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Edited Transcript of MINDAIND.NSE earnings conference call or presentation 7-Aug-19 10:30am GMT

Q1 2020 Minda Industries Ltd Earnings Call

Aug 18, 2019 (Thomson StreetEvents) -- Edited Transcript of Minda Industries Ltd earnings conference call or presentation Wednesday, August 7, 2019 at 10:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Sunil Bohra

Minda Industries Limited - Group CFO

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Conference Call Participants

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* Ashutosh Tiwari

Equirus Securities Private Limited, Research Division - Research Analyst

* Basudeb Banerjee

AMBIT Capital Private Limited, Research Division - Research Analyst & VP

* Mukesh Saraf

Spark Capital Advisors (India) Private Limited, Research Division - VP of Equity Research

* Prayesh Jain

Yes Securities (India) Limited - Executive Vice-President

* Ronak Sarda

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

* Siddhartha Bera

Nomura Securities Co. Ltd., Research Division - Associate

* Vijay Sarthy T.S.

Anand Rathi Financial Services Limited, Research Division - Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Minda Industries Limited Q1 FY '20 Earnings Conference Call. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions and expectations of the company as of the date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. (Operator Instructions) Please note that this conference is being recorded.

I now hand the conference over to Mr. Sunil Bohra from Minda Industries Limited. Thank you and over to you, sir.

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Sunil Bohra, Minda Industries Limited - Group CFO [2]

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Thank you very much. Good afternoon, and a warm welcome to all the participants. On the call today, I'm joined by my colleague, [Mr. Tripurari] at [SGA IR Consultants].

I hope you had a look at our financial results and presentation that is uploaded on stock exchange as well as company website. I will briefly speak on the industry and then update on our performance, following which we will be happy to answer your queries.

As you know, the auto sector is witnessing weakest demand environment over a decade, coupled with depressed volumes and margin pressures. Government has taken a (inaudible) start in the budget, lowered the GST rate and also incentivized the purchase by providing interest reductions -- interest reduction on loan, et cetera.

Contrary to hopes, there was no favorable announcement with exception to EVs in the budget to stimulate the sector. It is still struggling with build inventories, which peaked in Q3, Q4 of last year. Most of the OEMs have revised their volume downwards in line with the demand. Regulatory changes relating to insurance, BS4 to BS6 transitions have resulted in OEMs in general announcing fewer models. Industry seemed to have (inaudible) on new launches due to various uncertainties.

Demand remained weak across segments, with hopes on back of good monsoon so far and [NBS] to the [reduction] looking at some green shoots. In Q1 2020 as per CM, the vehicle volumes in 2Wheeler segment degrew by 10%; 3Wheeler by 9%; 4Wheeler by 12%; and off-roaders degrew by 22% year-on-year. After a long time, all the sectors have shown degrowth simultaneously, which is rare. Needless to say, historically, one segment has always outperformed when the other segment was witnessing challenging demand environment.

Rural demand has not picked up due to delays of normal monsoons, which of late has improved.

Favorable movement in foreign currency and commodity movement were positives for the sector. However, most of the benefits had been offset due to lower operating leverage of (inaudible). Second half of the financial year could see prebuying and industry is hopeful of good tractor season. Over the medium to long term, we expect the sector to grow in the range of 6% to 8% and long-term growth story of passenger vehicles remain intact despite challenges thrown up by shared mobility and ownership models.

Now coming to our performance. You will see that the kind of favorable factors we had, which was the robust sales despite industry-wide volume cuts, supported with cost management and austerity measures, we have been able to keep our costs in control, orders in check and as a result, we have maintained our EBITDA margin despite pressure on businesses.

At a consolidated level, we have continued to post robust sales despite industry-wide volume cuts due to weak demand. Management has taken various initiatives to manage overall cost structure, including certain austerity measures to keep the costs in check.

We continue to explore opportunities to regulize our kit value. At consolidated level, during Q1 FY '20, the company registered a revenue of INR 1,440 crores as against INR 1,430 crores for corresponding quarter, i.e., Q4 of 2019, with a growth of 1%. New products have started contributing to the top line.

Despite adverse business environment, EBITDA for Q1 was at INR 172 crores, growing nominally from INR 170 crores in previous quarter 1. EBITDA margin for Q1 is at 12% compared to 11.9% recorded in Q1 '19, an expansion of 7 basis points. The margin improvement has been possible due to cost management initiatives, favorable movement of commodity and currency exchange in the quarter under IFRS. It reinforces our commitment to continuously improve our margin profile.

PBT before exceptional items for Q1 FY '20 was at INR 84 crores, recording a decline of 26% from INR 114 crores in Q1 of '19. This decline is largely on account of lower operating leverage at certain facilities and partial utilization of certain new facilities in Gujarat, resulting in overall higher depreciation number. The management believes these investments will keep us geared up for growth in near future as and when the growth returns.

The management is very cautious in making new investments and capital expenditures. Finance cost is higher year-on-year due to increase in total borrowings, which stood at INR 1,119 crores in Q1 FY '20 as against INR 546 crores in Q1 FY '19. These borrowings were taken for investments in TG Minda, (inaudible) controllers, 2Wheeler (inaudible) sensor projects, et cetera.

The profit after tax attributable to MIL declined by 24% to INR 53 crores in Q1 as against INR 70 crores in corresponding quarter last year.

Coming to our product lines. Switching systems segment achieved a revenue of INR 532 crores for Q1, contributing about 37% of the total consolidated turnover. The EBITDA margin in the segment was around 11% this year.

4Wheelers business has received business for newly launched venue from Hyundai. We hope to build on the momentum with Hyundai further. 4Wheeler business is in line with OE volumes, while we improved our share of business in 2Wheelers.

Moving on to Lighting System division. The Lighting division achieved a revenue of INR 309 crores for Q1, contributing 24% to our total turnover. The EBITDA margin in the segment was around 10% this quarter. The lamp business witnessed better volume due to some new launches, supported with higher LED content.

Coming to acoustic or our horns business. The division achieved revenue of INR 178 crores for Q1 2020, contributing 12% of our total turnover. The EBITDA margin in this segment was around 6% in this quarter.

The domestic business is upbeat despite volume cut. The Clarton Horn Mexico business is under stabilization.

Moving on to Light Metal Technologies business. The division achieved a revenue of close to INR 200 crores for Q1 2020, contributing 14% of our total revenues. The EBITDA margin in this segment was around 26% this year. This segment benefited from better operational efficiency, favorable commodity movement and improved customer mix.

Our other segment, the product lines which we all added last year, have also started contributing and are showing good traction. As a whole, we achieved a revenue of INR 190 crores for Q1 2020 from other products. Most of the products in this segment are [Sunrise] businesses or [Nation] businesses. We have been able to achieve an EBITDA of about 11% in this segment.

Satellite and [TCS] have further added to the growth of this segment. ARPA and (inaudible) July 2019. However, as you know, these segments don't get consolidated to our top line.

Coming to business -- other business updates, which was primarily the merger of the 4 wholly owned subsidiaries. The merger scheme has been filed with the exchanges, and it is expected to be filed with NCLT in next week or so. The secured creditors' concerns are being procured. And we expect the merger to be consummated by end of this fiscal year.

And on another acquisition come merger, which is Harita Heating Systems Limited, the scheme has been approved by the exchanges and SEBI has also (inaudible) the schemes for direction. Here again, we are waiting for the consent of secured creditors, which we expect to happen in -- a couple of weeks from here. And thereafter, we will find that (inaudible).

In terms of major order wins, which is the new orders of the new customers. Sensor business has received new orders from Kawasaki and PSA, which is engine speed and oil temperature sensors. And Minda Kosei has been nominated business value of around INR 87 crores from the OEMs with the new orders.

Hence, in summary, while the near-term challenges remain in the sector, we remain cautiously optimistic about the level of the sector. We will continue to engage with our customers to work on emerging technologies and enhance our offerings.

That is all from our side, and now we can open the floor for Q&A. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Ashutosh Tiwari from Equirus.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [2]

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(inaudible) Firstly, I think we have seen a major [deterred path] level because of the increased interest rates and interest cost. Can we share what kind of utilization level we're currently operating at in different main key workers like 2Wheelers, 4Wheelers, Switches and Lighting and (inaudible) so that we would know the -- how much capability to -- going ahead?

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Sunil Bohra, Minda Industries Limited - Group CFO [3]

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Yes. Ashutosh, your point is right. So if you see, while on quarter-on-quarter, our revenue has been marginally higher, we have done a lot of CapExes in larger building facilities, which was generally alloy wheel in Gujarat and this was primarily in Gujarat to start with, which was alloy wheel. Then Minda Rika, then we had ROKI Minda, then we had Minda Kyoraku. So these businesses were newly sort of started there. The capacity utilization there has been almost top 50%. So that is just in terms of new facilities.

In terms of the existing businesses, it has been a little mixed bag. Like 4 wheel lighting has actually done very well, the utilization has been excellent. It's almost close to 85%. And we have got some new businesses in lighting, like the [XUV300], all the lines are up, which has held -- done very well in last quarter. Even the area, we have worked some lands. So all these have actually held up over lighting to do much better compared to the other businesses.

In our 2Wheeler lighting business, it definitely has been impacted in line with the drop in volumes, but our drop has been less than the industry drop. While the industry average drop has been around 10%, we are around 6% lower in 2Wheeler lighting. Our capacity there, again, is around -- inflation around 80%, 85%.

In terms of alloy wheel, it has been sort of flattish revenue. So again, if you ask me a capacity number, in terms of Bawal, we were operating at around 70%. And at Gujarat, we had less than 50%.

Then comes our acoustic business. Acoustic business has been flattish. We have not done any new investment in acoustics last year. So capacity utilization remains closer to 90%. In fact, there are points where we are actually increasing some shifts even on Sundays where we don't operate. So acoustic also is doing very well.

Then in terms of switches, first is 4Wheeler. Minda Rika has been almost directly impacted with the drop in OE volumes. There, the volumes are mostly nearing the OE numbers. So there, the capacity utilization, again, in Manesar, our other plant in Chennai, they are around 75%, whereas in Gujarat, it will be sub-50%. In 2Wheeler, the capacity utilization will be something around 80%.

I hope I have covered most of the bigger businesses.

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Unidentified Participant, [4]

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Yes, all product segments.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [5]

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Yes, mostly. So basically I mean, looking at it, except lighting, most of the (inaudible) utilization level is quite low. So there's only 2 (inaudible) per se in these verticals in, let's say [next one went up to maybe] 2 years also.

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Sunil Bohra, Minda Industries Limited - Group CFO [6]

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Absolutely. Absolutely. Whatever will be there, small, maybe some replacement of some sustaining CapEx, otherwise we'll not need any large CapEx or investments in these businesses.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [7]

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And we shared that we have got this [as all assisted out from] revenue. So can we provide some color (inaudible) that is supplied for the new and also what kind of share you have got it at, whole 100% share of revenue or is it lower than that?

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Sunil Bohra, Minda Industries Limited - Group CFO [8]

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So as you know that whatever switches you get, you get 100% because now that people don't keep 2 supplier for a component or a switch, so whatever switches we have bought -- it is not 100%. But whatever we have bought we are [fully committed]. So really, we maybe share separately a content revenue of them.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [9]

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Okay. And also, can you share some color on the dispenser and controller division, how that business can grow going into next year when BS6 becomes [off the table]? So how the revenue (inaudible) and what it is right now? So I mean, if you would (inaudible) rated business that will come. So overall, what kind of revenue growth we'll see around the FY '20 and '21?

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Sunil Bohra, Minda Industries Limited - Group CFO [10]

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So they are 2 different businesses, Ashutosh. One, as you rightly said, dispenser and other is controller, which is the (inaudible). Sensor again has done very well in this quarter. They're almost like actually performed better than budget in our Q1. So sensors business has done well. So our annual revenue of sensors is expected to be somewhere around INR 130 crores, INR 120 crores. This is based on the existing plant. The new plant, which we are putting for sensors, which we had technology acquired from Sensata, that should be up and running sometime in the second half of the year. Overall, in medium term, which is around 2 to 3 years, the sensor business, we expect to be north of INR 10 crores.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [11]

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Okay. And sir, wanted to say is that INR 130 crores in revenue in this year? What it was last year, FY '19?

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Sunil Bohra, Minda Industries Limited - Group CFO [12]

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That, it was around INR 110-ish crores type.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [13]

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Okay. Okay. And this thing -- but this doesn't include KPIT, right? KPIT Engineering, that doesn't include?

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Sunil Bohra, Minda Industries Limited - Group CFO [14]

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No. (inaudible) KPIT is a separate service controller division, it's a technology for AIS 140. But as you know, that transaction took some time to closure, it closed only in June, sometime in end of June. So this year, KPIT may not be a significant revenue at a vertical adding in terms of top line. But on a full year basis, it will be something like INR 50 crores or so, (inaudible) crores.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [15]

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Okay. In FY 2021, you're saying?

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Sunil Bohra, Minda Industries Limited - Group CFO [16]

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No, in this -- in '19, '20.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [17]

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Okay. '19, '20 also. And then next year, it will be growing?

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Sunil Bohra, Minda Industries Limited - Group CFO [18]

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Yes. Next year, it should be INR 100-plus crores.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [19]

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Okay. And we had some other controllers also right, and to i-SYS and all technology. So can you tell us how that will ramp up?

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Sunil Bohra, Minda Industries Limited - Group CFO [20]

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So that is stable as of now, there is -- whatever we have been doing in i-SYS, this is stable. The revenue quarter-on-quarter was also flat. So there, as you know, they are very high-tech sensors. As of now, they are -- we are working on seeing that how do we bring the cost down to make it affordable in India.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [21]

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Okay. And lastly, if I can ask, anything we have got for MG Hector?

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Sunil Bohra, Minda Industries Limited - Group CFO [22]

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What is that?

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Unidentified Participant, [23]

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MG Hector.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [24]

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MG Hector.

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Sunil Bohra, Minda Industries Limited - Group CFO [25]

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Nothing was real.

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Operator [26]

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(Operator Instructions) The next question is from the line of Siddhartha Bera from Nomura Securities.

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Siddhartha Bera, Nomura Securities Co. Ltd., Research Division - Associate [27]

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First question is on the demand outlook, like given the slowdown we have seen in the (inaudible) and economy. Sir, if you can give for our existing businesses, what is the growth we are looking at? If we assume that (inaudible) decline for the whole year in FY '20? And if you can help operating for 4Wheeler and 2Wheeler businesses.

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Sunil Bohra, Minda Industries Limited - Group CFO [28]

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Yes. So that -- it's very tricky to answer on behalf of OEs. I'm sure the OEs are better placed to answer this question, and I'm sure you asked the same question to them also. But having said that, if you see that Q1, if it was to be replicated, Q1 the OE growth or degrowth, if I may say, has been on average around 10% to 11%. 2Wheelers was around 10% and 4Wheelers are around 11.9% to be precise. Despite that, we have been able to maintain our revenue, which means that, in a sense, we have outperformed by around 11%, 12%. So that is what numbers I can sort of say that we should be able to continue with that momentum in terms of outperforming the industry. I hope I have put some light on that.

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Siddhartha Bera, Nomura Securities Co. Ltd., Research Division - Associate [29]

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Okay, sir. Yes, but sir, just wanted to understand that you have also indicated that there is -- there are some new business which have started in the quarter. So if you kindly tell us what are those and how much is the quantum if you have started in the quarter. And anything on…

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Sunil Bohra, Minda Industries Limited - Group CFO [30]

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Yes. If you see in Q1 to Q1, we acquired i-SYS in end of September. So i-SYS has added close to INR 11 crores, INR 12 crores, or INR 14 crores in this quarter. Then Katolec has started. While it is mostly for internal consumption, it also started selling to Panasonic with a small amount, probably INR 3 crores or INR 4 crores. So that also brings that feasibility in terms of quality of the business. Then, however, the business switches, additive metal, metal has done well in terms of (inaudible) this year. These are 2, 3 things which have actually added delta, which was not there in Q1 of last year. Other than the lot of business growth.

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Siddhartha Bera, Nomura Securities Co. Ltd., Research Division - Associate [31]

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Okay. Sir, telematics hasn't come yet, given it's from the telematics?

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Sunil Bohra, Minda Industries Limited - Group CFO [32]

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This month. The first -- that's why I was saying it was -- this started in end of June. I think we closed only on 28th of June, so there's nothing in the Q1.

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Siddhartha Bera, Nomura Securities Co. Ltd., Research Division - Associate [33]

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Okay. And this will annualize to how much for this year in FY '20?

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Sunil Bohra, Minda Industries Limited - Group CFO [34]

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Telematics should be something around INR 50 crores for this year.

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Siddhartha Bera, Nomura Securities Co. Ltd., Research Division - Associate [35]

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INR 50 crores.

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Sunil Bohra, Minda Industries Limited - Group CFO [36]

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Yes.

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Siddhartha Bera, Nomura Securities Co. Ltd., Research Division - Associate [37]

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Okay. Okay. I got INR 30 crores, goes up to INR 100 crores (inaudible).

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Sunil Bohra, Minda Industries Limited - Group CFO [38]

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That was based on 2 assumptions. With that, you are right. Initially, we were hoping they should be around INR 90 crores to INR 100 crores. But there were 2 things which have changed. When we have acquired -- earlier announced this acquisition, this transaction was supposed to close in March. This was delayed by a quarter because of various results of compliances.

And secondly, the industry volumes itself have got -- there also had been factors which are mostly commercial vehicles. And CV has seen bigger impact. So both these have impacted when I say INR 50 crores.

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Siddhartha Bera, Nomura Securities Co. Ltd., Research Division - Associate [39]

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Okay. Okay. But can we also know growth next year for FY '21 or FY…

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Sunil Bohra, Minda Industries Limited - Group CFO [40]

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We are expecting it should be around INR 90 cores to INR 100 crores.

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Siddhartha Bera, Nomura Securities Co. Ltd., Research Division - Associate [41]

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For FY '21?

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Sunil Bohra, Minda Industries Limited - Group CFO [42]

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Yes. INR 80 crores should be safe.

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Siddhartha Bera, Nomura Securities Co. Ltd., Research Division - Associate [43]

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Okay. Okay. Got it. And any change in the CapEx transfer for this year and next year?

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Sunil Bohra, Minda Industries Limited - Group CFO [44]

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Yes. So we are doing a lot of work in terms of optimizing CapEx. So while -- whatever is the greenfield CapEx on new products, and that was our interest and barring some optimizations and some further reductions and whatever renegotiations we could do in terms of price, market environment. So it is the tool and I will project, the sensor project and controller project, that continues. So we said that the beginning of the year, the CapEx should be around [INR 250 crores] in all for these 3 projects, which should have been plus/minus INR 20 crores in this year. Another delta is we said at the beginning of the year, the CapEx -- or sustaining CapEx some brownfield of around [INR 200 to INR 250]. There, we should be able to reduce hopefully like INR 100-odd crores, so we should be ending the year at INR 125 crores to INR 150 crores.

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Siddhartha Bera, Nomura Securities Co. Ltd., Research Division - Associate [45]

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So let me try to understand, INR 350 crores, plus INR 130 crores for this year?

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Sunil Bohra, Minda Industries Limited - Group CFO [46]

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Yes. So at the beginning, we said it was INR 350 crores plus INR 200 crores, INR 250 crores. What we are saying it could be now INR 350 crores, INR 325 crores, something like that, plus (inaudible) [INR 150 crores].

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Operator [47]

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The next question is from the line of Basudeb Banerjee from AMBIT Capital.

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Basudeb Banerjee, AMBIT Capital Private Limited, Research Division - Research Analyst & VP [48]

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Congrats for a good set of numbers in bad times. A few things. One, as you mentioned that cost-cutting initiatives. So if I look at revenue being flat and the high-margin alloy wheels revenue not adding on to the revenue. So if you can highlight a few sustainable steps how you managed to keep margin intact despite no benefit from operating leverage and mix also seemingly not improving?

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Sunil Bohra, Minda Industries Limited - Group CFO [49]

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So, Basudeb, if you see that last year, during the year, we have added a lot of new plants. The fixed cost, which we have increased because of those plants, the average sell was like INR 8 crores to INR 10 crores. So we have been able to absorb all those fixed costs and still maintain our revenue and EBITDA. So that is the kind of the magnitude of the actions which you're taking. And you see the results there. Is it may be cost cutting in terms of overhead, it may be cutting in terms of ARPU and in terms of negotiations, renegotiations of commodities, et cetera. So we have been able to absorb all those costs increase and maintain the margin. Otherwise, it would have been very difficult to maintain those margins with the increased fixed costs of new plants.

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Basudeb Banerjee, AMBIT Capital Private Limited, Research Division - Research Analyst & VP [50]

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Basically, sir, where I'm coming from is, if I look at July numbers of production or wholesaling to reduce inventory, all the large OEMs are -- instead of this 10%, 12% decline, which you said in Q1, in Q2 the decline is far sharper. So in that case, how to look at the margin in Q2 per se. Are you confident that it will remain at these levels or one can expect a shocker, or it's too early to say?

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Sunil Bohra, Minda Industries Limited - Group CFO [51]

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I think we are actually working. I will not say it will give a shocker, but we are working to see that we've maintain and sustained this kind of range, we are -- we should not be way off from this.

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Basudeb Banerjee, AMBIT Capital Private Limited, Research Division - Research Analyst & VP [52]

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Surely, when a full year revenue remains flat, a 12% margin will be very much welcome. Second thing, sir, in your annual report, I saw UNO MINDA has a group entity INR 8,000 crores revenue, where a listed entity consol revenue was INR 5,900 crores. So a stake of Minda Rika, TG Minda, those 2 large entities already being transferred. So which are the larger entities in that remaining INR 2,100 crores? And any plans of similar shift down the line?

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Unidentified Participant, [53]

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Basu, if you look at the numbers, of the INR 8,000 crores which then is reflecting as a subsidiary or the stand-alone entity. Entities like TG Minda, which has around INR 400 crores turnover; ROKI Minda, which has another INR 400 crores turnover, these are anyways -- and another INR 400 crores at the DENSO TEN, which is the infotainment company. So if you add these 3 together, we are like INR 1,200 crores, INR 1,300 crores business. Yes so these entities are large entities, which cover close to the next INR 1,500 crores. There's only one entity, which is called [TR] Minda, which is not part of the group as of now. And that has a turnover of around INR 600 crores. Which where the promoter holding was in just something in level of sub 10 percentage. So -- which will anyways not get added up in the top line.

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Sunil Bohra, Minda Industries Limited - Group CFO [54]

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But there also, why we show it is that they have as part of our road map, which we announced way back, getting part of the fund to bring it under MIL umbrella with overall 30% holdings. So that discussions are on with Tokai Rika Japan, and we are hoping that they should get consummated in the next 3 to 4 quarters. Because the time line for that is March 21.

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Basudeb Banerjee, AMBIT Capital Private Limited, Research Division - Research Analyst & VP [55]

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Okay. And last question, sir, venue for your supplies was full on from the beginning of the quarter, it was -- or it was more skewed in the second half of quarter?

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Sunil Bohra, Minda Industries Limited - Group CFO [56]

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From start of the (inaudible)

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Unidentified Participant, [57]

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Start of the launch, yes.

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Operator [58]

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

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Ronak Sarda, Systematix Shares & Stocks (India) Ltd., Research Division - Analyst [59]

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Congrats on decent numbers. So a couple of questions. If I look at your large subsidiaries, Minda Rika and Minda Kosei, can you just break up between what was the volume growth and the value? So I mean if I look at Minda Rika, it's a 7% decline year-on-year. But what was the volume decline there? And similarly for Minda Kosei as well?

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Unidentified Participant, [60]

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So Ronak, last year Minda Rika or this quarter you're talking about?

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Ronak Sarda, Systematix Shares & Stocks (India) Ltd., Research Division - Analyst [61]

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This quarter.

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Unidentified Participant, [62]

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This quarter, I think if you look at Minda Rika, we are talking about -- last year, we did around INR 200 crores against which we are doing INR 180 crores approximately.

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Sunil Bohra, Minda Industries Limited - Group CFO [63]

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Roughly 10%.

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Ronak Sarda, Systematix Shares & Stocks (India) Ltd., Research Division - Analyst [64]

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Okay. And for Minda Kosei?

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Sunil Bohra, Minda Industries Limited - Group CFO [65]

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That is flat. INR 145 crores, INR 150 crores. Flattish. It has a 3% growth.

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Ronak Sarda, Systematix Shares & Stocks (India) Ltd., Research Division - Analyst [66]

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Okay. And if I look at the segment-wise EBITDA margin now, I mean Minda Kosei comes from some 27% EBITDA margin due to the light metal technology's EBITDA margin. How sustainable is that? And I mean, what led to this large number? Will it be largely commodity-led? I mean the decline in aluminum cost has optically increased the margins?

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Sunil Bohra, Minda Industries Limited - Group CFO [67]

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Yes, definitely it was that. Definitely it is an impact of commodity prices because the pricing is with third quarter of -- (inaudible) of a quarter. So Q4 LME, you're getting Q1, Q1 and Q2 and so on. And also I think we said in the last meeting also that the most sustainable margin for LMT will be around 20% because when you enter into a new business, you get a better price from the OE. And you agree with some (inaudible). So I think sustainable margins should be around 20%.

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Ronak Sarda, Systematix Shares & Stocks (India) Ltd., Research Division - Analyst [68]

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Sure, sir. Sure. And sir, just a clarity on the 2Wheeler alloy business, when would that come in? And how would we disclose that? Will it be part of stand-alone business? Or is it through Minda Kosei?

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Sunil Bohra, Minda Industries Limited - Group CFO [69]

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So that is part of stand alone because Minda Kosei has a very -- Kosei globally is only a 4Wheel manufacturer. They don't have tools in the entity. We actually wanted to put that. We offered a partner to partner with us in 2 wheels also, but since they don't have global 2Wheeler, they chose not to partner in that business and that's why we have done it as part of Minda Industries. So it is a division up MIL.

Secondly, to your point on start of production. Currently, our plan is to start-up a couple of things around April of '20.

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Ronak Sarda, Systematix Shares & Stocks (India) Ltd., Research Division - Analyst [70]

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It's an operating...

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Sunil Bohra, Minda Industries Limited - Group CFO [71]

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Yes. So, one-off measures (inaudible).

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Ronak Sarda, Systematix Shares & Stocks (India) Ltd., Research Division - Analyst [72]

--------------------------------------------------------------------------------

Okay. So it's a slight delay in commissioning from...

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Sunil Bohra, Minda Industries Limited - Group CFO [73]

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(inaudible)

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Operator [74]

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The next question is from the line of Mukesh Saraf from Spark Capital.

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Mukesh Saraf, Spark Capital Advisors (India) Private Limited, Research Division - VP of Equity Research [75]

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The first question is actually on the light metal technology business. So as highlighted in the previous question, the margins are up significantly this quarter. And I mean, what I see, it is FY '19, it was 23%. And this first quarter, it was 27%, so close to 400 basis points improvement this quarter in LMT. And this was despite the LMT revenues being down Y-o-Y as well. So is there anything else? I mean, you had mentioned mix also apart from raw material costs. So could you just explain this, sir, because I thought 80% or 80%, 85% of this business was moderately impact there.

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Sunil Bohra, Minda Industries Limited - Group CFO [76]

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I'll tell you this. There are 2 things. One is revenue is not lower and it's higher than last year. Plus two, another major point is that in LMT, we have 2 businesses, one is alloy wheel, another is casting which is MJCL. So MJCL actually, the volumes are lower significantly than last year. It is almost 15% lower, in line with some of our customers which are directly [third] line. So that part is less. So whilst -- if you see the weighted average, the business it is contributing less margin, hence it dropped more. So that's what pulled your average up.

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Mukesh Saraf, Spark Capital Advisors (India) Private Limited, Research Division - VP of Equity Research [77]

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Okay. Okay, understood. Understood. And you also mentioned that you'll see 20% broadly as more sustainable for the alloy wheel business?

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Sunil Bohra, Minda Industries Limited - Group CFO [78]

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Yes.

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Unidentified Participant, [79]

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No, for the (inaudible)

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Mukesh Saraf, Spark Capital Advisors (India) Private Limited, Research Division - VP of Equity Research [80]

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For the LMT itself. Okay. Okay. And I mean, by when do you see? Because from 27%, coming to 20% is a good decline. So when do you see us…

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Sunil Bohra, Minda Industries Limited - Group CFO [81]

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First of all, 27% or 26%, what we are saying is not the right number to set as a base. Last year it was 26%. (inaudible) 26%, it's for various reasons I just explained. So I think (inaudible) 23% and not 26% or 27% first. Second, 23% to 20% also is not such a big decline considering that we have been able to maintain this kind of margin, which I'm sure is the highest in the industry in the segment.

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Mukesh Saraf, Spark Capital Advisors (India) Private Limited, Research Division - VP of Equity Research [82]

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Yes, yes, yes. No, appreciate that totally, sir. Actually, it was quite surprising to see the margins increase when probably OE production is down. So that's why I asked that question. On the...

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Sunil Bohra, Minda Industries Limited - Group CFO [83]

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It's for issues we just spoke about.

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Mukesh Saraf, Spark Capital Advisors (India) Private Limited, Research Division - VP of Equity Research [84]

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Right, right, right. And secondly, sir, there are 2 entities, which I saw in the annual report. One is JV, which is Minda Onkyo where the losses actually went up in FY '19. And secondly, an associate business, your Kosei Minda, the 30% stake one. That as well moved from profit to losses in FY '19. Could you give some sense on both of these, sir?

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Sunil Bohra, Minda Industries Limited - Group CFO [85]

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There are at least 3 entities which were in losses last year. So one, as you rightly said, Kosei Minda. Another was Onkyo. And third was (inaudible). So all these 3, that's held a turnaround in this (inaudible) in profit. In terms of speakers, Onkyo, we are confident of turning this around in -- somewhere in Q3 of the current year. And [KMA], the business is a little tricky because there, it's mostly supplier to (inaudible), et cetera where the price increases are annual. Plus, they have some panel issues. Because of it, you see that there is a big delta in profitability of KMA versus [NPA]. So we only -- I think 30% in KMA .

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Unidentified Participant, [86]

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Unlike our company where we hold 70%, there is no -- there is no part back to hold there.

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Sunil Bohra, Minda Industries Limited - Group CFO [87]

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And we have no management control at [KMA] unlike in (inaudible) or Onkyo, we are directly managing those companies, right. I think only KMA where we have no direct intervention.

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Mukesh Saraf, Spark Capital Advisors (India) Private Limited, Research Division - VP of Equity Research [88]

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Understood. Understood. And just my last question. As I was looking at the mix of revenues between OEM and aftermarket. And surprisingly, I saw that OEM mix continues to be in fact slightly up Y-o-Y. It was 91% last year this quarter, now it's 92%. I was expecting maybe aftermarket to actually gain some share there. But any color on aftermarket business, if you are seeing some impact there as well?

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Sunil Bohra, Minda Industries Limited - Group CFO [89]

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Yes, yes, absolutely. (inaudible) it's a country, entire consumable industry, consumption is slowly is under pressure. If it's stable under pressure, I'm sure we should not be surprised with aftermarket.

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Mukesh Saraf, Spark Capital Advisors (India) Private Limited, Research Division - VP of Equity Research [90]

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Right, right. It should be better than the OEM, at least.

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Sunil Bohra, Minda Industries Limited - Group CFO [91]

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Not necessarily because what's happening, let me be upfront and honest. So because it's volume pressure across the board, even OEMs, rightfully so, they're also having a lot of focus on their aftermarket sales. So that also has some bearing in-market.

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Operator [92]

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The next question is from the line of [Harishwal Patel] from [BMP Sherkan].

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Unidentified Analyst, [93]

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So I've got 2 questions. The first one is, sir, I just wanted to know what would be the impact of IND AS 116 standards that we've adopted from 1st of April on the EBITDA per se?

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Sunil Bohra, Minda Industries Limited - Group CFO [94]

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Yes. So in terms of IND AS 116 impact on us, the total impact on bottom line is roughly around INR 70-odd and EBITDA is marginally positive. And reversal is in the depreciation.

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Unidentified Analyst, [95]

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Okay. So sir, marginally positive as in like -- if you could just have a computation to it?

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Sunil Bohra, Minda Industries Limited - Group CFO [96]

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It's about INR 2 crores, INR 3 crores.

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Unidentified Analyst, [97]

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Okay. Okay. Okay. And sir, the second question is -- would be on the top line. So as you rightly said that the outlook, given the slowdown in the industry is like a bit difficult to credit, but things -- having said this, we're kind of looking to outpace the industry. And -- but most of the OEMs are kind of guiding for a very weak outlook and all. So do we -- I mean would it be fair to assume kind of a flat kind of a growth for this year, for '20 on the top line?

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Sunil Bohra, Minda Industries Limited - Group CFO [98]

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Very difficult to comment. Actually, we just spoke about this in a (inaudible). But I must tell you that whatever we are talking, this is all without considering any consolidation in terms of Harita. So if we are able to close the Harita transaction in January, then the annual will be adjusted in Q4.

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Operator [99]

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The next question is from the line of [Preer Rinjan] from [RMB Stockbroking].

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Unidentified Analyst, [100]

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First of all, congrats for the good set of numbers despite challenging environment. Just on, sir, I mean in terms of the cash non-related application, do you see some kind of bump up coming in this -- going ahead in the coming quarters? Apart from the AIS 145, which we have already probably have captured some of the delta.

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Sunil Bohra, Minda Industries Limited - Group CFO [101]

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We don't have any direct impact because of this past half in the norms. Only thing which I can say, we are working in terms of one of our blow molding business for any potential opportunity there.

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Unidentified Participant, [102]

--------------------------------------------------------------------------------

Yes. Like energy injection pads, where we think the business could move up.

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Unidentified Analyst, [103]

--------------------------------------------------------------------------------

Okay. And in terms of -- I mean the lighting business, can you throw some light on what is the share of say LED and non-LED part this quarter? Or have been -- how do you see this is going ahead, let's say a couple of years out?

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Sunil Bohra, Minda Industries Limited - Group CFO [104]

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This year or in this first quarter in particular, we have the key models that we have supplied, which would be the Harrier or the XUV300. They're all ready in terms of 4Wheelers. And in 2Wheelers also, there's a good mix of 2Wheeler and 4Wheelers. Like we said, Activa or the (inaudible). So a good mix in 2Wheeler LED will be around 40%.

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Unidentified Analyst, [105]

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Okay. Okay. And any -- I mean it's still early days, but have been any development on, say -- are you targeting other businesses even for, say 4Wheeler or other side of the business segment? If you have taken over the business so far.

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Sunil Bohra, Minda Industries Limited - Group CFO [106]

--------------------------------------------------------------------------------

No, no, we are not taking over. So it will be too premature for us to comment on where we are.

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Operator [107]

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The next question is from the line of [Rashil Shah] from CapGrow Capital.

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Unidentified Analyst, [108]

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I had a question regarding your top line. So you have been able to maintain your revenues at a -- I mean you have been able to maintain your revenues. So when you compare that with your peers or your OEMs, OEMs have been cutting production. So that impact still hasn't come on your revenue. So what have you done differently from other vendors that you have been able to stabilize them at current levels?

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Sunil Bohra, Minda Industries Limited - Group CFO [109]

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So no, [Rashil], the impact has actually come on us. I don't think it will be right to say there is no impact of reduction of OEM volumes on us. If that reduction would not have been there, we would have grown by 15%, 20%. 15% at least.

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Unidentified Analyst, [110]

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No, no. But when I said no impact, I meant compared to your peers, the impact was less. So what have you done differently that you still have been able to outperform the industry?

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Sunil Bohra, Minda Industries Limited - Group CFO [111]

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So we -- I think we spoke about all those reasons, what has contributed to our revenues, where we have done better in some of the businesses, we have improved our share of businesses. Some of the businesses have added more revenues. Some of the businesses that were in nascent health started adding some volumes. Some businesses we acquired last have added some (inaudible) and mix, so various things.

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Unidentified Participant, [112]

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So there is a slide also in the presentation, where we have given breakup of revenue segment…

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Sunil Bohra, Minda Industries Limited - Group CFO [113]

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The waterfall chart we have given in the slide, if you refer, if you have the presentation ready, it's there on Slide #5 or 6, 7. Yes. So if you see complete waterfall there, what has added, what has actually pulled down. So if you see the lighting, others have -- were plus whereas other 3 were actually minus.

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Unidentified Analyst, [114]

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And one forward-looking statement. I'm not sure if you will be able to comment anything regarding your revenues going forward. Assuming that Harita does not go through, so organically, what do you think how the trajectory will be?

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Sunil Bohra, Minda Industries Limited - Group CFO [115]

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[Rashil], I think it is a question that I don't want to repeat myself for the fourth time. We are actually quite confident that the market will bounce up because the monsoon so far has been good. The cover from last 2 weeks has been good across the country. The festival season, there's a lot of hopes because last year was not good. So unlikely that you have 2 festive seasons back to back very poor. Then there is expected to be some prebuying, but people who are buying -- who were delaying their purchases to come to market in second half before the BS6 launches. And just the last thing, I think you also saw a lot of focus from government in terms of passing all the interest rate cut benefit to the end borrower. And again, RBI also reduced the rates today by 25 basis points. So all these factors put together, I think we are fairly confident that businesses should look up only from here.

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Operator [116]

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The next question is from the line of Vijay Sarthy from Anand Rathi.

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Vijay Sarthy T.S., Anand Rathi Financial Services Limited, Research Division - Research Analyst [117]

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You've given some good numbers. Just wanted to understand how ROKI Minda did in the Q1 in terms of top line growth and (inaudible), and how do you see competition in that segment? We hear there's a lot of companies who are also coming in, trying to (inaudible). That's the first question.

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Sunil Bohra, Minda Industries Limited - Group CFO [118]

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You asked for ROKI is it?

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Vijay Sarthy T.S., Anand Rathi Financial Services Limited, Research Division - Research Analyst [119]

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Yes.

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Unidentified Participant, [120]

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Okay. The quarterly numbers are close to 100 almost.

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Sunil Bohra, Minda Industries Limited - Group CFO [121]

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It's flat compared to last year.

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Vijay Sarthy T.S., Anand Rathi Financial Services Limited, Research Division - Research Analyst [122]

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And in (inaudible)?

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Sunil Bohra, Minda Industries Limited - Group CFO [123]

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No, no. They are almost same.

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Vijay Sarthy T.S., Anand Rathi Financial Services Limited, Research Division - Research Analyst [124]

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Okay, good. And could you help -- update more about this blow molding? As to how, sir, we have done (inaudible) growth CapEx in Gujarat. I want to understand how will this get the commissions or with that addition of (inaudible) and Tata as you indicated last time? So where is this in terms of scale, given that there is a slowdown on both customers? So how do you think the capacity utilization is planned on that? And therefore, how will current [form] bookings (inaudible) look like?

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Sunil Bohra, Minda Industries Limited - Group CFO [125]

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So Kyoraku has actually started in March. And the (inaudible), the Gujarat part has started. But as you know, that it has direct correlation because there's no aftermarket. There's nothing else possible to do in blow molding, et cetera. So it has a direct correlation with the OE sales.

If you see that this Q1, actually, they have done pretty well than what we call last year. So last year, their sales for first quarter was like INR 22 crores. And this quarter, they have done INR 40 crores.

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Unidentified Participant, [126]

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There is a good business in (inaudible) which is happening.

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Sunil Bohra, Minda Industries Limited - Group CFO [127]

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So this has grown almost like 25%.

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Vijay Sarthy T.S., Anand Rathi Financial Services Limited, Research Division - Research Analyst [128]

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So the expanded capacity, so assuming that this degrowth remains, let's say this year and as we expand it, capacity utilization will fall about 70% only by FY '22? Or are you confident that you will be able to turn your asset much before FY '21?

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Sunil Bohra, Minda Industries Limited - Group CFO [129]

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So we are working on -- if you are asking specifically on MKL, we are working on various other opportunities. Because blow molding is a large business application even outside of auto comp. So 2 units that are assets to utilize better. The teams are working to see where we can shred the assets and get more business. It is a huge business potential outside of auto comps as well. We are hopeful that we should be able to get something in the coming quarters.

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Vijay Sarthy T.S., Anand Rathi Financial Services Limited, Research Division - Research Analyst [130]

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Okay. Finally, sir, on sensors, I saw in the presentation that sensors is INR 131 crores business in FY '19 and you have guided for INR 120 crores to INR 130 crores in FY '20. So I'm trying to understand how you (inaudible) growth on it?

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Sunil Bohra, Minda Industries Limited - Group CFO [131]

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Yes. So sensors, if you see, again, has a direct correlation with the OE production. So if market is dropping by 15% -- actually, (inaudible) drop by 15% because there's no aftermarket for sensors.

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Vijay Sarthy T.S., Anand Rathi Financial Services Limited, Research Division - Research Analyst [132]

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Because you have indicated, you've got some orders for [oil] sensors and switch sensors, (inaudible) thought there is some amount of (inaudible).

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Sunil Bohra, Minda Industries Limited - Group CFO [133]

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Yes, you are right. But the value-wise, there will be like in the INR 5 crores to INR 8 crores. It won't be that significant. And this is excluding the new projects which you are putting for sensors, which is expected to get also in the last quarter.

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Vijay Sarthy T.S., Anand Rathi Financial Services Limited, Research Division - Research Analyst [134]

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Sorry, sir (inaudible)

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Unidentified Participant, [135]

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These are sensors you will find application in BS6 products, and these will start production in the April month of 2020.

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Sunil Bohra, Minda Industries Limited - Group CFO [136]

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But you need to see a sensor business which our last June '18 versus June '19. Actually, it has improved by around 7%. So this is against (inaudible) the new sensors, the new product which you added. Otherwise, ideally last quarter 1 was [INR 30-odd crores]. Ideally, it should have moved down, where it actually was around [INR 34 crores].

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Vijay Sarthy T.S., Anand Rathi Financial Services Limited, Research Division - Research Analyst [137]

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Okay. Okay. Finally, if I may ask, given our 2Wheeler alloy wheel, is it on plan as (inaudible) or is it being postponed?

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Sunil Bohra, Minda Industries Limited - Group CFO [138]

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It's on track. The commissioning was April '20, and we are on schedule.

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Vijay Sarthy T.S., Anand Rathi Financial Services Limited, Research Division - Research Analyst [139]

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Okay. April '20.

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Sunil Bohra, Minda Industries Limited - Group CFO [140]

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Yes.

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Operator [141]

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The next question is from the line of [Vijay Carpe] from (inaudible).

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Unidentified Analyst, [142]

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My question pertains to the LMT division. So is it possible to give the breakup of the INR 200 crores between alloy wheels and aluminum [bike] cast?

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Unidentified Participant, [143]

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No, it's a single business, so…

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Sunil Bohra, Minda Industries Limited - Group CFO [144]

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We don't give the splits of the segments.

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Unidentified Participant, [145]

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It has different product lines. And that's how it is, yes.

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Unidentified Analyst, [146]

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Okay. And what were the sales volume of alloy wheels, unit wise and (inaudible) wise for Q1?

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Unidentified Participant, [147]

--------------------------------------------------------------------------------

No, we don't have unit wise numbers.

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Unidentified Analyst, [148]

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Okay. So on the margin you should get in the LMT division, they are more than 25%. So if I look at your competitors from the alloy wheels segment, they have margins between 5% and 11%. So how do you go about this differently and get those margins of 25%?

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Sunil Bohra, Minda Industries Limited - Group CFO [149]

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Look, I can't comment on what others do. How do others (inaudible). But we said very -- I think very clearly I think tried to explain. But I'm happy to explain again if required. Last year, our average margin was 22%, 23% for the domain, like LMT domain. This time it is 25% to 26%, and really because of 2, 3 reasons. One is the lower prices. Then what all new businesses, which we have got, plus efficient operations, we have been able to reduce our wastage by almost 3% to 4% in terms of (inaudible). So there, we've been able to extract not really from the scrap, which is being generated during production. Plus, there is a mix also itself, which is there, wherein the other casting business has not done that well. So because of that also, we (inaudible) a little better.

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Unidentified Analyst, [150]

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Okay. Okay. Last question. So we'll be talking about this (inaudible) 2020. So these are the clients that we are targeting for this similar plant?

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Sunil Bohra, Minda Industries Limited - Group CFO [151]

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We are targeting all the clients. We are targeting all the (inaudible) OEMs. We are discussing with all of them. But if you ask me what is -- who is the anchor customer, anchor customer is Bajaj.

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Operator [152]

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The next question is from the line of Prayesh Jain from Yes Securities.

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Prayesh Jain, Yes Securities (India) Limited - Executive Vice-President [153]

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Yes. I have a few questions. So first one on Maruti, you (inaudible) couple of launches, the XL6 and S-Presso. Are we [great] on any of the products yet? (inaudible)

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Sunil Bohra, Minda Industries Limited - Group CFO [154]

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No. Once they are launched, we will let you know because we normally don't discuss about anything which is in pipeline.

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Prayesh Jain, Yes Securities (India) Limited - Executive Vice-President [155]

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Okay. And with regards to the orders coming in from OEMs, how is the orders looking for the next couple of months? You will have some indication right now as to what kind of orders you have there for August and September probably?

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Sunil Bohra, Minda Industries Limited - Group CFO [156]

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I think it's same as it was in -- first of all, last quarter. Secondly, as you know, that nowadays the index cycle, which averages to be monthly, it is now weekly and in some cases it changes in biweekly. So the cycles are actually very less as it has been contracted in short term because OEMs also try to manage their inventory as efficiently as they can. So while we would expect the coming month of September to be good because that is the month prior to the festive season, we have not got any numbers for September. September numbers, you will get most early in end of August or first week of September. August numbers are same broadly as July.

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Prayesh Jain, Yes Securities (India) Limited - Executive Vice-President [157]

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At July. So July was actually bad then, the Q1. So possibly it's really -- July and August will be much lower sales compared to the Q1, right? That will be a good understanding?

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Sunil Bohra, Minda Industries Limited - Group CFO [158]

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Yes, broadly, business-to-business back, some of the OEs are actually better. Some of the OEs are not like pure 2Wheelers. 2Wheelers, we don't see that kind of (inaudible) 4Wheelers.

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Prayesh Jain, Yes Securities (India) Limited - Executive Vice-President [159]

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Okay. And with regards to Harita Heat consolidation, you mentioned that possibly, we will close it by Q4, right? So is this a full year consolidation? Or is it only for the quarter?

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Sunil Bohra, Minda Industries Limited - Group CFO [160]

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(inaudible) point forward.

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Prayesh Jain, Yes Securities (India) Limited - Executive Vice-President [161]

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Really point forward. Commodities. So it happened in Q4, it's only one quarter which added in this fiscal?

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Sunil Bohra, Minda Industries Limited - Group CFO [162]

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That's right. While we may give a pro forma account separately, had it been for a full year, what the number would have been, but limited we had Q4.

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Unidentified Participant, [163]

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Effective date of [majority] will be date of consolidation let's say.

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Prayesh Jain, Yes Securities (India) Limited - Executive Vice-President [164]

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Okay. And sir, my final question is on the EBITDA margin for the acoustic division. That business seems to be seeing a lot of volatility in terms of margins. And like it's over 6% this quarter and so being at 9% also in previous quarters, so what's the volatility for and what is a sustainable margin in that business?

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Sunil Bohra, Minda Industries Limited - Group CFO [165]

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So you are right. In terms of margins, the EBITDA margin for acoustic normally in India is around 19%. And our global operations, which is twice the Indian operations, is roughly around 6%. But what happened in this quarter is we have started our Mexico facilities as well. So obviously you have some initial costs of starting, et cetera, et cetera, which has pulled back the margin a little bit. So hopefully, in coming quarters, this 6% should be better only.

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Prayesh Jain, Yes Securities (India) Limited - Executive Vice-President [166]

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Okay. But we can get in further the 7% -- and 7%?

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Sunil Bohra, Minda Industries Limited - Group CFO [167]

--------------------------------------------------------------------------------

Yes.

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Operator [168]

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The next question is from Ashutosh Tiwari from Equirus.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [169]

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On this [TTE], how do you see the revenue pickup in the current year?

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Sunil Bohra, Minda Industries Limited - Group CFO [170]

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Yes. Okay. So TTE, we are -- while we don't consolidate, the volumes have started happening. Q1 TTE has obviously turned around with a profit of almost like 80 lakhs or so if I remember correctly. And Q2, they are looking to do much better than Q1. So this quarter, the sales was roughly around INR 20-odd crores

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [171]

--------------------------------------------------------------------------------

And for the full year, how much again, sir?

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Sunil Bohra, Minda Industries Limited - Group CFO [172]

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This quarter, to be precise, let me just get the number. Q1 was almost 15%. And Q2 is expected to be 25%.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [173]

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So we should see profit improvement from 2Q.

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Sunil Bohra, Minda Industries Limited - Group CFO [174]

--------------------------------------------------------------------------------

Yes.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [175]

--------------------------------------------------------------------------------

And Onkyo had made losses in Q4. How do you see -- how will it close in Q1 and how do you see that for the full year? Will that (inaudible) turn around?

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Sunil Bohra, Minda Industries Limited - Group CFO [176]

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So that continues to be at the license stage and needs a lot of support. (inaudible) while back, we're expecting it to turn around somewhere in Q3 of this fiscal. Q1, again it was in red.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [177]

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Okay, okay. And lastly, on the Rinder margin, if I look at FY '19, despite the really strong sales growth of 25%, 26%, margins had declined Y-on-Y. So how do you see that business margin ramping up in the current year? Are we doing some cost-cutting over there as well?

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Sunil Bohra, Minda Industries Limited - Group CFO [178]

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No, that definitely we'll do everywhere. But Lighting is the most competitive space in the country where you have most of the global players operating. So there has been obviously pressure on pricing from day 1 in this business. Plus also, there has been some pushback of the new launches from the OEs, which we are expecting to get a better share. So once that comes on track, we'll see some improvement there as well.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [179]

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Okay. If I can, may I ask one more question. On the loyalty that you mentioned (inaudible) new orders. So these are mainly the new model that we get or maybe the replacement of the older models also included in that?

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Unidentified Participant, [180]

--------------------------------------------------------------------------------

These are new platforms.

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Operator [181]

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The next question is from the line of [Harishwal Patel] from [BMP Sherkan].

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Unidentified Analyst, [182]

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Sir, just one clarification I need. On this side of slow and muted sales going on around the industry, OEMs have been resorting to quite a lot of cost cuts and also my question is towards the lighting division. Do you see some of the OEs kind of moving away from LEDs and all those things?

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Sunil Bohra, Minda Industries Limited - Group CFO [183]

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It's very difficult to comment. I don't think even OEs will be able to comment. That's my personal view. I may be wrong because it again depends on the end customer, what he or she wants. Because if customer wants an LED and if the price [there has not budged], obviously they go for it. At the end of the day, it boils down to what is the price delta, and we all know what that price delta between a normal light to halogen light to LED is almost like 3x. It's the delta in 2Wheelers and the delta in 4Wheelers.

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Operator [184]

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

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Siddhartha Bera, Nomura Securities Co. Ltd., Research Division - Associate [185]

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Sir, just we (inaudible) new order for sensors for Kawasaki and PSA. What is the quantum of that order? And when will we see that revenues coming in?

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Unidentified Participant, [186]

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We will see this only in FY '20 and quantum, I will come to you off-line. Because they were for new products, I thought it would be meaningful to just (inaudible) release.

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Siddhartha Bera, Nomura Securities Co. Ltd., Research Division - Associate [187]

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Okay. Okay. And I mean would it be possible to indicate how much has Minda Rika revenues done in the quarter?

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Unidentified Participant, [188]

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INR 190 crores.

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Siddhartha Bera, Nomura Securities Co. Ltd., Research Division - Associate [189]

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Minda Rika is INR 190 crores. Okay, sir.

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Operator [190]

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Thank you very much. That was the last question in queue. I would now like to hand the conference back to the management team for closing comments.

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Sunil Bohra, Minda Industries Limited - Group CFO [191]

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So I would like to thank everyone for joining on the call. I hope we have been able to respond to your [queries] adequately. For any further information, request you to please get in touch with us.

Thank you very much.

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Operator [192]

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Thank you very much. On behalf of Minda Industries, that concludes the conference.

Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.