Federal-Mogul Goetze (India) Ltd (FMGOETZE) Q1 FY23 Earnings Concall Transcript

Federal-Mogul Goetze (India) Ltd (NSE: FMGOETZE) Q1 FY23 Earnings Concall dated Aug. 11, 2022

Corporate Participants:

Vinod Kumar Hans — Managing Director

Khalid Iqbal Khan — Whole Time Director – Legal and Company Secretary

Manish Chadha — Whole Time Director Finance & Chief Financial Officer

Analysts:

Mamta Samat — Analyst

Saket Kapoor — Kapoor & Company — Analyst

Ashwini Jainapur — Lime Water — Analyst

Priyanka Singh — Individual Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q1, FY 2023 Earning Conference Call of Federal-Mogul Goetze (India) Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Ms. Mamta Samat from Perfect Relations. Thank you and over to you, ma’am.

Mamta Samat — Analyst

Thank you, Amman. Good afternoon everyone and thank you for joining us on Federal-Mogul Goetze (India) Limited Q1, FY 2023 earnings conference call. Today we have with us the senior management represented by Mr. Vinod Kumar Hans, Managing Director; Mr. Manish Chadha, CFO & Finance Director; and Dr. Khalid Khan, Director Legal and Company Secretary.

Before we begin I would like to add that some of the statements to be made in today’s discussion may be forward-looking in nature. We will begin the call with the opening remarks from the management after which we will have the forum open for an interactive Q&A session.

I would now request Mr. Vinod Kumar Hans for the opening remarks. Over to you, sir.

Vinod Kumar Hans — Managing Director

Thank you very much and good afternoon and welcome everyone for — on this earning call. I think quarter, which has gone by you know, to sum it up was very challenging, but also very promising signals given during this quarter. On the commodities side, we saw some of the peaks in the commodity in April till mid of May along with the peak of commodity rate, the availability became an issue, but towards the June, the commodity did come down and availability was better, so that was a good news and that’s what I referred to being promising.

On the geopolitical side, the Ukraine crisis, which we were expecting to be a short lived phenomenon has somehow converted into a larger complex problem for Mainland Europe and you might have noticed a lot of issues within Mainland Europe with the gas prices and several other inflations factors coming up, which is impacting the European market in a very, very different way and also the automotive market.

On the other side, the China remained during this quarter in lockdown and several cities and the ports in China particularly were constrained. The travel, I would say the travel as well as the goods transportation restriction remain, which created I would say in terms of freight rates one of the highest in the history and also the lead time for the transportation was also one of the highest. Nevertheless, in July, we saw a softening trend into these areas as well.

On the semiconductor side, I would say there was definitely ease all of the problem, but not completely recovered at least on the passenger vehicle our customers are calming, they are still not able to produce to the capacity based on not only semiconductor I would say, but also some of the other supply chain bottlenecks, which has resulted again on these — some of the geopolitical constraints, which were mentioned.

In summary the automotive market, which is the prime interest to us in India if we talk about light vehicle, which is a combination of passenger vehicle and pickup trucks, small pickup trucks, it was flat on a quarter-to-quarter basis. The heavy commercial vehicles were down by about 10% from the previous quarter. The two wheeler had a steady growth from a very low base and it grew by 6%. Tractor was a very shining star segment in the whole, I would say the exposure we have into the segment and it really grew by about 50%.

So in summary the way we are segmented into these market segments, we should have grown by nearly 8% to 9%, but I am happy to report that our growth is much higher than the market growth, and which is very in line with what we have been saying in our earlier calls that we should definitely improve our market share going forward, as the new generation vehicles comes along..

When I say promising quarter was basically, we have seen on the light vehicle side A) the market is maturing more towards the sports utility vehicle side, which is pretty good for us and I would say higher end of the spectrum and also lot of the launches by several manufactures were received well in the market. There is a claim that close to 700,000 vehicles are booked and waiting for delivery. And I am happy to report that our win rate in these new vehicles, which are launched, our participation is pretty good, and that’s the reason that it has resulted into — in terms of revenue, our highest ever quarter for us. We will discuss these numbers more in detail and Manish will run through these figures.

So in my opening comment, I will just again summarize very challenging quarter, but we see a very clearly, you know, a very I would say promising future in front of us. There may be still some headwinds, which remain related to the China and Ukraine issues, but I think overall in summary, we are on a, I would say a growth path for sure. And we’re already into — six weeks into this quarter, and I can tell you that this quarter is even better than the previous quarter.

With that I hand it over to Dr. Khalid Khan, who will run through the Company presentation initial part. Thank you so much.

Khalid Iqbal Khan — Whole Time Director – Legal and Company Secretary

Thank you, Vinod. So first slide is safe harbor, forward-looking statement and second slide is about the Company overview. So this Company as you know, was established in 1954, as a JV with Goetze-Werke of Germany, which was owned by Federal-Mogul LHC. Globally, Tenneco has four business groups namely performance solutions, motor part, clean air and powertrain. The company’s products substantially fall under powertrain business group. So this Company is based out of Gurugram, and it is engaged in the manufacture, supply and distribution of automotive components in India, as well as internationally.

So mainly we cater to — we offer pistons, piston rings, piston pins, valve seats and valve guides and cater to automotive, heavy duty, motorcycles, energy industrial, power generation, railway and defense industry. So the Company manufactures world class products at its state-of-the-art manufacturing facilities, which are located at Patiala, Bengaluru and Bhiwadi. Now this Company operates as a subsidiary of Tenneco INC, post Tenneco’s acquisition of Federal-Mogul LLC. The Company employees more than 5,000 employees, as on 30th June, and it has three manufacturing sites, two sales offices, 13 warehouses, and the Company has 30 plus OE manufactures components — customers.

Turning to the next slide, which talks about manufacturing facilities. So one of our plants is located in Patiala, Punjab, and it has an area of approximately 60 acres. Then we have — this plant was established in 1954. Another plant is located in Bengaluru, Karnataka, which has an area of approximately 50 acres and both these plants manufacture pistons, piston pins and rings. Bengaluru plant was established in 1977. We have a third plant, which is located at Bhiwadi, Rajasthan, and it has an area of about 5.5 acres and the products here are valve seats and valve guides. This plant was established in 1994. All these three plants are certified IATF 16949, ISO140001, ISO450001.

Turning to the next slide, which depicts the shareholding pattern, as on 30th June 2022. So there has not been any change since the last quarter, so our shareholding remains the same like 60.05% with Federal-Mogul Holding, which is our holding company; and 14.93% [Phonetic] is with Federal-Mogul, Germany and 25.02% is with others, which comprises public shareholders.

Coming to the next slide, which talks about the Board of Directors, so there has not been any change in the last quarter. So we have three independent directors and the board is headed by our Chairman, which is — who is an independent director. And we have one women independent director also in line with the requirements of law. Then we have two non-executive, non-independent directors and four whole-time directors.

For the next slide, I would request Mr. Vinod Hans to take you through the competitive strength and other slides.

Vinod Kumar Hans — Managing Director

Yeah. Thank you, Dr. Khalid. I think next 6 or 7 slides are very, very similar to what we presented in the last call, so I will run it through quickly so that we have more time for the Q&A.

So again on the credit rating we are long term A+ and short term A1+. On the R&D centre, we have R&D center in Bengaluru and Bhiwadi, and of course, these R&D centers are mainly oriented towards the application, engineering and testing. Our — I would say base R&D we are taking support from our global location. We mentioned that we have a seamless technology transfer on our products and this makes us little bit different from the other players, where they have either a joint venture or they have a technical arrangement, which has its own firewall. But in our case, the technology support is absolutely seamless.

In terms of our segmentation, we are well diversified between the two wheeler, three wheeler, passenger vehicle, commercial trucks, tractors, industrial, even railways and defense. We supply to more than close to 35 plus OEMs, so the business is naturally hedged.

We have strong, I would say financial liquidity, which has improved even during this quarter. And of course, we have a very stable and experienced talented team, which is driving this business. Some of the key customers you can see on this slide they are almost, I would say, whoever fireless [Phonetic] engine in India and also globally we are supplying them.

In terms of our revenue mix, I mentioned in my opening remarks, although for the overall split of our business on a yearly basis, we are kind of 86% directed towards domestic and 14% export. However for the quarter under discussion because of the situation in Europe, and of course, we stopped supplying to Russia because where we are part of U.S. subsidiaries, and we are mandated by these sanctions. So our supplies to Russia stopped and the European market, which is impacted by this crisis also softened down.

And then there was also slow down in the U.S. aftermarket mainly resulting out of the inflationary pressure and credit situation over there. So the share of export reduced from 14% to 9%. However the domestic market more then compensated this low turn, so even with the production in this export, we were able to make a record quarter.

Also I think we saw a shift because of the subject of constrain in some of the export market. What some of our customers were — have done that they have produced more in India, so that the India was a sweet spot in the whole quarter. So I am happy to report that some of the global customer they produced more in India, so we have more, I would say deemed export happening during this quarter by the way, so which is not that part of 9%. So we see a clearly a shift of this market happening and the customers are also shifting the locational priorities, and overall it’s a good news for India that the global customers are relying more on India production base within this global, I would say, geopolitical situation uncertainties.

In terms of our split virtually remains almost the same 28% for passenger vehicles, 12% for two wheelers, which comprises about 40%, which is impacted by I can say the cloud of electrification in front of us, but then we have about 27% business in aftermarket and OE spares and 33% business in commercial trucks, light commercial, off-highway, industrial tractors. So in summary we have I would say nearly 60% of our business, which is agnostic of the electrification factors.

On the market provision, no changes I would say. We are number two overall in piston, number one in distal piston. Diesel by the way in this quarter moved the needle, although there was a declining trend in diesel for so many years, but surprisingly because the way the market is shifting, you might have seen lot of SUVs getting preferred source of mobility and most of these SUVs diesel is being preferred by the way. So that is shifting the needle little bit in favor of diesel again what we saw.

[Indecipherable] we are number one and Seats and Guides again, number one position. So the powertrain overall the key driver in fact on the market and the technology remains the same. I would say the better fuel economy is, I would say call of the day with the prices of the fuel hitting the top. Within that we see very clearly a shift towards alternative fuels. The CNG, I would say portion of the light vehicle is now roughly about 11%.

So in summary the diesel has improved by 1% from 18% to 19%. CNG significantly improved to 11%, but the gasoline reduced to 67% actually. So the CNG is kind of overlapping into the gasoline. So with the CNG, there is a more shift towards the ethanol and other flex fuels, what we call, so we are working very closely on that, so that’s on the fuel side, which is driving the market. And this trend is on an increasing trend, which is again a welcome component supplier like us because we have a chance to increase our values with these [Phonetic] changes. And overall the low emissions remain, you know that the CO2 and other emission restrictions coming up very strongly from the government and from the media.

And the durability, I would say requirements are again increasing, so the brand users are looking more and more non-serviceable intervals and the extension of warranty, which OEMs are extended, which is again a good news for us. They are looking for a very reliable solutions.

During this time, I am happy to report that we had several awards. We had the award from CEAT India, Mahindra, General Motors, Daimler, and John Deere. We also got an award from KTM Austria, and also we got an award from Toyota.

With that I hand it over to Manish to run through some of the financials slides including the focus we have on margin expansion and cash remission. Over to you, Manish.

Manish Chadha — Whole Time Director Finance & Chief Financial Officer

Thank you, Vinod, and good afternoon to everyone. The Slide 13 talks about the performance focused [Phonetic] on margin expansion, so actually these are, [Indecipherable] competitive strength we have and technology, which we are and the strengths we have. So we are within this technical — highly technical environment, we are focusing more on the growth opportunities on the higher technology, and we’re also focusing parallely on fixed cost reduction, operational efficiency and also…

Operator

Sorry to interrupt you Mr. Chadha, may I request you to please come a little closer to the mic. Your voice is breaking.

Manish Chadha — Whole Time Director Finance & Chief Financial Officer

Yeah. Can you hear me now?

Operator

Yes, sir.

Manish Chadha — Whole Time Director Finance & Chief Financial Officer

So sorry, I’ll go again. So as I mentioned, we noted — saying earlier the competencies [Indecipherable] the Company. We are now focusing more on this growth opportunity with high technical environment. The business is consolidating and we are trying to take advantage of this consolidation and also parallelly working on the cost reduction and low capital intensity, the balance between the capex and the revenue ratio. And at the same time I think with — our major focus is also on the commodity inflation recovery, this is all creating value for the shareholders.

Maybe if you go to the next slide on the financial, Vinod did touched about which is higher sales for this Company for the quarter. So as I mentioned we are focusing to capture the market and we are growing more than the market. Despite we were having impact of exports getting soft in North America and Europe. So we grew almost 26% from the previous year and almost 13% from the previous quarter.

Our EBITDA at 11.3% as compared to 11%, as it was in the previous year and 12% for the previous quarter. As you know this also [Indecipherable] that this quarter was very challenging with global supply chains disruptions, issues in China, COVID situation, so we have to have this expedited freight sector and also we have this peak of the raw material in the current quarter, which get softened in June, and now [Indecipherable] we are seeing the recovery also coming. So overall, I think we had the best quarter on the top line and we have a reasonable EBITDA of 11.3% for the current quarter.

Next slide you can see the revenue front it is showing increasing EBITDA absolute number it is reducing in previous year, but at the same time on the previous quarter, it was almost flat. As I mentioned, these are some of the reasons of this global environment of supply chain disruption has resulted in this what we have guided impacted exactly for the current quarter. So EPS [Phonetic] and also the same result for the current quarter.

In the next slide you can see the PBT and PAT is also moving in the same direction. So from the previous year of 4.3%, current year it is 6.3% and PAT 3.3% to 5%. So I think we are moving into the right direction.

From the highlights financial overview we have revenue of INR4,000 million [Phonetic], INR500 [Phonetic] million, which has major increase. We grew almost around 48% in the domestic market, but impact of the slowdown in the U.S. and European markets, where we were able to export content has gone down to 9% as compared to the year, last year 13%.

EBITDA we had INR454 million versus INR352 [Phonetic] million of the previous year corresponding quarter. So as I mentioned it is impacted by steel prices directly impacting the global supply disruption, and you can see the previous rates, but we see recoveries coming in the second quarter, which is July to September, and we are also seeing the sales should be better from the previous quarter, first quarter.

And the Company has net profit after sales of INR185 million and cash. Even in this supply chain disruption, we did increase in inventory because there are projects. But at the same time, we had the basic cash of INR293 [Phonetic] million. So we have related cash, and we are investing in the growth opportunities as well as [Indecipherable] technology.

That’s all from my side. I will hand it over to Dr. Khalid Khan.

Khalid Iqbal Khan — Whole Time Director – Legal and Company Secretary

Thank you, Manish. So I would update you regarding our CSR efforts, so there is Prayas Juvenile Aid Centre. So we sponsor the education of 100 girl children. Out of 100 girl children, 50 are from the remand home itself and 50 are from the local community. Approximate budget for 2022 and ’23 is INR16.50 lakhs. Additionally, we also 100 percentage sponsor a school, which is in Ghar Angana, and this school has approximately 85 children, and all of them are from the local community. Approximate budget for 2022 and ’23 is around INR10.225 [Phonetic] lakhs.

With this I would like to hand it over to Mamta.

Questions and Answers:

Operator

Thank you very much. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question is from the line of Saket Kapoor from Kapoor & Company. Please go ahead.

Saket Kapoor — Kapoor & Company — Analyst

Yeah. [Foreign Speech] and thank you for the opportunity and a detailed presentation. So just to sum up in one line, although we had a very good quarter in terms of top line in the first quarter going forward, as the current outlook is that we will be getting the benefit of the lower commodity prices and also the lower freight cost that these two factors, which have affected our EBITDA margin for the first quarter will get evened out and the demand outlook remains firm as has been the case for quarter one. So my understanding is correct, Mr. Hans?

Vinod Kumar Hans — Managing Director

Yes. I will add only one factor that our prices say from 1st of July with say, one third of our customer will also picking with the back dated, I mean, based on the previous high commodity prices. So on the revenue side our net prices are still on an increasing mode with the customers. So that’s another factor, which will help.

Saket Kapoor — Kapoor & Company — Analyst

Right, sir. So that these are all positive incremental EBITDA margins factors that will play out over the period of time now.

Vinod Kumar Hans — Managing Director

That’s right. I mean, we have to see overall as I said that this quarter so far if you talk about the six week is in a sweet spot, where we are experiencing better commodity prices and reduced rates. They are still high, but at least lower than the earlier quarters.

On the other side based on remember we used to say that our prices with customer are so contracted that we get a price increase after on an average six months. So our prices in say July are getting kicked in sorry in January is getting kicked in July. So we are still having some advantage from that cycle actually. So now the prices, which we have seen a reduction in the commodity, so the price give back will be only due in the next year. Next year means in the last quarter January to March. I hope I am able to explain that.

Saket Kapoor — Kapoor & Company — Analyst

Yeah, sir. So the lag effect will now play in a positive way as has been the ones, where there was a compression with the rising tide and now there will be an expansion with the falling price.

Vinod Kumar Hans — Managing Director

You are absolutely right. This quarter and I think some portion of even next quarter will be on a better lag. And then this reduction from the customers based on if this commodity prices remain, where they are, then there will be a reduction due to contract, which will happen may be from January onwards, January next year onwards.

Saket Kapoor — Kapoor & Company — Analyst

Okay. And about the utilization levels are going to be firm for this quarter itself as per the visibility from the order program from your OEMs?

Vinod Kumar Hans — Managing Director

Well, Manish has a better number on the utilization. Manish can you take it.

Manish Chadha — Whole Time Director Finance & Chief Financial Officer

Yeah. Saket, thanks a lot. So utilization Saket is I would day average 95%, 96% in the current quarter and some of the value streams we are at 100%. I am talking about April to June. But at the same time I would say it is somewhere around 94%, 95% of average utilization in April to June. And we would see that July to September, I think we would be doing better than April to June. And there is one more factor if you see our sheet of the impact of softening of Europe and North America has impacted our profitability and actually we are slight better margin in export market also. So that has also impacted the quarter.

Saket Kapoor — Kapoor & Company — Analyst

Sir I didn’t get you, sir. Come again, sir.

Manish Chadha — Whole Time Director Finance & Chief Financial Officer

So the margins in the exports sales are better than then domestic customer. So what I am saying is that the decline in the exports sale in the current quarter because of the geographical situation in Europe and North America has also impacted the profitability of the current quarter.

Saket Kapoor — Kapoor & Company — Analyst

But since sir, you have mentioned that many of it is in the deemed export category so if that gets negated in that sense.

Vinod Kumar Hans — Managing Director

Yeah. On a sequential basis it may not apply. What Manish was probably trying to clarify is that in the previous, I mean, in the quarter, which is under discussion, which is April to June your question was that in spite of the highest revenue our profitability still not moved in that. So Manish was answering to your question that because of the export I would say pie getting shrunk, where we were sitting on a good margin so that has impacted along with these hedging what we mentioned about the commodities and freight.

Saket Kapoor — Kapoor & Company — Analyst

Right. Sir when we look at your consolidated numbers they are also looking better, but the bottom line is remaining the same. So how the — has the consolidated set of numbers behave. And also some on the employee cost rationalization from the very beginning of hosting con call sir, you have been articulating the fact that cost of employee needs to be rationalized, but where are we in that journey sir, if we take that into account? Is it a quarter-on-quarter improvement increase in employee cost by INR5 crores and also year-on-year is not comparable currently. So if these two aspects as to be clear.

Vinod Kumar Hans — Managing Director

So may be, yeah may be I will take that. So if you see our labor cost as a percentage to revenue it is lower by 1.25% from the previous quarter and almost 4.5% from the previous year right. So over labor levers keep touching that we have a clear focus on labor cost, and we are addressing our labor cost very interestingly. And from the previous quarter, previous year if you can see, it’s a slight increase of 2%, whereas the revenue have grown up by 26%. So we have the labor days may be [Indecipherable] 40% less [Phonetic] [Indecipherable] which we are addressing based on the volume.

And at the same time in the last quarter, we were having [Indecipherable] actuarial right, which has also you can see the gap around the value wise on the last quarter, but overall if you see as a percentage to revenue I think you will see the improvement. We are now not at 20%, whereas if you see in the previous year when we started it was somewhere around 20%, 24%. So we are bringing it down to somewhere around 20%, 21% level.

Saket Kapoor — Kapoor & Company — Analyst

Okay. So this will be the new normal since the utilization levels are also at peak optimization levels 20% should be the normalized employee cost?

Manish Chadha — Whole Time Director Finance & Chief Financial Officer

No, I won’t say that. It is — so it has — so we are — our focus is towards that. And as I mentioned 60% is the fixed labor, right and 40% is variable. So you have that window to address. And at the same time this percentage is also because it is semi-variable, I would say, is linked to the volume. So in a volume like this, yes, 20% is fair. And we are also further addressing on those assets.

Saket Kapoor — Kapoor & Company — Analyst

Right, sir. If you could throw some light on the page number 13 of your investor presentation sir, wherein very categorically you have mentioned about your top priorities and the way forward, I am just flipping [Phonetic] to building a stronger FMBIL [Phonetic], wherein you have mentioned about optimizing shareholder value creation through cash generation and targeted growth opportunities. So if you could throw some more light on these two assets of value creation to cash generation and targeted opportunity.

And again sir, coming to the point about the — that coming of a dividend distribution from your investors since I think so now the new management in place Apollo, your thought process on the way ahead. And also Khalid sir, on the buyback part once these are answered?

Vinod Kumar Hans — Managing Director

Thanks, Saket. Maybe I will try to answer the first two question, the slide 13 and then may be on — from the new management and where we are may be Khalid I would request you to take that.

So if you see our presentation I think we are mentioning that the current environment is highly technical and there is lot of technology driven products. So there is consolidation happening in the — consolidation is happening in market, and we are looking into all those growth opportunities, which will help us taking the market share, and which you see in our financial number by the way.

And now with this technical advances, there is a core — the part of core design so we are working with the customers, who are designing those parts with highly technical markets. So I think these are the growth opportunities with this technology as we have and we are focusing on capex — annual capex. We have seen that in Euro 6 [Phonetic], which has given clearly advantage to us.

So and also we are focusing along with the growth opportunity on the business, we are also focusing on cost reduction. We have talked about labor cost, etc., which will drive the values to the business. So and the result what we are currently doing with these actions or focus to take share in the market and do better than the market, which will ultimately create values for the shareholders. And by and so large, I think, you can see the results we are meeting those expectations.

Saket Kapoor — Kapoor & Company — Analyst

But sir how this will get translated when it boil [Phonetic] down to your investor [Speech Overlap].

Khalid Iqbal Khan — Whole Time Director – Legal and Company Secretary

So let me give in a very simple example, Saket and allow me to make it little bit simple although I am giving an example. See, If you see typically during last one year even off late during last quarter you would have noticed if I have to take example of Toyota getting — announcing a new hybrid vehicle and which is in collaboration with Suzuki and it is manufactured at Toyota plant. So it has a hybrid as well as the convention engine okay.

And then you had this new Scorpio launch, which is claimed to be 100,000 booking done in 30 minutes. And similar number also claimed by Toyota and Suzuki for Grand Vitara and their hybrid vehicle. Now if you think their typical, the architecture we are present for example with the Toyota powertrain with hybrid and these have a high content per vehicle than an entry level vehicle.

And here we participate with customer, as a kind of a solution provider to them. So in a typical, I would say low end vehicle, it will be more — there are somebody giving you the drawing and you are making as per that and where the value content on the table is less for a supplier.

So what I am trying to say is as the needle is moving and these kind of vehicles the customers are seeing to really put their focus on the vehicle design and the engine and combustion chamber they have given a chance to supplier like us to contribute because we are seeing that probably we can give the best solution. So that’s where the value addition is coming. I do not know, if I am able to explain this now.

Saket Kapoor — Kapoor & Company — Analyst

Yeah, sir. Okay. I can take offline also, but value addition okay for your customer is done, sir definitely that will translate into better margins. But your cash generation sharing with your investor when will that start happening sir? And for the consolidated account sir, if you throw some more light sir [Speech Overlap] also better.

Khalid Iqbal Khan — Whole Time Director – Legal and Company Secretary

[Speech Overlap] when these things start kicking in, so you will see that our revenue content per component, we also see a very significant shift in the needle. And this dipping has to hit on the ground and this whole I would say parabola shift and which happens in the market, you will also shift, you will see this parabola shift into our numbers with some lag.

Saket Kapoor — Kapoor & Company — Analyst

Right, sir. Okay, sir. Khalid sir about the new management thought process currently and dividend and I think so their option for this buying back the minority shareholders. Any update on the same.

Khalid Iqbal Khan — Whole Time Director – Legal and Company Secretary

Okay. So on the buyback there is no plan right. With regard to the tender offer whereby an exit opportunity will be given to minority shareholders, so they are still working on it and they have publicly announced that it will happen sometime in the second half of the year. So we don’t have any specific timeline from them but they are working on the documentation part and wherever required we have been providing the information to them for finalizing the documents.

Saket Kapoor — Kapoor & Company — Analyst

Okay. Correct, sir. Sir I will come in the queue, sir. I have couple of points. Shall I ask or [Speech Overlap].

Vinod Kumar Hans — Managing Director

Let’s give chance to others.

Saket Kapoor — Kapoor & Company — Analyst

Yes, sir, I will come in the queue. Yeah, please. Thank you, sir, for the elaborate answer, sir, and will wait for my turn again.

Operator

Thank you.[Operator Instructions] We have the next question from the line of Ashwini Jainapur [Phonetic] from Lime Water [Phonetic]. Please go ahead.

Ashwini Jainapur — Lime Water — Analyst

Hi. Good afternoon. My complements to the management for a good quarter despite lot of market challenges. My question to you is looking at the global inflation numbers, what are your plans of rebalancing your export to domestic market. And are there any new markets internationally that you would be looking after? And how would your product mix be matched to the export market please.

Vinod Kumar Hans — Managing Director

So if I have to take the question what’s happening and you will see more and more I can now mention because Citroen had announced its vehicle and this platform when I say platform the engine powertrain platform will be globally I would say manufactured here and supplied in other countries. So this is one way to look at answering your question on the inflation and other side. So obviously as I mentioned that India is still a sweet spot within the global scenarios. Even if the market are difficult in some of the geographies that is making it clear shift in some of the OEMs to produce more from India okay and that’s what we see here.

And we also see I would say better allocation of semiconductors to Indian companies, so that they can produce competitively here. So this is one of the reason if you see globally India is performing much better than I would say any other region. So that’s a very clear shift, which is happening.

So for us what this means is, there will be, I would say not a real export, but increase in the deemed export, which we have been communicating in our several previous calls. So I think now you will start to see this happening okay. And then you see the latest product, which are launched by almost all the OEMs, they are the global product. In fact some of these were the global launches from India. So that is again, a good news for component suppliers like us. Okay. Having said that, we are also discussing with our global team with the same the drive, where our OEMs are experiencing. Obviously, there we are working on several possibilities there. We can supply to our global locations from here.

So but I have to also mention with a caution that our kind of product it takes about anywhere between 12 months to 18 months for testing and homologation to be completed. So but I can say with confidence that there are projects, which are under final stage, where we are just speaking in those investments. And maybe, Manish can share better that our investment in this year would be definitely better than the previous year, although if you see overall, there is so much of uncertainty, I would say, volatility is the norm. But we are very clear and we should be investing more than what we have done in the previous year.

Ashwini Jainapur — Lime Water — Analyst

What are the top line expectations then can you give us a prediction for the rest of the three quarters?

Vinod Kumar Hans — Managing Director

I am not sure, we should give you a hard line projection. But Manish could you answer this question in the capacity utilization way.

Manish Chadha — Whole Time Director Finance & Chief Financial Officer

So I think Vinod, I am not sure whether we can comment on the future projection. But as we mentioned the current quarter July to September, we will see better from the previous quarter, the capacity utilization [Indecipherable] somewhere around 95%. So that is one way of looking into this for the full year. And at the same time, Vinod did mentioned that we are investing more than the previous year and even within the year with this capacity utilization, we are thinking to prepone those capex within the year that, so that we can start delivering of — we can prepone those deliveries. So we see a good growth in this year, as compared to the previous year.

Ashwini Jainapur — Lime Water — Analyst

Okay. Give us some flavor of what would be the spends on R&D, any new product lines coming in.

Manish Chadha — Whole Time Director Finance & Chief Financial Officer

So again I’ll take this question. Thanks for that. So our main R&D is happening globally. We are relying there. But at the same time we have an application center, application engineering and analysis is done in India. So overall if you ask me the total cost for [Indecipherable] is somewhere around 1.5% to 2% per year.

Ashwini Jainapur — Lime Water — Analyst

Okay. Thank you. Thank you for that update. Any — and my final question is what is the update on the status of buyback if I may ask.

Vinod Kumar Hans — Managing Director

Khalid can you take this.

Khalid Iqbal Khan — Whole Time Director – Legal and Company Secretary

Sorry can you just repeat it.

Ashwini Jainapur — Lime Water — Analyst

After the whole Tenneco growth — sorry the acquisition, any update on the — any status update for buyback and price revision on interest account.

Khalid Iqbal Khan — Whole Time Director – Legal and Company Secretary

Okay. So as I answered to Mr. Saket Kapoor, Apollo is working on the detailed public statement and letter of offer, right. There were certain approvals pending. So hopefully this should happen. They have announced that this will happen in the second half of the year, okay. So we don’t have visibility on the exit timelines. But we hope that it will happen in the second half only. Okay.

Ashwini Jainapur — Lime Water — Analyst

Okay. Thank you. Thank you for the update. All the best to the management. Thanks, sir.

Vinod Kumar Hans — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Priyanka Singh, as an Individual Investor. Please go ahead.

Priyanka Singh — Individual Investor — Analyst

Thank you, sir. Good evening, sir. I have two questions. One could you share some insights on your EBITDA in terms of lower commodity prices? And the second question is how are you planning your dividend distribution among investors for the rest of the fiscal year? Thank you.

Manish Chadha — Whole Time Director Finance & Chief Financial Officer

So we discussed in our presentation that commodity prices are on the peak in April and May and then softening in June. But at the same time Vinod did mention that we have a contract with the customers, where we see lag recovery coming in. So for the current quarter, I would say, the lag is somewhere around almost 0.5% of the revenues. We are pretty much recovering say from the current quarter exposure. We have almost recovered 90% of the recovery. So that is one on raw material exposure.

Vinod Kumar Hans — Managing Director

Also, I will add that we also forced to increase our prices in the aftermarket from 1st of July. So that is another action we have to push it onto the market because these costs was simply unbearable. So you will see some advantage from there. Although, we have to see whether the market is able to absorb this price increase what we have put into our independent aftermarket.

Priyanka Singh — Individual Investor — Analyst

Thank you, sir, and I wish you well for your next quarter as well. Thank you. Thank you so much.

Operator

Thank you. [Operator Instructions] [Indecipherable] follow-up question from the line of Saket Kapoor from Kapoor and Company. Please go ahead.

Saket Kapoor — Kapoor & Company — Analyst

Yeah, sir. Sir, as we discussed earlier also and requested from investor analyst community about the capital allocation policy? If you take into account the cash generation that happens on a quarterly basis and how is this cash going to be deployed? You mentioned about 1% to 1.5% of the revenue on R&D. And other aspect, if you could give some clarity how are you going to share this cash with your investors that will suffice [Phonetic] sir.

Vinod Kumar Hans — Managing Director

Thanks, Mr. Saket Kapoor for your question. So I think we did discuss earlier also that we are discussing on this dividend distribution we are taking up with our management. But at the same time I think we were also discussing that we are seeing the growth opportunity with the business increasing, there is increase in the working capital, we are spending more than — in capex more than both in the last year and also preponing all the stock. So I think we are addressing both with this cash and customer investing in India or looking India as the hub, sweet spot for this automobile. So I think this cash liquidity is helping us, but at the same time, we are committed to consider this dividend distribution this year also. We are working on that.

Saket Kapoor — Kapoor & Company — Analyst

Okay. Sir, so may be sir, when can we hear something about it? I think so we closed the year in the month of March quarter and now the AGM is due and we know that there was no resolution for any dividend distribution last year. So for this year, should we wait for the March results then to it or what is the thought process? And what is the cash on book sir, as on 30th June.

Vinod Kumar Hans — Managing Director

It is INR122 [Phonetic] crores cash available. So as I mentioned there is a lot happening in this world [Phonetic] of with this global disturbance and the market picking up, investment capex, working capital and then we have a change in management also in our company. So we are trying to coordinate, address all those stuff. The business should not suffer. And as we mentioned that we are working towards that and we will try to get it resolved at the earliest.

Operator

[Operator Closing Remarks]

Vinod Kumar Hans — Managing Director

Thank you.

Khalid Iqbal Khan — Whole Time Director – Legal and Company Secretary

Thank you.

Manish Chadha — Whole Time Director Finance & Chief Financial Officer

Thank you. Thank you, everyone.