INR 73 crore this quarter. I guess it around 40-odd crore will be primarily driven to the CapEx. So whereas, I think the-
You're right. I think I also explained it earlier in the slides. The temporary working capital challenges this quarter created that kind of disparity. But if you see the earlier quarters, it was coming out nicely.
Okay. Okay.
Quarter-on-quarter, it's better cash conversion, you should look for a longer period. So nine months, the numbers looks, good.
Okay. Okay, thank you for all the questions.
Thank you.
Thank you, sir. We have a follow-up question from the line of Prateek Poddar from Nippon AMC. Please go ahead.
Sir, maybe if you could just spend some time explaining us as to the overseas operations. We have seen a very, very sharp decline, if I were to see from quarter one. How should we think about its recovery? I know you have explained it in bits and parts, but, you know, I mean, the customer concentration risk, which we have seen, and we are trying to mitigate that. How should we think about this business in the next two, three years or maybe next 12 months?
So, see, when it, see there abroad, you know, the major area for us is Europe, you know, and of course, we have also Vietnam. So, see, here, the issues have been largely do with the European market, where we are concerned, whether it's to do with two-wheeler or whether it's to do with, you know, the electronic products. And of course, this has been a little bit compounded by concentration on a few customers, you know, and basically, what has happened is that our, when it comes to two-wheelers, our focus has been more on scooters, you know, and where scooters have actually de-grown more than the motorcycles, you know, in that segment.
So what we are doing is, that now we are also winning businesses on the motorcycle front, you know, where it comes to Europe. And also, when it comes to our Vietnam plant, you know, the focus is now going to be much more with the Japanese OEMs. You know, for today, the conversation is more actually with some of the European OEMs, even in that market. Yes, we have Japanese customers, but now we would like that we are focusing more, you know, with the Japanese OEMs and we also strengthen, you know, our sales, you know, our sales team, you know, in, you know, both in, also in, I mean, also for Southeast Asia.
We already have an office in Japan, you know, which is also closely working on seeing that a lot of these businesses, you know, kind of, are already converted, you know, into orders for us. So, there's a lot of focus when it comes to more, I would say, Southeast Asia. And when it comes to Europe, yes, the growth there, you know, will not be as high as Southeast Asia when it comes to two-wheeler. But when it comes to electronics, you know, our plant in Romania, that's where we are looking at, you know, we are really focused on winning new businesses, you know, over there. So one is, of course, the focus on, you know, sales, sales wins, you know, on the overseas.
The other is, what we have done is that, which includes China and also in Vietnam, that we have, you know, we were so far, you know, though our margins were, were quite okay, you know, I would say, across, distinct product lines, but, you know, we didn't have our own electronics, you know, so far. You know, whether it comes to, two-wheeler, products, you know, or the four-wheeler lighting in China. So now we have installed, you know, our own SMT, to the extent of at least, you know, when it comes to two-wheeler, I think it'll be almost 100%. When it comes to, four-wheeler, it'll be 30%-40%. So this will also, you know, increase margins to the extent of at least 3%-4%, you know?
This is one, you know, big step. One is sales growth, utilization of capacities there which we have seen, you know, in the last quarter, go down, and which will be impacted for the next few quarters also. But we are working very proactively on sales wins, you know, which probably, you know, should happen probably, let's say within a year's time, that we'll see that growth, this thing taking. On the other hand, cost controls, and mainly on the bought-out side , SMT. In-house SMT is what is gonna drive margins up, which will help the overall situation of our business division, you know, abroad.
This is it. Thanks. Thanks. Thanks.
Thank you. Ladies and gentlemen, that was the last question for the day, and I would now like to hand the conference over to management for closing comments.
Thank you very much. So I just want to kind of say that the focus of the company remains to further strengthen the Indian operations, bringing back the profitability in our overseas operations, control on overall CapEx, and generation of free cash flow, and reduction in net debt. So with this, thank you for joining the call and-