Categories Latest Earnings Call Transcripts, Others

Divgi TorqTransfer Systems Ltd (DIVGIITTS) Q4 FY23 Earnings Concall Transcript

DIVGIITTS Earnings Concall - Final Transcript

Divgi TorqTransfer Systems Ltd (NSE:DIVGIITTS) Q4 FY23 Earnings Concall dated May. 29, 2023

Corporate Participants:

Jitendra DivgiManaging Director


Pradyumna — Analyst

Pramod — Analyst

Parim — Analyst



Hello, and good afternoon, everyone. On behalf of Equirus Securities, I welcome you all on the 4Q FY23 Conference Call of Divgi TorqTransfer Systems. From the management side, we have Mr. Jitendra Divgi, who is the Managing Director; Mr. Hirendra Divgi, who is the Whole-Time Director; and Mr. Sudhir Mirjankar, who is Chief Financial Officer of the company. Without further ado, I hand over the call to Mr. Jitendra Divgi for opening comments, post which we can open up for Q&A. Over to you Mr. Jitendra.

Jitendra DivgiManaging Director

Yes. Thank you, Ashutosh. It’s a pleasure. Welcome everybody here to this webinar. And we are pleased to present our first inaugural set of results post our IPO in March of ’23. Without further ado, let’s just dive into the details.

So as you can see, we’ve had a very satisfactory year and you can see that from our last quarter, and going back a year to FY22, there has been significant growth in revenue, EBITDA and PAT. And this is sort of consistent as you will see in the numbers going forward in the presentation with the sort of results, we’ve had in the last three years. I’m happy to report that there is good amount of progress in business development, that is going on. And while there are some asymmetries in the composition of the business, I think we will make good as the year unfolds, and our business in EVs, exports and other transfer gives customers best fruit.

In terms of continuing our asset acquisition of our future growth that is underway and envisioned in the prospectus in terms of the objects of the issue. And I’m pleased to say that we are sticking to that focus quite well and making good progress. Continuing on with the presentation, I think this particular slide is particularly illustrative and enlightening. And you can see that across revenue, EBITDA and PAT, we have sustained a very healthy CAGR. In terms of return on invested capitals, I’m happy that despite additional investments in the growth we have managed to sort of sustain ourselves in the ballpark range of the numbers that we’ve been operating in. And as the EUV business and we have some updates in terms of our facilities that are coming on-stream as that settles down I think this growth path will continue.

I just want to take a moment and dwell on statement of profit and loss. And you can see again that on a year-on year basis the growth numbers are quite encouraging. This is on an annual basis and for purposes of generating a more informative perspective, we have set the numbers against the backdrop of the last three years, going back to FY20. For the benefit of members who may not have to refer to the prospectus, we had given FY20 as the starting benchmark here and so we are measuring our progress relative to FY20.

A quick snapshot of our balance sheet, which continues to remain strong. We have a significant amount of investment that is going in. So you can see that reflected in capital work-in progress for our new plant that is intended to house our EV business and the work we’re doing in automatic transmissions. The other thing is that the trade receivables, you can see our — they reflect increased domestic sales, with its additional GST component. And so the numbers look inflated compared to previous years when exports were significant and the GST component was limited. But overall you would agree that it’s a strong balance sheet and the right place to be in as we go-ahead.

Any questions at this point in time.


Sir, we will first have the presentation, then we start the Q&A.

Jitendra DivgiManaging Director

Okay, okay, so. What we wish to do is, I wanted to get to the meat off the presentation which was the numbers and then give members an update of the progress that has happened this last one year, and particularly in the last four or five months. So as many of you are aware, we are an old company based in Pune. We have three manufacturing plants and one of which in — fourth one is coming on-stream about 50 kilometers south of Pune. And broadly speaking, we are in the business was making various types of gearboxes for the automotive industry. The scope of offering includes specialty components, that go into these products. And the component business is an equally attractive offering that we have, not just in India but globally.

So as you might expect of a company like us, we have several market customers. And through some of the world’s preeminent Tier 1s we reach-out to global OEMs as well. We have in-place a technology license agreement with BorgWarner and a product development agreement with HOFER Powertrain in Stuttgart in Germany for DCT automatic transmissions. And right now, the big focus for us is EV transmissions that we are developing and launching for Tata Motors from our plant in Shirwal nearest Pune.

So I just want to not dwell too much on this but highlight the point that we continue to have very encouraging run since we separated from BorgWarner in 2016, infused private-equity capital between 2016 and 2018, and then, prepared ourselves for the IPO and had a successful IPO. The first of 2023 on March 14th, 2023. What I have done is in the most recent years, I’ve listed some of the highlights of new businesses that we have won. We have a significant transfer case contract from MG Motors in Halol for the Gloster SUV. We’ve been awarded EV transmissions contract for three different models for Tata Motors, [indecipherable] Tata Automotive Components. We’ve been awarded significant new business for new module changes that are going on at in the US market through BorgWarner at their plants in Seneca, South Carolina in the US and at Irapuato, Mexico. I’m also very pleased to inform you that both at a component level and a system-level, we have a significant amount of business coming in from Mahindra for their EV segment. And two cap it all off, we have also won the transfer case business for the Force Motors, Gurkha SUV module.

So you would agree that in the last 2.5 years, this run of continuous business development and market innovation, product innovation continues unabated. It’s not listed here, but we are also in the middle of executing one of India’s a largest defense orders for new four-wheel drive vehicles that Indian Army is acquiring from Indian OEMs like Tata, like Mahindra, and Bharat Forge. So these are new high mobility tactical platforms as they call. And I’m pleased to share with you that on several of these models, from various OEMs the common feature is Divgi TTS four-wheel drive transfer case.

Post our IPO, our shareholding as it stands today is encapsulated in the insert there on the bottom-right hand corner. And by way of information for our members that is the current shareholding that we have. Very quickly, I wanted to just touch upon some highlights, not spend too much time, keep time more for questions. But I want to reiterate that we are one of very few Tier-one suppliers who bring system-level capability, we are able to do that because of an unremitting focus on research and development and trying to map that on the market needs. The long-term relationships we have with market customers obviously helps us in terms of the insights we need to sort of fuel and power our development. We match all of that with strategic investments in manufacturing, and I think being able to do a lot of this in-house helps us get competitive from a cost standpoint, and all of that is done under the overall sort of shepherding of good professional team, led by a highly experienced Board of Directors. And I think I’ve already touched upon the financial outcome of such an approach.

So to quickly recap, we have four verticals of quadrants, that we are working in, manual transmissions and synchronizers, four-wheel drive systems, both for rear wheel drive and front-wheel drive, what the dual-clutch transmission quadrant basically reflects is our initiative in the automatic transmission space and then we have offerings for electric vehicles. This is certainly a segment that seems to be surprising everybody, especially in the light of the success that Tata Motors has had in the segment.

What I wish to state here is that we are not limited to the systems business, and the reason for that is the systems business have a longer gestation period. So to fill out the gaps that can emerge between winning new businesses, we have the ability to develop and market and sell composed specialty components that go into products like this globally and the investments we make for component manufacturing actually help us make our products more cost-effectively and I dare say that on a global scale we are one of the most competitive at the volume levels that we are at. So and I think that gives us a sustainable basis for our business the fact that we are globally competitive and at the same time it gives us the financial returns that I think are expected of us by the shareholder community.

A little bit on our R&D, some of you may be familiar with this Slide. So we integrate many diverse knowledge and technology streams in the products and services that we offer, both in hardware and software. It’s interesting that with the advent of EVs, this has been raised to a new high in terms of in-house testing capability and software-based simulation of designs that we’re developing. And what it means is that we are able to develop products with shorter lead times and are an effective one-stop shop for the kind of a full-service end-to-end handholding that is required at an OEM today. With the advent of EVs, the lifecycles of powertrains is also shortening, which means that Tier ones such as us need to develop products with the short lead time and then be flexible enough and agile enough to adjust to both technology and market changes that can then come about. And I’m happy to say that the investments and the sort of moves we made early-on in the last six years are standing us in very good stead as we go-ahead.

Now all this means that we are now in a position to offer solutions in these various segments. Conventional ICE, manual, automatic and four-wheel drive solutions, we have offerings in the hybrid space. We are one of very few suppliers in the country mass producing components for hybrid powertrains built by Toyota, and these are supplied to their hybrid powertrain plant now in Bidadi in Bangalore, and it’s been in production now since last July-August ’22. And of course in the battery and battery-electric vehicle space, we have had a good measure of success now with the award of the business from Tata and both at a component and systems-level from Mahindra. And we continue to get RFQs globally in the space and I think as time goes on hopefully, you will see the results bearing fruit.

What it does it, is — this is a market study that was done I think by CRISIL. And it was part of our prospectus. And I’m just sharing this, again, to give you a feel for what the market size is as we go-forward. And we look at the long-range plan going-forward from here. And what we’ve done is, looked at the various product segments that we are operating in and through the planning horizon in front of us, what growth prospect we are seeing. And I think this is the vision with which — this is mind you, not the addressable market, but the overall market size and it’s growing as you can see rapidly from around 15, should be INR15,000 crores to almost INR30,000 crores.

Here just a quick one, that not only do we have long-term relationships, but we get involved early-on in the development of powertrains and it’s interesting that in the last six months, as our capability has advanced, we have had many customers approaching us both in the passenger car space and light commercial last mile mobility space for solutions on transmissions.

In the EV space, I might add that a particular acute pain areas for OEMs is noise, vibration, harshness of the powertrains where our one-stop shop kind of integrated capability is a strength to help customers solve these problems effectively and speedily. And I think that we see is a distinct competitive advantage that we bring to the marketplace. So early involvement means you are integrated into the platform of the customer. So whether it’s MG Motors, Tata, Mahindra or customers overseas that we are working with. And once you’re part of that platform, you are likely to remain with it through the lifecycle of that product.

Again, this is a slide that I think I’ve shared in the past, but it’s updated and I’m pleased to let you know that a few weeks ago, we were again awarded by Toyota for quality and delivery. This time, specifically in the hybrid component development for the new hybrid powertrains that feature on the Grand Vitara and Toyota Hyryder and Hycross. So I’m pleased to report that the appreciation that we get from the industry continues and we sustain that. And these are last awards that we have won at Toyota and Mahindra.

Our investments in manufacturing capacities continue, and I’m just giving you an overall view of the capacities that we have put in. But of special focus is our new facility which is now taking shape, it’s practically ready, just finishing touches going on and even as we speak, our new indigenously designed and developed transmission for Tata small cars is launching from this facility in Shirwal, Pune. At facilities in Pune and our plant in Sirsi in Karnataka, this is the kind of equipment that has been invested in and I’m happy to report to you that in terms of state-of-the art, this — our company now brings capability and capacity — capability that is basically, second to none. The best of the brands from around the world, from Japan, South Korea, Taiwan, Europe, United States are available in our facilities.

This is a shot of the — it’s a collage of the equipment we have at Shirwal to assemble and test our new family of EV transmissions. On this line is flexible, it can build products from fairly heavy-duty SUVs to small three-wheeler transmissions as well. And has a capacity of more than 100,000. This is the new transmission that we are launching on the Tiago, Tigor and Punch at Tata. So you can see the car, the packaging on which we’re shipping product and the transmission itself. So we continue to be led by our experienced Board and for our new members who are seeing this for the first time, who are from the capital markets, Mr. Praveen Kadle, needs no introduction and most of our directors as you can see are non-family external independent directors.

We have professional management team and what is significant is that the majority of our team members are — have been developed within the organization. We have a very robust organization development process and the focus is to develop leaders of the future. And I’m happy to say that most of the people that you see here are started their careers with us as trainees.

So in summary, I conclude and these are the sort of highlights that I think, continue to keep our company unique. We operate at a systems-level. We have unique offerings, strong R&D means there’s continuous innovation and invention. We are a solution based for our customers. We package those solutions in distinctive products that we manufacture at world-class levels, with world-class equipment and under the overall guidance of an experienced management team and Board of Directors. And I think that — with that, I conclude my remarks and open up the proceedings for questions.

Questions and Answers:


[Operator Instructions] So we have our first question from Mr. Pradyumna. Please unmute your line and ask your question.

Pradyumna — Analyst

Yeah, hi, sir, can you hear me?

Jitendra DivgiManaging Director

Yes, yes. Very well. Please.

Pradyumna — Analyst

Yeah, congratulations on a decent set of numbers. So my first question is regarding the EV transmission business that we run with Tata Motors. So when are we expecting this to commercialize? And on the same topic like what could be the realization we will be looking at and the wallet share for the particular modules that we will be supplying, how much would that be?

And secondly, sir more towards the outlook for FY24 and FY25, so like can you give some sort of guidance where revenue and margins could look like or maybe some guidance on the order book, which we might be having. And lastly, you spoke about certain EV components that we’ve won at Mahindra. So could you elaborate a bit on that as well like who were the existing suppliers we had replaced and what kind of components we have won. Yeah these are my questions.

Jitendra DivgiManaging Director

Thank you. Thank you. There are several components to your question, so I’ll go step-by-step, but if I slip up, please bring me back and I’ll make sure that your question is systematically answered. So at Tata Motors, actually we are in the middle of the launch process. The product we have finished all the testing and in the — from June onwards, July we will be seeing the ramp-up. The vehicle — target vehicles that we are on are currently in the market with imported content, which will be obviously localized as we come aboard the supply-chain. So you could say that the commercial realization is upon us and Q2 — I think I made a reference to that in one of the slides, let me, yeah, if you see that second point, Q2 FY24, we expect this to pick-up substantially. As I said, the capacity — overall capacity on the line is over 100,000. Obviously, this will have a step-by-step approach as Tata sort of stabilizes its small car electrification program. As you are aware Tata Motors started electrification, with the Tigot sedan and then the Nexon SUV and a few months ago, they launched, Tiago and there has been in the social media announcements that you’re seeing also on the Punch and Altros are likely to come. So we are on sort of this space of Tata Motors and the numbers are pretty substantial, as you said, which is why there is this capacity investment of 120,000, so it’s essentially the nominal planning for capacity, is that 400 per day. Okay, that’s — so the program is upon us. The products are developed. And the business is up and running. We will see those numbers unfolding in time hopefully second-quarter we will have substantial results in terms of the fruition of this program in the marketplace.

As far as the guidance is concerned, I don’t want to sort of get into the specifics of this, but suffice it to say that if you look at our track-record there is a certain promise implicit in that. And over our mission, I feel, is that over a two to three-year period, we want to sustain this sort of performance. Obviously that has implications for the quarter-wise progress and annual progress. But in this business, there are — there is a gestation period. We are, as you’ve seen from the presentation, unique in terms of the systems offerings that we bring. And our experience is that when you when you have high technology, complex bundling of technologies and features in a product that is integrated in a customer vehicle. These development cycles are a little long, they take some time, but once they’re up and running, they will last a fairly long-duration. And you are sort of married to that platform for the duration of its lifecycle. A platform — powertrain platforms in India tend to have fairly long lifecycles unlike in the West, Europe or North-America.

So that sort of is at the heart of our sustainability. So we are — the other thing that I wish to state is that, which we’ve alluded to in this particular slide is that we are seeing a strong revival in our exports, which last year was dented a little bit because of the Ukraine war. We had very good exports to Russia that were dented and the geopolitics with China had also affected us. In the US, we are going through some life-cycle changes and the new programs are coming on-stream now with, as I mentioned with BorgWarner in the US and Mexico. Our business development register or order books as some people call it is robust. And we are confident that exports, we will be able to bring exports back to around 25% of our portfolio over the next 12 to 15 months. And the asymmetry that is there in the business with respect to products and customers will settle down to a more balanced kind of portfolio as customers make MG, the Tata EV, our exports and the work we’re doing in the Far East with Toyota bear fruit.

And I conclude by saying that, what I’ve said, I think in our track-record, there is a promise that is implicit, those are historic numbers to which I think it would be fair to say that shareholders will expect us to hold ourselves accountable to, to that kind of performance. And that I feel is our mission going-forward. So maybe that’s a long-winded way, but I think I’m sure I’ve answered your question.

Pradyumna — Analyst

Yeah, sir really comprehensive. Thank you so much. Just one part, which got missed maybe was with MNM, I was just trying to understand —

Jitendra DivgiManaging Director

I’m sorry, yeah, that was the last component of your question, yes. At MNM the areas we are on include components for their last mine delivery three-wheelers. We are looking at components on the XUV400. We are working on, they’re like pickup trucks, electrification and also complete systems for three-wheelers. But there again, not just for Mahindra but the overall three-wheeler electrification industry which includes many start-ups as well. So the idea there is and I think this is the advantage of being an independent developer and supplier, because we are able to bring our standard architecture to bear on the market and understand trends in the marketplace, design our own architecture and then develop specific designs within that. The advantages that we are able to then bring the standard architectures to bear on solving problems at different OEMs. So the turnaround time for the customer, the overall investment required then in terms of engineering and tooling becomes optimized for our customers. It keeps us competitive and at the same time, profitable.

So I think the heart of this is being independent, being able to design and develop products for the industry. And as I said, the most acute pain area that we are observing for customers in the electrification space is noise, vibration and harshness. And these are problems which we feel the industry might be underestimating and we have the solutions to handle these sort of acute problems that OEMs face. And that’s what we are doing, I feel at both Tata and Mahindra.

Pradyumna — Analyst

Okay, sir, understood. Thank you so much.


Our next question from Mr. Rakesh. Please unmute your line and ask your question. There is no response. Let me move to the other participants. We have have next question from Mr. Pramod, please unmute your line and ask your question.

Pramod — Analyst

Yeah, thanks for this opportunity. So first question is with regard to the three-wheelers. Considering the complexity, under which you operate in the cars don’t you see so much more dilution when you address the three-wheeler market.

Jitendra DivgiManaging Director

That’s a very legitimate question, yes but our experience is that the basis for solutions can be on multiple dimensions. Because the market is very fast-moving, OEMs need to move with speed to put that supply-chain solutions in place. So in some instances it is very-high performance, generally, that’s what you will see in branded passenger cars. But for the commercial area, you need very-high durability and reliability, while of course maintaining performance. And if the products are not appropriately engineered because commercial vehicles do not have the kind of extra padding for sound insulation, you cannot have the driver subjected to the misery of a continuous pain in the driveline, given the fact that commercial vehicles have long duty hours and cycles compared to — so it can very quickly, result in fatigue for — of a certain type for the driver and therefore affect the productivity.

So you have to maintain a certain performance standards, but the duty cycles being more sort of in a manner of speaking abusive. The products are also need durability and reliability. So the advantage we have is by virtue of having been in this industry for several decades, we know what kind of design and manufacturing needs to be brought to bear on commercial side perhaps as against passenger consumer side where the duty cycles, may not be as abusive. So there is an apparent dilution, but at the same time by virtue of the fact that the expectations on cost are there, quick development, and in many instances, customers need the capacity. So unless the supplier has the wherewithal and the bandwidth to bring in the resources, okay, he cannot be a legitimate candidate for the business.

What OEMs are also learning that unlike the ICE applications, the insight that is emerging now in the industry is that, it is actually safer for the OEMs to work with one supplier for all the critical components as a kit or better yet one supplier for the complete transmission system because if you have a durability or a performance issue the ability to do problem solving is easier if there is a clear kind of line of accountability in the whole process. So all this eventually results in bringing competitive advantage to suppliers who have sort of moved and positioned the chess board if I may say so appropriately. And these are some of the dynamics that we’re seeing unfold. I’ll tell you there is one interesting — I think the jury is still out on this. What we are observing is that India’s light commercial — the products like the Tata Ace, the Mahindra Jeeto, the Ashok Leyland Dost, these things are going to electrify very fast just like the three wheelers. And the numbers that are going to come are going to be pretty significant.

These are highly competitive segments and our sense is that the big multinationals of the world, who are also on-the-ground here in India are going to find it very difficult to meet the kind of cost expectations that our Indian OEMs or even multinational OEMs, because we know somebody like Maruti Suzuki is also in that space with small last mile delivery vehicles. So those cost targets there are also, I think pretty difficult to meet for multinationals. So in this space, we see a role for Indian companies like us who I think have the advantage of being pretty effective challengers on the global stage and more than holding their own in the domestic market, despite some world-class competitive pressure.

Pramod — Analyst

Sure, thanks for the detailed answer. So the second question is with regard to the new product developments by the multinationals. As you have been long associated with Toyota, which has been laggard in EVs and now trying to catch-up and it has a much more bigger implication with Maruti being associated with Toyota now, so in terms of product development cycle for EV, do you see more positive vibes for person — or the company like you in the initial developments of a global EV products or you still feel it still goes through the international scale of bigger companies participating and then later on when the product comes to India, you get the chance.

Jitendra DivgiManaging Director

Yeah, very good question, very insightful. And I — we find ourselves, thinking about this issue a lot so I appreciate the question you’ve asked. It’s like this, right now, first of all, let me say that the market is extremely fluid and dynamic. So what I say today, could change in six months to 12 months. And so based on what I’ve seen in the last I mean, just in the last 15 to 24 months, things have changed very rapidly. But suffice it to say that among the big OEMs today especially in the area of branded passenger cars, clearly the multinationals have an edge, because they have come into the market with a lot of R&D. A lot of R&D means they have data, on reliability, on helping OEMs do things right the first time. But they are also severely challenged on cost.

So I think in the first phase what we will see is, the big multinational scoring big wins on some of the branded you know the big, like Hyundai, Toyota, but even Tata and Mahindra, we know that Mahindra has already made the announcement that they have this tie up with Volkswagen on some of their bond electric models. That’s information that’s available in the public domain, so in that space, I think the multinationals are going to be a force to reckon with. But in that space, what’s going to happen is that the Indian companies will have a role to play in helping them cut costs and make their products more affordable, especially in the Indian market and if you see the pace at which Indian OEMs are electrifying and one hopes that bottlenecks in infrastructure charging, battery capacities will workout as we go forward in market development, this pace of electrification will expand to a pretty significant considerable extent of India’s automotive industry.

I mean I won’t be surprised if the electrification reaches 30%, 40% in the next sort of foreseeable future. And then I think, India will end-up setting global cost benchmarks, because people will see the kind of prices, the purchasing departments and the big multinational companies, Tier ones and OEMs will have a sense of what the Indian companies can do. And therefore, my sense is, we are going to see a lot of work migrating to India in a big way. This is going to be aided my sense is with the kind of challenges that companies are facing in Europe today with inflation and increasing energy costs and of course the geopolitics, that we’re seeing with China, and the rest of it. So with all these things at work, I think Indian companies, if they are focused on a discipline of excellence, they have a clear strategic positioning and they’ve have aligned their resource allocation to execute their sort of strategic outlook, I think they have more than a good chance to succeed in this. We are certainly optimistic. We are quoting on business across the world in Japan, even in China, in a big way in Europe. We have an excellent relationship with Toyota. And as I said, because if you end-up buying components from three or four suppliers and then you have an NDA issue, you will not — the problem solving for the OEM or the Tier-one becomes really challenging. So the — it is advantageous for the entire value chain to have one supplier do all the components and work very closely with the engineering organization of the Tier-one or the OEM in helping manage the — let’s say the NVH pattern because today the noise, vibration, harshness levels of gearboxes can be measured accurately and precisely and we can have quantitative targets that we are working with.

A company that has the engineering acumen to understand this and execute its business to these standards, clearly has an advantage and what I want you to consider is that Divgi TTS by virtue of being a systems player brings therefore a very enlightened approach to its component development as well and that I suspect is going to vibe very well with both Tier ones and OEMs.

Pramod — Analyst

Sure, thanks for detail answer. All the best.


Yeah, we have a next question from Mr. Parim, please unmute your line and ask your question.

Parim — Analyst

Yes, good evening. So one of the question was the last question with the previous participant asked and you explained very elaborately. Sir, my question was that in the EV space, software also becomes a very important part of the whole ecosystem. And in that front do we have the capabilities and do we do the entire software side also in-house or we work with partners over there.

Jitendra DivgiManaging Director

Thank you for bringing that up. Because as a gearbox maker, we don’t often get challenged by this question. I’ll tell you what’s — what our — let me back up a little bit and explain why I consider software important although, our focus is purely on the mechanical side of the business. You know, the typical three in one today has of course, the battery is separate and there is a battery management systems, BMS associated with that. But you have a motor and inverter integrated with it and a mechanical gearbox. And while lot of people are increasingly deeply integrating these three elements, offer the electric propulsion system, most of the systems out there are modular.

Modular means that one motor can be used for a variety of applications, and you can have one gearbox going with different types of motors or many different gearboxes with one-type of motor and modularity gives you the ability to be, if I may say so eclectic and little judicious in the way you mix-and-match motors and gearboxes. So you might say that a mechanical gearbox player that way, it doesn’t have much of a role, because what he is doing is just mechanical portion. But what ends up happening is that, increasingly, safety legislation means the parking system, park lock as we call it, is going to become integral to the gearbox. And what it means is that on the console of the vehicle, if the user puts the vehicle in the park mode, the backlog system has to come on in the gearbox because unlike an ICE engine, there is no engine braking in an electric vehicle and if the handbrake system fails, you could have the vehicle in runaway condition. And it is a serious safety hazard.

At this stage, in the pursuit of electrification, perhaps we have been a little forgiving in India and park lock systems are not strictly enforced. So the low-end cars do not have integrated park lock systems in the gearboxes, but the design that we have and what we started-off with many years ago as we were experimenting with the Indian market and the initial prototypes that we gave to customers actually had an integrated park lock system, which means there is an electromechanical motor that actuates and locks the gearbox. But it has an ECU, an electronic control unit that takes the signal from when the user sort of puts it in park mode and then actuates this. This controller, obviously then has its control software. And the moment you integrate this into a vehicle, you have to have the ability to talk to the data bus on the vehicle, which means even if its scope of control is modest and limited, it has to have the ability to converse, to put it in simple terms with the data that is going back-and-forth on the data bus.

And so the ability to integrate this into the vehicle network is an essential competence of the guy who is bringing the gearbox. Now, you might say that hey, how come you have all this knowledge and the reason is because we have been for the last 25 years, we’ve been doing software-based electronically controlled four-wheel drive systems for the automotive industry and so our software, it’s a small group but effective group that is well-versed since 2008 with integrating mechanical drivetrains into vehicles and the canvas of the vehicle and how we need to organize ourselves to dialogue with the software groups of the OEM or the Tier-one as the case may be to do this integration, is something that we have done. We have electronic control units, we have shift motors all production-ready, ready to be deployed in the market as and when the government mandates 100% park lock legislation. So that in a way is the answer to you. And so even if we stick to the mechanical portion, we see the need for software coming and my answer to you is that we are ready.

The larger question, I think maybe that’s what you intended is, the software, of course, is needed for electric motors and inverters and that is a space, which we are not playing in right now. These are early days, we are investigating various opportunities in that space, but it’s too early. My observation of the industry is that the motor and inverter space is so crowded with really strong multinational. I mean you name the multinational that’s in electrical, in software, in motors, any type of motor or even ECUs, electronic control units, all these guys are operating in that space, but there are fewer good gearbox manufacturers, then there are motor manufacturers. So we think that sticking to our knitting and deepening and sort of widening our portfolio and becoming faster and better transmission makers with this integrated park lock, will actually make us a more effective competitor in this otherwise difficult marketplace that is developing.

Parim — Analyst

Great sir. Thank you. That was quite exhaustive. And so, on DCD side, how has been the adoption —


Excuse me, Parim. I think due to time constraint, we had to end the call, now it’s already 5 o’clock. We will probably take it offline.

Parim — Analyst

Okay, thanks.


Thank you everyone for joining this call. Over to you, Jitendra sir for closing comments.

Jitendra DivgiManaging Director

Yeah, no, I appreciate the patient — sorry, if I came across a little long-winded, but I just wanted to take the effort to answer the questions in all the nuances, which are there you know. We always sort of enjoy interacting and providing these clarifications. And we continue to look-forward to these sessions. So thank you everybody for your time and interest. It is much appreciated. Thank you.


Thank you, everyone.


This transcript is produced by AlphaStreet, Inc. While we strive to produce the best transcripts, it may contain misspellings and other inaccuracies. This transcript is provided as is without express or implied warranties of any kind. As with all our articles, AlphaStreet, Inc. does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company’s SEC filings. Neither the information nor any opinion expressed in this transcript constitutes a solicitation of the purchase or sale of securities or commodities. Any opinion expressed in the transcript does not necessarily reflect the views of AlphaStreet, Inc.

© COPYRIGHT 2021, AlphaStreet, Inc. All rights reserved. Any reproduction, redistribution or retransmission is expressly prohibited.

Most Popular

Cochin Shipyard Ltd (COCHINSHIP) Q4 FY22 Earnings Concall Transcript

Cochin Shipyard Limited (NSE:COCHINSHIP) Q4 FY22 Earnings Concall dated May. 26, 2022 Corporate Participants: Madhu S Nair -- Chairman & Managing Director Jose V J -- Director Finance Analysts: Vastupal Shah

All you need to know about Antony Waste Handling Cell in one article

Can you guess the name of the company that was listed during the IPO frenzy in 2020 and is the second largest player in the Indian municipal waste management industry?

Demystifying the Leading Non-Ferrous Recycling Company of India

“Hey, how is the market doing today?” “Oh!, its falling tremendously since morning” I am sure news like these might be a common topic of discussion for you nowadays. Interestingly,