Q4 24/25

May 20, 2025

Summary

FY25 net profit rose 56% to INR 105.9 crore despite lower full-year revenue. FY26 outlook calls for healthy single-digit growth, stable profitability and a 7% EBITDA margin.

Ladies and gentlemen, good day and welcome to the Wheels India Q4 FY 2025 earnings call hosted by ICICI Securities 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 the 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 Vivek Kumar. Thank you, and over to you, sir. Thank you, Sasha. Good evening, everyone. I would like to thank the management of Wheels India Limited for giving us the opportunity to host the call. We have with us the senior management represented by Mr. Srivats Ram, Managing Director, and Mr. P. Ramesh, CFO of Wheels India Limited. I would like to hand over the call to the management for the initial remarks, followed by Q&A. Over to you, sir. Good afternoon, everyone, and thank you, Vivek. Welcome to the Wheels India Q4 press conference. The company has posted revenues of INR 1,195 crores for Q4, which is 2.4% higher than the sales of INR 1,167 crores in Q4 of March 2024. Over the same period, the profit registered is INR 36 crores against INR 36.8 crores in the corresponding quarter of FY 2024. So a marginal increase in sales, profit pretty much at the same level. At the same time, if you look at it on FY 2025 full year basis, our focus on cost control, favorable product mix, and lower commodity prices led to very strong profit growth. We were able to cross INR 100 crores of net profit. Last year, we did INR 105.9 crores as opposed to INR 67.9 crores in the previous year. This is a 56% increase in net profit. Whereas for the full year, if you look at it, the revenues were less at INR 4,425 crores against INR 4,619 crores. This, of course, this revenue degrowth has been offset in the fourth quarter, and we believe that this trend will continue going forward in the coming year as well, where we do see some amount of growth. If you look at Q4 per se, we saw a marginal growth in top line in the domestic market, driven by a stronger agriculture tractor market. We make wheels for tractors. Also a strong demand for air suspension systems for buses that we service. On the export side, the growth was led by sale of windmill components, which saw strong growth in the fourth quarter. This is as far as demand in Q4 is concerned. During the year FY 2025, we made CapEx of INR 250 crores, out of which the largest single product investment was for a tractor wheel plant for larger wheels. We expect that in the coming year as well, the CapEx will be along similar lines, but the largest single investment in the coming year will probably be for components for the windmill segment. The company had a degrowth in exports last year, marginal about 8% degrowth from our peak exports in FY 2024. This is largely due to a drop in the second quarter of last year in exports. Subsequently, things are along expected lines. In the coming year, we expect exports to also show some amount of growth going ahead. We are building a strong base, which should probably lead to some amount of export growth over the next three years. That base is being built now on which we can actually develop products and also show increase in export sales in the coming years. Lastly, I would like to mention that the board of directors of the company met in Chennai today to recommend a final dividend of INR 7.03 per share. This is over and above the dividend of INR 4.5 per share, which was interim dividend, which was announced earlier during the year. That is it from my side. I am now open to questions from all of you. I look forward to your questions. Thank you very much. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the 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. Participants are requested to press star and one to ask the question. Participants who wish to ask a question may press star and one at this time. The first question is from the line of Rajkumar Vaidyanathan, an individual investor. Please go ahead. Good afternoon, sir. Congratulations. A good set of numbers. Sir, just to start with, I just want to know what is the outlook for the exports because in the last call you said that some of the export programs are getting right shifted. Just wanted to know if you could give some colors. Yeah, I think barring all the talk of tariff, demand remains reasonably strong. Although I do expect that probably towards the latter part of the year, the full impact of tariffs will reduce demand at some point. The company per se is expecting to show some growth in exports even in the coming year despite this. The outlook, as I mentioned, is quite positive. It is in a number of areas. The exports are export of construction equipment wheels, hydraulic cylinders, aluminum wheels and windmill components and tractor wheels. Sorry. Okay, sir. Sir, any outlook on the domestic auto, including the truck, I mean, sorry, the tractor segment, what is the outlook you have? Yeah, I think each of these industry bodies have made their claims in terms of what the growth will be. If you look at the tractor segment, I expect a fairly reasonable growth, at least about 5%-6% growth in the tractor segment. About 5% in the tractor segment, commercial vehicle segment maybe about 3%-4% and maybe 3%-4% in the passenger vehicle segment. This is what we expect. Okay, sir. Sir, just a couple of housekeeping questions, if you permit me to ask. Sure. The first one is, if you see the cash flow, the full year cash flow, I see items on account of obsolescence, about INR 6.13 crores and non-moving under provision for bad debts for INR 3.26 crores. So that is what is shown in the current. Those are the two line items I want to highlight in the cash flow Yeah for the full year. Yes. If I see your September cash flow, there is an item in negative for INR 5.2 towards, I think for the provision for bad debt line item. Yes. Ramesh, would you like to comment on this? Sure. Which means you would have provided about roughly INR 15 crores in the second half. Is my understanding correct, sir? Sure. Good evening, sir. This is Ramesh. Sir, the negative INR 5.25 crore, I think we also clarified in the last call. It is a movement in the provision, sir. Okay. When provisions are made and provisions are reversed, that is the movement which is coming in the previous period. In the current period, these provisions are relating to obsolescence of fixed assets and which has hit the P&L. Since it is a non-cash charge, it has been added back, sir. Similarly, on the provisions, we have a provision. We have an accounting rule for bad debts provision. Based on the rules, a provision is being made and since it is a non-cash charge, it is again added back, sir, for the purpose of cash flow. Okay. Got it, sir. Thank you so much. These are basically provisions which are being reversed when you are calculating cash flow because it is not a real cash out. Yeah. They are non-cash items. Yeah. Sir, the next question is, I see your inventory has come down from INR 880 to INR 970 crores. Is it due to the efficiency measures or is it due to poor demand for the coming quarter? No, we have cut our inventory. There are no worries about it. Okay. It's not related to demand. I'm sorry. The answer is it's not related to demand. Demand remains reasonable at the moment. Okay. That's nice to know. Okay. And the last one on the line. I want to know the reason for declaring 7.03 as a dividend. Why the decimal 03, if I can ask? Can I answer that question? Yeah, sure. With your permission. We went through an internal dividend policy, and probably we could have come up with a number like seven and we put 25% of the profits for distribution. That's the reason. There is no any specific reason for that. Okay. No numerology at play. Okay. That's what I wanted to ask. Okay. Thanks a lot, sir. Yeah. Thank you so much. Thank you so much. The next question is from the line of Zaki Nasir, an individual investor. Please go ahead. Sir, good afternoon, sir. Good aft- Congratulations on a very nice bottom line, which you have shown, which you said was a result of cost control, product mix, and commodity pricing. Sir, do you think these type of margins will continue going on to the next year? What kind of absolute—I realize that the top line will depend on commodity prices and product pricing, but could it be safe to assume that we will have a 10% growth over the absolute number from here on, sir, and the margins will be maintained at current levels? Yeah, to answer you, I think the margins will be maintained. Demand, from what we see, we see positive growth, but it will not be double-digit margin. It is very difficult for us to show a double-digit margin when all our customers are talking much lower percentages of growth. If you look at the PV sector, SIAM's reference is 1%-2% growth. If you look at commercial vehicles, people are talking about 3%-4%. If you look at tractor, they are talking 5%-6%. So given that the underlying industry segments are not growing that much, it would be difficult for us to expect a double-digit growth. At the same time, I will say healthy single-digit growth should definitely be possible. Sir, let me put it another way, sir. Would it be safe to assume that we can enter INR 5,000 crore mark this year, sir? I mean, that will be 6%-7%. With commodity prices helping, maybe. But I will— The margin with Yeah, margins I think we'll maintain. I think the overall profitability will, the overall profit will be maintained. But honestly, it doesn't look like commodity prices will increase too much this year, given that everyone is talking of doom and gloom. Sir. Sir, coming on to the next question, sir, is Wheels India has in the past, I think since I've been tracking six quarters, four to six quarters, has introduced windmill components. Do you think that the face of the company can change from maybe, as some people view, a metal converter to an engineering company, sir? Yeah. See, essentially we've been looked at as an auto component, metal converter, as you put it. But actually, if you look at the company sales, if you look at automotive wheels per se, it is 55% of our sales. If I include the air suspension part of it is slightly over 60% of our sales. Then you have construction equipment wheels, which is different. You have hydraulic cylinders, you have the windmill components, you have some fabrication, all these which are not essentially your auto component type of category. So the company has been very different from a pure auto component player actually for quite some time. But it is enlarging because the opportunities here seem to be larger. We basically grow as our customers give us more opportunities, and it looks like globally, if you look at it, we are getting more opportunities on the non-auto side. Sir. If I may, sir, what would be the debt on books as of now, I mean, at the end of March 2026 with this INR 250 crore expansion and your, whatever paybacks you do during the year? Ramesh, can you comment? Yes, sir. If you look at our debt, the debt on the book is about INR 704 crores. Okay? If you look at our debt on 31st March 2024, it was INR 708 crores. So our plan is to maintain the debt around the INR 700 crores, and we will be using a bills discounting of around INR 400 crores-INR 450 crores. So debt will remain at the present level while we continue to invest on the business at the rate of around INR 250 crores a year. And- One thing, I'm sorry, just to interrupt, one thing that I need to highlight here is that, for example, the CapEx that we do is very often not for the year in question, but for the year after that. Yes. If you understand what I'm saying. So that is actually one thing that you have to bear, especially when you look at these large industrial componentry. The lead times are about 12 months for capital equipment. So I just wanted to highlight this for your understanding. Thank you, sir. Thanks so much. And best wishes for the year, sir. Thank you. Thank you so much. Thank you. Thank you very much. Before we take the next question, we would like to remind participants that you may press star one to ask a question. The next question is from the line of Manas from JUS Enterprises. Please go ahead. Yeah. I just wanted to understand, if you can just give a quantitative number on the top line growth and margin for the next full year. Yeah, as I said, we are governed by what our customers will end up doing. As you know, a demand for our product is really very much a derived demand. Broadly speaking, commercial vehicle is talking 3%-4%, PV is talking 1%-2%, and the tractor industry is talking about 5%-6%. I would say a single-digit growth probably on the higher end of those numbers. Okay. My second question, I just wanted to understand your export situation with regard to the tariff and everything. I just want to understand, I think one of the competitors mentioned that rims don't come under the tariff. Is that the right thing or we are still under the tariff? No, see, Wheels India has got so many HS codes. There are some HS codes which are under Section 232. Clause Section 232 is a tariff based on input material, 25% of input material. There are some tariffs which are on complete product grouping. There are numerous tariffs which apply to Wheels India. Let me put it this way. A lot of the products are actually FOB, so the customer takes on the tariff. Okay. Do we have a risk of margin coming down or they are bearing the cost? What is our outlook ahead in this? Yeah. Per se, maybe marginally, but as I mentioned, we expect to be able to maintain our profitability in the coming year as well. So 7% EBITDA margin is sustainable on a yearly basis? Yes. We are confident we can do that. Okay. I just wanted to understand your hydraulic cylinder business. How is it doing? Yeah. I mean, you mentioned there are strong prospects on it, how do you think about this business for next year? Yeah, I think we will probably need to wait till the second half of the year. I'll just tell you what the prospects are. One is we are looking at doing some contract manufacturing for the cylinder works of a large OEM. Still, the discussions are not finalized. We are more in the sample submission stage. Second prospect is actually tying up with a Korean cylinder manufacturer, which we started negotiations, but I think it'll take another 3, 4 months for it to happen. Thirdly, we are working with one of our large customers who's looking at making us more competitive and also improving the quality system so that maybe a year down the road, he will look at exporting more from us. Okay. Was there any pre-buying notice in this 90-day period, like you had some export or it didn't happen? Nothing. What you're talking about, whether people rushed to order as much, we're not seeing it actually. Yeah. We didn't see that. It was pretty much, they give us three months notice, four months. It's all as per what they've given earlier. Okay. Got it. Thank you. Thank you. Thank you very much. Participants who wish to ask a question may press star and one at this time. The next question is from the line of Rajkumar Vaidyanathan, an individual investor. Please go ahead. Yeah. Rajkumar Vaidyanathan, I'm sorry, are you there on the line? Yes, sir, they're there on the line, and they are unmuted. Okay. Can you hear me now? Yes. Yeah, I can hear you. Yeah. Yeah. Sorry, I was on mute. Sir, thanks for the follow-up. Sir, the question is, on the margin for Q4, generally, I think in the previous year, the Q4 call you mentioned there were some steel discounts and something because of which there was a bump up in margin. Did we also get similar such thing in this Q4? Yeah, we did. But as Mr. Ramesh explained earlier, there were also some provisions which we made. Okay. In that case, this margin of 8% that you are saying, that kind of will be a steady state, because even with that you have still done well. Yeah. Compared to December quarter, the margin has moved, I think, about 30, 40 basis points it has moved. Yes. Of course, I need to also highlight in this that, in the event of any escalation in steel price, it will put pressure on the margins as there is normally some amount of lag effect that takes place when prices go up. Okay. That is the timing difference that you are talking about. Yeah. Correct. Okay. Last year we were fortunate that there was no real increase in price. It is only reduction or no movement. Do you anticipate any increase, sir, based on your current discussions you entered? Yeah. We believe there will be some marginal increase in the first quarter based on the fact that the government has put safeguard duties on steel. There could be some increase in the first quarter, which is coming up, but we do not believe it will be substantial. Okay. And sir, any of the margin levels that you will be working for this financial year, given that you already improved your margins this financial year, this Q4. What is the target you have? Couple of areas which will play a key role is our ability to ramp up cast aluminum wheel production, which unfortunately will happen probably more from December onwards because start of production of programs that we have won business are only from that period. From that period, we should definitely see a ramp-up of the cast aluminum wheel project. Secondly, we believe that also in the second quarter onwards, we feel that the windmill business is normally down in the first quarter. Second quarter will be higher. That should also help in higher margins thereafter. First quarter is the low quarter in the seasonal business of windmills. What you are saying, essentially, your margins will improve, but it will improve in the second half of the year, sir, compared to current year? Yeah. Probably, let us say from second quarter onwards, it should improve. The first quarter is always a little bit strange. March, April. April, May, June is not the same as January, February, March. So the first quarter will be slightly lower. After that, it should improve from first quarter levels in the second quarter onwards. Okay. How much it will improve, sir? Like you have, can what, 100 basis? It is difficult for me to. I am not even 100% sure of what will be customer offtake in this month. So it is very difficult for me to determine exactly what will be the increase in profit. All I know is that the product mix change in the second quarter should help the profitability. Yeah. Because first quarter has a slightly unfavorable mix in the first quarter. Yeah. So the reason is that you have got a very huge top line. So even a small improvement in margin will show a big change in your bottom line. No, I appreciate the idea behind it. Yes. Okay. And, sir, any color on your subsidiary? Because last time you said the subsidiary is turned around and we can see that Yes, see, the subsidiary made a loss for quite a few consecutive years, and the subsidiary has become profitable. Ramesh, I forget the net profit numbers. Do you have the net profit number? Yes, sir. On the consolidation, subsidiaries loss was INR 20 crores in FY 2024, has become INR 6.65 crore in FY 2025, sir. Positive PBT? Positive PBT, sir. Yes, sir. So that is reflected in the consolidated financials. Okay. Any reason we are not consolidating that subsidiary, sir? Because you will get the benefit of your carry forward loss. No, we are consolidating. It's there in the consolidated. No, I'm talking about merging that entity, because given that the entity has substantial losses. No, there's a joint venture partner, so that's why we're not merging it. Oh, okay. I'm sorry. Yeah, got it. Sir, last question. This time, many of the PV companies are kind of moving out of location. Just to know, is Wheels India considering moving out of this location and any chance of monetizing those lands? No, we are not thinking of that at this moment. Okay. Actually, my office is in Padi. So at least I have not been told that we're moving out, because I still go to the same place every time. Okay. Thank you so much, sir. All the best. Thanks. Thank you so much. The next question is from the line of Jai Unadkat from Namli Publication Limited. Please go ahead. Good afternoon, and thank you for the opportunity. Sir, you highlighted on this incremental opportunity on cylinders that we are focusing on just now, and you said that Yeah you are working with some Korean company to be able to advance into this business. Would like to learn more about this in terms of what kind of cylinders. Are these the same ones that are required for storage, or are these those No different types which go into industrial and medical applications? No Sorry, sir. Go ahead. Yeah. Let me answer your question. No, the Korean cylinder manufacturer is actually making cylinders for construction and industrial equipment, more heavy duty type of cylinders. They are the leading manufacturer of cylinders in Korea. And really, they are looking at using us as a source for new businesses that they win so that they don't need to ramp up in Korea, and they can use our capacity to produce in India for the new business that they win. This is a negotiation which is going on. It's a question of royalty, how much royalty, what is the period. The legal part of it is going through. As and when it gets updated, we will also keep you informed. Sir, if I may, and if it's okay to share the name of the potential Korean partner, their current revenue and the kind of profitability he would make on outsourcing. Because cylinders, as I understand, is a slightly more difficult, complicated business depending on the industry that they cater to. So this will be purely outsourcing only relationship, or will this be a technology sharing where they will assist you to manufacture to their quality requirements? No. I'm sorry, I'm not able to share the name because the agreement is not yet signed. I can't share the name, but basically it is a technology type of agreement where we also get technology. It's not just an outsourcing agreement. So with that technology, sir, if they are not procuring from you beyond their requirements, can you start manufacturing using that technology and know-how for your requirements to sell in India or elsewhere in the world? Or will that be restricted to manufacture only for the Korean partner in specific? Yeah, I think these are the details that will get fleshed out in the agreement. As the agreement is not yet signed, I am not at liberty to speculate on what will be there. Okay, sir. Is it a fair assumption that these should materialize into something meaningful in the next financial year, or could this be a much longer gestation kind of an- No, I think it is reasonable to assume that it will start, again, by next financial year. Depends on when we come to an agreement with the Korean party. But I am hopeful that sometime in this financial year we will be able to come to some understanding, and following that there should be some start of production. The impact may come more in the next financial year as opposed to this one. Fair. Sir, if I may extend this further, what size of an opportunity would this mean for the company in terms of manufacturing for them as partners or for your own interest? Is this coming because of the China Plus One realignment of supply chain, or some capability or confidence that they have in the engineering and conversion skills of Wheels India? How does one really look at this? Yeah. They have already started buying cylinders from us. Okay. They have bought cylinders from us, and they have experienced our quality. Based on the fact that they have had a good experience, they are looking at some kind of agreement. From their side, they want a supply agreement. From our side, we want a technology agreement. Do we have an ideal capacity to be able to cater to them? As I have been following the company for a few years now, and I see our utilizations are towards the higher of 80% mark on a continuous basis and all incremental CapEx, like you also suggested, of INR 200-250 crores. We keep doing that in parts to be able to meet our own growth needs. Yeah. We tend to not have too much of spare capacity. Right. But rest assured it will not result in any CapEx in the current financial year over and above that 250 crores. Okay. Because, again, they will not start at full volume. They will slowly ramp up. So if it does materialize, hopefully it will come into the CapEx for the next financial year. Okay. But we will not have an arrangement where they will want to separately set up a unit with us, which will also involve some kind of CapEx commitments coming from them or anything like that? No, nothing like that. Okay. So whatever capacity expansions have to be undertaken to cater to the needs will be borne by Wheels India, I take it. Yeah, will be borne by Wheels India. And again, as I said, this agreement is more a discussion which is going on at the moment. It is not yet fructified into anything material. Fair. So last one from me. The 200 to- Yeah 250 crores of CapEx which you indicated- Yeah with a lead of the next 12 months and hopefully coming into play in FY 2027. Is it fair to assume a similar asset turn? And if I may ask, what area of business is that getting dedicated to? Yeah. So that actually is a significant part of that. Basically, I said that the total investment is about INR 100 crores, which is only in windmill components. Right. Out of the INR 100 crores, there is at least INR 66 crores, which is a long lead time asset acquisition. And that INR 66 crores will have more of an asset turn of one. But it is a very profitable business because it is a conversion business. It is not a material-based business. Okay. You understand what I am saying? Yeah. I got it. So basically there will be some value add on the conversion and it's more Yeah towards engineering than just Yeah vanilla manufacturing. Not a problem, sir. Thank you very much. Very helpful. Thank you again. Thank you. Thank you very much. Participants who wish to ask a question may press star and one at this time. I repeat, participants who wish to ask a question may press star and one at this time. As there are no further questions from the participants, I now hand the conference over to the management for closing comments. Thank you so much for your queries, and I hope I have been able to clarify all the points which have been raised. As I mentioned, the company, despite the fairly murky economic environment, especially in the international markets, but also the subdued economy that we have in our country at the moment, the company is hopeful of positive impetus in terms of having a sales growth in the coming year. We are also confident of maintaining our profitability. Thank you so much for all your support and look forward to interacting again in the near future. Thank you. Thank you.