Subros Limited (SUBROS) Q3 FY23 Earnings Concall Transcript

Subros Limited (NSE: SUBROS) Q3 FY23 Earnings Concall dated Jan. 25, 2023

Corporate Participants:

Parmod Kumar Duggal — Chief Executive Officer

Hemant Kumar Agarwal — Chief Financial Officer and Vice President Finance

Analysts:

Harsh Gemavat — Batlivala and Karani Securities India Private Limited — Analyst

Abhishek Jain — Dolat Capital — Analyst

Aashin Modi — Equirus — Analyst

Sachin Trivedi — UTI — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q3 FY ’23 Earnings Conference Call of Subros Limited hosted by Batlivala and Karani Securities India Private Limited. As a reminder, all participant lines will be in a listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Harsh Gemavat from Batlivala and Karani Securities India Private Limited. Thank you, and over to you sir.

Harsh Gemavat — Batlivala and Karani Securities India Private Limited — Analyst

Thank you, Melissa. Hello everyone, welcome to the Quarter Three FY ’23 earnings conference call for Subros Limited. So today we have from the management, Mr. Parmod Kumar Duggal, CEO; Mr. Hemant Kumar Agarwal, CFO and VP Finance and Mr. Sukhbinder Gill, AVP Finance. So, we will start with a brief opening remark from the management about the performance and outlook, and going ahead, we’ll start with the question-and-answer session. So, over to you sir.

Parmod Kumar Duggal — Chief Executive Officer

Thanks, Harsh. Good evening, ladies and gentlemen, a warm welcome to all of you for Subros Investor Call for the quarter three FY ’23. The Indian automobile industry setting out on a journey with the hopes for a sustainable growth momentum in ’23, and further investing green technology amid [Indecipherable] speed breakers from rising interest rates and costs increase due to emission and safety norms, having witnessed a strong comeback from COVID let down from this year.

Passenger vehicle industry set a record highest ever sale FY ’23, so far nine months, which is very encouraging. The market is showing a sharp recovery, passenger vehicle industry has grown by almost 36% on production basis because that is relevant for us in quarter three of FY ’23. And commercial vehicle truck industry has also registered a growth of 12% during the quarter.

I think there is much more positive sentiment for both of auto industry in India now, going by the current trends. Today, very few percent of the new vehicles sold globally as well as in India which are electrified. This opportunity ahead is much larger. Indian players can come home for innovation with domestically and in similar market abroad, supplying complete product range, aggregate and component worldwide, with a significant success in securing new business from our customer for alternative-fuel, which is related to hybrid technologies, CNG, or electric vehicle.

The company is focusing very focused way on these opportunities, and in the short term and long term targets, we are targeting 20% of our revenue of thermal production be realized through such vehicle application by alternative technologies. This is a short-term view, but for the long-term view we will align ourselves along with industry sense, however, by 2030, total electrification will be shaping up.

Profitability pressures are still ongoing. The input cost escalation and high price pressures of new model launches as the bottom-line. The company is making effort in identifying short-term and long-term opportunities of cost optimization, and we are confident that we will overcome this situation between next four to six quarters in a comfortable way.

The results for quarter three FY ’23 has been shared with the stock exchange, and I’m just summarizing them for your needs. First, I’ll update about the industry and the relevant part of our business. In this quarter, passenger vehicle industry has shown a growth of 36%, as I mentioned before, on production basis, in comparison with the corresponding quarter of last year, whereas Subros PV, passenger vehicle segment thermal product has grown by 23% on sales basis — our sales basis, in comparison with corresponding quarter of last year.

Commercial vehicle bus is also improving as tourism and school segment has opened up now. AC fitment ratio has also improved, and industry has shown a growth of 118% on production basis in Bus segment in comparison with the corresponding quarter. And we also registered a growth of 186% as compared to the corresponding quarter.

Further on commercial vehicle truck segment for N2, N3 category which is relevant for AC or blower option, there is upside trend. After two years, the industry has grown by 12% in quarter three, and Subros has also grown by almost 12% in this segment for the same period. Growth is mainly because of more AC fitment ratio, consumers preferring to shift from AC trucks as compared to the normal truck.

Revenue from operation has been recorded at INR654.60 crores in this quarter as against INR547 crores in the corresponding quarter, there is a growth of 20% during the quarters. Year-to-date, April to December, there is a growth of 32%, and we are closing nine months at INR2,058 crores as against INR1,500 odd crores in previous nine months.

So let me summarize the overall contribution for each segment. In this quarter, car and non-car segment with respect to AC products, the contribution is 78% versus 22%. ECM product, engine cooling module product has contributed 15% of the total revenue and remaining 7% is for non-car products. Maruti and Suzuki Motor Gujarat has contributed total 86% of the total revenue during the quarter.

The share of business in passenger vehicle air conditioning market is maintained at 40% in this quarter, and SOB, share of business in truck segment is 45%, and in bus segment it is 20%.

Now I will talk about the operational performance. We have been continuously updating you about the supply-chain disruptions which are not still normalized. Commodity prices are fluctuating, there are steep prices in foreign-exchange, especially in USD, and very high logistic and fuel prices which are leaving impact on higher input costs on the business operation. Few of these cost escalations are part of customer price adjustments, but with a period lag, somewhere it is quarter, somewhere it is half yearly or annual. And, few are first time request to the OEM for compensation for which negotiations are in progress.

Significant increase in the lead-time of import shipments and subsequent fluctuation of schedule by the OEM due to semiconductor set the shortage, and availability of child [Phonetic] part at vendor end has impacted our inventory level, which had also now risen to INR315 crores approximately, which is blocking our cash flow by 10% to 15%.

In addition to this, there are extraordinary costs incurred on the air-freight on some of our input materials due to capacity and supply issues at our overseas suppliers. The cost was necessary to meet customer delivery commitments, such cost impact will continue in quarter four as well.

To mitigate the impact of future, alternative local source have been developed now, and we are requesting customer to expedite the approvals to mitigate this for the long-term.

The company has realized EBITDA of INR42 crores in quarter three of FY ’23 as against EBITDA of INR40 crore in the corresponding quarter. Despite all odds, the company is able to improve EBITDA as compared to the corresponding period by 5%. Profitability before tax in quarter three is INR12 crore, which is 1.87% of the net sales, and PBT margin of the corresponding quarter of the last year, it has improved by 6%. Profit after tax is INR8.19 crores, which is 1.25% of the net sales. This has also improved by 10% during the quarter.

We are continuously working on minimizing the impact of such market-driven indices, so aggressive localization and cost on projects are identified for long-term improvement of EBITDA as well as the profitability. So overall, if I have to summarize, INR655 crores of revenue in quarter three with 20% growth, EBITDA of 42 with 5% growth, PBT of INR12 crores with 6% growth and PAT of 8.19 with 10% growth is the broad summary of the operating performance.

Now a few business updates. As I mentioned that April to December, we have grown by 32%. So, we are hopeful that we’ll be able to meet our plan of this year by ending March ’23. It is significant to mention that this year we have a new SOP during this quarter, which is a new Eeco version of Maruti, which has started production in November ’22, and also there is a significant success in acquisition of new business in the EV space from Mahindra as well as from Maruti for their future model which are coming in ’25 to ’27.

Thank you very much, and now we are ready to take the questions.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, we will now begin with the question-and-answer session. [Operator Instructions] Ladies and gentlemen we will wait for a moment while the question queue assembles. [Operator Instructions] We have the first question from the line of Abhishek from Dolat Capital. Please go ahead.

Abhishek Jain — Dolat Capital — Analyst

Good evening, sir, and thanks for the opportunity. Sir, from last many quarters basis, jumping fabrication costs which are impacting your gross margin. So, what sort of the discussion is going with your clients to pass it on?

Parmod Kumar Duggal — Chief Executive Officer

Can you be a little bit clearer in communication. I think your voice is very heavy.

Abhishek Jain — Dolat Capital — Analyst

Sir, there is a jump in the fabrication cost from last many quarters, and which is impacting your gross margin. So, what sort of discussion is going on with your clients to pass it on?

Parmod Kumar Duggal — Chief Executive Officer

For fabrication costs, you are referring to?

Abhishek Jain — Dolat Capital — Analyst

Yeah, yeah.

Parmod Kumar Duggal — Chief Executive Officer

Okay, so right now in our imports, especially for the raw material, there are two elements. One is raw material and second is the fabrication. So as far as our contract with the customer, raw material compensation indexation based on the LME fluctuation is compensable, and for fabrication cost increase, since this is a global phenomena, we have already submitted our claims to the customer, all the OEMs, and we are at a very advanced stage of discussion to conclude that. So, I think it will take another two to three months’ time to conclude these escalations.

Abhishek Jain — Dolat Capital — Analyst

So, can we get compensation from first quarter FY ’24?

Parmod Kumar Duggal — Chief Executive Officer

I cannot say with a firm thing that when it would be, but of course there would be settlement, it would be either full settlement or partial settlement, depends upon each negotiation trend. But yes, it would be either for quarter four or next quarter, there will be some impact coming.

Abhishek Jain — Dolat Capital — Analyst

So how much impact of the increase in the fabrication cost in overall gross margin?

Parmod Kumar Duggal — Chief Executive Officer

So, I would say that it is a roughly 0.25 to 0.4%.

Abhishek Jain — Dolat Capital — Analyst

I’m not talking about the quarter-on-quarter perspective, I’m talking about from last two to three years, because the gross margin has gone up — gone down significantly.

Parmod Kumar Duggal — Chief Executive Officer

So, fabrication cost when I’m referring to, this data is as compared to pre-COVID versus post-COVID.

Abhishek Jain — Dolat Capital — Analyst

Okay, but the impact on the gross margin is quite high. You can see that there is a significant erosion of gross margin of around 500 to 600 bps. And as a matter, prices are going down, you should get benefit of it, but that is not happening. If the fabrication cost impacted only 0.5%, then gross margin should be at a higher side.

Parmod Kumar Duggal — Chief Executive Officer

No, then we need to understand this in a complete perspective. The impact of 2% to 3% in the material sales ratio which if you compare last year versus current year, the gap is between 2% to 3%. This differential is not only because of the fabrication cost, this differential is because of three, four elements, one is LME impact which is compensable in a quarter lag or a period lag. Our second point is about the logistic cost which has gone up because of the container availability, so that also is contributing roughly 0.5% to 0.75%. There are certain cost escalation because of suppliers price increase on certain proprietary parts as well. So, if we accumulate everything, there is overall impact of 3% to 4%, that is what I’ve said that the commodity fluctuations are compensable, but other things we are negotiating for compensation. So, if we go ahead next year or so, even though we get partial compensation, then in fact reduction on the material cost would be in the tune of maybe 1.5% to 2%.

Abhishek Jain — Dolat Capital — Analyst

But if we study from last many quarters numbers, so in first quarter FY ’21, you were making a gross margin of 31%, now your gross margin is around 23.8%, so you have lost around 700 to 800 bps kind of the gross margin, and as you said that material cost is passed on, on a quarter lag, but we don’t see all these things in the gross margin front, sir.

Parmod Kumar Duggal — Chief Executive Officer

I agree, that’s why I’m saying that our relevance is not directly gross margin, our relevance as of now is to come back to the material cost, which was there before COVID and now, and if you follow the results last year complete year, we were at 74.32 in the material cost to sales ratio. This year we are at 76.61 in nine months. So that is 2.3% is the delta, which has impacted. So that’s what I’m saying that the compensation impact or the improvement impact in the short-term and long-term view would be between 1.5 to 1.75%. That is my relevance here.

Abhishek Jain — Dolat Capital — Analyst

And how much impact of the logistic cost in your margin? Is it on the other expenses?

Parmod Kumar Duggal — Chief Executive Officer

No, no, logistic cost is part of the material cost, because the part of the landed cost, so it is almost a 1% plus, 1.2% or so overall on the cost escalation.

Abhishek Jain — Dolat Capital — Analyst

So, as you mentioned that in this quarter also there is some impact on the logistic cost. But if we see the number, freight cost that has gone down significantly and we are expecting some benefit in the quarter. But what is the reason of again, [Speech Overlap]

Parmod Kumar Duggal — Chief Executive Officer

You are referring to freight costs, which is the outward freight. The inward freight is part of the material cost.

Abhishek Jain — Dolat Capital — Analyst

Sorry sir.

Parmod Kumar Duggal — Chief Executive Officer

The inward freight or logistic cost is a part of material cost. What you’re referring to a freight cost reduction is the outward freight.

Abhishek Jain — Dolat Capital — Analyst

Okay. Okay, sir, and from last quarter, production was impacted due to the chip shortage issues. And so how is the semiconductor supply situation now in the passenger vehicle segment? How would be the fourth quarter volume?

Parmod Kumar Duggal — Chief Executive Officer

So, it is not only because of the chip shortage, that also the impact of the periodic shutdown, which customer has initiated from 25th to 31st. In fact, they started on second, so that also has one impact of that. So, chip shortage is variably impacting the fluctuations, so wherever the lots are available, that model volume forecast is increasing, wherever there are shortage, they are reducing. So overall — of course, it would be better than the quarter three, but of course we need to wait and watch, because till February the volumes forecast is quite reasonably okay.

Abhishek Jain — Dolat Capital — Analyst

Okay. And sir, in the Home AC segment, do you have any concrete plan to achieve scale in Home AC segment, because you have bought one plant and you had a target to complete around INR250 crores from that plant, but now all you are doing around INR150 crores, INR140 crores kind of the numbers, and you are not coming up with any capex plan in this segment. So, if you can throw some more light on it, what is your long-term plan in in this segment?

Parmod Kumar Duggal — Chief Executive Officer

So I will first elaborate the short-term plan because this market for home appliances is also becoming very volatile now, because this whole commodity logistics was an all import, foreign exchange impact is not directly getting compensated from the contracts which we have with our OEMs. So, we are going slow right now till the market has stabilized. We are not pushing the order booking at a very harsh pricing which will impact finally the bottom-line EBITDA margin and PBT margins, so we are going slow on that as of now. We’ll watch for this market, when we get fully compensated on the cost escalation, we will aggressively pursue this market again. So right now, we are slightly slow on that.

Abhishek Jain — Dolat Capital — Analyst

Okay, sir. And my last question is on this nine-month revenue from passenger vehicle AC, ECM, railway and truck segments.

Parmod Kumar Duggal — Chief Executive Officer

You want the individual breakup on that?

Abhishek Jain — Dolat Capital — Analyst

Yeah, sir.

Parmod Kumar Duggal — Chief Executive Officer

So last quarter we clocked around INR514 crores from passenger vehicle air con product and INR98 crores from ECM. And rest is roughly INR40 crore [Phonetic] from under segments.

Abhishek Jain — Dolat Capital — Analyst

And sir, in nine-month basis, how is that number?

Parmod Kumar Duggal — Chief Executive Officer

Nine months basis, the breakup, so roughly around INR1,515 crores from passenger vehicle segment. And around INR280 crores from ECM.

Abhishek Jain — Dolat Capital — Analyst

And truck and bus segment, sir?

Parmod Kumar Duggal — Chief Executive Officer

Truck segment would be around INR40 crores — INR60 crores and bus segment would be the roughly INR30 crores.

Abhishek Jain — Dolat Capital — Analyst

And railways, sir.

Parmod Kumar Duggal — Chief Executive Officer

Railways is INR6 crores. These are [Indecipherable] and others are some others.

Abhishek Jain — Dolat Capital — Analyst

Thanks, that’s all from my side.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Aashin Modi from Equirus. Please go ahead.

Aashin Modi — Equirus — Analyst

Yeah, thanks for the opportunity. So, sir, firstly, on the other expense side, so other expense has increased sharply quarter-on-quarter, and you said that about 80 basis-points effective of this currency. So could you explain this increase of other expense?

Parmod Kumar Duggal — Chief Executive Officer

So, other expenses constitute one major element of MTM losses. So MTM gain is a part of other income, whereas other expenses include MTM losses. So, if you see the comparison, both are on a variation side. Other income is also increasing as well as MTM is [Indecipherable] it is to compensate to knock off, I think the impact is not significant. Hemant, you have any other?

Hemant Kumar Agarwal — Chief Financial Officer and VP Finance

If you see the impact is 0.8% in the other expenditure. And that 0.8% is contributed by MTM losses which is grouped under other expenditure. That profit is clubbed under the head, other income. [Speech Overlap]

Aashin Modi — Equirus — Analyst

Okay, sir, what sort of impact do we see of currency movement going forward?

Hemant Kumar Agarwal — Chief Financial Officer and VP Finance

So, we do not have any currency loss going forward, because we are heading as per our contracts.

Aashin Modi — Equirus — Analyst

Okay. Actually, in this [Indecipherable] equity, we have talked about three new SOPs starting from next quarter. So, I mean, it is for the two new Maruti model launches?

Parmod Kumar Duggal — Chief Executive Officer

The SOP which already has gone into production is new Eeco. The next SOP which will be coming would be the extension of Baleno, that would be by April. And after that, there will be new Jimny which will be SOP by April again, so two models of Maruti, one has already gone into production. And post that, we will be having as SOP of Mahindra EV which will be in ’24. For that we secured a large business for all their four platforms, not fully, but only for one or two components. So that is how the lineup is already planned.

Aashin Modi — Equirus — Analyst

And sir, in this Maruti Baleno and Jimny, are we supplying all the four parts? What are we supplying to them?

Parmod Kumar Duggal — Chief Executive Officer

So in Jimny, we have SOP all 100% thermal products with that. New Baleno extension of existing Baleno is also almost 100%. So both model has 100% business with us.

Aashin Modi — Equirus — Analyst

And in terms of new technologies, especially hybrid and EVs, how do we see content going over there. We have displayed that over in the Auto Expo as well, so what sort of a content increase do we see over there? And do we have all the technologies to supply the complete EV AC?

Parmod Kumar Duggal — Chief Executive Officer

So, for complete EV AC, other than compressor, we have all the technologies and products available, and as and when the demand would be there, we can roll-up to the OEM requirement. Compressor being a very-high investment part, we are in discussion with collaborator for starting with pass-through and the subsequent localization, but volume plays a very important role for kicking off the investment for this product.

Aashin Modi — Equirus — Analyst

Thank you. And sir, what sort of the content would be there? I mean, compared to an ICE, EV AC?

Parmod Kumar Duggal — Chief Executive Officer

ICE AC are a full system. If you take, example of, roughly example of say INR12,000 or INR14,000, the EV would be around INR35,000.

Aashin Modi — Equirus — Analyst

Okay, so it is almost 3.5 times.

Parmod Kumar Duggal — Chief Executive Officer

Yeah.

Aashin Modi — Equirus — Analyst

Okay, thank you sir. And sir, in the Maruti EV order which you have secured. So, there also we have secured, I mean, only one or two parts, or we will supply them whole AC?

Parmod Kumar Duggal — Chief Executive Officer

Which one?

Aashin Modi — Equirus — Analyst

The Maruti EV order for which we have gone [Indecipherable]

Parmod Kumar Duggal — Chief Executive Officer

Maruti EV, we got almost 70% of the component, which are going into this.

Aashin Modi — Equirus — Analyst

Okay, okay, sir. Thanks a lot, sir, I’ll join back the queue.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Sachin from UTI. Please go ahead.

Sachin Trivedi — UTI — Analyst

Hi sir, thanks for taking this call. Sir, maybe just going back to the question one. If I want to understand the fall in the profit margin better. I think from 2000 or FY ’20 level till now, maybe there is close to 500 basis-point erosion in the profitability at EBITDA level. If you were to explain what is –how much is this fall is structural? How much of how this fall is maybe temporary? If you can help me understand that. And by when we expect the recovery in the margin or the profitability to happen. I’m not asking for guidance, but maybe if you can help me understand the nitty-gritties of it.

Parmod Kumar Duggal — Chief Executive Officer

So, if I answer exactly, then it will be a guidance. So, I’ll refrain from giving.

Sachin Trivedi — UTI — Analyst

So, Yeah, let’s not talk about the future, but at least the past, if you can explain.

Parmod Kumar Duggal — Chief Executive Officer

Sure, sure. So, as I mentioned before, I’ll be maybe some part I’ll be repeating again. So yes, we were at around 10% to 11% EBITDA before, before COVID period. And after that, now we are at around 6% to 7% EBITDA. So, there is a dip of around 3.5% to 4.5% on EBITDA side or so. And majorly of this variation is contributed by the material sales ratio, and material sales ratio is mainly having impact of three major element if I say. One is of course the commodity price fluctuation which has almost 28% to 42% where the fluctuation is in the commodities. There are certain commodities which are directly related to the product. There are certain commodities impacts, including fabrication, which is not variable, but it is not part of our contract.

So, as I mentioned before, fabrication contributed roughly 0.4% of this variation. Logistic costs contribute roughly 1%, 1.5% of total variation, and there are certain processes also where the cost has increased, like fuel, helium or certain consumable which are one-time impact. So far, we have not seen such a sharp increase in such elements of cost which is going-in, so that has also impacted. So, cumulatively there is almost 3% impact which has deteriorated the bottom-line so far. That is one reason. Another part is as 40% to 50% business of ours has been now refreshed with the new model launches. So that means the turnover which was before, maybe 2019, and turnover composition which is now, is having almost 50% new business. And all new businesses are acquired, secured, because of the competition, maybe having impact of 1.75% to 1%, which will gradually be evolved through the localization effort which will do because SOP condition was to start with as is, but gradually we have opportunity to improve on their full aggressive localization.

So, I’m sure that within next two years’ time, we’ll come back to the pre-COVID situation, that’s the only thing which I can share with now right now.

Sachin Trivedi — UTI — Analyst

Sure, so basically, effectively you are saying some bit of the direct cost, which is, let’s say, explaining you said commodity related is a 3% kind of increase of this 28% to 40% — 48%, which is the commodity-related which we should get a pass-through, but the fabrication, we are under negotiation and logistics which obviously we — the international logistics cost would have come down now, that benefit should come through, and you said, fuel, which is the helium related one-time input cost can actually, again that’s under negotiation or that’s just one-time and it will not recur in next quarter onwards or maybe [Speech Overlap].

Parmod Kumar Duggal — Chief Executive Officer

No, it won’t be part of compensation, because so far, there was no reference with the customer for compensating such, but since the fluctuation is more than 100%, so that’s why our request now with the OEM is to have a one-time compensation or as a recurring compensation, so that whenever prices will normalize, we will return back. So, we are in that negotiation.

Sachin Trivedi — UTI — Analyst

Sure, and sir, the new business-related cost escalation or maybe deterioration of close to 1% in the margin, you said that can be done through localization, maybe if you can refer to a few components or if you can more elaborate on that, how do we intend to achieve this journey? what are the parts? if you can give us some color that should be quite helpful.

Parmod Kumar Duggal — Chief Executive Officer

So there are — since new component or new products which are coming in, all global models where the reference of component usage already exist through the overseas or import parts which has to be used, so just to avoid the risk of SOP, we started using such import component. For example, motors or for example, some rubber hubs, some bearings, certain doors, levers, which are very high in terms of technology, which we started with import. Gradually, we have planned and already investments have been kicked off now to localize it, and since customer has a policy to give localization approval after six months of SOP of any new model. So, they are in progress. So probably between first half of next year, we’ll be able to get substantial approvals of such localized sources. So, from that onward, I think there will be some improvement on the bottom-line.

Sachin Trivedi — UTI — Analyst

Sure, so this localization process, if I were to rightly just to summarize, will kick-start sometime in H2 of next year. And maybe the benefit of that will be seen only in FY ’25. Is that the right understanding?

Parmod Kumar Duggal — Chief Executive Officer

No, it will start once we move to the localization parts. It would be for the complete model, it cannot have a ramp-up. So, it would be, by quarter three onward you will start seeing some declining trends.

Sachin Trivedi — UTI — Analyst

Okay, okay, and sir, in terms of capex, how are we looking capex, because our ROCEs are already hit single-digit, and that I’m sure that’s not a sustainable level at which we want to operate. So, how gently we are working towards improving our metrics on that, if you can help me with that?

Parmod Kumar Duggal — Chief Executive Officer

So, ROCE has two elements, one is of course profitability plays a very important role for ROCE, and as we deteriorated in 3% to 4% on margins. So that has one element of utilization of ROCE, which we are sure we will come back on that. Second, now delta investment on incremental capacities which we need to generate to cater to FY ’24, FY ’25, they are not very large investment as I keep on repeating in my previous calls also that INR70 crore to INR100 crores is roughly capex, which include the replacement, maintenance as well as new programs, because now we started getting substantial part of our capex compensated from customer, so we don’t see very high burden on capex. We will be maintaining the capex investment out of the internal accruals only. So, we will not be burdening more on that. So that’s how I think the rules will improve and as we start improving in quarters for profitability. You will see we will be coming back crossing first of all, two digits and then crossing maybe 15% to 17%.

Sachin Trivedi — UTI — Analyst

Sure, okay. Thank you. Thanks a lot for this.

Operator

Thank you. [Operator Instructions] The next question is from the line of Abhishek from Dolat Capital. Please go ahead.

Abhishek Jain — Dolat Capital — Analyst

Sir, what is your capex plan for FY ’23

Operator

I am sorry to interrupt. Abhishek, you are not clear. Could you use the handset?

Abhishek Jain — Dolat Capital — Analyst

What is your capex plan for FY ’23 and ’24?

Parmod Kumar Duggal — Chief Executive Officer

We have not yet concluded our annual plan for next year, but it would be in similar line of the last year. As I mentioned, between 100 — around INR100 crores.

Abhishek Jain — Dolat Capital — Analyst

And in this year, sir, how much capex you have already incurred, and what is your plan for the quarter four?

Hemant Kumar Agarwal — Chief Financial Officer and VP Finance

This year also whatever we planned for was around INR110 crores. We will be within that, we will not be exceeding that.

Abhishek Jain — Dolat Capital — Analyst

And sir, as Maruti is going to add its capacity, so most probably you will also add the capacity in the next year. So, within INR100 crores, is it possible to setup a plant?

Parmod Kumar Duggal — Chief Executive Officer

So, that’s where I mentioned that we are planning for 2.5 million capacity requirement of Maruti as a first step, and so-far even with Kharkhoda plant, the incremental capacity will not be in day-one, there will be some one-line setup and after that there will be some lines shifted from the existing Gurugram plant. So, we need to be watchful of that. Once we have a firm plan that Maruti is moving to 3 million and then subsequent to that 3 million to 4 million, we will line up of our investments accordingly. Right now, we are focusing on 2.5 million, which is a short-term capacity requirement of Maruti.

Abhishek Jain — Dolat Capital — Analyst

And as you mentioned the capex for the next year, that would be the $1 billion, that also includes this capacity expansion plan or it is excluding?

Parmod Kumar Duggal — Chief Executive Officer

No, it will be separate. So, this plan of INR100 crore would be for FY ’24. FY ’25, we will be aligning this along with the Maruti build the investments for future capacities for FY ’26, ’27.

Abhishek Jain — Dolat Capital — Analyst

Okay. And what will the capex for that?

Parmod Kumar Duggal — Chief Executive Officer

Right now, we cannot assess that. We would need to wait for Maruti’s overall plan coming out.

Abhishek Jain — Dolat Capital — Analyst

Okay sir. Sir, in home AC segment, how much revenue is nine months, and how much EBITDA loss you done in large segments?

Parmod Kumar Duggal — Chief Executive Officer

So, I don’t have a EBITDA loss result, but I can only refer to that, in home air con, our to date sale is around INR78 crores.

Abhishek Jain — Dolat Capital — Analyst

Total sale is INR78 crores, and what is your target for this year? FY ’23.

Parmod Kumar Duggal — Chief Executive Officer

It would be another INR2 crores to INR3 crores in this quarter because we are not, as I mentioned before, we are not bullish right now for aggressively pursuing this business because of too much pressure of commodities and the price compensation not available from OEMs, so we are going slow on that.

Abhishek Jain — Dolat Capital — Analyst

Okay, and you have also made some investment under PLI segment. So how much capex you are going to do in that particular area?

Parmod Kumar Duggal — Chief Executive Officer

We have not opted for PLI for any segments, so there is no commitment for PLI investments.

Abhishek Jain — Dolat Capital — Analyst

Okay, okay, sir. And my last question is on the new business. So, we have also business from the Toyota and Maruti, so how much incremental revenue will get in FY ’24, from these business Bangalore plant?

Parmod Kumar Duggal — Chief Executive Officer

So, Toyota — Maruti Alliance business, this Grand Vitara is roughly estimated to be around 200,000 for the year. So, we’ll be having around INR300 crores plus incremental turnover coming on from that line.

Abhishek Jain — Dolat Capital — Analyst

And how much is expected in this year, sir?

Parmod Kumar Duggal — Chief Executive Officer

For current year, because it was started I think in September. So, it may be around INR120 crores to INR140 crores this year.

Abhishek Jain — Dolat Capital — Analyst

Okay sir, thanks and that’s all from my side.

Operator

Thank you. We have the next question from the line of Harsh Gemavat. Please go ahead.

Harsh Gemavat — Batlivala and Karani Securities India Private Limited — Analyst

Yeah, hi there, thanks for taking my question. I just had a couple of questions; you have answered most of them. So, what is the current SOP with Maruti, Mahindra and our other bigger customer?

Parmod Kumar Duggal — Chief Executive Officer

What is your question, what how much is?

Harsh Gemavat — Batlivala and Karani Securities India Private Limited — Analyst

Our share of business with Maruti, Mahindra and other business, our bigger customer.

Parmod Kumar Duggal — Chief Executive Officer

So, Maruti, we have around 76% share of business. With Mahindra, we have 24%. Renault-Nissan, we have around 17%, and Tata Motors including CV segment, we have around 30% to 32%.

Harsh Gemavat — Batlivala and Karani Securities India Private Limited — Analyst

Okay, okay, I understood, sir. And Sir, talking about our growth in PV segment was only 23% compared to the 36% industry growth. Is there any major reason for that? Could you tell us our key competitors in the petrol and diesel segments in the PV sector, and what kind of market-share do we command?

Parmod Kumar Duggal — Chief Executive Officer

So, competition is Mahle, Hanon, Calsonic or Sanden, but basically in PV segment, we have a market-share of around 40%. And while the growth is low as compared to the industry growth is that Tata Motor and Hyundai has won because Maruti has shrunk their share of business from 48% right now. They are around 40%, 41% or so. So that has an implication on overall growth and percentage.

Harsh Gemavat — Batlivala and Karani Securities India Private Limited — Analyst

Okay, understood sir. And sir, do you have a split between our market share in the petrol and diesel vehicles?

Parmod Kumar Duggal — Chief Executive Officer

So that is insignificant now because Maruti has stopped diesel vehicle production. So, we don’t count on now category, because our product is not differentiating between diesel and petrol.

Harsh Gemavat — Batlivala and Karani Securities India Private Limited — Analyst

Okay, understood, understood. Okay sir. And one more thing, what is the current inventory situation. Is the inventory going up or is it at normal level currently?

Parmod Kumar Duggal — Chief Executive Officer

No. We are at around INR300 crores plus inventory, and it is delta by our standards by around INR30 crores to INR40 crore rupees. And this is a diligent call we have taken just to avoid any air freight because the fluctuation in volumes are quite significant, so and logistic lead time is also very high. To avoid that, we are keeping this buffer, and as and when this situation will be normalized, will be liquidating.

Harsh Gemavat — Batlivala and Karani Securities India Private Limited — Analyst

Okay, okay, understood. And so, you called out the higher freight costs. So, sir, I just wanted to know which regions do be import most of our import content from?

Parmod Kumar Duggal — Chief Executive Officer

So, it is Japan, China, Thailand, they are the major contributor, and Indonesia. So there are four countries from where the maximum imports are.

Harsh Gemavat — Batlivala and Karani Securities India Private Limited — Analyst

Okay, okay, understood. That was all from my side. Thank you so much.

Operator

Thank you. Ladies and gentlemen, as there are no further questions from participants, I now hand the conference over to the management for closing comments. Please go ahead.

Parmod Kumar Duggal — Chief Executive Officer

So thank you very much for all your patient hearing, and we understand the more of curiosity is towards the top-line as well as on the bottom-line. So, top-line we are doing fairly okay, 32% growth, definitely is the benchmark for us also to sustain. So, top-line growth is what we are intended for, we have realized that, but of course, the challenge on-bottom line is there. So, rest assured, the company is doing all aggressive action to recover back to the normal level of profitability. Please wait for a few quarters, and we’ll come back on that. Thank you so much.

Operator

Thank you, members of the management and Mr. Gemavat. [Operator Closing Remarks]