Ladies and gentlemen, good day, and welcome to Varroc Engineering Limited Q3 FY 2026 earnings conference call, hosted by Equirus Securities Private Limited. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Mihir Vora from Equirus Securities Private Limited. Thank you, and over to you, sir.
Yeah. Thank you, Palak. So good evening, everyone. We are pleased to invite you to the Q3 FY 2026 post-result conference call of Varroc Engineering Limited. The management team will be represented by Mr. Tarang Jain, Chairman and Managing Director, Mr. Arjun Jain, Whole-time Director and CEO, Business Unit One, Mr. Dhruv Jain, Whole-time Director and CEO, Business Unit Two, Mr. Mahendra Kumar, Group CFO, Mr. Bikash Dugar, Head IR and Finance Controller, Business Unit Two, and Mr. Vishal Dhawan, Head Financial Controller, Business Unit One. Without further ado, I will now hand over the call to Bikash for the disclaimer. Yeah, Bikash, over to you.
Thank you, Mihir. Thank you, Equirus team, for hosting the call. Just a small disclaimer before I request our chairman to give his opening remarks. So the disclaimer is that the call today may include statements which may constitute forward-looking statements. All statements that address expectation or projection about the future, including, but not limited to, statements about the strategy for growth, business development, market position, expenditure, and financial results, are forward-looking statements. Forward-looking statements are based on certain assumptions and expectation of future events and involve known and unknown risks, uncertainties, and other factors. The actual results, performance or achievement could, does differ materially from those projected in such forward-looking statement. So with that disclaimer, I'm handing over the call to our chairman.
Yeah. Thank you, Bikash, and good evening to everyone. I'm Tarang Jain here. So let me start by stating that India has delivered a robust 8.2% GDP growth in July to September 25 period, the highest in six quarters, driven by strong performance in manufacturing, services, and construction, despite global uncertainties and tariff-related pressures. The GST cut introduced during the festival season gave a significant boost to consumption and enabled strong growth for the manufacturing sector also. The inflation in India continues to moderate, which augurs well for the growth as the central bank can further support growth by easing the monetary policy. The recent FTAs agreements with the European Union and reductions in reciprocal tariffs with the U.S. shows that the world is recognizing the importance of India, both as a market and as a reliable supply chain partner also.
The automotive industry is also preparing to deal with these uncertainties and geopolitical challenges. In these uncertain times, it becomes very important for the company to find ways to manage this uncertainty and grow simultaneously during this period. As evident from the recent stock exchange disclosures we made recently about our VRS program and some of the large order wins from reputed global OEMs, our company is taking some tough decisions to make the cost structure more robust and also focusing on winning large businesses in India and abroad for its future growth. Coming to the performance in this quarter, let's first understand the industry performance in India. In terms of automotive production in India during Q3 of FY 2026, all segments of the automotive showed strong growth on a year-on-year basis, supported by a strong economic growth and GST reduction.
On a year-on-year basis, two-wheelers grew by 15%, three-wheelers grew by 34.7%, passenger vehicles grew by 19.1%, and commercial vehicles grew by 17.5%. On a quarter-on-quarter basis, two-wheelers de-grew by 1.7%, three-wheelers de-grew by 4.6%, passenger vehicles grew by 5.4%, and only commercial vehicles grew by 9.7%. Sequentially, that is quarter-on-quarter, the growth was not as strong as the year-on-year due to seasonality effect, as generally quarter three is sluggish in comparison to quarter two due to the model change-year change. In the first nine months of financial year 2026 also, we saw a similar positive trend across all the segments.
On a year-on-year basis, nine months of financial year 2026, two-wheelers grew by 8.8%, three-wheelers grew by 21.1%, passenger vehicles grew by 9.8%, and commercial vehicles grew by 10.4%. Coming to the operational performance during Q3 FY 2026, the company registered a consolidated revenue of INR 22.9 billion, with a growth of 10.2% year-on-year, with the India operation growing at 12.3%. Our EBITDA for the quarter was around 9.3% as compared to 9.2% on a year-on-year basis. Our PBT before JV profits was 4.4% of revenue in quarter three of FY 2026 , as against 3.2% in quarter three of FY 2025.
The revenue from supplying to EV vehicles in this quarter was at 14.3% of the revenues, and which grew by 50% on a year-on-year basis. We had some exceptional items in this quarter. The first one is a launch of a voluntary separation scheme, in which more than 400 employees opted for the benefits of the scheme, and this resulted in a separation cost of INR 799 million. We continue to explore such restructuring operations in the near future, which will make the company more and more robust in the medium term and the long term.
The second is exceptional item pertains to a change in the definition of the wage as per the new labor code, as a result of which we had to recognize an estimated incremental expense of INR 225 million towards reassessment of gratuity and leave encashment costs. However, I'd like to bring to your attention to the point that the India EBITDA and PBT were strong at 11.9% and 7.6% respectively, and grew both on a year-on-year basis as well as sequentially. I explained earlier, the overseas electronics, lighting and the forging business continues to face challenges due to customer concentration and the macro environment. However, we are winning significant orders for the overseas electronics and lighting businesses already, and a turnaround is expected to be visible from half two of FY 2027.
The net debt of the company in the nine months of financial year 2026 is INR 4,405 million. This has increased for the first time after many quarters due to one-time cash outflow pertaining to our VSS. The net debt to equity is very comfortable at 0.26. The significant growth-enabling investments planned in the coming quarters on back of strong order wins, the net debt and interest costs will only see modest improvement in the coming quarters. In nine months of financial year 2026, we achieved net new business wins with an annualized peak revenues of INR 20,636 million.
Notable business wins among these in the last quarter are: the High Voltage Electronics business for a range of high-performance E-Powertrain components for a Romanian plant from a global EV player, the four-wheeler lighting, headlamps, and small lamps business for a Thailand plant from a global EV player, and the four-wheeler lighting business for our Indian operations from an incumbent OEM for its upcoming EV vehicle. All these, all these business wins helps us to fill the existing capacity and sweat our assets even more. In this quarter, we also had some business wins from the non-automotive segment. As emphasized earlier, in this volatile new normal environment, we continue to strengthen our company for a long-term growth and performance by taking appropriate decisions and meticulously executing them.
With this, I will now ask MK, our Group CFO, to walk you through the presentation and give more insights into the financial performance in Q3. We have uploaded the investor presentation to the stock exchanges as well as on the website.
Thank you, Tarang. Good evening, everybody. I will take you to slide number seven, which is about the highlights of Q3. As our CMD explained, the revenue was INR 2,288 crores with a 10.2% growth. Within that, India operations registered a significant growth of 12.3% year-over-year. The interesting point here is within this, the EV models, the revenue from EV models in Q3 was at 14.3%. As some of you may recollect, it was in the range of 10%-11% earlier. So this actually amounts to a growth of 53% year-over-year within Q3. If you take nine months together, revenue from EV models was at 12.1%, and there was a growth of 38% year-over-year.
Coming to PBT, it was at 4.4%, compared to 3.2% last year, in the same period of Q3. EBITDA was 9.3 versus 9.2. Another significant highlight is the highest ever new order wins in these nine months, which has the annual peak revenue potential of more than INR 2,000 crore. This is the highest ever order win for us. Another important point here is 74% of this relates to EV models. Net debt increased this quarter to INR 441 crore. As you may recollect, in the last three years, we have been steadily reducing the net debt quarter-on-quarter. But this time, because of the VRS spending of close to INR 80 crore, there was an increase in net debt.
But this particular initiative, as our CMD explained, is going to strengthen our cost structure further, and this will give us the payback within four years. Coming to patents, in the nine months, we filed close to 15 patents, taking the tally to 130+. And within the order wins, we also have these three significant order wins, which we also announced to stock exchanges earlier. There is one HV, high voltage DC-DC order, which is going to be met by our Romanian entity, for a global EV OEM. We also have order wins in four-wheeler lighting. One is from a global EV OEM, which will be met from our Thailand entity, and another one is in India. The next slide is about the industry trends, CMD they already explained these numbers in detail.
So there was a significant growth in Q3, largely helped by the GST reduction, plus the elimination of that rare earth constraint, which we had in Q2. So that also helped us help the industry across different segments to register a significant growth. Moving to the next slide, which is about the consolidated financials of Q3. So as I mentioned, 9.3% was the EBITDA. And in terms of PBT, you really see it's about INR 101 crore compared to INR 66 crore of last year, which is more than 50% growth. So PBT went up by almost 53% to be precise. The exceptional items had two parts. One is the new labor code impact, which most of the companies are picking up this quarter, so that was about close to INR 23 crore.
We also had VRS impact of INR 80 crore, as I explained in the previous slides. So the PBT growth was largely enabled by, significant PBT growth was also enabled by the interest cost reduction over a period of time, and also, strict capital controls, which enabled us to control the depreciation charge also. Coming to the nine-month numbers in the next slide, close to 8% growth on the top line, EBITDA at 9.3% and PBT at 4.2%. Here again, more than 30% growth, 33% growth was there in the PBT in absolute terms. The next slide, we are continuing this, trend which we started last time of showing the split between India business and overseas businesses. As you can see, the India business growth was, pretty strong.
Top line growth of 12%, but EBITDA growth was 30% and PBT growth was more than 80%. The overseas balance, overseas businesses, of course, they have the challenges, but we explained it in the previous meetings also. So this will now be a temporary phenomena with the strong order wins, which we got in the recent times. This picture should look significantly different next year and the following years. The third part denotes the investment or the spending, which we are doing on the R&D activity. The next slide, we have the net debt trend. As I mentioned, we have been reducing the net debt significantly in the last many quarters. This time we see this as a temporary blur, a temporary phenomena.
But before end of the year also, we may not see a significant change in the net debt level. It will more or less continue at this rate, because we are also planning for some land purchase in Q4. Part of that may come this year, and part of it may spill over to next year. But our effort will be to move to a zero debt status by end of next year. Next slide, we have the revenue breakdown. More or less similar to what we have been showing earlier. The two and three-wheelers now add up to 76%. And customer segmentation, if you really see, Bajaj adds up to 46%. And within India, 89% versus 11% outside. And in the next slide, we have given the details about the order wins.
As you can see, the annual peak revenue potential of new orders, which we have taken in the last nine months, adds up to more than INR 2,000 crore. And of this, nearly about INR 982 crore will move to SOP this year. And in terms of the split, if you really see the two-wheeler and three-wheeler, that's about 34%. So here it is the other way, four-wheelers and others add up to more than 60%. And EV orders also add up to 70%, which actually indicates the strength of our EV product portfolio. So let me stop here. The subsequent slides are more about the product information and other generic details. Thank you. So we're happy to take your questions.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may please press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Preet from InCred AMC. Please go ahead.
Hello. Thank you for the opportunity. Yeah, thank you for the opportunity. My first question would be on line of the revenue growthb falling in the range of 15%-20%. So what led to the underperformance in respect to industry?
Yeah. So, I would say there's a couple of different topics. I think, if you think about our portfolio from the perspective of, ICE and EV, yes, I think, on ICE, I think driven by a customer mix, driven also by, yeah, driven also by some, significant models, going undergoing changeovers. You know, we had, a muted impact on growth over there. However, if you look at our EV performance, the EV performance, we have grown by almost, 53%. So yeah, and I would say it is just a question of, it's, it's a combination of, it's a combination of weaker performance on ICE versus EV for us, and, also I would say, driven really by mix and, and model changeovers.
Thank you, sir. That was helpful, helpful. And second question on the line of the new order win which we have got. When will we, when do we expect our overseas business to be breakeven?
I think in some of the markets like electronics, Romania, we may reach breakeven, cash breakeven by next year. Full PBT level breakeven may happen in the following year.
Thank you, sir.
Thank you, sir. The next question is from the line of Ankur Poddar from Svan Investments. Please go ahead.
Hi, sir. My first question is regarding the VSS cost, which you have taken of INR 80 crore, one-time expense in this quarter. And in the presentation, it's mentioned that the payback period for this is 4 years. So is it safe to assume that this leads to an annual saving of around INR 20 crore in the employee cost for you?
Yeah, yeah, that's right. Could be a little more than that, but yeah, that's a safe number to go with.
All right. Thank you. And my next question is about our gross margin, which have declined during this quarter. So is it due to increase in RM prices? And if so, like, will we be able to pass them on with a lag, or what's the lag with which we can pass it on?
No, it's not because of the raw material changes.
So yeah, I would say on the raw material, there's definitely a level of volatility, with respect to certain commodities and also Forex, but those are largely passed through, and I would say majority is also passed through.
Yeah, it's largely driven by these mix changes, product mix as well as, market mix.
All right. Understood. And, my last question is about our debt levels. So our net debt has increased, which you have explained. So can you give me the gross debt level, currently as at the end of December 2025? And also, what do we see as our total interest expense for the entire year, which for nine months is close to INR 100 crore, and where do we see this going in FY 2027?
Yeah. So gross debt, you can add another INR 300 crore to it, which is what we keep in cash, so about INR 750 crore will be gross debt. In terms of the interest cost, yeah, like what I mentioned, there won't be a significant reduction between now and end of the year. It'll more or less be in this range. So based on this, you can compute for the rest of the period. Next year, by next year-end, we should come close to the 0 debt levels, so there'll be, should be a gradual reduction, maybe largely happening more towards or more between Q2 to Q4, because the Q1 also may have some land purchase. I mean, part of the consideration for land purchase and all may go during Q1 of next year.
We will again start seeing some good reduction in net debt starting from Q2 of next year to Q4.
All right. Understood. Thank you. That's all from my side.
Thank you, sir. Ladies and gentlemen, to ask a question, please press star and one now. Participants who wish to ask questions may please press star and one at this time. The next question is from the line of Ronak Jain from Equirus Securities. Please go ahead.
Yeah. Thank you so much for giving me this opportunity. So my first question is, so the growth was very strong in the E-mobility and HMI division. So what has driven this growth, and how much of this growth was due to non-Bajaj customers? Like, how is the traction with non-Bajaj customers currently?
Yeah. So I would say. Sorry, what was the first part of the question?
How much of the EV was-
No, that was the second part. What was the first part? HMI and EV.
E-mobility.
So I would say one big driver for the growth, in particular on E-mobility, is the fact that we have been able to, the crisis around rare earth magnets has been solved for. So there's definitely a level of backlog also that was covered up through this quarter. So that has been one big driver of growth for E-mobility. Further from the standpoint of, Bajaj versus non-Bajaj customers, there is growth in both, right? There is growth in both, in both of these segments.
Okay, so during the quarter also, both non-Bajaj customers and Bajaj customers contributed to the growth?
Sorry, I have a clarification. Do you mean the E-mobility segment we report, or are you talking about sales into EV models?
E-mobility segment that you report.
Yeah. So E-mobility segment is driven today purely by Bajaj.
Okay, that is purely Bajaj. So are you getting any traction from non-Bajaj customers, like are you in discussions with non-Bajaj customers?
Yes, so we have business wins, one of which we should be SOP-ing sometime soon. We also have further formal engagements with other customers as well. And, you know, I think our strength really is the ability to ramp from business win to SOP very quickly. So, you know, we feel confident that we will see through FY 2027 further customer additions and revenue.
Okay, got it. So, my second question was, so lighting was a drag during the quarter. So was it mainly due to the overseas subsidiaries, like overseas business?
Yes.
Okay. Any color on the new orders, like, both in the domestic and export segment on the lighting side? New orders.
Yes, so I think, I think as you will have seen, in our presentation also, I think two of our biggest business wins are actually in the lighting space.
Lighting.
One in India, one abroad. I would say our order pipeline on lighting is, is extremely healthy, and-
Two-wheeler lighting.
Passenger car lighting, two-wheeler lighting, both is extremely healthy. From an India perspective, lighting has grown fairly strongly for us.
Okay, so you mentioned in the PPP that one of the orders for lighting is from the Thailand facility. So like, by when do you expect the Thailand capacity to ramp up to optimal levels?
I would say that definitely in 2027. So I'll say in 2027 is when, you know, the revenue will increase for this location.
From 2027?
Yes.
Okay, thank you so much. That's it from my side. Thank you.
Thank you, sir. Ladies and gentlemen, to ask a question, please press Star and One now. Participants who wish to ask questions may please press Star and One at this time. The next question is from the line of Aditya Jhawar from Investec. Please go ahead.
Yeah, thank you for the opportunity. Congrats on, you know, good set of numbers and good order wins, especially in the overseas business. My first question is, you know, the VRS, the quantum seems to be relatively bigger in terms of the number of employees, almost about 5% of our workforce. Do you expect any impact on revenue in the near term? And these, you know, employees were part of which, you know, business division, if you can give... throw some light?
So, you know, the VRS is already fully executed now, so we have been living in the new reality for approximately a month and a half, and we have not seen any impact. And of course, that is really driven by the fact that we have transitioned the, I mean, touch wood, we have been able to transition the workforce quite effectively. Secondly, I would say a bulk of, ninety-five percent of, the headcount here, really comes from our ICE powertrain, ICE powertrain product group.
You know, and let me add, Aditya, that this-
Yeah.
We are not doing this from point of view of any business going down. Nowhere has our business gone down. It is just that it's an initiative from our side to make better our cost structure going forward. You know, because a lot of these plants are our older plants, you know, and and we just wanted to mitigate the cost impact, moving forward. We have never done a VSS before in this company. So it was, for us, the first time, while a lot of the other, companies have done it over the years. So we felt it was probably the right time to take a call, you know, in this regard. Just to improve the cost structure.
Yeah, okay. That's quite helpful. Now, second question is, you know, in the overseas business, when you look at it, you know, of course, a lower base will kick in, hopefully in the next couple of quarters, and you will start seeing, you know, some of the new orders from Romania will also start, you know, coming on stream in 2027. If you can split the business, overseas overall business into, the premium two-wheeler lighting, IMES, and the Romania part, and if you can help us understand. So Romania, clearly, you know, as Dhruv also mentioned, that second half of, you know, next year, you will see start that business, you know, flowing into numbers. But the other, the current business that we have, whether it is premium two-wheeler lighting, IMES, where are we in terms of the base?
Are we seeing the hurdles of, you know, for example, one of the customer has started doing insourcing, the customer was also losing market share? So what is the way ahead of, you know, the other overseas business other than the Romania business?
Yes, yes. No, no, so I'll just, I'll just comment on the different overseas locations. So when it comes to premium two-wheeler lighting, I, I think here you're referring to maybe the, the, the Vietnam and the Italy locations.
Yeah.
And of course-
Yeah.
There's also Ducati there as well.
And, however, there are some, there's a, there's actually an upcoming launch of certain programs, so we're actually expecting this, you know, so we're, so we are expecting actually a revenue growth in the coming fiscal year compared to compared to the current fiscal year. However, the big wins are more with respect to our, and I think what we've also mentioned earlier, is more with respect to our Romanian plant for electronics and the Thailand plant for lighting. And, so while, while even the, so while there is, there are new business wins that are coming into production in each of these locations, of course, the bigger growth is going to be with respect to Romania and Thailand, compared with with the Vietnam and Italy locations.
This is. I'm not referring to IMES here. I'm only referring to the other locations.
On this, and also this two-wheeler lighting, you know, where these, two-wheeler lighting, premium lighting business, we have seen a degrowth last 3 years, I would say, but now we are looking at, at doubling the growth in the next 4 years. And we have some new customers also here, you know, for in the, in the two-wheeler premium lighting segment, starting from, you know, the next financial year. You know, so there here also we have one, certain significant, you know, orders, going forward. So we're looking at a growth, not only in the future in Romania and Thailand, where of course, the revenues will be of a much, will be much, in, in a much bigger, in a much bigger way, because it's in the four-wheeler segment.
But a two-wheeler also, we are looking at a good level of growth on the back of you know new customers and not really relying only on on Piaggio over here. Where it comes to I think IMES, I think here we do not really see a very great you know. We are, of course, looking at the moment of turning around this business from a profit standpoint. That a lot of work is going on. We have made investments in the past to you know recondition some machines, replace some machines. So we will see some good momentum from a point of view of profitability for the in the next financial year. But going forward in the long term, we will have to find a good solution over here.
Because this is also more a non-auto business, you know, where we are not really that focused.
Got you. Very encouraging to hear. So clearly we are talking about a growth rebound in the overseas business, and also, you know, a profitability excluding the Romanian operation, right, in FY 2027?
Yeah.
Yeah.
Okay.
Romanian operation also should show improvement, to be more like a cash break-even next year.
Okay. Okay, that's good. And, you know, and congratulations on the four-wheeler, you know, lighting win, for a BEV. I'm sure this would really help in overall our contribution from four-wheeler and EV in next couple of years. So that's it from my side. All the best.
Thank you. Thank you, Aditya.
Thank you, sir. The next question is from the line of Sachin Kasera from Svan Investment Managers. Please go ahead.
Good evening, everyone, and congratulations on a good number, especially in India. I had two, three questions. One was, if you see the India numbers as per the presentation, we seem to have seen some margin improvement there. So can you just comment a bit on that? One, is it sustainable? Secondly, was it driven by gross margin or operating efficiencies, or both?
It's a combination of both, but mainly, if you really see the fixed cost part of it, I think there was a good amount of cost control, which we did there.
Mm-hmm.
If you really see the year-over-year increase in fixed cost, it was pretty less. We took some tough decisions, Q4 of last year in terms of cutting down from headcount. Plus, we also had-
Mm.
Some strict controls on the other elements of fixed cost. So the operating leverage is getting magnified because of that. So that's the main reason.
So we should see this more sustainable. There's no one-off in that, and the India numbers are more or less something which you can look to be sustained?
It should give us flexibility to do maybe 0.2%-0.3% this year that way. But yeah, directionally, yes.
Okay. Sure. Secondly, I think there have been a couple of questions, and you clarified on the overseas operations. But just to, again, get a clear, more clarity, I believe, your presentation mentions that there are two parts which are dragging the profitability. If I see you reported INR 160 crores of PBT in India, and around INR 35 crores is the negative delta from overseas operations, and some INR 27-28 crores from the R&D initiatives for mainly, again, I believe, for your global lighting foray. You mentioned that, Romania will start to break even, or you mentioned about the entire overseas market breaking even in second half of next year?
I mentioned Romania for cash break-even next year. See, see, within this overall businesses, overseas businesses, the two-wheeler business is already making profit, so it's not incurring losses.
Mm-hmm.
But then the remaining part is IMES. IMES, as our CMD explained, we are taking some actions.
Mm-hmm.
That should also improve a bit, significantly next year, but for it to turn to profits, it will take some time.
Currently, what will be the drag because of Romania, in the first nine months or for the quarter? If you could give some sense on that, of the losses that we reported in overseas operations.
Sorry, come again?
What would be the drag from Romania's to the profitability for the quarter? Because that's what you said will turn around from next year.
I mean, that country level breakup, we generally don't give, but you will anyway see the result coming in anyway.
No, but basically, as you said, that Romania, at present, the utilization is very low of the capacity.
Mm-hmm.
You will see that with all the new lot of new orders kicking in from the second half, the revenue growth will be significant, you know, from the second half. And of course-
Mm-hmm.
It will then grow even more in the following year. And these are some of the big businesses that we have won, actually, you know, so compared to where, where we are today, it will be a lot more going forward. So Romania will really, this thing do, do exponentially. Two-wheeler lighting is already very, you know, already profitable, even at a lower base. That will also see a growth next year because we have new customer over there, a significant new customer. And, when it comes to our Thailand facility, that only will start in the calendar year 2027, because that business is, you know, in automotive, you know, cycle is 1.5-2 years after you win a program.
So that will only start, you know, in the calendar year 2027, you know, somewhere in the second quarter or something, and then you will start seeing that utilization and, you know, numbers coming in the Thailand facility. And a lot of these costs, which you see, you know, the R&D and all, are actually been incurred in the last 1 year mostly to win these programs. You need a very strong R&D team. We have created a very strong engineering team in China also. We already had in Poland and in India people supporting, you know, these four-wheeler electronics and lighting. But now this lighting, I mean, lighting electronics team in China is, for us, a game changer because it's cutting edge, and that's what will drive more of business wins also going forward.
Without this investment, we call it a big investment. It's not a cost for us, you know, it's a big investment for future exponential growth, and that's what we already, we already see the wins coming because of, you know, the team in China also playing a very big role here.
Sure. So just to understand the R&D bit, this R&D, what we mentioned in the presentation on INR 27.20 crores of negative on the PBT, that will remain. But, because of this investment in R&D, we will see improvement in the core, EBITDA, the PBT at the, India as well as the overseas operations. Is that the way to look at, the combined numbers in the next, few quarters?
I think it will be more abroad, I would say, which is this thing. I think this engineering team is there, of course, even for part of the India projects on four-wheeler, but mainly it is for, you know, the, including for, is also for India, definitely for lighting and all, for India also. But basically, yes, it will drive a lot of growth abroad also, you know, which today is quite low. Our revenues abroad are quite low, but I think going forward, we are looking at a much bigger level of revenue abroad.
Sure. But just to understand, you mentioned that overseas lighting is already profitable, and Romania will see breakeven next year. But despite that, we are seeing overall PBT will still take some time for breakeven. So does it mean that Thailand and Italy are a larger part, and hence, that is the reason why, you know, even next second half next year also, overall at the you know breakeven level, it will be challenging for us to become breakeven?
See, today, the two-wheeler lighting business is already profitable, and that's the main revenue at the moment. Today, we hardly have any Romania revenues from Romania and almost negligible in Thailand. So basically, all this investment in R&D has led to many, quite a few big business wins, which will start playing out, you know, from the second half of the next financial year for us, you know. And therefore, the, and all these, this business win, the revenues coming out of there will cover a lot of all these R&D costs, which we, which we have incurred already, you know.
Maybe I'll just sort of clarify something for you. So our two-wheel lighting plants are the ones that are already profitable. We also have a new four-wheel lighting plant in Thailand. This is the one which will ramp up only in calendar year 2027. So maybe, I don't know, that clarifies that the entity that we said is profitable is more the two-wheel lighting plants, where, of course, Vietnam is, you know, one of the bigger drivers of the profitability. But the Thailand plant for passenger vehicle lighting is a new plant, so that will only ramp up next year.
Sure. And lastly, on the CapEx, you mentioned about some land being acquired. So are we looking at a fresh round of greenfield CapEx, and what is, like, the plan for the next two, three years on the land that we are looking to acquire?
Yeah, I think we explained in the previous calls also. Our planned investment close to about INR 150 crore in land. This is for, yeah, of course, greenfield facility, near Pune, in Pune. Entire thing may not come on heaters in Q4 this year. Part of it may come this year, and part of it may spill over to Q1 of next year.
My question was, sir, about over and above the land, how much of land is basically like the basic infra for the greenfield? So my question was more in terms of the CapEx over and above the land in the next 2-3 years on that parcel.
I mean, next year, let's talk about could be in the range of maybe INR 300 crore-INR 350 crore. Then in the outer years, it should moderate to maybe INR 250 crore-INR 300 crore, but it also depends upon the new programs we win. If we win a significant-
Sure.
programs overseas, then we may have to invest temporarily for those programs.
Sure, sure. Thank you very much for answering all the questions, and wish you all the best.
Thank you.
Thank you, sir. Ladies and gentlemen, to ask a question, please press star and one now. Participants who wish to ask questions may please press star and one at this time. The next question is from the line of Rahul Kumar from Vaikarya Fund. Please go ahead. Mr. Rahul, your line has been unmuted. Please go ahead Mr. Rahul, your line has been unmuted, please go ahead. As there is no response, we'll move to the next question. The next question is from the line of Priya, Priya Ranjan from HDFC AMC. Please go ahead.
Right. Thank you. Just couple of clarification. Tarang, since we have won decent orders and a lot of, probably the programs is going to start from for overseas operation, probably in 2027, 2028. So how should we look at in terms of the balance of the business going forward from, say, 88, 12% to India overseas? So do you see substantial change in terms of the mix of the business in the next two, three years down the line?
No, definitely we'll see a better share coming from business abroad. But today, I think largely the revenue is all mostly coming from India. More than 90% is coming from India, you know. So going forward, with all the business wins and all, and a focus on select businesses, you know, certain four-wheeler electronics, certain lighting, both two-wheeler, four-wheeler lighting. We, a nd so we are going to drive a lot of the revenues out of selected plants, you know, abroad. And here I'm not talking, here on I'm talking about a forging business. Forging business, we have to look at what to do going forward. You know, it's a non-core area for us at the moment.
You know, we don't know about the growth, but the, but the rest will definitely drive more growth, and you will see that the share of the foreign business will grow as we go along. Not only India will, India will, because India also, we are looking at a good double-digit growth, you know, year-on-year. But then it will be augmented by, quite a large, you know, growth abroad, where the, you know, where the, where the abroad business, of course, percentage of the total overall goes up, you know, to a, to a decent percentage.
Also a negative growth, which has been affecting us in the last two years, will now become a positive growth. That will also bring in good improvement.
Sure. Just one clarification on this, the three charts you have shown, India business, overseas, and four-wheeler R&D side. So overseas business include this four-wheeler R&D and all, or is it, it doesn't include the overseas?
Yeah, the four-wheeler R&D is the last box, third box.
Okay. So that is separate. So that is over and above the overseas business losses, right?
Correct.
Okay, got it. Thank you. All the best.
Thank you.
Thank you, sir. Ladies and gentlemen, to ask a question, please press Star and One now. Participants who wish to ask questions may please press Star and One at this time. The next question is from the line of Harshal from AM Investment. Please go ahead.
Hello.
Yes, sir. Please go ahead.
Yeah, so, based on the order wins in both India and overseas markets, what kind of revenue growth are we projecting going forward, sir?
I think we mentioned earlier also, our target is to grow between 15%-20%, ahead of the market, at least 4%-5% ahead of the market. So that, that direction still remains.
Okay, sir. That's it from my side. Thank you.
Thank you.
Thank you, sir. A reminder to all participants, to ask a question, please press Star and One now. The next question is from the line of Mihir Vora from Equirus Securities Private Limited. Please go ahead.
Yeah. So, sir, just a clarificatory question. So on a steady state basis, the R&D expenditure, which we are mentioning in the overseas part, the lighting and electronics. So what will be the amount in a steady state basis as such? Because we are seeing that amount increasing right now to around 28 odd crore, 25 crores. So some color in that part.
No, see, the overseas R&D investment will more or less be around these levels for the near future. There should not be a significant increase in the overseas R&D spending.
Okay. And last, second one is on basically, you know, there's a note in your financials where the arbitration case with the OPmobility is still going on right now, which is roughly around, say, EUR 66 million. So, sir, what is basically the issue we are facing there, and what do we think about that part? Like, when do we close on that? Some color on that.
Yeah. So basically, the dispute has two parts. One is about the supply agreement, which Pivot terminated abruptly without enough notice and without proper justification. So for that, we filed a court case against them, which is going through the process now. And then this arbitration is something which they initiated saying that some of the divestment agreement conditions have not been met and there are some warranty obligations, et cetera. So it's a combination of many issues. So in terms of timeline, if you ask me, it's difficult to put a timeline because these arbitrations go on for two to three years. But we will see how to actually manage this in the coming quarters.
Right. And, we haven't made any provision for that, right?
No, it has been... First of all, claims itself are getting disputed, so there's no question of claim.
Okay. Okay.
We feel that the claims are very unreasonable and,
Yeah, some of them are frivolous, so-
... provide for that.
Right, right, right. Okay, sir. Thank you.
Thank you, sir. The next question is from the line of Ritik Chopra from Buoyant Capital. Please go ahead.
Hello, sir. So you mentioned in your opening remarks that you're going towards non-auto side. So what are we doing over there, and how much CapEx have we put in? And what is the size of opportunity that we are trying to cater?
Yeah. So I would say from a non-auto perspective, I think our primary interest in this space is also to drive alternate utilization for capacities that we've already built for ICE powertrain. Which means primary target applications would be lower wattage motors. And the businesses that we have so far are also really in these motors and in plastic. In terms of incremental CapEx commitment, I would expect it to follow similar economics to what we would have if we were driving automotive growth, for example. And again, I will say that I think it's really because the products we pursue in non-auto are very similar to products, or very similar is not the right word, because every application is unique.
But the products we pursue in non-auto utilize the same competencies we already have, from a design, development and manufacturing perspective.
Very close adjacencies.
Okay. Are the margins similar to our auto business?
It's too early to comment on margins because we are just making a beginning. But yeah, in the long term, yes, they should be.
And any, how much capacity have you built in any customer over there? Any customer?
You know, we are one business, so there are customers.
Mm-hmm.
And we will, we will SOP in FY 2027. And like I said, I think the way we look to mitigate the investment is to redeploy existing capacity. That is the first choice. Of course, you cannot 100% do that, which will mean there will be a level of delta investment, but the first preference is, the first preference is to deploy existing capacity.
All right. Thank you. That was helpful.
Thank you, sir. The next question is from the line of Avnish Tiwari from Vaikarya Change LLP. Please go ahead.
Hi. This IMES forging business, which is non-core for you, will you be open to execute this via sale or other measures?
I mean, we are. See, we have not decided anything yet. At present, we are trying to see how to make it profitable with the level of business we have. But yes, we will be looking at also all other options, you know, in regard to this particular business.
This U.S. and European deals which we have had at a country level, does it create any positive environment for you anywhere?
Definitely. Definitely, I think, I think both these deals will definitely encourage auto components exports to Europe. Europe is anyway a very big market for us, for quite a few of our products, you know, which we export. I think, I mean, this can be further, you know, we can further grow in, with various other customers and existing customers here in Europe. And America, we don't have much of a presence today. You know, North America, we don't have much of a presence today. But then with this new trade deal, which has been signed with a lower tariff, I think that we will have, you know, a lot of future potential with various customers.
Some of them we already know, we've been discussing with, but because it had to be stalled because of this 50% tariff by the U.S. Now again, we are going to start those discussions, and I think, we will win business also in the U.S., export business.
Which products are we going to do?
See, largely, I think a lot of these products are the metallic products, you know, including engine valves, which is a very big product for us, a lot of the forged machine products, which we do already. We see a huge scope of growth more in these products. And then, of course, you know, there are, we're looking at selective things, could be in electronic space, electrical space, you know. So we're looking at also at this, some of the other of our product portfolio, but maximum we see the potential more on the metallic space presently.
And lastly, the discussion you are having with the non-Bajaj EV two-wheeler customers, where you're confident that something can justify in FY 2027, will there be a motor, motor controller or a non EV components to be delivered?
We talk about EV components only.
Right.
We are talking about motor, motor controllers.
Right. Non-EV components, we already do with multiple non-Bajaj customers, so lighting, seats, switches, displays. When we talk about early FY 2027 SOP, we're talking primarily about e-powertrain.
Great. That's very good to hear.
Yeah, and we are going to. And we are, you know, we, we're already starting an SOP with one of the customers, you know, for the E-powertrain, from early next year. And, also in discussions with others, you know, and, we are very close to winning an E-powertrain business also with one more premium, one more premium customer going forward. So we are very closely aligned.
Great.
Yeah.
Yeah. Thank you. And just to conclude this, would increase your, let's say, these customers you're talking about, they have a reasonable market share in electric two-wheelers, right? They are not like a smaller guys in the electric two-wheeler space.
So one of them is actually a newer player, but quite a strong player. Other one, of course, is a very established player. I mean, among the new people we are going to be dealing with.
Sorry, I missed your last sentence. What did you say about second player?
No, let me clarify. One is fundamentally incumbent, the other is a newer player, but is not, you know, is definitely somebody who's in the top seven, eight.
Okay. So both of these will significantly expand your target addressable electric two-wheeler market effectively for motor, motor controllers?
Yes.
Okay, great. Thank you, and wish you really the best.
Thank you.
Thank you, sir. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to management for closing comments.
No, thank you everyone for all your questions and for joining the call, and also for your continuing support. See you in the next quarter.
Thank you, sir.
Thank you.
On behalf of Equirus Securities Private Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.