AUTOMOTIVE AXLES LIMITED (NSE: AUTOAXLES) Q3 2026 Earnings Call dated Feb. 06, 2026
Corporate Participants:
Nagaraja Gargeshwari — President and Whole Time Director
Raman K. — Interim Chief Financial Officer
Kishan Kumar — Whole Time Director Meritor HVS
Analysts:
Sailesh Raja — Analyst
Shikha Mehta — Analyst
Akash Vora — Analyst
Abhishek Kumar Jain — Analyst
Pritesh — Analyst
Ankur Kumar — Analyst
Rakesh Sharma — Analyst
Saket Kapoor — Analyst
Vijay — Analyst
Aditya Bhoir — Analyst
Krushi Parekh — Analyst
Presentation:
operator
Sa. Sa. Sam foreign. Ladies and gentlemen, good day and welcome to The Automotive Axles Limited Q3FY26 earnings conference call Home hosted by Bartliwal and Karani securities. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing Star then zero on a Touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Shailesh Raja from Batliwala and Karani securities. Thank you. And over to you sir.
Sailesh Raja — Analyst
Yeah, thanks Shubham. Good morning and thanks to everyone who. Have logged into Automotive Axis 3 QFA. 26 earnings conference call. From the management side we have with us Mr. Nagaraja, President and Whole Time Director, Automotive Axles Limited. And we have Mr. Raman K, Interim CFO of Automotive Axles Limited and Mr. Krishan Kumar who is Whole Time Director Meritor HVS India. I would now like to turn the call to Mr. Nagaraja for the opening remarks followed by Q and A. Sir, you may begin now.
Nagaraja Gargeshwari — President and Whole Time Director
Thank you Shailesh. Good morning everyone. Wish you a belated Happy New Year 2026. I have with me Mr. Kishan, General Manager and President MHVSL and also Mr. Raman K, our new interim CFO. First of all, it was an exciting quarter. Started a little bit slow but momentum picked up and I’m very glad to share with you that we were able to convert most of our order board. And to start with, Raman will quickly go through the financials and followed by Kishan giving you an update on the market outlook for rest of the year including how our new products are faring.
Over to you Raman.
Raman K. — Interim Chief Financial Officer
Thank you Angie. Good morning everyone. Thanks for joining this call. So I’ll start off with the financial updates. So for the quarter ended Q3 our revenue was 562 crores. And including the other income, our total income stood at 570 crores or 5709 million. Our expense structure has been, you know, fairly stable over the past and you know we have been kind of closed all our expenses at about 507 crores leaving us with EBITDA of 725 million or 72.5 crores which is at about 12.9%. So when you compare the sequential quarter, the revenue growth happened at about 21% and the margin growth has happened at about 26%.
So we have an on basis points percentage. Our margins grew by 52bps quarter over quarter and maybe giving a same year over year comparison, I think our revenue grew by about 6% year over year and our EBITDA grew by about 14% year over year. And on percentage basis it grew by 93 basis points. And in this quarter there is an exceptional item of about 12 crores which was an impact on the wage code that we had to take. The new wage code came into effect on 21 November. So we assessed the impact based on the new wage definition and basis, our feedback from our SAT auditors.
So we have taken the impact of about 119 million, so close to 11.9 crores. So considering that our profit before tax is about 512 million or 51 crores which is at about 9.1%, so comparing to sequential quarter, we had about 10.4% PBT. And considering this exceptional item because that exceptional item had an impact of close to about 2% in the margin. But overall the margin has kind of dipped only about 1.3% quarter over quarter and coming to the pat. So we ended the quarter about 388 million at about 7% PAT. So again, you know that has the impact of the exceptional item of 12 crores.
So I think these were the key highlights of the financials with this. Maybe I’ll turn over the call to Mr. Kishan for the market updates.
Kishan Kumar — Whole Time Director Meritor HVS
Thanks Raman and good morning to all. So the last quarter was like Nagara just said, it started at a pretty reasonable average quarter that we have been seeing in the past several years. But after September post the GST rate cuts, there was real traction in terms of demand and this came from almost every OEM that we are partnered with and which translated into a very strong quarter in terms of the volume that did have some change in the product mix compared to previous years which was anticipated. And the overall, if I can say the upturn in terms of percentage from where we started to where we ended, we were able to convert most of that.
It was a significant ramp up in terms of some of the products that we have launched recently and I’m happy that it turned out pretty reasonably well. Looking forward, the next quarter, which is this quarter, which is typically again a very high quarter in the financial cycle for the several past years. The momentum is going forward so we are expecting it to be better than last year, at least by 5 to 10%. One thing that we are very closely monitoring is how the OEMs are maintaining their inventory. So far it is in a very healthy level.
So there is a real conversion of Sales and I think we are very positive that this quarter will also turn out to be one of the best for the industry. Thank you.
Questions and Answers:
operator
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press Star and one on the Touchstone telephone. If you wish to remove yourself from the question queue, you may press Star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Shikha Mehta from Time and Tide Advisors. Please go ahead.
Shikha Mehta
Good morning sir. Congratulations on a great set of numbers. I was just looking to understand our numbers a bit better. So when we’ve said there has been a bit of product mix and we saw good volume growth, can you quantify the volume growth if possible? So how much of our top line growth year on year has come from volume and from pricing if possible.
Nagaraja Gargeshwari
Thank you. Thank you very much for this. I will probably also ask Kishan to add comments after that. For us it’s a little bit tricky and a bit difficult for us to quantify the overall growth with respect to a specific product or product mix. What I can tell you is the product mix has been positive and our new product, what we have introduced, Ms. 195, that volume is getting traction which along with the operational efficiency which has really helped us converting those additional sales. Kishan, would you like to add anything to that?
Kishan Kumar
Yes, thanks for the question. The way we look at is first is whether do we have the full bandwidth when this product mix change happens. And in this case in the previous quarter we were able to convert most of the upturn. So the 10% increase, what we saw, 10 to 15% increase, what we saw in the quarter we had the products available, we had the capacity to ramp up to that level. Now what it means to our financials in terms of number is just as a comparison again tandem axles versus a single solo axle. So there is definitely a difference in the per axle realization because of the architecture, the content and the fact that there is more meat, more material in the tandem.
So that impact is natural when the product mix change happens. So that is something we have been seeing for a long period of time. So in nutshell I agree with Nagaraja. With the mix that we see, this is probably going to be a normalcy. This is what we have to be ready and the agility that we have in our product portfolio and the capacity and the overall operations efficiency is what is driving us towards the right approach to manage this situation. Thank you. And sir, if I could I just have two more questions. One is if you see Ashok Leyland’s data who of course is a major customer for us, I think 60 to 70% of our revenues in the MHCV segment which we cater to.
Shikha Mehta
If you remove their bus volumes, they see they’ve been seeing almost, you know, 20, 25%.
operator
Miss Mehta, Sorry, not audible. You were not audible. Can you please repeat the question?
Shikha Mehta
Yes. Am I audible now?
operator
Yes.
Shikha Mehta
So I was talking about major customer for us. And if I see their volume growth since November has been north of 20% only on the MHCV segment without buses, which of course, you know, we are, we might cater to at some point. But currently I guess large chunk of our axles go into the MHCV segment. So when can we see, you know, that kind of volume growth come through for us or would it not convert in the same way?
Kishan Kumar
I can take this, Nagaraj. So if I understand rightly, you are, if we discount the buses, you are saying you are looking at a 20, 20 to 25% growth in Ashokiel and M&HCV segment.
Can I confirm that please? Yes. Okay. Right. So I, I have not seen, seen the data but going by what you’re saying, if there is a change shift of 20, that will translate into volumes. Considering where we have a single source, which means we are the 100% suppliers, that is with us, we convert that completely. That is what we did in the previous quarter. And then there is a common source where the customer has dual sourcing strategy. They can buy either from us or the competition. So that will decide or that will give you a comparison of their strategy versus how we grow along with their requirement or demand.
So what we see is depending on what they demand, we need to be close to 99% delivery. That’s the target. So that’s how the numbers roll up when we look at our financials. Understood, sir. And sir, could you give any indication on for how many products we would be a single source supplier? Even in percentage terms or ballpark, roughly 30 to 50% is. It depends on the product mix. Again, roughly 30 to 50%. Got it, got it. And so lastly on our EBITDA margins as we mentioned, the product mix seem sustainable. So these margins would also be sustainable for us.
Right?
Raman K.
Yes, I think.
Nagaraja Gargeshwari
Yeah, sorry Raman, go ahead.
Raman K.
Yeah, so yeah, when compared to, I think you know, as I explained, like the margins have grown. So there is, there is the mixes as they mentioned, you know that is some very critical factor that helps us, you know, maintaining the margins. You’re right there.
Shikha Mehta
Thank you so much for answering my questions. I’ll come back in the queue.
operator
Thank you. The next question comes from the line of Akash Vora from nvm. Please go ahead.
Akash Vora
Yeah, thanks for the opportunity. So just adding to the earlier participants question I would like a more detailed and elaborated response on when do you expect the industry growth to reflect in our numbers? Because industry clearly for the last three, four months, beta key customers. Even if we are, you know a dual source supplier to some OEMs that should effectively reflect in our numbers as well. Right. So I mean just wanted your thoughts on you know, how you see Q4 shaping up and for FY27 what kind. Of. Growth estimates are you are building in.
Nagaraja Gargeshwari
You’re taking that. Okay, it looks like Kishan has dropped off. He will join. Let me try to answer this question. As you can see there in the numbers, if I’m right, you know our top line has grown, you know almost by 21 22% compared to the last quarter. So we are expecting this one to continue. But again FY27 is you know, anybody’s guess. While we are having a positive outlook in terms of stability, whether we can grow from there, it all depends on the inventory that all the OEMs are going to end up at the end of this quarter which probably will get a much better outlook as we near the last week of March.
But based on the you know, order order book we think that you know, this quarter is going to be stable and the next quarter will be probably a little bit flat just like any other earlier years. But you know, the Q2, Q3, Q4 of FY27 we still waiting for the OEM’s, you know, outlook so that you know, we can align our capacities and supply chain to that requirement.
Akash Vora
Sir, one more question from my side. That is sir, I wanted to ensure do we have the capacities to I mean handle a 20, 25% ramp up in Q4 as well as let’s say there’s a further 8 to 10% jump in FY27 in the market. Will we be able to handle those capacities? And last question will be on the new product. MS.185 would like to understand more about that. What is that product? Where does it find its end use and what traction are we seeing there? Yeah, that’s it for myself. Okay.
Nagaraja Gargeshwari
Kishan, are you there?
Kishan Kumar
Yes, sorry I got disconnected. I don’t know how much of what I was saying Was. Yeah.
Nagaraja Gargeshwari
Yeah.
Raman K.
So you want to take this call?
Akash Vora
Hello?
Kishan Kumar
Sorry I missed the question. Sorry.
Sailesh Raja
Okay. Okay.
Nagaraja Gargeshwari
Yeah, maybe I’ll just add it up and then, you know. So the thing is like this. Our current capacity utilization is around 80% again our capacity is going to go, you know, up and down depending upon the product mixes and then you know, different configuration and you know, it keeps changing, you know, almost on a weekly basis. But the current outlook, we can say that whatever the demand is there, we probably will be able to meet, you know, most of the, you know, requirement in the short term unless there is a big change in the, you know, weekly or daily bucket that changes.
So, you know, capacity wise, you know, will be like we discussed about, you know, we are investing it and you know, starting from Q1, FY27 and by Q3, FY27 we would have added all the capacities that is required for the, you know, outlook of you know, somewhere around 500,000, you know, M&HCV segment with respect to Ms. 195, you know, where it is used and their application and how the traction in the market. Maybe Kishan can answer that.
Kishan Kumar
Yes, thank you. So it’s definitely the trend. I think we have spoken about this in the previous investors calls as well. The shift in the heavy duty or high tonnage vehicles, multi axles into tractor trailer, tandem into tractor trailer, that’s going to stay. Now where will it reach as a peak? That’s anybody’s guess today. But we think with the share of business that we have with our customers and the plan that we have to ramp up and to meet that demand, we are in fact looking at demand in 2030. So it’s five years or four years from today.
So that is what our focus is. And 185 is very relevant to the industry and that will continue to see the growth where it will stop. Probably that like I said, we will see in the coming years when the change in the powertrain, mainly the engine that will start driving further change in the Excel. And we have a global portfolio ready for that.
Akash Vora
Thank you.
operator
Thank you. The next question comes from the line of Abhishek Kumar Jain from Alpha. Accurate. Please go ahead.
Abhishek Kumar Jain
Thanks for opportunity and congratulations. Set of numbers. Sir, your revenue growth was just 6% y on yes versus the industry growth of 17%. And you had also underperformed in the last quarter as well. So just wanted to understand is it because of the change in the products mix due to slowdown in the T per and higher shares of the buses and just wanted to Understand how long it will continue when will start to outperform usage that industry. What would be the suitable tailwinds? When we’ll start to show the number.
Kishan Kumar
Let me answer this first. You are partially right. The impact happens when our core, which I can say that the tandem and probably the high tonnage axle that shifts to you know, market segment where we are not strongly present, which is today the bust. And there was definitely more buses in the last few months and even the previous quarter. But that is not the primary only reason. The other reason which I was trying to answer in the previous question is it’s also what we do outside the M&FCD. Those markets also influence to some extent our top line.
So I was talking about the defense end of IV where we are present very limited part and then the export which has been I will say a considerable drop. So all these three, four things put together is why if you just look at the amendment CV growth and then compare with our top line growth, it will never match. These industries behave differently. It is not even just India, it is the global markets that also will have impact on some of these things.
Abhishek Kumar Jain
Yeah, go ahead.
Kishan Kumar
The second question that you asked was how long this will continue. What is in our control is getting the product there, right? That’s been the focus and we have spoken about bus Excel. There may be few questions on that. I’m not sure how many of you have seen an announcement that came in about a few weeks ago where the requirement or the mandate is beyond October 26th. All the 9 plus meter city buses, they have to be low floor. So we are really evaluating this. What does it mean to the new product that we have in the pipeline.
So once we have the clarity. I’m not saying we are stopping anything. It’s just how the OEMs will take this and how their architecture will change that will define the overall powertrain and the impact on the action.
Abhishek Kumar Jain
Okay, so just wanted to understand the contribution of revenue from the MSCB vs the non MSCB segment defense. The next quote.
Kishan Kumar
Raman.
Raman K.
Sorry Christian, sorry, can I get that question again please?
Abhishek Kumar Jain
So what is the contribution of MSCVs versus non MSCBs segment revenue? I mean to say that a defense plus export.
Raman K.
Okay, so see our export has always been you know in the. In the mid teens and within the. Within the axles segment. Predominantly we are on. We are on highway segment. So that could be about maybe I would say the off highway or the defense segment should. Should make us about another 10% within the axle segment.
Sailesh Raja
So.
Abhishek Kumar Jain
So 90, 90 is the MSCV, correct?
Raman K.
Yes.
Kishan Kumar
I slightly change that. Sorry, I’ll slightly change that. It varies. So in the recent quarter if you see it may be 90 because there’s a drop in export or 5A demand and defense demand. But if all the industries or the other industries come back, it can shift 70, 30 or 80, 20 also.
Abhishek Kumar Jain
Okay, got it. And just wanted to understand is slowdown in the tractor tailor is also impacting the overall revenue of the company because that in a tractor trailer there is a higher requirement of this Excel versus that sorry in a, in a T per there is a higher requirement of the Excel versus that tractor trailer. So. So just wanted to understand slowdown in the T per segment is impacting overall.
Kishan Kumar
Yes, you’re right. That has an impact.
Abhishek Kumar Jain
So. So can you give me the mix of tractor Taylor Hollis and deeper revenue in our revenue?
Nagaraja Gargeshwari
Yeah, we generally don’t share the, you know, customer mix and mix because like what Kishan was mentioning, it can dramatically change, you know, month to month, you know, week to week. So it becomes very difficult for us to you know, kind of, you know, segregate and then share that product mix. I’m sorry.
Abhishek Kumar Jain
So got it. So most probably the last quarter you had mentioned that Tractor Taylor total mix is around 30, 32%. So most probably the T PER would be 50%.
Nagaraja Gargeshwari
Again we don’t want to speculate there. I would say that a good percentage of our, you know, last month production came out of you know, our prime or prime axle portfolio that is you know, deeper axles and then the MS.185.
Abhishek Kumar Jain
Okay, okay. And my last question on that this in this quarter many OEMs are saying that there’s an improvement in the demand of the T per segment And Asok Leland has also launched two new tippers. So just wanted to understand because of the change in the outlook of the tpir, revenue growth can outperform of your company as you are saying that 20, 25% growth in the next quarter.
Kishan Kumar
So let me correct that. I’m not seeing 20 to 25% growth but what I am seeing is definitely it’s going to be better than the previous quarter fours and the thicker launches are there from the OEMs and it will keep happening. What I would like to end this question is we are 100 present where there is a new launch with this customer.
Abhishek Kumar Jain
Okay. Okay, got it. Thank you sir. That’s all for me sir.
operator
Thank you. The next question comes from the line of Pritesh from Lucky Investment. Please go ahead.
Pritesh
Yeah. Hello sir. Sir, just to ask Very clearly, you know, from all the, the earlier three, four questions which have been asked, we are a little bit concerned because when we look at the OE growth and when we look at your growth, there is a difference. So is there any loss of wallet share with Ashok Lenant? Is there any loss of market share with Ashok Leland? If you could just comment on that and if not, then maybe you want to comment on the residual 35% of your business. Because I think 60% of business are shown what’s happening in the residual 40% of the business.
For us to understand the deviation between the OE growth and your growth for this quarter or last quarter, whatever, that would be very helpful, sir. For a more clearer understanding rather than running around the bush, sir.
Kishan Kumar
Let me attempt this question again. So if we look at it is not just one OEM last quarter, I think every OEM had a higher demand. And against that demand our delivery performance was in the north of 97, 98% which means to the capacity we have and what we could do to increase and maximize the additional volume that was in the market, we were able to serve that at the rate of 97 to 98%. This did not result in any drop in the market share of our share of business with the customer. Of course there were mixed changes where single source was the priority.
As you understand, no line Stockbridge is expected. So we were able to do that. And the second question is again, which comes again and again, if there was a way to plot our growth removing all other elements from the revenue which is coming from non on highway or M&HCV segment, then you will see that it is as on par with the industry growth provided there is no serious impact from the product mix. Mainly the bus. Because we have been saying that bus is one thing which we get impacted and that is where our focus was in launching the new axle.
So whenever there is more bus, yes we have an impact. But if it is the regular M&HCV segment and if you have seen our product portfolio, we are there from 7 ton all the way up to 70 ton and every slicing that the market has, we have a product available except the bushes.
Pritesh
So in this comment it’s fair to conclude that above seven, seven and a half ton you are mirroring industry growth rate and you do not have any loss of market share with the main customer. And Obviously the other 30% of the business which is some other customer. Is this a fair conclusion?
Kishan Kumar
That is a fair conclusion. And even the other on highway customers we are able to meet their demand. So what is not in our control is the other segments which will not show up in the top line because we don’t give that difference of M&HCV and other segments. But if you compare growth to growth, let’s put it in terms of number of axles, it is in line with what is the demand.
Pritesh
And the other segment is what other than mhcv, that’s what your reference is. So you have a MHCV business and a non MHCV business, right?
Kishan Kumar
That’s right.
Pritesh
And non MHCV business is what portion of your revenue.
Kishan Kumar
It ranges depending on how the export market behaves, it can be 15 to 25%.
Pritesh
So whatever deviation.
Kishan Kumar
Yeah, mix of, mix of export, defense and off airway.
Pritesh
Perfect. So whatever deviation that we are trying to gauge or see is to do with that 20% of the business.
Kishan Kumar
Yes, primarily export. Export is really low. I think it’s not, it’s not just us. I think most of the companies in this domain who are into export, they have seen this reduction.
Sailesh Raja
Correct, Correct.
Pritesh
So now from a course correction point of view, what do you see on this 20% of the piece? How does it shape up over the next one year? And first of all, in the nine month, if you could tell us this 20% of the piece, what is the shrinkage in this 20% of the pieces? That one number, if you get, would be very helpful for us to, you know, solve this, resolve this math.
Kishan Kumar
Robin, I will turn that question to you. I don’t know if we, because if.
Pritesh
One number, see if you give us one number, you know, we can, you know, we can stop moving around the bush. You know, we can come to some conclusion.
Sailesh Raja
I’ll try to just.
Nagaraja Gargeshwari
Yeah, go ahead, Raman.
Raman K.
Yeah, sorry Ng. Yeah, so see overall as we explained, right. The move in the export, you know, can vary depending on lot of circumstances earlier.
Pritesh
So we are not asking you for the reason, we are just asking you in nine months, what is the drop in the 20 of the revenue? 20% of the business? Is there a shrinkage? Is there a shrinkage? And what is the shrinkage?
Raman K.
See like, you know, I will just put it this way, maybe see the out of the total wallet share as Kishan mentioned. So we have, you know, between exports and the other business, we have closer to about 20 somewhere it ranges between 15 to 25%. So when I, when, when I see a total, you know, nine month window. So you know this again, you know, depending on the quarter, there are a lot of other factors that come in. So that’s, that’s the reason we are not able to exactly give you, you know, how this movement happens because you have, you have the factor of all the macroeconomic stuffs and everything that’s going on.
Pritesh
Yeah, sorry, no, nothing so good.
Sailesh Raja
Correct.
Nagaraja Gargeshwari
So. So you know, one thing, you know that we can assure is like, you know, we have, you know, we, we have a, you know, complete understanding of how the market is working. So I think we’ll be, you know, in the range of 15 to 25% across in that particular, you know, export and the off air business that we have.
Pritesh
Okay, perfect. So I am just concluding this. Your 80% of the business with MHCV there is no loss of market share. You have to mirror the we growth eventually I think some distortions for a few months here and there based on who has what kind of inventory in the system. The 20 of the piece is where there are variations and hence the overall revenue growth of auto Excel at times doesn’t mirror the OE growth which we are trying to do. Correct. Are you constrained by capacity? That’s broadly right. Are you constrained by. Yeah. Are you constrained by capacity for growth?
Sailesh Raja
No.
Nagaraja Gargeshwari
That’s what I told you. Right now we are not constrained and like I said, by Q3, 20, FY27 will be completely, you know, improved our capacity to meet the peak demand in the next three years.
Pritesh
Perfect.
Nagaraja Gargeshwari
Assuming that.
Raman K.
Of course.
Nagaraja Gargeshwari
One comment in of course. Assuming that we have been continuously, you know, trying to increase our share of business. You know, right now with the kind of line of sight will, will not be running out of capacity.
Pritesh
Okay, just three quarters back, my last question. You had talked about two products, 175XL and 180XL and bus axle which were introduced to your key customer and you’re talking about a wallet share rise of about 2, 3%. What is the progress there on those new product line with the customer? So here we were actually looking at you increasing market share and growing faster because of this product line. So if you want to update us on this.
Kishan Kumar
Sure. So there are three products. One is the Break 394 Break which we went into production end of December and this year. So the way to look at this break is this is the next trend. This is the future with all the ships that we are seeing. This is going to replace some of our existing volume. It may not be the additional share of business. This is the trend that is in the industry and that is why the break is developed and it is in production now. The second product is it’s for the tipper Market which is where our strength is.
And this is also going into production this quarter. It’s going to be a pilot production and it will get into a full SOP again. There will be some cannibalization of the existing tipper axle into the new tipper axle. This is again a upgradation of the technology and making it more suitable for the market. The third product which is the bus axle, that’s the real product gap where we are not present. And this is almost it is ready. I will say this is ready tested. But the concern we have now is this latest mandate from the government that all 9 plus meter city buses have to be low floor.
We are re evaluating what does it mean to the oem, what will be their power trim strategy and then how this may or may not impact us. So that’s ready, but it’s not ready for the launch. Because we really need to focus on what is the next change coming in.
Sailesh Raja
Okay.
Pritesh
Does the first two product, by virtue of their tech advancement help you gain some share with us with your OEs or it’s just a continuity of business for you?
Kishan Kumar
It is both, sir. It is both. I would say it would be the continuity to a large extent because this is a change, this is a brake replacement. And then there is an additional, I would say 5 to 10% opportunity where it can be applicated to the new vehicles where we are not present today. So the product can serve.
Sailesh Raja
Both done sir.
Pritesh
So this was very helpful. Thank you and all the best, sir.
Kishan Kumar
Thank you.
Pritesh
Thank you.
operator
Thank you. I request to all participants, please restrict your questions to two per participants. For more questions, please rejoin the queue. The next question comes from the line of Ankur Kumar from Alpha Capital. Please go ahead.
Ankur Kumar
Hello sir. Thank you for taking my question. And sir, most of the volume related questions. So I just wanted to inquire on the raw material side. Course side. So our COGS has improved in the last 2, 3 quarters. So do you expect this to trend to continue? This cognitive gross margin improvement trend to continue.
Nagaraja Gargeshwari
So I want to be a little bit cautious here because the way we are reporting our results has slightly changed because of the recent related party transaction that happened, you know, three quarters ago. Okay. So few numbers are, you know, kind of moved in and around. But you are right, we have been always focusing because 70 plus percentage of our cost is the raw material. So we have been always focusing on that, optimize our supply chain, developing innovative designs, lighter designs so that we can always continue to improve in that. So that trend will continue.
And as we also look at having a better realization by introducing new products. So that you know, number will be continuously you are going to see the improvement. But also considering the nature of our product. Okay. So there is only so much that we can do. But there is a opportunity over next two to three years to you know, improve in that area. As you know high performance, high technology products are going to come in. So that cogs, you know, civo cost of raw material is going to come down.
Ankur Kumar
Got it, sir. And sir, on in this quarter there is a significant jump in the other expense. It has moved to over 81 crore versus 60 or in the last quarter. So can you explain links what is the increase in this.
Raman K.
So I’ll take this question. So see it’s like I think we have already explained, right. So we have the technical fee arrangement with Meritor. So. So whatever is the revenue growth. So to that extent because it works as a percentage on the revenue. So you can, you’ll see the same amount, you know, that will also move in the other expenses. So maybe that is one significant portion. Given that revenue has grown by about 22% you would see a similar kind of a growth there. So yeah, that’s mostly about that.
Ankur Kumar
Sorry. But if I look at yoy revenue has grown much lesser than this growth in this other expense. No.
Raman K.
Yeah. Right. So last year again you know we did, we don’t have this technical fee arrangement.
Ankur Kumar
Right.
Raman K.
So it is only pertaining to this year. So I’m just comparing quarter over quarter. So where the revenue grew by 22% the cost has also grown in the similar range.
Ankur Kumar
Okay. And in terms of Q4, you expected things to go better than our growth to be in line with OEM growth or you think will still continue to grow slower than the.
Raman K.
Maybe ng if you can take that.
Nagaraja Gargeshwari
I think you know, Kishan has answered it. I think with the current product mix and then you know our share of business with all the OEMs and with a little bit of flat, you know, export and aftermarket, you know, outlook, I think, you know we will be in line with the industry barring you know those product lines where we are not present. As long as you know, tractors and tippers, you know, they continue to, you know, grow. We will be, you know, keeping up with the industry or probably there is a good opportunity for us to also improve in other areas.
Raman K.
Sure, sir.
Ankur Kumar
Thank you.
operator
Thank you. The next question comes from the line of Rakesh Sharma from Sinestek. Please go ahead.
Rakesh Sharma
Thank you for the opportunity, sir. And congratulations for great Satra members in a challenging environment and constrained product portfolio. What I would like to ask is that sir, after this India, US FTA or any or the deal, whatever you talk about that and this EU deal, what will be the benefits in the next three to four years for the company?
Kishan Kumar
Thank you for the question. I will start. So yeah, definitely we see this as a much weighted positive move, both the European and as well as the North America or US specifically. I’ll talk about the Europe first. We don’t see a major, at least as of now the details available. We don’t see a major movement in the way we are actually exporting into Europe because it’s more what we’re seeing is the import benefits which we are not, you know, on our BOM cost. If you see we are almost everything locally available. So we don’t see a big change there.
But details are awaited. So we have to really understand it from a more holistic way coming to the US tariff. It’s not just the tariff, when it is US, it’s important to understand what the market is, what is happening in the market there. And as we stand beginning of February, I think the market is still expected to be low. And when I say market there, the addressable market for us in the commercial vehicle is the Class 8, which is the heavy duty. That is where our strongest presence is. And until unless the market improves, the tariff alone will not drive any major shift.
And but what we are expecting is with this at least there is some certainty and clarity and that should help the OEMs there to plan their supply chain because everything requires four to six months. If they are expecting a market comeback in H2 calendar year H2 they have to start putting things in action in March. So we are expecting that will start now. That dialogue has been almost like nothing till now because of the uncertainty that will come back and in the overall 3 to 5 years horizon I think there are very good opportunities with the ramp up and everything that we are doing in the plant that will keep us ready when the market comes back there.
Thank you.
Rakesh Sharma
Perfect, sir. And sir, starting FY27, can we expect a revenue growth of 10% and after the new capacity comes in and all this deal starts to kick in in the next financial in the next calendar year. So can we expect a growth of 15%, something like that starting FY27, 10%. And after 15% revenue growth possible.
Kishan Kumar
Again, let me take this question. It more than the percentage. How we are looking at is in two ways. One is do we have the right capacity and Capability to meet the requirement, technical and the capacity requirement. And second one is what will be the trade off. If we have to do a trade off which we don’t want to do. Domestic market fluctuation versus the global market. And this is exactly the long term strategy that we have in place. So it is not the 10% or 15%, is it? What is our ability to convert the upturn at the best rate.
So that’s how we are thinking about this. Not just the number in the short term or in the one to two years horizon.
Rakesh Sharma
Perfect sir. Any new product portfolio from the parent or any new product portfolio you have introduced in house.
Kishan Kumar
I will read this as whether for the current market is there any new product required? Yes, I think the bus axle is the new product. But looking at the future trend, five years now from now, engines getting into higher horsepower. We already have global products available. They are not localized because the market here is not ready. So when we see this happening we will start the action of getting those localization plan in place. How we can make it more unique to India. So this is something we have been doing for years and years. The good example is 185.
We knew 185 will be required in 2022. We knew that it’s going to be there. So we are, that’s why we have a seamless launch of that product and we are ensuring that we are ramping up also in the same phase.
Rakesh Sharma
2032. 2022. Not 2032.
Kishan Kumar
Right. No, sorry. 2022. We anticipated the Ms. 185 which is the hotcake now that is required for the industry and we had started all our work on that and the product was ready at least one 12 to 18 months before the demand.
Rakesh Sharma
Great. Great sir. Best of luck for the future sir.
Kishan Kumar
Thank you so much.
operator
Thank you. The next question comes from the line of Saket Kapoor from Kapoor and Co. Please go ahead.
Saket Kapoor
And thank you for this opportunity. Hope I’m audible sir.
Kishan Kumar
Yes, yes please.
Saket Kapoor
Yeah, yeah. Thank you. So sir, as in the discussion, is it clear for us that going ahead the next year will be the, the first year where we’ll be seeing meaningful volume growth because of the fresh capacity addition. So is that understanding correct? First of all.
Nagaraja Gargeshwari
Let me just talk about this. You know, see we did not have any capacity constraints for the current market, you know, volumes. So we did not lose any revenue because of the capacity portion of it. Like Kishan has always mentioned, it was a product mix in the industry at the same time other than amended cv, whatever the, you know, industry impact was there. That is what is kind of, you know, slowing us down in terms of growth or matching with The M&HCV, you know, growth. What we talked about, the, you know, capacity is basically to look at, you know, the future capacity.
Whenever the, you know, the M and HCV market and then exporter demands come back, you know, next six to 12 or to 18 months, we will be ready to, you know, convert those, you know, demands, you know, without having to, you know, lose that, you know, potential orders.
Saket Kapoor
Okay, so, so just to simplify it, in terms of tonnages, will there be additional tonnages that we will be adding to our portfolio or will be only the product mix that is going to change? That is also on the advent of demand going ahead.
Kishan Kumar
Let me take this question. So. Yeah, go on.
Saket Kapoor
Kishan Tanesh.
Kishan Kumar
So I think it will be at least for the next 12 to 18 months the tonnage will be the focus. But I think over that period tonnage will not matter. What will matter is tonnage will remain. What matters is the top speed efficiency specific to axle efficiency, how much more further we can improve. So that is when our next generation axles will come into play. And along with that, what the expectation based on the trend is when we move the average horsepower of the vehicle which is still in the 200 horsepower today to 350, 400, that is when the next generation high efficiency products will be required.
So tonnage, yes, it will remain where it is today. There may not be a big movement there because globally also we don’t see anything operating on highway more than 60, 70 tonnes. I think we have reached that is already done now how to make it more efficient, that is, that is the challenge in the industry. So I think our portfolio from global experience, it’s already there. So how to seed them, how to work with the oem that’s the focus we are having.
operator
Thank you. A request to all participants, please question to one per participant. For more questions please rejoin the queue. The next question comes from the line of Vijay from Nuama. Please go ahead.
Vijay
Hi sir. Thank you for taking my question. I have a couple of questions. First on so I did some back calculation based on industry growth for our MSCV segment and non MSTV segment 20 sales contribution. So is it correct that our non MSCV sales has declined by around 20% Y that understanding should be correct.
Kishan Kumar
So there is definitely drop. I will start with that. Whether it is and I am not fully aware of what data you use for your analysis but internal analysis shows that it can be 5 to 15% now and also going forward in at least the next couple of months. Because the the respond I gave in the previous one of the questions.
Vijay
Growth sir or contribution?
Kishan Kumar
No, the drop in the non amended CV revenue I’m talking about the drop in the export revenue for example is in this range of 5 to 15% for us.
Vijay
Okay, okay, okay, okay. So helpful to know. Secondly sir.
operator
We request you to return to the question queue for the follow up question.
Vijay
This is my second.
operator
The next question comes from the line of Aditya Bohar from LFC Securities. Please go ahead.
Aditya Bhoir
Yeah, good morning. Am I audible? Yes sir. Thank you for the opportunity. I just wanted a small clarification for Q4. The comment was that it is expected to be better by 10%. So in terms of sales revenue number.
Nagaraja Gargeshwari
You are breaking off.
Aditya Bhoir
Sorry, sorry Mr. Bohr, your voice is not. Am I audible?
Sailesh Raja
Yes, yeah.
Aditya Bhoir
The question was for Q4. The commentary was that it is expected to be better by 5 to 10%. Y o y. So is it in terms of revenue numbers?
Kishan Kumar
Okay, I understand the question, thank you. So it is the industry volume. So we are looking at the industry volume. The revenue will again be a mix of many things that we have been discussing in the previous questions. Okay.
Aditya Bhoir
Okay. So it is a. The industry is expected to grow by 5.
Kishan Kumar
That’s right. Compared to the previous quarter. Yes.
operator
Thank you. The next question comes from the line of Khushi Parikh from Bugle Rock pms. Please go ahead.
Krushi Parekh
Yeah, hi. So the question is that we mentioned about the new product on the bus Excel side and the regulation that is likely to start impacting our product itself. So how much tweaking or anything that we anticipate and the timeline that we anticipate once this regulation kicks in and as a continuity of this particular question. So how much of the market share we expect to have for our current largest customer for this particular product itself altogether. So any discussions that you’ve been having on this line as well?
Kishan Kumar
Yeah, thank you. So the regulation, what it states is from the October 26 onwards it has to be a low flow. And when we say low flow there is a number associated with that, 400 millimeters. Now what we are trying to understand further is this 400 millimeters, whether it is a completely flat floor or there are steps allowed because you may have already seen there are low entry buses, low floor buses with different architecture and different definition. So and second point here is once that is understood, OEMs will have to look at what tweaks that you mentioned.
Right. What tweaks they have to do to meet this requirement. And in this exercise what we will figure out is our current Excel, if you really see it meets most of this 400 meter depending on how the 400 meter is defined. So we are trying to get that detailed analysis done. Second, say that we have figured it out and our current product line is matching the requirement. The expected penetration with the, with our largest OEM may be 3 to 5% because that is the only gap we see. It’s 3 to 5%. And let the third part to your question was if it is not meeting the tweak.
We don’t know that yet. Whether it’s a totally different architecture, whether it will require a complete low floor which we have in the global portfolio, whether we need that, we have no idea right now. So we are still trying to analyze this in a detailed manner technically and also understanding from the OEMs how they will approach this and each OEM may approach in a very different way.
Krushi Parekh
So just to clarify, the 3 to 5% that you mentioned, it is the 3 to 5% market share of the buses portfolio that they have.
Kishan Kumar
3 to 4, 3 to 4% off. Yes. Our customers portfolio. Yes, you’re right.
Krushi Parekh
Oh, got it. Thank you.
operator
Thank you. The next question comes from the Ran Akash Vora from nvfm. Please go ahead. Mr. Vora, you may proceed with your question.
Akash Vora
Yeah, I’m audible.
operator
Yes.
Akash Vora
Yeah. Sir, are we in any way losing what we can say, losing market to kind of, you know, OEMs doing their in source manufacturing for axles? Is, is that a possibility? I mean is that happening in India the way the OEMs are in house assembling the axles by procuring, let’s say the axle housing, the beam and the shaft from various other domestic players.
Kishan Kumar
When you. Okay, let me start with what we are seeing globally. We’re seeing globally, OEMs are actually moving away from doing anything to do with accent. So we have examples in Europe and North America where discussions are going on where OEMs are asking us do our actions, even including their own design. Right. That’s the trend where the focus is on other technology and other relevant value that they want to create on the vehicles. Coming back to India, within our existing business, we have this model where we supply as a kit different parts. That’s purely basically because of logistics, but the entire content is ours.
It is not that the modularity, what you’re saying, that doesn’t exist in the industry where they pick something from somebody and then Try to assemble it themselves. No, it is mostly content is from one supplier, but it is supplied in different conditions.
Akash Vora
So. So in the present moment you are saying that the whole Excel is what they look to procure. Some players like you. Right. And not actual components. They’ll be procuring separately and in house assembly. That would not be the case.
Kishan Kumar
So the answer is we are supplying the whole axle and we are also supplying the axles in kits to the same oem. It is depending on the logistics, their plant capability, what they have in that location based on that. So the answer is the full content at the vehicle level belongs to us. It cannot be that supplier one or competition. One gives something, competition two gives something and they bring something else and make it, you know, it doesn’t fit. That way the architecture will be very different.
Akash Vora
So just a follow up on this. I mean who’s our current competitor? I mean in the domestic market, who’s a current competitor? Biggest competitor since we are dual source as well for many OEMs.
Kishan Kumar
So our in terms of largest competition we have is the captive OEMs where like we have Tata Motors, iShares, they do their own axles. So if you look at from that way they are the largest competition. But of course as an independent axle brake supplier we have multiple. We have brakes, Indian brakes, Dana American axle and some pieces in the off highway segment which is very small.
Akash Vora
And for the show, clear name.
Kishan Kumar
It’s the same names that I mentioned.
Akash Vora
Thank you, thank you.
operator
Thank you ladies and gentlemen. That was the last question for today. And now hand over the conference to the management for closing comments. Thank you. And over to you sir.
Nagaraja Gargeshwari
Okay, thank you very much Once again, you know, having trust in automotive axles and continue to be our stakeholders. Just to summarize it, you know, the last quarter, you know, it was exciting and we are able to convert it. The current quarter is also looking quite positive. We will do everything possible to make sure that, you know, we convert these, you know, opportunities. And thank you very much for calling in and have a great day.
Kishan Kumar
Thank you.
operator
Thank you. On behalf of Bakliwala and Karani securities. That concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.