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Edited Transcript of ENDURANCE.NSE earnings conference call or presentation 8-Aug-19 11:00am GMT

Q1 2020 Endurance Technologies Ltd (CN) Earnings Call

AURANGABAD Aug 20, 2019 (Thomson StreetEvents) -- Edited Transcript of Endurance Technologies Ltd (CN) earnings conference call or presentation Thursday, August 8, 2019 at 11:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Anurang Jain

Endurance Technologies Limited - MD & Director

* Massimo Venuti

Endurance Technologies Limited - Non-Executive Director

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Conference Call Participants

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* Aditya Jhawar

Investec Bank plc, Research Division - Analyst

* Hitesh Goel

Kotak Securities (Institutional Equities) - Associate Director & Automobile Analyst

* Jamshed Dadabhoy

Citigroup Inc, Research Division - Director

* Jinesh K. Gandhi

Motilal Oswal Securities Limited, Research Division - SVP of Equity Research

* Mahesh Bendre

KARVY Stock Broking Limited, Research Division - Research Analyst

* Miten Vora;BNP Paribas;Research Analyst

* Nilang Mehta

HSBC Global Asset Management (Hong Kong) Ltd. - Portfolio Manager

* Priya Ranjan

Antique Stockbroking Ltd., Research Division - Research Analyst

* Ronak Sarda

Systematix Shares & Stocks (India) Ltd., Research Division - Analyst

* Ruchit Mehta

SBI Funds Management Private Limited - Analyst & Fund Manager

* Siddhartha Bera

Nomura Securities Co. Ltd., Research Division - Associate

* Ashish Nigam

Axis Capital Limited, Research Division - SVP of Automobiles

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Endurance Technologies Q1 FY '20 Results Conference Call hosted by Axis Capital Limited. (Operator Instructions) Please note that this conference is being recorded. I now hand the conference over to Mr. Ashish Nigam from Axis Capital Limited. Thank you, and over to you, Ashish.

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Ashish Nigam, Axis Capital Limited, Research Division - SVP of Automobiles [2]

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Thank you. Good evening, everyone. Welcome to the Q1 FY '20 Results Conference Call of Endurance Technologies. From the management team, we have with us Mr. Anurang Jain, Managing Director; Mr. Ramesh Gehaney, Director and COO; Mr. Massimo Venuti, Director and CEO, Endurance Overseas; Mr. Satrajit Ray, Director and Group CFO; and Mr. Raj Mundra, Treasurer and Head Investor Relations.

I'll now hand over the call to Mr. Jain for his opening remarks, post which we can have Q&A. Over to you, Anurang.

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Anurang Jain, Endurance Technologies Limited - MD & Director [3]

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Thank you, Ashish. Good evening, everyone. I'm Anurang Jain, Managing Director of Endurance. I would like to share details of how we have done in the first quarter of 2019, '20. In India, the first quarter of 2019, '20 has been a tough quarter for the automotive industry, including the 2-wheeler and 3-wheeler industries.

As per the SIAM data, the 2-wheeler industry sales degrew by 9.74% compared to the quarter 1 of the previous financial year. Scooters degrew by 16.46% and motorcycles degrew by 6.24%. 3-wheeler sales degrew by 10%. In Europe, in quarter 1 of 2019, '20, the passenger car sales degrew by 3%.

On the financials, I will briefly talk to you about the first quarter of 2019, '20. During quarter 1 as compared to previous year same quarter, our consolidated total net income grew by 2.8% from INR 18,645 million to INR 19,160 million. Consolidated EBITDA grew by 26.3% from INR 2,755 million to INR 3,481.5 million. Consolidated EBITDA margin percentage was at 18.2%. The profit after tax was INR 1,656 million at 8.6% of net income. (technical difficulty) megaproject incentives for 2018, '19 and for quarter 1 of 2019, '20 of INR 701 million. For your information, without the megaproject incentives, total net sales were at INR 18,458 million with the EBITDA at INR 2,780 million at 15.1%, and the profit after tax was at INR 1,199 million at 6.5%. Our consolidated ROCE is at 24.8% and ROE at 20.4%.

Our consolidated net debt is INR 1,659 million and a net debt-to-equity ratio is 0.06:1. During quarter 1 of 2019, '20, our stand-alone total income grew by 3.5% from INR 13,177 million to INR 13,645 million. Stand-alone EBITDA grew by 37.7% to INR 1,808 million to INR 2,488 million with an EBITDA margin of 18.2%. The profit after tax grew 43.3% and was at INR 1,291 million at 9.5%. This included the megaproject incentives for 2018, '19, and for quarter 1 of 2019, '20 of INR 701 million. For your information, without the megaproject incentives, total net sales were at INR 12,943, with an EBITDA margin of INR 1,787 million at 13.8%. And the profit after tax of INR 834 million at 6.4%. Our stand-alone ROCE is at 26.2%, and ROE is at 18.4%. Our stand-alone net debt is at INR 1,331 million with a net debt-to-equity ratio also of 0.06:1. The detailed financials are available with the stock exchanges and on the Endurance website.

During quarter 1 of 2019, '20, 71.2% of consolidated total income, including other income, came from Indian operations and the balance 28.8% came from European operations. Bajaj Auto share of business on consolidated sales were at 37.5%. In India, there was a growth in business with Bajaj Auto at 6%, Yamaha also at 6% and Hero MotoCorp by 35%.

In Europe, we mainly grew 53% (technical difficulty) net sales of Bajaj Auto, Fiat Chrysler, HMSI, Volkswagen Group, including Porsche and Audi, Royal Enfield and Daimler. Our aftermarket sales in India grew 11.6% from INR 530 million to INR 592 million. This included both the domestic and export sales.

I would now like to brief you about certain key highlights at Endurance. This morning, at our Board meeting, we took a principal approval for a proposal to pursue tire manufacturing for 2- and 3-wheelers, for which we took approval for land acquisition, also the indicated estimated CapEx. We would like to assure all of you, the project is at an initial proposal stage with no project activity started. We are in the process of evaluating this project and will not be going ahead unless we are 100% confident of our profit margins and the return on capital guidelines. This means that we may not even -- I would like to reassure you that Endurance has always focused on high industry growth, profitable growth as well as high focus on financials, including ROCE and ROE.

As far as the inverted front forks orders are concerned, they will be doubling in the next 18 months. And as you know, this is a very high-value business for us. We are entering the aluminum forging business to start making triple clamps and active clamps in-house for our inverted front forks. We have signed a technical collaboration agreement with FGM, Italy. These aluminum forgings will be an import substitute, and we will offer the sale at lower prices to our OEM clients.

This will also help us increase our profit margins and give an opportunity to Endurance to also grow this aluminum forging proprietary business to other 2-wheeler and 4-wheeler aluminum forging requirements, including for electric vehicles. The supplies are targeted to start from June 2020. The potential is to reach INR 1,250 million within 3 years after start of supplies.

We are also extremely happy to inform all of you that we have strengthened our partnership with KTM components. KTM will transfer to Endurance the latest technologies for the front forks and shock absorbers, including semi-active electronic suspensions. It will also include corporation to supply suspension for electric e-bikes and electric 2-wheelers, and include increased exports from Endurance to KTM in Austria, China and India. This is an extremely important step for a profitable growth in future.

In quarter 1, in India, INR 1,880 million value of business has been awarded, mainly from HMSI or Honda 2-wheelers, Kia Motors, Hero MotoCorp, TVS and GETRAG with SOP starting in quarter 3 of 2019, '20 and the peak sales reaching in 2020, '21. In quarter 1 in Europe, EUR 12.8 million new business has been awarded, mainly from Maserati and Fiat Chrysler where the SOP will start in 2020.

The status of our new plants are as follows. Our 2-wheeler suspension plant at Halol, Gujarat had started supplies from September 2018. It has now reached 2,600 front fork shock absorbers sales per day. The LOI is for 6,200 front fork shock absorber sets per day.

Our Kolar, Karnataka plant are supplying scooter front forks and shock absorbers to HMSI or Honda 2-wheeler, will start supply for September 2019 and reach a peak of 3,500 front fork shock absorber sets a day from January 2020. We will also be supplying front forks to TVS from this plant.

The Halol plant will start supplies in quarter 3 of this financial year, mainly for Hyundai and Kia Motors. The ABS brakes tie-up with BWI, USA is progressing well. Our ABS samples for both are in the process of being tested for performance and road endurance tests now. We hope to get clearance in quarter 4 of this financial year, by then we will be ready to start supplies also.

As far as TVS is concerned, after getting the 2-wheeler disc brake assembly order, we further got orders for 2-wheeler front forks and 3-wheeler brake systems also. The supplies for these orders will start in this financial year. We are also in the process of getting further orders from TVS.

Our 29 acre track is virtually complete, and you are all welcome to come and experience it. We are organizing a visit to the track for investors with Mr. Ashish Nigam of Axis in this month itself. This test drive will give us first-time-ride products for OEM clients. Going forward, we see a large increase in our business volume and value by way of entering the new product area of aluminum forgings which are also required for electric vehicles. Increasing supply of technology upgraded products, including paper based clutch assemblies, combined braking systems up to 125 cc bikes, rear disc brakes, ABS 150 cc and above 2-wheelers, inverted front forks and advanced rear shock absorbers for high cc bikes. And also for fully machine castings for 2-wheelers, 3-wheelers and 4-wheelers.

Also, we are increasing business with Hyundai and Kia Motors, and now we have INR 2,790 million worth of orders final, which peak will be reached in 2021. This will be supplied both from our existing and the new plant at Chennai.

Also, 2.76 million scooter front forks will replace front shock absorbers from 2020, '21. This will be supplied from our Sanand and Kolar plants from quarter 3 of this financial onwards, as I mentioned earlier. We are also going to start 2- and 3-wheeler brake assemblies and front forks for TVS from this financial year. Strengthening partnership with KTM components will help us substantially increase our front fork and shock absorber exports for KTMs Europe and China plants with the latest technologies, including electronic suspensions and supply suspension for e-bicycles as well as electric motorcycles and scooters.

So we at Endurance are focused to go higher than industry by increasing our share of business with existing clients, adding new clients, adding and upgrading to latest technologies required in our product areas for collaboration in our R&D, focusing on growth in new product areas, increasing our aftermarket and export business, and also looking at inorganic opportunities in India and Europe.

With these opening remarks, I would like to invite questions from everyone. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have our first question from the line of Ruchit Mehta from SBI Mutual Fund.

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Ruchit Mehta, SBI Funds Management Private Limited - Analyst & Fund Manager [2]

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And just with regards to this proposal, your investment into the tire business, if you could clarify for us 3 things. One is, assuming that since you have gone to the board for principal approval, and permission for a certain amount of money is to be spent, and identify the possible land and some (inaudible) gone into at least to making what is the opportunity size for you? What kind of return, if you could clarify what is the expected return ratios for the business that you've gone into? Second is that so far you're always saying that you will remain on a proprietary side of it. So how does getting the 2-wheeler and 3-wheeler tires, any backed requirement is there. And third is this being done at a request of your customer, the customer has asked you to sort of invest in this business, and therefore you have to consider doing this?

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Anurang Jain, Endurance Technologies Limited - MD & Director [3]

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Yes. Yes, so one is this idea has come across, because one of our OEM clients also talked to us about doing this business. And of course, as far as we in Endurance are concerned, we have the highest -- I mean, the promoter family having a 75% shareholding as well as we have a very, very high focus on ensuring that we don't lose shareholder value for our 25% shareholders. So definitely, this was a talk with the OEM.

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Ashish Nigam, Axis Capital Limited, Research Division - SVP of Automobiles [4]

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Please stay connected. The management's line has been dropped, reconnecting them in a moment. Please stay connected. Audience, we have the line from the management connected back to the call.

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Anurang Jain, Endurance Technologies Limited - MD & Director [5]

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Yes, so I can keep talking?

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Ashish Nigam, Axis Capital Limited, Research Division - SVP of Automobiles [6]

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Please continue, sir.

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Anurang Jain, Endurance Technologies Limited - MD & Director [7]

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Yes, yes. So one is, of course, this was a talk with an OEM client, and that's how this subject came about a few months ago. And when we did the initial project study, definitely looked very interesting. And as you know, we in Endurance will not take up any project unless we are very convinced on the profit margins and the returns on capital. Because we have to protect shareholding of our investors as well as the promoter family. So that's the reason in principle, we took it, okay. And -- but right now, we are still in the process of this evaluation. And unless we are 100% sure, like I mentioned in the call, we will not be going ahead with this project. So we have to be convinced. And there is still some talk in process with the customer. And once we are clear, then only we will do it. But if we feel that the financials and profit margins are not meeting our expectations, then, of course, we will not be doing it. Because I don't want to -- we have no intention of destroying any shareholder value by doing projects we don't make money.

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Ruchit Mehta, SBI Funds Management Private Limited - Analyst & Fund Manager [8]

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So would it be that this was premature to jump the gun for you to go ahead and take the board approval if we're not 100% sure of what kind of return ratios it makes?

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Anurang Jain, Endurance Technologies Limited - MD & Director [9]

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This was an enabling approval. This was a, enabling approval. And that's why we went ahead. And whatever initial study we did and after we talked with the customer, looking at their requirement need, in spite of all the capacities, you know that all OEMs are looking at rationalizing their vendor base. Trust of the clients counts a lot in expanding whether existing business or new business. So we explained to the Board about it, and this was just enabling and the board is very clear about it. And so unless we're 100% sure, we are not going ahead with it, that's very clear.

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Ruchit Mehta, SBI Funds Management Private Limited - Analyst & Fund Manager [10]

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So how will it fit into your stated objective of going only into proprietary products? This is as commodity as it gets in the automotive industry.

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Anurang Jain, Endurance Technologies Limited - MD & Director [11]

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See as far as we are concerned, we are looking at profitable growth. Today, as far as Endurance is concerned, you see any of our product segments, we have 4 product areas today. Today, I've always said that money is not made by just pricing. It is made because of the strategy. This could be operational, sourcing, technology. And tire business also has the process and product technologies. Today, there would be huge, huge requirements coming for electric vehicles, where noise will be a very big factor. So question is, everything is -- you can call it a commodity or a technology. Alloy wheels what we do, that's a small business for us. That is a technology. It's a product and, of course, a technology (technical difficulty) We are very, very clear that unless -- but whether we are looking at profitable growth. And once we see it, we normally go after that. And I also want to clarify one thing. As far as the tire business is concerned, you know, even if one goes ahead with this project, it will be a project of reaching INR 250 crores within 3 years of starting, 18 months to start this project. So INR 250 crores won't be even 3% of my India business. So are we to ignore 97% of my India business, which is showing a great financial and ROC. So question is, one has to understand that any business that much I do I expect investors to have in Endurance looking at the experience of last 3, 3.5 years, that we have given returns. We have grown higher in the industry. We have grown profitably. In tough times, also, like now we are taking austerity measures, and we are growing. So question is, I mean, we as a company have to be open to all ideas. And today, I have -- I mean, one has to be aware of what's happening around, definitely. See what other industries are doing, why we are doing, why we don't waste so much money. If you look at competition for Endurance also today, how much margin are they making compared to our margins. So it is not about just pricing and running a company, it is about your strategy, whether it's technology, whether into value engineering through technology, whether it's pricing, whether it's operational, whether it is sourcing. I've always said, we have very strong Endurance brand of association with 200 very loyal vendors. And so ultimately, I -- we cannot close our eyes in Endurance to any new project comes and when the customer talks to us. I have to take it seriously. Because today, let me tell you, business in B2B, especially auto component is done on trust over a period of time and strong relationships. And that's how you get the support. And that's why we are increasing our share of business on all existing product segments. I mean, today, this tie-up we are having with KTM is a very strong tie up and future will tell, what kind of technologies we will come out with in suspension products in future. So we are -- also, please keep some faith in us, also. (technical difficulty) till we are 100% sure we are not going to do it. I'm very clear. Because I cannot -- I am not going to waste any business. So you please be very, very rest assured on this.

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Operator [12]

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We have our next question from the line of Nilang Mehta from HSBC Global Asset Management.

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Nilang Mehta, HSBC Global Asset Management (Hong Kong) Ltd. - Portfolio Manager [13]

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I think sir the question is on the similar line like the previous participant. While we understood your answer, I think the point is taken from management's point of view, but I still fail to understand that if the business opportunity is just 3% of your overall top line, why would you like to diversify into something which is completely unrelated to your existing auto components business, especially when there are existing tire companies well-established for decades and who are in that space, it seems like a distraction rather than building on ancillary opportunities, this seems to be a total distraction, at least from -- that's the way I would look at it. I understand we have full faith in the management, and that's the reason some of us would be investors. But most of us would have signed up for continuing with our existing strategy rather than completely diversifying into something like tires, which is highly capital intensive, low ROEs, relatively. And again, a lot of established players already present there. So I would -- again, management -- request management to reconsider this. You've seen that in several other companies where managements have tried to diversify over a period of time, sometimes it works, sometimes it doesn't work. But at least we would like you to reconsider this and we can discuss again.

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Anurang Jain, Endurance Technologies Limited - MD & Director [14]

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Sure. So that is what I've said in my statement also, that definitely, we are not going ahead unless we are fully convinced. I think -- because it is premature to think that we are going ahead. So that's why these kind of calls always help to clarify some of the businesses. And one thing, 3% of every business takes time to grow. I mean, you cannot become INR 1,000 crores in a few years. It takes its time. You know what I'm saying. So the question is, based on our talk with an OEM, we went ahead, very old OEM of ours, lot of trust in us, and according to us, the initial study we did, what we found is that this is a property business. And like I said, today, you see my competition, why do they -- why don't they make margins like us. Why the ROCE, ROEs are not like us, ultimately it is a question of focus, and it is a family like I say, whether it's operational, sourcing, technology, and one has to consider these things. Just because 10 other people lost, it does not mean that Endurance will not do it. You know what I'm saying. But having said this, I fully agree with your concern, and definitely we are not going ahead unless we are 100% sure. This is what I have said in my opening remarks.

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Nilang Mehta, HSBC Global Asset Management (Hong Kong) Ltd. - Portfolio Manager [15]

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And the reason sir why only Endurance trades at multiple it is exactly because you mentioned your profitability, your returns are much superior and market appreciates that and it is reflected in the multiples. That is why -- you know the multiples at which tire companies are trading. And while OEM might have a requirement, we understand that. But -- and the relationships are important, but it is also -- it doesn't fit the current return ratios or the returns of the current business, which Endurance is running. It might be a total dilution of that. So that's something which also the industry will be looking at sir.

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Anurang Jain, Endurance Technologies Limited - MD & Director [16]

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No, no. Of course, we are. See without looking at that, we are not going to go ahead, there is no project activity, which is...

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Nilang Mehta, HSBC Global Asset Management (Hong Kong) Ltd. - Portfolio Manager [17]

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Sir, the fact that a supporting amount has been put. It seems that it is -- it seems that you have gone ahead -- much ahead than...

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Anurang Jain, Endurance Technologies Limited - MD & Director [18]

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No, no, no. We had to give a project report to the Board, because without that, how can they give us enabling this thing. And if you ask me, the figures which we put in are not based on actual raw material prices, but based on the pricing we are getting from the customer. I mean, we had, to be honest, the initial study showed that this is a profitable business with high returns. So the question is, that is why we wanted to go ahead and proceed further with further valuation. And this is what I've said. And unless we further evaluate we are 100% sure, we are not going. That much faith I expect everybody to have in Endurance after 3 years being investors. And like I said, I mean, even in 2024, I mean the business is 3%, my 97% business answering also on what you say it is low return, erode, how can a 3% business erode my this thing.

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Nilang Mehta, HSBC Global Asset Management (Hong Kong) Ltd. - Portfolio Manager [19]

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I think it's not about the absolute amount or the -- it's more about directionally how management is thinking. And that is the concern, it's not about the amount per se. It's about the...

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Anurang Jain, Endurance Technologies Limited - MD & Director [20]

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No, that part I fully agree with you, and I totally share your concern here.

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Operator [21]

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We have the next question from the line of Aditya Jhawar from Investec.

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Aditya Jhawar, Investec Bank plc, Research Division - Analyst [22]

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Anurang, based on your initial work that you would have done before going to the Board for the approval, what kind of ROCEs will this business make in comparison to our existing ROCEs?

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Anurang Jain, Endurance Technologies Limited - MD & Director [23]

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Same. Trust me, same. Question is how you do your CapEx and how you do outsourcing of the business?

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Aditya Jhawar, Investec Bank plc, Research Division - Analyst [24]

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Yes. But Anurang, our existing businesses, there is a lot of scope of backward integration, and hence, our profitability is much better than peers. Whereas in case of tires, there is a relatively lower scope of backward integration. So our profitability as well as ROCE matrix could not be materially different from the sector leaders.

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Anurang Jain, Endurance Technologies Limited - MD & Director [25]

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See, the point is, I don't want to go too much into detail. But trust me, the outsourcing opportunity is as good. I mean, if you just do a further study, but I don't want to debate on this subject anymore. I mean, we are a very attention to detail group and we just don't take calls in the air. Because it is not only -- it is all of you who are 25% of our shareholders and armor wealth. I mean, I've total, total regard and have respect for that. And I will not do anything which affected after so much of hard work over the last 33 years. So please be rest assured on that. I just want to assure everybody on that.

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Aditya Jhawar, Investec Bank plc, Research Division - Analyst [26]

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Yes. Actually, what you said is quite comforting that you would reconsider the decision if your further study prove that the ROCE is not as...

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Anurang Jain, Endurance Technologies Limited - MD & Director [27]

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Definitely, definitely 100%.

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Aditya Jhawar, Investec Bank plc, Research Division - Analyst [28]

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And just a ballpark split between OEM and replacement that you would have thought for this business.

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Anurang Jain, Endurance Technologies Limited - MD & Director [29]

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See it could be -- ultimately, it would be 50/50.

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Operator [30]

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We have the next question from the line of Jinesh Gandhi from Motilal Oswal.

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Jinesh K. Gandhi, Motilal Oswal Securities Limited, Research Division - SVP of Equity Research [31]

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My question pertains to, first, can you give more details about the aluminum forging business, which you are also...

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Operator [32]

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Excuse me, Mr. Gandhi, may I please request you to ask that closer by the telephone.

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Jinesh K. Gandhi, Motilal Oswal Securities Limited, Research Division - SVP of Equity Research [33]

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Yes, is it better now. Yes. Can you give us some more detail about the aluminum forging business, where we are standing on this?

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Anurang Jain, Endurance Technologies Limited - MD & Director [34]

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What is happening today is, today our inverted front forks, you have 2 triple clamps and 2 axial clamps. These are aluminum forgings which we import from suppliers in Austria and in Italy. These are very high-value products. So one is for our own in-house requirements, so we wanted to -- because there was also a request from our customers, both, I would say, Bajaj, KTM and in future, as I told you, we also got an inverted front fork order from Honda. So we're starting in June 2020. So we said, why don't we do it in-house, we can give a price reduction to our customers, at the same time, we get higher value add, higher profit margins on the inverted front fork. So we found a company in Italy, called FGM, and we have already signed a technical collaboration agreement with them because the technology is in the tooling and the process. And do you want to start this. So basically, we are going to start with all our requirements. So today, last year, we did about 130,000 inverted front forks. This requirement is going up to almost 175,000. And like I said, these will double in the next 18 months. Okay? With new orders coming with our new KTM, a strong partnership, which we have established, so for these requirements. Also we want to do personally for our own in-house requirements and then for petrol, diesel, electric vehicles, whether it's 2-wheeler, 3-wheeler or 4-wheeler, you need aluminum forgings. So that is a new business, also which we will target. So it is not only for in-house requirement, we will be servicing aluminum forgings for other requirements. In a likewise example, a 2-wheeler electric vehicle, the training arm, motor housing, the battery pack, the cover, suspension links, these are all aluminum forgings. If I cover 4-wheelers, electric or a suspension arm, battery pack support, aluminum control with steering knuckle joint, these are all aluminum forgings. So there's a huge requirement here also. But first is to cater to our own in-house requirement, and then service the industry after that. So this is a very good project. And it's got technology. That's why we signed a collaboration agreement with the Italian company.

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Jinesh K. Gandhi, Motilal Oswal Securities Limited, Research Division - SVP of Equity Research [35]

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Okay. I did not catch the name, its...F G

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Anurang Jain, Endurance Technologies Limited - MD & Director [36]

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It's called FGM. You can go in the google and internet. FGM, Italy.

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Jinesh K. Gandhi, Motilal Oswal Securities Limited, Research Division - SVP of Equity Research [37]

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Sure. And secondly, can you also throw a bit more light on this KTM tie-up for latest tech suspension, what...

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Anurang Jain, Endurance Technologies Limited - MD & Director [38]

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See what has happened is, we are -- last 11 years, we have had a very strong partnership with KTM Components, which was earlier called WP Suspension. And then basically it was in July that the owner Mr. Stefan Pierer, he's the owner of KTM, he wanted to meet with me because he has a lot of confidence in Endurance over 11 years, on pricing, on technology, quality, which we give them. And he said, I want to further strengthen our partnership. So what we will be doing is that -- so the -- so in that respect, we did plan to do some investment, of course, in the KTM industries, but very small. It would be around EUR 4 million over 2 years, okay. So he also feels strengthening our partnership, that's his expectation.

But he will transform me, free of cost, the latest technologies of front fork shock, including the semi-active electronic suspensions used on his 2019 cc and above bikes. It will also include cooperation of supplying suspension for electric e-bikes and electric 2-wheelers which are going to come, including scooters and motorcycles. And I will be increasing our exports to both Austria and Nigeria and China for Fiat Moto. So I will even increase my exports to both Austria and China coming up in the near future. So it's a very good partnership, which we have. Because these are very high-technology parts, and (technical difficulty)

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Jinesh K. Gandhi, Motilal Oswal Securities Limited, Research Division - SVP of Equity Research [39]

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Sorry, your voice blanked out. Okay.

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Anurang Jain, Endurance Technologies Limited - MD & Director [40]

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So what didn't you catch actually?

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Jinesh K. Gandhi, Motilal Oswal Securities Limited, Research Division - SVP of Equity Research [41]

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So you primarily exports to Austria and China and that was last.

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Anurang Jain, Endurance Technologies Limited - MD & Director [42]

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Yes. Austria and China, and of course, the Indian KTM Bajaj, we are the single source. We are supplying there. And in future, whereas electric scooters and motorcycles, whether it e-bicycles for European market, which is a huge business, very high-value front fork business. So all these opportunities now are opening up for us with this tie-up, which we have done.

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Jinesh K. Gandhi, Motilal Oswal Securities Limited, Research Division - SVP of Equity Research [43]

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Understood. And can you also give data for European business in terms of what was constant currency growth and group for key customers?

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Anurang Jain, Endurance Technologies Limited - MD & Director [44]

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Okay. I will request with the Massimo Venuti to answer this question.

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Massimo Venuti, Endurance Technologies Limited - Non-Executive Director [45]

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Okay. So in the first quarter, early June of the fiscal year 2019, 2020, sales of new passenger vehicle in the European market fell by 3% compared to the same period of the previous year. With the exception of Germany, with plus 0.9%. All the metal market moved down. France, minus 3%; U.K., minus 5%; Italy, minus 0.5%; and Spain, minus 5%. In this period, the European operation posted a total income growth of 3.1%. And considering the same price of aluminum, we grew 6%. The price reduction of the aluminum indexation pass through the customer is in. EBITDA grew by 7% from INR 11.9 million to INR 12.7 million. EBITDA margin percentage improved from 17.3% for the previous year to 18%. And also, the profit after tax grew by 8.1% from INR 4.3 million to INR 4.7 million. The percentage of net result was 6.6% compared to 6.3% of the previous year. The best result achieved compared to the general market in terms of total income was driven by the significant increase in sales with Volkswagen Group, which was able to offset the reduction (technical difficulty) with the FCA, we saw further reduction of the 34.7%. We had also a positive contribution coming from the consolidation of India Gap SpA, the company that we acquired at the end January 2019. But it's true that the month of June was very bad compared to the previous 2 months because the market closed with 7.8%. And all the general market in Germany, France and Italy go down in important way. The month of July, the first feeling that we are seeing from the market. In Italy, the market was more or less stable. In France, there was a reduction of 1.8%. In Germany, there was an increase of 4.7%. And our major customer there performed very well with a leverage of 15%. In U.K., there was a reduction of 4.1%. In Spain, 11.1%. We are confident to maintain the same level of turnover. Also in the next months due to the fact that, as you know, we are starting with a lot of new projects, and we have increased our share of market compared to our competitors.

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Jinesh K. Gandhi, Motilal Oswal Securities Limited, Research Division - SVP of Equity Research [46]

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Sure. Just to clarify, you said constant currency growth is 3.1% and 6% during aluminum price pass through?

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Massimo Venuti, Endurance Technologies Limited - Non-Executive Director [47]

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No. I explained to you, there was an important reduction in the aluminum compared to the previous year. If I consider the same level of aluminum compared to the previous year, we grew 6%, and certain that there is a 2.9% of reduction with a total turnover due to the reduction of price of aluminum.

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Operator [48]

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We have our next question from the line of Miten Vora from BNP Paribas.

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Miten Vora;BNP Paribas;Research Analyst, [49]

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Thanks for the clarification. Just one last question on this tire thing, is there any time line by which we will come to know whether you are going ahead with the project or not since you started the report. Any time line by when the company may come out with a final decision?

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Anurang Jain, Endurance Technologies Limited - MD & Director [50]

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Yes, I think we would like to do in the next 2 weeks. Because we're getting some other information in 2 weeks.

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Operator [51]

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We have our next question from the line of Jamshed Dadabhoy from Citigroup.

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Jamshed Dadabhoy, Citigroup Inc, Research Division - Director [52]

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So could you talk a bit on your CapEx? What you're going to do is spend in India and how much are allowing spending on the tech collaboration with KTM Company? And any other technical tie-ups, et cetera?

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Anurang Jain, Endurance Technologies Limited - MD & Director [53]

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Sorry, I mean, how much we're spending in which collaboration you said?

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Jamshed Dadabhoy, Citigroup Inc, Research Division - Director [54]

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The KTM components, anything additional spend on that? Because your line kept dropping, so I heard there a number of like EUR 40 million.

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Anurang Jain, Endurance Technologies Limited - MD & Director [55]

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Thank God, that's not true. Because then I won't do such tie-ups. It is 10% of that. It's EUR 4 million over 2 years. It's this year and next year. So that's an investment into KTM Industry. It is a public-listed company. And in turn, we get free-of-cost all the technologies, all improvements, electronic suspensions, higher export orders to Austria and China. So it was a very strong tie-up, and it's come -- the initiative has come from Mr. Stefan Pierer himself, who is owner of KTM.

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Jamshed Dadabhoy, Citigroup Inc, Research Division - Director [56]

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And what's your CapEx in India and in the EU, please?

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Anurang Jain, Endurance Technologies Limited - MD & Director [57]

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Well, in India, we are going to have a CapEx not exceeding the INR 300 crores. But as we speak, we are continuously trying to decrease the CapEx looking at the market. So we have regular meetings. In fact, we have done already a lot of CapEx cuts last week. And we're going to our assets, plus inventory controls, fixed cost cutting. A lot of the initiatives are going on in Endurance. Because we have a focus on our business. External factors are not in our control here. So we are focusing on our business.

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Jamshed Dadabhoy, Citigroup Inc, Research Division - Director [58]

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How much is the European CapEx?

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Anurang Jain, Endurance Technologies Limited - MD & Director [59]

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European CapEx is EUR 30 million.

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Jamshed Dadabhoy, Citigroup Inc, Research Division - Director [60]

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Okay. And this tire opportunity, what share of the OE will you all be when you hit that INR 250 crores of revenue?

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Anurang Jain, Endurance Technologies Limited - MD & Director [61]

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It would be about -- very difficult to say what the volumes will be at that time.

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Jamshed Dadabhoy, Citigroup Inc, Research Division - Director [62]

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No. You mean it's just INR 250 crores of top line.

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Anurang Jain, Endurance Technologies Limited - MD & Director [63]

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At INR 250 crores, it will be at least 2.4 million.

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Jamshed Dadabhoy, Citigroup Inc, Research Division - Director [64]

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So 2.4 million tires.

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Anurang Jain, Endurance Technologies Limited - MD & Director [65]

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Yes. It's 2 million to 2.5 million. So it would be 2.5 million approximately. Yes. Approximately.

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Operator [66]

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We have our next question from the line of Chirag (inaudible) from Samara Investments.

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Unidentified Analyst, [67]

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I wanted to know this Maharashtra incentive scheme, the INR 702 million. Why is it part of the top line and not the other income?

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Anurang Jain, Endurance Technologies Limited - MD & Director [68]

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No. This accounting has been going on for the last 3 years. This is the way it's treated as a part of our operating scheme and as per the prevalent accounting standard.

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Operator [69]

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We have our next question from the line of Hitesh Goel from Kotak Securities.

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Hitesh Goel, Kotak Securities (Institutional Equities) - Associate Director & Automobile Analyst [70]

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Sorry to harp on this question again on the tire side. But just wanted to get a sense, why is -- why has the OEM actually approached Endurance for the business. Because the way we understand actually the established players who are already working with the OEs and guiding to a pretty decent growth in business, and there's also a new player called Maxxis was coming and supplying a set of capacity of 7 million tires for 2-wheelers for the Honda. So very surprised to see that. Is there some player who's going bankrupt because of a deal that is happening or you are giving them better pricing for OEM business?

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Anurang Jain, Endurance Technologies Limited - MD & Director [71]

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So the question is there are reasons which I cannot talk about. This won't to be right to -- for the reason -- but there was a very good reason for that. I can only say that.

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Hitesh Goel, Kotak Securities (Institutional Equities) - Associate Director & Automobile Analyst [72]

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And sir, basically, another thing is that can you just give -- so initially, actually you were talking very fast, so we missed the revenue growth among with the customers and India revenue growth. Can you give us that, like the Bajaj, what are the growth on Yamaha, and...

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Anurang Jain, Endurance Technologies Limited - MD & Director [73]

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No, I did not -- yes. So actually Bajaj, we grew 6%; Yamaha, 6%; and Hero MotoCorp was 35% in India. And in Europe we grew 53% Volkswagen Group including Porsche and 43% with CH New Hauling, CNH as we call it.

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Hitesh Goel, Kotak Securities (Institutional Equities) - Associate Director & Automobile Analyst [74]

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And sir -- but the top line, if I look at with in India, excluding the euro incentive -- additional incentive that you got, it's almost like this...

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Anurang Jain, Endurance Technologies Limited - MD & Director [75]

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Yes, yes, yes. It is. It is. But the industry is degrowing by 9.74% and 3-wheeler by 10%. Now these 2 industries are 88% of our business in India. But I'm still flat. I think that's pretty decent, no? I now always promise higher than industry growth. I've always promised that to the investors.

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Hitesh Goel, Kotak Securities (Institutional Equities) - Associate Director & Automobile Analyst [76]

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I understand, sir, and compliment you for that performance. I was just trying to understand, where has been the decline because your Bajaj Auto has grown, Yamaha has grown, Hero MotoCorp has grown. So is it because o and Honda and RE because of its distribution...

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Anurang Jain, Endurance Technologies Limited - MD & Director [77]

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If you ask me, everybody has declined? Everybody declined except Bajaj, except Bajaj in motorcycles. Even 3-wheelers even did decline, but because of me taking more business, which I've always said, we take more business, increasing SOB, taking new products. And like I said, all the things, whether it is technology upgradations, paper base clutch assemblies, rear brakes, ABS; 2-, 3- and 4-wheeler machine castings, starting Hyundai, a large business. It's growing very fast. You know what I'm saying. So all this has helped us to be flattish in spite of a de-growth of 10% in 3-wheelers and 9.74% in 2-wheelers.

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Hitesh Goel, Kotak Securities (Institutional Equities) - Associate Director & Automobile Analyst [78]

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Okay. And my final question, can we -- you always give this number of the total new business revenues, which may come in next 3 years. You've given for this quarter, but can you update us on the total order book for the next 2 years?

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Anurang Jain, Endurance Technologies Limited - MD & Director [79]

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No, what I said is that we have got INR 10,330 million last year, and another 89 -- INR 80 million this year, and I told you that in there are customers also, including TR and TVS, Hero MotoCorp, HMSI. So this business will -- the peak production will be 2021 is what I said.

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Operator [80]

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The next question from the line of Siddhartha Bera from Nomura.

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Siddhartha Bera, Nomura Securities Co. Ltd., Research Division - Associate [81]

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Sir, I would like to ask on questions on the tire segment. First, sir, any numbers you can give us like from when do we plan to start this if we go ahead with the plant, and the return issues we are targeting a few years after that?

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Anurang Jain, Endurance Technologies Limited - MD & Director [82]

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We are going to ensure that we are same or better than the existing return ratios. Otherwise, we are not doing this project. That's for sure. And the margins, for which we had an initial study, look pretty good. I mean, there's no way that these are lower margins than what we do right now. Because like I said, I mean, money is made due to various reasons. And so -- so to answer your question, that was our thinking. But to be honest, we are going to take -- we are still in the evaluation stage, like I said, let's wait to 2 weeks. It will be clear whether we are doing it or not doing it.

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Siddhartha Bera, Nomura Securities Co. Ltd., Research Division - Associate [83]

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Okay. But some understanding about the long-term vision because INR 250 crores revenue from a single product in a few years is really a small scale. And so any thoughts you have to where do you want to take it, say, after a few years?

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Anurang Jain, Endurance Technologies Limited - MD & Director [84]

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No. Right now I will not be able to comment on that. Of course, we believe in profitable growth. But it will be a bit premature to talk about that. But another interesting thing with tires was that it is the coming of electric vehicles. And if the (inaudible) policy goes through in a big way, maybe it’s a bit delayed. But the 3-wheelers 2023 to stop IC engines. And in -- by 2025, they want to -- everything below 150 CC. They we want to stop IC engines. Then definitely, there is a -- it is a very interesting business to think about. So that's the reason we're looking at everything, and we in Endurance are open. We will never close our minds to opportunity. We do our own study, our own this thing. But what has completed that. Once we complete it, then we'll tell you like I said. Unless we're 100% sure, we are not going ahead. That's for sure.

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Siddhartha Bera, Nomura Securities Co. Ltd., Research Division - Associate [85]

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Okay. So obviously, we will come with more capital in this, INR 2.5 million, how much, I mean, will you scale up?

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Anurang Jain, Endurance Technologies Limited - MD & Director [86]

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Yes. We will potentially go ahead, and then we then, of course, we'll have the figures.

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Operator [87]

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We have the next question from the line of Priya Ranjan from Antique Stockbroking.

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Priya Ranjan, Antique Stockbroking Ltd., Research Division - Research Analyst [88]

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Coming back on the tires investment. So what kind of assumption you have made for, say, because you have already talked about that, it will be like profitable business. It will be as ROCE-accretive or it will be similar ROCE to the existing business. So what kind of assumption you have made in terms of volume, in terms of profitability, RMC margin, et cetera, the investment behind that?

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Anurang Jain, Endurance Technologies Limited - MD & Director [89]

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See, basically, in 3 years, we should be reaching at least 10,000 a day. The RMC, which is -- it is based on -- there are 7 types of materials in a tire. And it is -- and it is linked to various, like, you have Chrysler standards, you have a rubber board. So we knew what the RMC percentage is. Because this also has a quarterly amendment by OEMs. It's quarterly.

Aftermarket, you get a much higher pricing. We are in aftermarket for 19 years. We were very good in running the aftermarket. I know this a bit different. But the 2-wheeler industry aftermarket is becoming a one-stop shop. A personal buyer, shock absorber or front fork parts or clutch parts will also like the tire to be there. So things are changing in this country. So it is really that we really have a lot of information. We have that, but we have to be sure of the financials completely. And that's why I said unless we're 100% sure, we are not going to. But there are -- these are some of the assumptions existing.

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Priya Ranjan, Antique Stockbroking Ltd., Research Division - Research Analyst [90]

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So any thought on margin or kind of investment you will be requiring because any kind of, say, this much tonnage of the kind of plant you have to pay eventually?

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Anurang Jain, Endurance Technologies Limited - MD & Director [91]

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See, according to us, if our strategy is good between outsourcing and in-house, the CapEx is not very high. In fact, sometimes even I don't understand why such huge CapEx is done by the 2- and 3-wheeler tire industry. Because what we have bought so far, the CapEx is not very high over. The initial is high because the land and building is very high. That is maybe 75, 80 out of the 175 that you put on there. 70, [50 million] that you put in there. But then, the CapEx is not very high to increase capacity. So we have done our homework. But that's just for us to finalize, we've not finalized. Like I said, we were still enabling the approval and update you once we have approved them all. Once we are the pure leader in there.

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Priya Ranjan, Antique Stockbroking Ltd., Research Division - Research Analyst [92]

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This thought process has -- was also because of the (inaudible) thing that some of your business might be obsolete in the next 3, 4 years?

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Anurang Jain, Endurance Technologies Limited - MD & Director [93]

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For us, the major one is the clutch. This is about 4.5% of our consolidated business. It's not that big. But definitely, let's go out and see. Definitely, that is the consideration that we have to look at, for the future. Ultimately, I have to look at the future of the business. I'm not a short-term player or the promoter, happening in the longer term, what happens in 5 years to this thing.

So after a lot of great deal of thought and all we're doing for projects, we are -- I mean, do not appreciate that as a 75% shareholder. The business still comes on me. So I've to be very, very careful on this. And I'm not going to hamper 25% shareholders. I mean, I've got that highest I mean, I'm going to make sure that there is a full commitment to a 25% shareholders. I'm not going take any stupid chances like that. So that's why I said earlier also, have a little faith in us.

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Priya Ranjan, Antique Stockbroking Ltd., Research Division - Research Analyst [94]

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Yes. But, I mean, say, your ROE, or your investment -- return on investment, is very, very different. And, say, suppose if anybody -- any new investor who has entered for the first time. So their return ratio will be very, very different than what you have invested at a very, very early stage. So that also need to be considered, right?

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Anurang Jain, Endurance Technologies Limited - MD & Director [95]

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Yes. Sure. Okay. So all these things, like you rightly said -- all the things will be kept in mind. We are not here to disclose shareholder value at all.

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Priya Ranjan, Antique Stockbroking Ltd., Research Division - Research Analyst [96]

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Yes. And just coming back on, say, in terms of the outlook, I mean, say, for the domestic as well as the export, what kind of outlook you're getting from the OEM side? I mean...

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Anurang Jain, Endurance Technologies Limited - MD & Director [97]

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See, according to me, I think, we have to wait till Diwali -- festive season of Dussehra and Diwali, what kind of sales happen because there are stocks, as you know, in the pipeline. Let's see how they do and how this credit squeeze has taken care of, to the auto dealers or to other stakeholders. This is also hampering.

And -- but I am a firm believer that as good times don't last forever, even bad times don't last forever. Something will happen for sure.

As far as we are in Endurance is concerned, we are focusing on our business. I mean, we are looking at CapEx reductions, inventory reductions, fixed cost reductions. So areas of business was up and down, our biggest strength is that we don't have long-term debt, that's our biggest strength today. So we are focusing completely to make sure that we sustain our margins. And we grow higher than industry. But extremely very difficult to say that some of the issue is the credit squeeze, and the sentiment that this could improve. Lastly, the monsoon seems to be good. So I'm optimistic that, that helps in some better sales this festive season. Last 2 monsoons have not been good. So let's wait and watch with what really happens.

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Priya Ranjan, Antique Stockbroking Ltd., Research Division - Research Analyst [98]

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Yes. And just lastly on the domestic business. So if I have to segregate, how much is your business is going to engine component for 2 wheelers?

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Anurang Jain, Endurance Technologies Limited - MD & Director [99]

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Like I said -- so like I told you, 4.5% or you can say if I take only the business for India part only. So EBITDA was 6.5% is in the clutch, and that also 75% is below 150. So if I'm affected, 75% with the 6.5% growth if 100% becomes [real].

And castings, of course, there are new types of castings coming in, motor housings, battery housings, covers. So there are a lot of new castings are coming in. Also, some structural castings are coming. So we have to wait and watch of which castings will come in. Although we have a good idea, these castings are coming in also. So aluminum casting business, we'll have to wait and watch what really happens. But what is sure is, there will be no clutch. That's for sure. Which will affect below 150 ccs at 75% of the business of 6.5% as of today. For India, consolidated, 4.5%.

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Operator [100]

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The next question from the line of Ronak Sarda from Systematix.

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Ronak Sarda, Systematix Shares & Stocks (India) Ltd., Research Division - Analyst [101]

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I have a couple of questions. First, on the TVS side. You highlighted that you have won new orders on the scooters and shock and 3-wheeler breaks as well. Did I hear it right because your...

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Anurang Jain, Endurance Technologies Limited - MD & Director [102]

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Yes. So it was basic for the small motorcycle front forks and 3-wheeler breaks. So these 2 have been added. And both should start by end of the third quarter or the beginning of fourth quarter. While the 2-wheeler disc brake assemblies will start from the next quarter for sure.

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Ronak Sarda, Systematix Shares & Stocks (India) Ltd., Research Division - Analyst [103]

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And how large are these businesses? Are there volumes or values you can highlight?

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Anurang Jain, Endurance Technologies Limited - MD & Director [104]

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Okay. That I don't know, but we're pretty good because these are high-value products, breaks. And I don't have all time -- I don't know, initial breaks order was, I think, INR 40 crores, if I'm not mistaken.

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Ronak Sarda, Systematix Shares & Stocks (India) Ltd., Research Division - Analyst [105]

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Yes, INR 30 crores to INR 40 crores last time.

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Anurang Jain, Endurance Technologies Limited - MD & Director [106]

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INR 400 million, but okay, unfortunate, but that I can tell you. I mean, I'll tell you offline. But this -- but as we talk, we are taking new business from TVS.

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Ronak Sarda, Systematix Shares & Stocks (India) Ltd., Research Division - Analyst [107]

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As you said in the update from the new Karnataka facility, which will be shared for the HMSI.

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Anurang Jain, Endurance Technologies Limited - MD & Director [108]

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So the TVS, also, we will cater from Kolar plant. You know what is the scooter front forks, which I said, 2.76 million, which will start on September, but peak will be on 2021 and we're starting 500 front fork shock absorbers -- front forks a day from January onwards. So that plant will also cater to TVS front forks.

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Ronak Sarda, Systematix Shares & Stocks (India) Ltd., Research Division - Analyst [109]

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Also similarly, you said Hyundai and Kia business, which was INR 170 crores earlier and INR 280 crores. Is that right?

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Anurang Jain, Endurance Technologies Limited - MD & Director [110]

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So right now we are doing about INR 100 crores of business, but 2021, we'll go 3x, INR 300 crores.

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Ronak Sarda, Systematix Shares & Stocks (India) Ltd., Research Division - Analyst [111]

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For sure -- sorry, sir, I think I missed your entire comment. Can you please repeat?

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Anurang Jain, Endurance Technologies Limited - MD & Director [112]

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So what I'm saying is right now, we are doing at a level of INR 100 crores mainly, and Kia has just started. And by 2021, we'll reach INR 300 crores because we have the orders for that.

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Ronak Sarda, Systematix Shares & Stocks (India) Ltd., Research Division - Analyst [113]

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Okay. So that's why I didn't understand. Yes. And last question on tires again. You said there are some things spending which has to be worked out or decided...

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Anurang Jain, Endurance Technologies Limited - MD & Director [114]

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It is a financial evaluation to be completed.

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Ronak Sarda, Systematix Shares & Stocks (India) Ltd., Research Division - Analyst [115]

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All right. So, this basically includes your costing, pricing and everything you have today?

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Anurang Jain, Endurance Technologies Limited - MD & Director [116]

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So we are going more into deep. We a lot of information, which we have shared, but we have to be 100% sure, only then we'll do it. If we find any risk, we are not doing it.

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Ronak Sarda, Systematix Shares & Stocks (India) Ltd., Research Division - Analyst [117]

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I mean, just as an input. I mean, most of the 2-wheeler manufacturers today have a contract manufacturing kind of models for 2 wheelers and 3-wheeler tires. So when you say outsourcing as a business model for your tire segment, how much would be in-house and how much percentage are you -- I mean, thinking of bringing it in-house?

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Anurang Jain, Endurance Technologies Limited - MD & Director [118]

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About the model which we are making will show up.

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Ronak Sarda, Systematix Shares & Stocks (India) Ltd., Research Division - Analyst [119]

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All right. So this is lot of spending...

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Anurang Jain, Endurance Technologies Limited - MD & Director [120]

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For the aftermarket, I'd like to outsource. This will tell you in principle. If we do the project.

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Ronak Sarda, Systematix Shares & Stocks (India) Ltd., Research Division - Analyst [121]

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Okay. So aftermarket could be outsourced?

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Anurang Jain, Endurance Technologies Limited - MD & Director [122]

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Yes, and I don't need to invest at all.

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Ronak Sarda, Systematix Shares & Stocks (India) Ltd., Research Division - Analyst [123]

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All right. Sir, can you highlight which OEM are you -- have been thinking of? Is it Bajaj or TVS...

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Anurang Jain, Endurance Technologies Limited - MD & Director [124]

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No. I cannot tell you that. It's confidential.

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Operator [125]

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We have our next question from the line of Mahesh Bendre from KARVY Stock Broking.

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Mahesh Bendre, KARVY Stock Broking Limited, Research Division - Research Analyst [126]

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During the quarter, you had received INR 70 crores of incentives from the Maharashtra government. What was the number last quarter -- corresponding quarter last year? Any...

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Massimo Venuti, Endurance Technologies Limited - Non-Executive Director [127]

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You will get in the annual report. But we are talking about the project scheme of incentive under the megaproject incentive for which Mr. Jain had said that we are eligible to receive INR 367 crores over a period of 7 years.

So last year, so quarter 1, we did not consider anything. So quarter 4, we only considered quarter 4, 31.5%. Reaching a profit after tax figure which showed you -- told you is INR 20-odd crores after tax. So it's a small figure last year. But this year, the figure has increased. Because I said I had to consider '18, '19, that was for '17, '18. So '18, '19 and quarter 1 was considered in quarter 1.

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Operator [128]

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We have the next question from the line of Jamshed Dadabhoy from Citigroup.

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Jamshed Dadabhoy, Citigroup Inc, Research Division - Director [129]

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Anurang, I just wanted to come back on this tire project ROCE. You're reasonably confident that it will be in line with what you're currently..

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Anurang Jain, Endurance Technologies Limited - MD & Director [130]

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Yes, absolutely.

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Jamshed Dadabhoy, Citigroup Inc, Research Division - Director [131]

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The question is that at that kind of ROCE will be -- are the OEM already agreed to the pricing? And will that pricing be something which will sustain for a length -- period of time?

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Anurang Jain, Endurance Technologies Limited - MD & Director [132]

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Yes. Can you hear me?

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Jamshed Dadabhoy, Citigroup Inc, Research Division - Director [133]

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Yes. The line totally dropped.

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Anurang Jain, Endurance Technologies Limited - MD & Director [134]

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Yes. So actually, we definitely had a line of sight from the customer with a line of sight of the raw material costs, and that's the reason. We were seriously looking at this for a year. That's the reason we are seriously looking at this project. So we have done our homework, but it's not completed. I mean, that's why we believe -- we just mentioned that -- and even if you see the press release, we have said that, that this is a proposal which we have made clear -- the wording is very clear on that.

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Jamshed Dadabhoy, Citigroup Inc, Research Division - Director [135]

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Okay. And if you -- I think someone asked on this, that if you already have clarity on so many aspects, what else are you sort of looking to get assurance or a clarity on the...

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Anurang Jain, Endurance Technologies Limited - MD & Director [136]

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See, I'm going to get assurances on the aftermarket, including the pricing. And also, we are just tying up on the actually -- further investments, we are clear of the initial, but we had made some assumptions. So we have to fine tune it with some industry experts, which is -- so we just want to be like 100% sure. But if it's -- but we are not 100% right now. We're not concluding on that yet.

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Jamshed Dadabhoy, Citigroup Inc, Research Division - Director [137]

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Okay. And is the aftermarket assumption realistic, and given that...

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Anurang Jain, Endurance Technologies Limited - MD & Director [138]

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So that is what -- so that is the main thing which we are looking at, to be honest.

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Jamshed Dadabhoy, Citigroup Inc, Research Division - Director [139]

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And then what profitability of the project hinge crucially on the aftermarket, share...

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Anurang Jain, Endurance Technologies Limited - MD & Director [140]

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See, the OEM is also important, but definitely aftermarket is as important, for sure.

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Jamshed Dadabhoy, Citigroup Inc, Research Division - Director [141]

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I understand. So probably, what you assume that you will have no aftermarket revenues for, say, the first 3 years. Does that change the complexion of the ROCEs so far meaningfully?

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Anurang Jain, Endurance Technologies Limited - MD & Director [142]

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Yes, yes, yes, it does. And that is the reason I need this extra time.

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Operator [143]

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We have the next question from the line of Nilang Mehta from HSBC Global Asset Management.

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Nilang Mehta, HSBC Global Asset Management (Hong Kong) Ltd. - Portfolio Manager [144]

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As you said on the following suggestion, if you could give us the framework how to look at future investments in related areas, where there will be -- are there any areas which you have? And what kind of return ratios you would you evaluate for new businesses? It could help investors have a clarity that there will be certain areas where company can explore and there will be certain which will be completely no go. So while these are being reviewed, you could come out with a framework. There's -- future investments can go. This will help a lot in having clarity for future.

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Anurang Jain, Endurance Technologies Limited - MD & Director [145]

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Sure, absolutely. And unless we are sure of the return margins and profit after tax margins, looking at our business as a whole and the return on capital, I mean, both ROE, ROCE. Without that -- and like I said in the previous calls also, I mean, outer limit for ROI is 5 years. And we are a very financially focused company. And so that is very, very clear. We're not going to take any type of crazy risks.

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Operator [146]

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Thank you. Ladies and gentlemen, that was our last question. I now hand the floor back to the management for closing comments.

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Ashish Nigam, Axis Capital Limited, Research Division - SVP of Automobiles [147]

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Thank you. On behalf of Axis Capital, thank you to the Endurance management and all the participants for joining the call today. Mr. Jain, if you have made closing remarks or you'd like to just conclude?

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Anurang Jain, Endurance Technologies Limited - MD & Director [148]

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Yes, I mean, I would only like to say one thing, that as far as Endurance is concerned, we have the highest focus on shareholder value. And at the same time, any project we undertake, unless we are 100% sure of our analysis, we don't do it. And that's why our financials over the years have been better than the competition, they're growing higher than the industry and have had profitable growth. So this I request investors to keep that in mind.

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Operator [149]

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Thank you. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.