Gabriel India Limited (GABRIEL) Q2 FY23 Earnings Concall Transcript

Gabriel India Limited (NSE:GABRIEL) Q2 FY23 Earnings Concall dated Nov. 11, 2022

Corporate Participants:

Manoj Kolhatkar — Managing Director

Rishi Luharuka — Chief Financial Officer

Analysts:

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Deep Shah — YES Securities (India) Limited — Analyst

Chetan Gindodia — AlfAccurate Advisors — Analyst

Akshat Hariya — Multi-Act PMS — Analyst

Dhiral Shah — PhillipCapital (India) Private Limited — Analyst

Jyoti Singh — Arihant Capital Markets — Analyst

Jayesh Gandhi — Harshad H Gandhi Securities Private Limited — Analyst

Pankaj Prabhakar Bobade — Affluent Assets Private Limited — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to Gabriel India Limited’s Q2 FY ’23 Earnings Conference Call.

This conference call may contain forward-looking statements about the Company, which are based on the beliefs, opinions and expectations of the Company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.

[Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Manoj Kolhatkar, Managing Director at Gabriel India Limited. Thank you, and over to you, Mr. Kolhatkar.

Manoj Kolhatkar — Managing Director

Thank you. Good morning all, and a warm welcome to this earnings call of Q2 and H1. So all of you had first view — all of you had a very good, safe and very happy and joyous Diwali. So we are now — of course, we had both the festivals Dussehra and Diwali in the month of October. I must say a bonus month as far as festivities are concerned. So good to see all of you back.

Along with me is Rishi Luharuka, our CFO; and Nilesh Jain, our Company Secretary; and our IR advisors, SGA on the call. So we’ve uploaded our results and the presentation for the quarter ended 30 September. I hope you have been able to go through the same. So I’ll, of course, take you through the presentation on some of the slides as we go along. But, I mean, before that, I’ll just give a brief industry overview. So top line, of course, we are very happy to report that our growth momentum has been very good, continued in the second quarter, and we had the highest-ever sales in a quarter ever. So, I mean, that’s something really significant. If you see, we have been able to accommodate a lot of new product launches during this period and relatively flawlessly, so we are seeing an improvement as we go along product launch after product launch in terms of our own maturity of launching the products, that is helping us in the time-to-market part.

In the EV market, of course, I’ll share that as well, it’s been an — it continues to be a good success story. So, in fact, all of our business verticals have exceeded our expectations, resulting in increased volumes. Capacity utilization is in the range of 65% to 70%. In fact, the passenger car, as we speak, is going up even higher. I’ll come to that when we probably go through the questions.

So coming to the auto industry, yes, the challenges continue. Thankfully, and hopefully, we are — I mean, our — the COVID pandemic is behind us now. It’s already a thing being declared as an endemic. So that challenge is relatively, I must say, taken care of. But the semiconductor and supply shortages still continue in the industry. And as we all know, it will still take time, that’s what the industry experts say. Commodity prices, the inflation was really severe over the last two years. So that clearly has started easing off from the last quarter onwards. And we are seeing prices come off, all those highs and coming back to almost pre-COVID levels. We talk about steel, aluminum, copper, every commodities, we are seeing a reduction that is happening. Of course, this is, as you know, in our case, it’s a back-to-back arrangement with the customers. And you all, of course, you must have read the recent article on the huge backlog of or waiting list of cars. In fact, if you go to buy any car now, the standard waiting period is one and a half to two months, some models going over a year as well for waiting, which shows a very clear, robust pipeline for passenger cars, particularly. And, of course, yes, there is a bit of cautious optimism there in the industry as well. I’ve been speaking to some of the OEMs. They say that once this demand is over — again, this demand you have to read it with a little bit of pinch of salt because there is some double bookings which happens in these times. But once this demand is over, there might be a — I’m not telling a slowdown, but definitely, we’ll not see the growth rate that we have witnessed in this first half.

As regards the passenger vehicle segment, we had a record month in September, record quarter as well. Clearly, volumes for passenger cars is going to cross 4 million figure for the first time as regards the annual numbers are concerned. There is a very strong response, particularly for the SUV vehicle. As you know, SUVs are over 50% of the sales. So that is a clear shift that has happened in the industry. Infrastructure and real estate are expected to expand as are also mining, e-commerce, transportation and logistics, which all are very important for economy and for mobility, which is where we come into play. In the coming months, we’ll be shed by the adequate rainfall, which has thankfully again, been very good for the country. The first six months of the fiscal year, the CV industry grew very strongly at 54%. It has not yet reached the peak in terms of volumes, what we witnessed in 2018-’19, which was over 1 million. But if you see in terms of tonnage, it surely has crossed that figure. As you know, the tonnage norms got redefined based on the axle load norms. So if you see the tonnage kilometers, I think we have exceeded the earlier figure as far as the industry is concerned.

Another growth area has been the three-wheeler segment, which was very dormant, particularly because of — I mean, the most impacted segment during COVID because people were not preferring this mode of transport, the schools were shut, colleges were shut. But this has shown a huge increase in sales in April to September, the first half of the year. Within this, of course, the movement towards EV is even stronger, as you all know, which again, I’ll share during the slide.

I mean, talking about EV, the demand for two-wheelers is, I mean, really very high. I mean, the last — in the month of October, though, it’s not in H1, but you all know, in the month of October, the industry — I mean, the two-wheeler industry, EV sold over 74,000 vehicles. So that’s really a huge jump from the earlier 50,000 peaks that were — which the industry was hitting in August, September. October has been a bumper month with over 70,000 two-wheelers, I mean, in terms of EVs. So here, again, as I mentioned, Gabriel has been quite successful in getting all the orders from the key two-wheeler makers so that has helped us gain market share in the overall two-wheeler segment as well.

Coming to the numbers, now I’ll take you through the presentation. So I’ll just read the slide, if you go to Slide #5, which is the financial highlights Q2 FY ’23. As you can see, we — like I already mentioned, we did a revenue of INR800-plus crores, the first quarter, we did INR800-plus crores, which is almost a 36% jump year-on-year. And even if you see sequentially, INR802 crores would be about 10%, 11% compared to the previous quarter, which was also a record quarter, which was INR720 crores, which you can see below.

In terms of EBITDA, we did INR59 crores, which is 7.4%. So marginal improvement in EBITDA from, as you can see below, Q4 — the last couple of quarters from 5.5% to 7.1% to 7.4%. So our efforts on cost reductions and CORE 90, which I’ve already mentioned earlier, on several calls, those are working. And similarly, in PBT, you will see pretty much the same improvement of 36%, 37% Y-o-Y.

Coming to Slide #6 — Slide #7, sorry is the financial highlights for the first half, H1. So we crossed INR1,500 crores, so INR1,524 crores in sale, I mean, needless to say highest-ever. EBITDA of almost INR110 crores, PBT of INR94 crores. The balance sheet position also is good, net cash of INR251 crores, and we had — in H1, we had cash flow from operations of almost INR25 crores, which was a little less than the last year’s corresponding period. But in the quarter, if you see, we had a much better cash flow compared to the last quarter. Capex, I mean, we incurred almost INR46 crores — INR47 crores of capex in this year, mainly on R&D and capacity improvements and quality and safety improvements that we have done all across our plants.

Slide #8 is the very quick P&L. So I’ll not go through the details because we already shared that. We’ll move to Slide 9, which shows the trend. As you can see, FY ’23 half year sales is INR1,523 crores, which is more than the full year sale of FY ’17. So good growth, good gain in market share in all segments that Gabriel has achieved has led to this good improvement in the sales figures. ROCE for the quarter, again, has been really good, almost 34%. So, again, based on our good efforts by all the teams and Rishi, who is on the call, I think this we have achieved quite well.

On Slide 12 are the key ratios, while — I mean, again, I’ll not go through each of the ratios, but we also know that we declared the interim dividend of INR0.90 yesterday in our Board meeting. So this is, again, something which is definitely in line with what we have been planning to do.

Coming to Slide #14, which is the segment performance. Two-wheelers and three-wheelers, this is including aftermarket. So the market share here, of course, is the OEM market share. As you can see, while 65% of our total revenue comes from two-wheelers, the market share is 32%, this is including EV. Just to share, at the same slide last year, which was the half yearly call, which we had in November of 2021, this figure of market share was 25%. So you can see a very healthy improvement in market share, mainly on the back of the EV dominant position. We are get — we continue to get good models, recent launches being the TVS Raider, which is very successful. Jupiter 125, Mahindra, all the platforms of Yezdi and Jawa and Bajaj three-wheeler models. I mean, EV, OLA, Ampere, Ather, Okinawa, we also got an order from Hero Electric, which is the only one which we didn’t have. We also got that order and the SOP will begin in the next quarter.

Coming to Slide 15, which is on EV. Our share of business in EV is 66%. So the industry figure was 32% as we saw in the previous slide. But the EV share of business is 66%, which is — and you can see the models. So Okinawa, Ampere, OLA, Ather, TVS iQube. We are there in all these industry leaders except Hero. So that augurs well for us, for sure.

Coming to passenger car. Again, this has been a good performance. The market share is 23%. The same figure exactly one year back was 21%. So we again, marginally improved mainly on our increased share of business from Maruti Suzuki and the Toyota platform. So Maruti Suzuki, we have won the — what we’ve written here is YXA, YFG, which is basically the Vitara Brezza and the Toyota Hyryder. So these are the two key volumes and in pipeline is YWD and, of course, Y0M, which is new Alto, has already been introduced. YWD is the Jimny, which is shortly going to be launched. We also have started the Stellantis, or the Peugeot, Citroen CC21, CC3 as well, which has received — which has been received quite well at the market. The volumes are small. But it’s a good car, I must say, quite a spacious roomy and a good value for money for that price point.

So still on Slide 16, which is the passenger car. So, yeah, we also have already got the business from Volkswagen and Skoda for all the new vehicles that you see currently, right from Slavia to Virtus to Kushaq and Taigun. So that is entirely with Gabriel. So this will, of course, keep adding to — as the volumes ramp up, this will to the passenger car space as well.

Going to Slide 17. Yeah, Slide 17 in commercial vehicles. So here, of course, we have the dominant market share, almost 90%, all the new platforms, I mean, almost all OEMs are with us. We continue to work on some new technologies here as well, so that we are able to answer all the future requirements very well. We — our exports program in DAF is also going quite well. We are already exporting to Netherlands and Brazil, and we have won some more programs from them as well. And, in fact, recently, we had the PACCAR DAF vendor meet, the annual vendor meet, where we were asked to present to the entire fraternity on the success story of Gabriel. So, we already have won the award from them as the Best New Supplier and also top quality supplier, which they have an award called 10 ppm. So we have won that as well. So this is — this augurs well for our exports and how — I mean, we surely want to leverage this in terms of our global journey in CV, particularly.

The next slide, Slide 18, is on railway. You can see a lot of new pictures here, new models for us. So we have got at least the first breakthrough for The Vande Bharat Express, this will be — we will be supplying to Medha, who got the order for the rakes from the government. So we’re also talking to some other rake manufacturers. The discussions are on. And other important thing is, we have been developing and working on the locomotive dampers, which we — which Gabriel was never supplying. So we have again got the first development proto [Phonetic] order, and we have actually supplied our parts for tryout to the locomotive works. So this will also increase our presence in the railways. Having said that, yes, the volumes are still small for railways, they have still not recovered fully to pre-COVID volumes. So we have to wait and watch this particular segment. But yes, our product portfolio has definitely increased or the content for railways, if I may call it, has definitely increased as regards railways.

Coming to next slide, which is Slide 19, aftermarket. Again, very strong growth, 24% growth on H1. And in fact, we have hit almost INR100 crore figure in a quarter — in this last quarter for sales of aftermarket. So a lot of new product launches that has been — and we are trying to reduce the time-to-market. We are increasing our traded products or the branded products that we have. Tires, while we had launched it earlier, we had some challenges. So we are now reining the push on tires, and we surely expect this to increase quite well going forward. The initial response has been good with the new launches that we have made in tires, particularly.

Slide 20 is the exports. Yeah, as you can see, this has been — while the story was good, and we are on the right track for the entire last year, I mean, the — I would say, post-COVID. But then due to the Ukraine conflict that is going on, Volkswagen has almost closed down the operations there, so which has a significant impact on us because we were supplying on a single-source basis to Volkswagen Russia for the rear damper [Phonetic]. So that decision is yet to be taken, what we hear is, they are likely to shift this production to a different country. Work in the timing this volume has gone out from our figures. But despite that, you can see from Q4, Q1, where we are doing INR21 crores, INR22 crores of quarterly sales, we have still improved it in Q2 to INR25 crores. This means largely on the increased orders from DAF of Netherlands.

21 is the balance sheet, again, I’ll not — I already shared the broad numbers, which is INR251 crores of cash at the end of September, and capex of INR46 crores that we have done. We have also lined up some new capex for increasing capacities, this is Hosur, where we are doing an in-house — actually a backward integration, where we’ll reduce dependency on our imports from China, which has been a continuous initiative for us. Jharkhand for capacity expansion because the Toyota Hyryder and Vitara Brezza, both are being supplied from Jharkhand and the Volkswagen as well. So because of this there is a good increase in demand in Jharkhand. Dewas paint line an improvement and the paint line was very old. So you’re having quality and safety issues. So this was a planned decision. So this is on stream now, new hi-tech paint line with much better efficiencies and quality. Khandsa, again, expansion due to really good volumes of Maruti Suzuki, in addition to our own increase in the share of business with regard to Maruti. So both these together. This, we have started last year itself. I mean, we’re actually coming to the — we’ll probably come to the close of the capacity expansion. We are also putting up a — adding a building for this, of course, we have to take the relevant permission. So that is on stream.

Cash flows, again, I’ll not spend time on this. The CORE 90, which is Slide 23. I’m — while I’m mentioning slide is this has definitely helped us when you are seeing the results, we continue to push. We are reviving it again. I mean, it’s always there, but we are again pushing so that we make the most of the improved commodity scenario and try to improve our margins further.

Yeah. So this is — I mean, the Slide 24 is a vision and going forward is the corporate overview, where you can see on Slide 25, the picture of our new tech center in Jharkhand, absolutely state-of-art tech center. So this will also help us in our journey in improving our positioning with customers. So this is — I mean, in short a quick run through our numbers. So based on the presentation that we have uploaded in the — on the site.

So now I’ll end my presentation, and just one more thing is the sustainability report, we have been as a Company and as a Group, very focused on sustainability, right from inception to be honest. We also won several awards in the industry within the auto component industry. I mean, yes, we are known to be doing very well on this front and the human infrastructure practices as you all know. So I’m very happy to share with you that we’ll be launching our first ESG report very soon, in fact, in the next week, it is ready. But I thought I’ll take this opportunity to share with all of you that we’ll be launching the first sustainability report for ’21-’22. And from next year, it will be along with the annual report itself.

So with that, I hand over back to the moderator and look forward to your questions and your inputs. Thank you.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] Our first question is from the line of Viraj from SiMPL. Please go ahead.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Yeah. Hi. Thanks for the opportunity and congratulations on a good set of numbers in such a challenging environment. I just have a couple of questions. First is on the cost part. So we have been, for last many years, undertaking CORE 90 program. And I think the benefits of which we have been clearly seeing in last few quarters. So just kind of dwelling a little deeper into this because when you look at the opex cost and — at the reported level, we have this management service fee, which I’m assuming is kind of a portion across the four quarters. So when we’re to kind of this kind of adjust for that? How would have our breakeven cost moved in last few quarters as a benefit of CORE 90? So any deeper if you can dwell into? And incrementally, what kind of savings one can expect further — from this program?

Manoj Kolhatkar — Managing Director

Thanks, Viraj. So, yeah, I mean, we have been working, we track the breakeven point and the breakeven point has been reducing. So the absolute breakeven point, of course, has gone up due to higher volumes and higher costs and there are some conscious investments that we have to do as we move to the next level of revenues. So, I mean, that definitely adds some costs. But, however, the breakeven point in terms of percentage of sales has been continuously reducing. That’s how you see the improvement in the margins that you have seen over the last couple of quarters. So that remains a focus area.

Now, your second question of how much we can expect more from this cost efficiency, it’s a game which is you have a place to survive in this industry. While, as you know, the OEMs also have not passed the entire price increase to the market. They have absorbed some of the commodity increases to the market, which is why you’re seeing such a good demand as well. So they have absorbed in terms when the reduction scenario starts. While we have to pass them on, there is a continuous pressure from them to pass on reductions due to volume increases. So that continuously goes on. So you have to, what you call, keep running twice as hard to stay in the same place as we say. So that continues. But definitely CORE 90 has synthesized the entire team towards cost. That is a good part. So we are better prepared in case of when things go — things do not go as planned.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

So just two follow-up on this. One is, in the past, we used to talk about the breakeven being around, say, plus 72%, 75%. And we I think on the last call, brought it down to below 68%, 67% and this was a couple of quarters back. So, if I have to just understand in current perspective, would it be still around those levels? Or we have managed to further bring it down to, say, probably somewhere between 60%, 65%, those kind of levels? Just a perspective if you can share, maybe not the exact figures. And…

Manoj Kolhatkar — Managing Director

We’ve been able to [Technical Issues] down from 68% levels surely. So, I mean, I would say, a couple of percentage points, yes.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Okay. And second part to the question was, as volumes further improve, just trying to understand, the cost base, which you are looking at right now and we’ve been kind of maintaining this kind of a cost base for quite some time. So what kind of a scale this cost base kind of cater to if I have to look at next two, three years? And beyond which we will have to kind of look at significant increase in the investment or just in kind of give a perspective what kind of a cost base — just what kind of a turnover this cost base can cater to?

Manoj Kolhatkar — Managing Director

Yes. In terms of, I would say, maybe slightly rephrase your question, and I would say that there will be some costs that we’ll add to be ahead of the industry or at least even the — in some cases in line with the industry as regards to technology. So we have already shared in terms of having a dedicated technology team, we have already added our CTO from — who is an expat [Phonetic]. We are adding a couple of people more there. In fact, we’ll add them in Europe and back here in India as well. So these will be some additional investment that we will do in terms of ensuring that technology is in place for the future development of suspension. So these are costs that we’ll have add. Also, yes, we have to add some — while we’ve had a good land bank, we still have a good land bank, we have to add some more greenfield locations now going forward because up to INR3,000 crores, like I had mentioned in the earlier call also, some years back, possibly, we’ll have to look at addition of buildings, even in new spaces. So we will be definitely adding a footprint in South to increase — to meet the increased volumes of two-wheelers, EV and also improve our backward integration. One dedicated initiative that we have taken is reduced dependence on imports, mainly, as you know, from China, mostly from an angle of, one, geopolitical uncertainty and second, also from being more flexible and third, being more cost competitive. So these are some investments that we’ll have to do that will add to the cost, if that answers your question.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Okay. So the reason why I was asking is, in last couple of years, you’ve kind of also made a significant investment. So we have opened a few more R&D centers. We have added some — you kind of bridge some roles at the senior level. So in that perspective, despite those investments, we have kind of able to maintain the cost base quite well. And hence, I was kind of — I’m trying to understand in relation to the current cost base, what is the kind of scale one can kind of cater to without — before going into a major next level of investment. So that was the whole thought process.

Second question is in relation to — you mentioned about greenfield investments, which we are looking to cater to. So when you’re kind of looking at setting up a business, what are the kind of commitments or communications you are getting from your customers? If you can just kind of give a more deeper dive, which segments these are and which we are seeing demand accruing and hence, we’re kind of looking at greenfield investments per se? So that is second.

And third is, any update you can give on the new venture or a new product which we were kind of evaluating? I think it’s more than a year, year and a half. So any perspective you can give on those points? Thank you.

Manoj Kolhatkar — Managing Director

Viraj, so yeah, quite a few questions. So, on the greenfield, I’ll tell that, basically — I mean, the customer volumes — I mean, we can’t double guess the customer. We are seeing clearly there has been a very solid growth quarter after quarter. So we’ll have to be in line with that. We do our own factoring of volumes of, of course, each customers. But then we are still clearly seeing a growth. And as I said, part of it is customer-driven, part of it is our own intent to integrate backwards, so reduce our cost base. So greenfield is a mix of both.

The other part also, on the new product or I would take it on a larger level, which is inorganic growth. So yes, we are — as we speak, in discussions on, I would say, a couple of projects. But, obviously, I cannot share as of now because they are still in discussions.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

So for new product, I meant more from a sensor. I think that was one of the products we were evaluating.

Manoj Kolhatkar — Managing Director

Yeah. So sensor is a product we are evaluating, again, we’ve done the complete detailed study. So we had even applied for the PLI benefits there. So that is one of the commodities. So the detailed scanning is done in terms of who are all the players who can give us technology. But yes, it is still early stages.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Sure. I’ll come back in queue. Thank you.

Manoj Kolhatkar — Managing Director

Okay.

Operator

Thank you very much. [Operator Instructions] Our next question is from the line of Deep Shah from YES Securities. Please go ahead.

Deep Shah — YES Securities (India) Limited — Analyst

Yeah. Thank you for the question, sir. And so, couple of questions. First is on the market share gains, you have mentioned in the PPT for two-wheeler segment, it was at about 2% if I’m not wrong sequentially to 32%. And similarly for CVs also is at about 4%. So first of all, what explains this and whether these are sustainable expansions?

Manoj Kolhatkar — Managing Director

Mr. Shah, I mean, they are definitely sustainable because we have made some — as I said, in the EV space is helping us — I mean, their volumes are increasing as you see month-on-month, I mean, the growth is 300% in EVs. And it’s only keep going up. So there we will continue to increase our market share totally. Having said that, yes, maintaining this kind of share of business in EV will not be easy. Certainly, there will be other people vying for this space, as well as OEMs should be looking at alternatives. So that will go on as a process. But on a trend line, yes, this market share improvement can continue, even with legacy customers, let’s say, TVS, where we’ve grew our market share, with HMSI, it has improved marginally, but with the introduction of this new motorcycle, which they are planning, it will — where we have got 100% share of business. So it’s a first motorcycle entry actually. So this will improve our share of business with HMSI further.

Similarly, if you see on PC side, Maruti Suzuki, they’re gaining more and more models. Tata Motors, we have got one model, and we are — just last week, we have got a confirmation for another model, so where our presence was quite low. So that’s why it’s significant. So we are gaining there also. And I mentioned on Volkswagen, we were under development. Now all the products are developed and cleared and we will be — we already started production. But each and every model will start getting productionized now. With all this, clearly I see the market share improvement will surely continue.

Deep Shah — YES Securities (India) Limited — Analyst

Okay. Sure. Thanks. And second question was on this backward integration capex, which you have been talking about. So if you can talk more on how things will shape up, let’s say, on the cost savings front? Because we are talking about localizing the components from China. So on sustaining basis, do you see this would add at least 40 basis points to 50 basis points to our margins?

Rishi Luharuka — Chief Financial Officer

Yes, that’s an interesting question. See, there are multifacets reasons as to why we’ve done the localization and why we continue to do some amount of in-sourcing rather than actually buying. A couple of things. One is largely also driven by the customer requirement or some of the strategic processes to be done in-house. The other is, obviously, to streamline the supply chain and reduce the dependency because of the high lead time that we have seen. The third aspect is with regards to cost. Cost is something that, obviously, when we take the decision, it’s beneficial to us and a project like Nest, that’s what we mentioned in the capacity and in the capex slide as well is significantly going to help us in terms of improving our raw material costs. But over a long period of time, these initiatives are largely driven towards maintaining a steady state of supply to the customer and also to reduce dependencies where their processes which are critical to the product.

So in terms of benefits overall, well, the way we look at it from there, in one way or other, there will be another compensation for this, so not very clear to sort of comment on your 0.5 at this moment. But the endeavor is definitely for each of these projects to ensure that there is a reasonable payback and the hurdle rate of IRR is also taken care of.

Deep Shah — YES Securities (India) Limited — Analyst

Sir, just to follow-up. What is the absolute capex amount for this particular stuff for backward integration?

Manoj Kolhatkar — Managing Director

Well, we keep adding. We have done almost — if you ask me, we have done almost INR20 crores already in terms of using or adding furnaces and machining centers to — the biggest commodity that we buy is the aluminum front fork outer tubes from China. Now, let me also tell that they are really absolutely efficient and real top quality — it’s really difficult to even find a supplier in India who can give that quality, that quantity at that price. So that is why we took this decision of making it in-house. So we have done investment. We are further increasing the capacity by adding one more furnace which got approved in yesterday’s Board Meeting. So we will continue to do that.

So like I mentioned and Rishi also mentioned, China is, as you all know, really competitive. So it’s not that by doing that, I will — we’ll immediately take some big amount of money. It’s not like the localization from Japan or the developed countries, where we have 20%, 30% margins. So that is a difference. But also let me tell you, there is an improvement — we obviously, get some benefit and the bigger benefit is in terms of the flexibility. So if you know, last — not last year, but when — after COVID when there was a steep story [Phonetic], we had incurred a freight bill of almost INR10 crores to INR15 crores in the year [Technical Issues] supply from China because there were COVID factors, container factors, shipping not available, etc. But now this year, I hardly got a call from any customer during Diwali, even during these high volumes, which really means that — the supply chain is far more streamlined. It’s a much more smoother supplies, which improves our customer goodwill, improves cost, no doubt. We don’t incur these costs and reduces a lot of stress — unnecessary stress in the system.

Deep Shah — YES Securities (India) Limited — Analyst

Sure, sir. Thank you.

Operator

Thank you. Our next question is from the line of Chetan Gindodia from AlfAccurate Advisors. Please go ahead.

Chetan Gindodia — AlfAccurate Advisors — Analyst

Hello, sir. And congratulations for great set of numbers. Sir, I have two questions. Firstly, if I see two-wheeler and passenger vehicle volumes on a quarter-on-quarter basis, they have grown by 14% to 16%, whereas our revenues have grown by 10% to 11% on quarter-on-quarter basis. So has there been any realization decline that we are seeing that we have passed on? And is it now entirely complete, if you can explain this?

Manoj Kolhatkar — Managing Director

Sorry, Chetan, did you say our revenues have — I probably lost you on that — revenues have declined…

Chetan Gindodia — AlfAccurate Advisors — Analyst

Revenues have grown by 10% quarter-on-quarter.

Manoj Kolhatkar — Managing Director

Yeah. Yeah, 11%, yes, that’s right and?

Chetan Gindodia — AlfAccurate Advisors — Analyst

Yes. Versus PV and two-wheeler industry growth in 216 [Technical Issues] quarter-on-quarter basis. So is there a realization decline?

Manoj Kolhatkar — Managing Director

No, I wouldn’t think so. In fact, if you — the figures that we have in terms of volumes of the industry, let’s say, in passenger car or CV or two-wheeler, three-wheeler customers, we clearly see — I mean, our growth has been ahead of the industry. So maybe we need to…

Chetan Gindodia — AlfAccurate Advisors — Analyst

Got it, got it, sir. And secondly…

Manoj Kolhatkar — Managing Director

But we’ll come back to you on that.

Chetan Gindodia — AlfAccurate Advisors — Analyst

Okay. Sir, secondly, we have multiple new models. We are part of a multiple new models in the PV segment and also increasing our share of business with Maruti. So when can we see our market share improvement in the passenger vehicle side, similar to what we are seeing on the two-wheeler side?

Manoj Kolhatkar — Managing Director

Yeah. So, as I mentioned, we have already seen an improvement from 21% to 23% in passenger cars. I mean, same presentation last year versus this year. Now in two-wheelers, I mean, the good point or the blessing that we had was the EV, the change in the dynamics of the market because of the EV players and many of them being non-traditional, not aligned to any particular shock absorber maker. That played to our advantage, where they wanted a definitely a good, reliable brand name with a lot of flexibility in development. That’s where we could win business. That happened in two-wheelers and three-wheelers. But in passenger car, in the EV space, that — we are not seeing that kind of a huge volume. So, obviously, while our market share will improve from 23% to — I mean, we definitely target it higher than that, much higher than that. But it won’t be in the same pace as two-wheelers, due to, as I said, the dynamics in the market.

Chetan Gindodia — AlfAccurate Advisors — Analyst

Okay. Got it, sir. Thank you and all the best.

Manoj Kolhatkar — Managing Director

Thank you.

Operator

Thank you. Our next question is from the line of Akshat Hariya from Multi-Act PMS. Please go ahead.

Akshat Hariya — Multi-Act PMS — Analyst

Yeah. Hi, sir. Thank you for the opportunity and congratulations on record high sales numbers. I had just one question, mainly on margins. So if you look at it we’ve seen significant improvement in our cost structure below the gross margin level, and that is what has led to our recovery in EBITDA. However, if we look at the raw material cost are the cost above gross margin level. What we see is that, the raw material cost, which used to be around 71%, 72% up until 2018-’19. Now, since last few years has been in the range of about 75%, 76%. In fact, this quarter also, we’ve seen a sequential increase from 76.5% to 77%. So — and at the same time, we’ve increased our market share. So any such indication that the increased market share is coming at the cost of lower realization or something like that? Or when do we think about going back to our historical 71%, 72% RMC?

Manoj Kolhatkar — Managing Director

Yeah, Akshat, it’s a good observation. On raw material, as you all know, the commodity cycle was continuously increasing. So that definitely increased the percentage. So once these commodities are coming down, we will see some margin correction, but honestly, going back to 72% is difficult because, again, this is the way the market is moving, and we have to compete finally. So — but what we need to do in terms of improving our raw material percentages try to maximize in aftermarket and on exports. So that’s what we are trying to do. So it is balance out the market players. So that’s why we are seeing — you are seeing that push in terms of aftermarket, in terms of exports. So that’s — and getting new technology products, so that’s why the push on technology as well, where eventually we’ll be able to reset the — may not be the raw material, but overall profitability base, we’ll be able to reset it at a higher level when you introduce new technology products.

Akshat Hariya — Multi-Act PMS — Analyst

Understood, sir. And sir, overall, on the EBITDA, our target of double-digit EBITDA margins, are we on track? And what could be the timeline or a glide path towards that 10% EBITDA margin? Because still, we are like at almost 2.5%, 2.6% away from our target range. So the glide path would be mainly through RM cost or even further efficiencies below our gross margin level. And also, if you could give the thought process on management fee and any feedback on the — the feedback which we got on the last many calls? So any thought process on that from the management side?

Manoj Kolhatkar — Managing Director

Yeah. So EBITDA, I mean, 10% — yeah, it’s very difficult. I mean, I really cannot give a guidance going forward. But we clearly are focusing towards getting to double digits. It is getting more and more difficult, to be honest, as we go along with every change in the marketplace we are seeing this is becoming all the more difficult. So real difficult to define a timeline when it will happen. But — and we had earlier thought about 20%, 25%. COVID took over two years, the whole thing got reset. So we have to rework on that number getting back to 10%. Yeah, that’s what I think I can share on this.

Akshat Hariya — Multi-Act PMS — Analyst

Sir, any reward from the Board or the management on the management fee suggestion, which we’ve received in last many calls?

Rishi Luharuka — Chief Financial Officer

So, Akshat, on the management fee, we’ve explained in the previous call as well, these are towards expenditures, which are incurred by the Anand Corporate towards the various services, plus the brand for which we are able to realize the profitability from. And also we’ve done the benchmark study on the same as well. And we have found that in line with it. This also, as you might be aware, gets tested in the income tax assessment as well. So from that perspective, we are in line to the principal, as well as the percentage that is being given on this. Yes, there are some thoughts and discussions of looking at the model going forward given the increase in sale and volume. But yes, we have to still see that volume on a budget or a strategy number for us to look at the model. So as of now, we would like to continue with the current model.

Akshat Hariya — Multi-Act PMS — Analyst

Thanks a lot, sir. Thank you.

Operator

Thank you. [Operator Instructions] Our next question is from the line of Dhiral Shah from PhillipCapital. Please go ahead.

Dhiral Shah — PhillipCapital (India) Private Limited — Analyst

Yeah. Good afternoon, sir. Thanks for the opportunity. Sir, on the export side, what is our outlook considering the global slowdown and all?

Rishi Luharuka — Chief Financial Officer

Well, Dhiral, unfortunately for us, I mean, DAF is really doing very well. They’ve, in fact, introduced two models, which won the Truck of the Year Award and I’m proud to say, both of which Gabriel has been supplying. So that way, DAF story is very strong. And the slowdown that we are seeing, of course, is mainly on the passenger car side, which we are not — currently not supplying. Commercial vehicle is still going quite strong. And the issue, as I said, Volkswagen Russia, which I mentioned. Once they decide to shift it to another location, that actually will restart. So while it is a temporary setback, but going forward, I see that as an upside.

Dhiral Shah — PhillipCapital (India) Private Limited — Analyst

Okay. And sir, how much we are backward integrated as of now? And with the new capex that we are talking about how much this will improve the ratio overall?

Manoj Kolhatkar — Managing Director

Well, in terms of aluminum castings, we still do buy a lot from outside sources. But we have — close to half of it, we have already done. Plus machining as well, we have done even more, powder coating also we’ve installed. So that is done — this is the main component in two-wheelers.

Coming to passenger car side, we do the piston rods in-house with a very green and top-of-the-line technology. So that is, again, a main component. We do — I mean, I don’t have the figures as such how much of — on overall — because it’s a mix. Model wise, we sometimes do a make versus buy even model wise. So at gross level, if you want me to answer what would be our backward integration or what is the buy that we do, that I don’t have that figure, but we can definitely revert back to you.

Dhiral Shah — PhillipCapital (India) Private Limited — Analyst

Okay. Sure. And sir, lastly, on the aftermarket side, what is our strategy to accelerate the overall growth?

Manoj Kolhatkar — Managing Director

So, I mean, a couple of things. One is, we are continuing to increase our penetration and we have done in Tier 2, Tier 3 cities, but we take it much deeper and also trying to penetrate areas like Northeast, which we can do more. That is one.

Second, we have a very successful program called the Elite Retailer program, which we do in India. So now we have launched that in Nepal as well, and we plan to do that in the subcontinent, which connects us to the retailer who actually is the main person who can make a big change as far as sales is concerned. So this is the second part.

Third part is, as I said, tires, which we see as a good potential in terms of sales. That we had some — we had our own challenges where we had to change the supplier as well based on quality reasons — quality and capacity. So we have done that, and the response has been really quite good, so with this we were able to increase our new product push through tires. We continue to add new products. We already done, in terms of three-wheeler cone set, in terms of — we’re also looking at dry shafts. And we’re always doing the radiator coolant and the front fork oil, etc. So that is already in place. We also added the brake pads last two years back, the passenger car brake pads as well. So with this, aftermarket should definitely improve. In addition, we have formed a task force internally to improve our time-to-market and to introduce more and more products in the market. So that has also fallen in place. That’s why you see that we have been able to actually take out quite good numbers, good growth. And as I mentioned, a sale of almost just a little less than INR100 crore in a quarter.

Dhiral Shah — PhillipCapital (India) Private Limited — Analyst

So can you expect this run rate going ahead?

Manoj Kolhatkar — Managing Director

Pardon?

Dhiral Shah — PhillipCapital (India) Private Limited — Analyst

Can we expect this run rate of INR100 crore or even more than that going ahead also?

Manoj Kolhatkar — Managing Director

Yeah. I mean, I would say yes. I mean, we — I also forgot to mention, we’ve also added our dedicated exports manager in aftermarket team. So where — next year, we want to push the aftermarket sale as well. So even that addition we have done.

Dhiral Shah — PhillipCapital (India) Private Limited — Analyst

Okay. Sure. Thank you so much, sir.

Operator

Thank you. Our next question is from the line of Jyoti Singh from Arihant Capital Markets. Please go ahead.

Jyoti Singh — Arihant Capital Markets — Analyst

Yeah. Thank you for the opportunity and congratulations on the good set of numbers. So, sir, my question is on the EV side that how much percentage we are going to expect that we will grow?

And another question on the competitor side. Like we are in the smart lock and keyless, so like [Technical Issues] now we’re expecting it will grow ahead.

And last thing that I’m trying to connect with the management from the long time but I am not able to. So if you can help me in that also?

Manoj Kolhatkar — Managing Director

Okay. Thank you. You said your name was Jyoti?

Jyoti Singh — Arihant Capital Markets — Analyst

Yes.

Manoj Kolhatkar — Managing Director

Okay. Yeah, Jyoti, so you noted your last point, we’ll request LG also to try to get that connect done. On the other part, we lost you in-between, I couldn’t hear you, but I’ll just mention on the first part which you asked about the EV and the competition and the growth. So it’s growing — I mean, as you know, April, May, June, it was at 50,000, I’m talking about two-wheelers, which is the main segment that is moving in EV space in good numbers. That has gone to 70,000 in October. The schedules that we have got October, November also are good. And that growth rate will continue. I mean, obviously, the penetration of EV is still only 4% compared to the industry, but it is improving. Last year — actually, it’s gone to almost 6%. Last year, same time, I think it was about 2%. So from 2% it’s gone to 6% in two-wheelers. In three-wheelers, it is higher. So the growth rate for sure for next two, three years in EV will be very strong. I don’t see an issue with that.

In passenger cars, yes, as long as the OEMs are able to bring cost competitive models, this growth rate may not happen that quickly like it is happening in two-wheelers. There is a range anxiety as well. We are reading several reports on the claim range versus actual range due to terrain, driving conditions is very different. So on passenger car, while the growth we are seeing, but we may have to be a little more watchful. But two-wheeler, three-wheeler, for sure, it will continue to grow very well.

Operator

Ms. Singh?

Jyoti Singh — Arihant Capital Markets — Analyst

Yes. And sir, on the competition side, how we are competing in the market, like we are in the smart key and keyless segment? So there are other number of companies providing to OEM. So how we are differentiating from that and how we are competing?

Manoj Kolhatkar — Managing Director

Sorry. But yeah, this is what I could not listen, maybe we lost you for that. But on the car key and smartless, we are not playing in that segment. So we don’t have any offering in that segment — I mean, in that product.

Jyoti Singh — Arihant Capital Markets — Analyst

Okay, okay. Thank you, sir.

Manoj Kolhatkar — Managing Director

Yeah.

Operator

Thank you. Our next question is from the line of Jayesh Gandhi from Harshad Gandhi Securities. Please go ahead.

Jayesh Gandhi — Harshad H Gandhi Securities Private Limited — Analyst

Sir, congratulations on good set of numbers. And thank you for providing me an opportunity. Sir, my first question is, in the context of PLI that we have applied for. I mean, what is the status? And can you just help me out in understanding the opportunity in the sensors, I mean, which we have applied in PLI?

Rishi Luharuka — Chief Financial Officer

Jayesh, thanks for the question. So essentially, the step towards this PLI application was done along with the Anand Group of companies for the purpose of being able to qualify the various criterias which were there. We have applied under the central category. This project evaluation is complete in terms of the market space study. Also the current customers and the way the supply chain, as well as the current production is being done. We are looking at the domestic sensor space only at the point in time. The way it currently stands is that, the technology partners are being evaluated in terms of who sort of evaluate for further discussion, post which we will start looking at the numbers because, again, in sensors, there are various categories of sensors and we have are yet decide as to which ones we would like to foray into eventually. So it’s currently a little fluid in that space. But as and when the plan reverses, we’ll be happy to announce on that.

Jayesh Gandhi — Harshad H Gandhi Securities Private Limited — Analyst

And sir, what is the investment that we have applied for in that PLI?

Rishi Luharuka — Chief Financial Officer

The PLI overall investment would be in the range of INR40 crores to INR50 crores over a period of two years of time. That will all depend upon what kind of manufacturing footprint, as well as template we acquire.

Jayesh Gandhi — Harshad H Gandhi Securities Private Limited — Analyst

Okay. And sir, last question on the railways opportunity. I think we have got a breakthrough in Vande Bharat, from Medha, I guess. So can you just throw the — throw some light on the opportunities lies here? I mean, what can be the sales potential, I mean, that you are looking next, say, for two, three years?

Manoj Kolhatkar — Managing Director

Well, sales wise, it’s still a small part. But the point is the LHB coaches, which you have seen is moving to this Vande Bharat. So earlier it moved from the old bogies to LHB. From there we are seeing a shift to, I mean, the Vande Bharat train. So we are seeing an improvement, but yeah, the volumes will still be very muted, I would say.

Jayesh Gandhi — Harshad H Gandhi Securities Private Limited — Analyst

Okay. That’s all from my side, sir. Best of luck for future.

Operator

Thank you. Our next question is from the line of Pankaj from Affluent Assets. Please go ahead.

Pankaj Prabhakar Bobade — Affluent Assets Private Limited — Analyst

Thanks a lot for taking my question and congrats for excellent set of numbers. Sir, just wanted to understand, are we — I mean, we have been claiming to have a successful cost control measures taken over the last three to four years, but our margins are still 7-odd percent. So are we in any kind of commodity product? I mean, because since I tracked some other companies or competitors of us, who are enjoying upwards of 10% margins. And in our — in the question earlier by earlier participant, you are quite different [Phonetic] in saying that it will be difficult for you to give a timeline to reach that double-digit margin mark. So just wanted to understand, since we are into light suspension quality product, why are we not able to defend our margins or claim better margins given the 7-odd percent of margins we have been charging historically?

Manoj Kolhatkar — Managing Director

Yeah, Pankaj, good question. So it’s not exactly a commodity market, but I mean, yes, there are several players in the market so that there’s a fierce competition from what it was earlier. So, as you know, in the last couple of years, several players have got added in the space. So that makes it that much tougher for everybody surely. It is not a commodity product because the OEMs still value this product and also give a lot of importance to the right handling, particularly the global OEMs. So I don’t think this falls in the commodity space. I mean yeah, the market pressures are there. And your question about — your point about other players being in higher margins, actually, of course, there are some in competition who are in listed space where we have the figures. They also are a group of companies. So ascribing that entire margin to this particular product, I don’t think would be right. I mean, we don’t — because it’s competition and not — that data is not shared. But yes, there is, for sure, room for improving margins definitely. So I think I can only share this much with you.

Pankaj Prabhakar Bobade — Affluent Assets Private Limited — Analyst

Despite our success in the cost saving measures you are still there. Secondly, I suppose this is the first time you have introduced a full fledged slide on railways. So — and do you see substantial portion of share going forward coming from railways? And are — they are at better margin or that would be a tender business?

Manoj Kolhatkar — Managing Director

Yeah. So, Pankaj, the margin is definitely much better than the others, no question. But the volumes are really, as I mentioned, this Vande Bharat also the orders that we have is just a couple of crores. So it will take time. And even — I mean, yeah, you also mentioned it’s a tender business, that’s right. So it’s a tender business, so it gets shared between four, five players. As of now, there are lesser players, but they have a policy where a new player gets a 20% order as development supplier. So yeah, it is always — I mean, you can’t expect a higher share, it is distributed. Margins are good, but revenues are small. It should definitely help in the margin front, not in the top line front.

Pankaj Prabhakar Bobade — Affluent Assets Private Limited — Analyst

But I understand that there are orders of around 400-odd Vande Bharat trains. And are we not present in metro business, metro segments, which also would require…

Manoj Kolhatkar — Managing Director

We are not there in metro. So we have been in talks with Bombardier and Alstom. So that needs a different product. But right now, yes, we are not in metro business.

Pankaj Prabhakar Bobade — Affluent Assets Private Limited — Analyst

And as there are 400 — orders of 400-odd Vande Bharat trains, and are we getting only miniscule share of the whole?

Manoj Kolhatkar — Managing Director

No, no it’s only a start now. I mean, once we get into CV, normally operate on a 20%, 25% share.

Pankaj Prabhakar Bobade — Affluent Assets Private Limited — Analyst

So what is the potential that we can reach?

Manoj Kolhatkar — Managing Director

In terms of railways?

Pankaj Prabhakar Bobade — Affluent Assets Private Limited — Analyst

Yes.

Manoj Kolhatkar — Managing Director

Well, if you see the total revenue now that our revenues is, let’s say, first half, we did INR1,500 crores. So railways would be a very minuscule portion. I mean, just about a few percentage points. Very low-single digits.

Pankaj Prabhakar Bobade — Affluent Assets Private Limited — Analyst

Right. So what is the potential then? Can we be — can it contribute meaningfully to our share of revenues?

Manoj Kolhatkar — Managing Director

No. Honestly, no, because this is a completely tendered business. I mean, whatever we do, even if we are in much better facilities, much better R&D, if you have to compete with a supplier who is — I mean, what you say, I wouldn’t considering as a Tier 2 supplier. So that is the way the business is.

Pankaj Prabhakar Bobade — Affluent Assets Private Limited — Analyst

Okay. Thank you. Thanks a lot.

Operator

Thank you. Our next question is from the line of Viraj from SiMPL. Please go ahead.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Yeah. Hi. Thanks for the opportunity. Just two questions. What is on the capex for this year and next year if you can just guide, what is the capex you’re looking to spend?

Rishi Luharuka — Chief Financial Officer

Viraj, it should be in the range of INR120 crores to INR150-odd crores.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

For both the years put together or you’re talking about each other year?

Rishi Luharuka — Chief Financial Officer

Each of the year.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Sorry, your voice was breaking.

Rishi Luharuka — Chief Financial Officer

Each of the year, Viraj.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Okay. Got it. And second is on the export piece, so you said that despite VW being on there, they’re still kind of doing around INR25-odd crores kind of a run rate. With the new orders, how should one understand the export road map for us for next few years?

Manoj Kolhatkar — Managing Director

The immediate target is, of course, crossing the INR100 crores. That would be for the year. I mean, going forward, now we are seeing some good interest, at least generated due to the China factor. As you know, the China Plus One strategy. So there are some people who are relooking at resourcing the China imports or China buy. So yes, it will take time. I mean, we don’t have an order, which we can say yes we’ve got it, so the SOP, so and so. But we clearly see this materializing into good orders, let’s say, from ’25 onwards.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Okay. And last question is on the margin and especially the contribution margins. So if I look at our own stay [Phonetic], we are at the lower end of the historical band in contribution margins. Now, I understand there was a impact in terms of raw material pressures and other factors. But if I have to look at going forward, your communication seems to be that even close to double-digit margins looks a little bit difficult. So is it that the new borders which we are kind of won? Are they at a much more aggressive price points and hence, the margins which we typically on those segments are won’t be enjoyed in the future? Is that how one should understand?

Manoj Kolhatkar — Managing Director

Yeah, Viraj, the honest answer is, yes, the margins are under pressure. It’s not only for Gabriel. This is overall set of numbers, you can actually do a check on the overall industry as well.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Okay. But in terms of major segments which we have won the order, say, in case of EV, two-wheelers or passenger cars — passenger vehicles new orders. The base margin in that business is not moderated materially, right? Or has that been the case?

Manoj Kolhatkar — Managing Director

So EV, we are seeing better margins, of course, as of now. But yes, once they are under market pressures, things will flow back to the suppliers. But as of now, EVs, we were getting at relatively better margins.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Okay, fine. Thank you very much. Good luck.

Manoj Kolhatkar — Managing Director

Thanks, Viraj. Thank you.

Operator

Thank you. Our last question is from the line of Dhiral Shah from PhillipCapital. Please go ahead.

Dhiral Shah — PhillipCapital (India) Private Limited — Analyst

Yeah. Thanks for the follow-up opportunity, sir. Sir, does content per vehicle in EV is better than the IC, on the two-wheeler and three-wheeler side?

Manoj Kolhatkar — Managing Director

Well, this content is the same, but our realization will — I mean, realization and margins are little better. Content is pretty much the same.

Dhiral Shah — PhillipCapital (India) Private Limited — Analyst

Sir, if you can quantify how much realization better?

Manoj Kolhatkar — Managing Director

Sorry, Dhiral, I can’t do that.

Dhiral Shah — PhillipCapital (India) Private Limited — Analyst

Okay. At least 10%, sir, not more than that?

Manoj Kolhatkar — Managing Director

Well, Dhiral, unfortunately, the information that would be counterproductive for us. So we would not like to share it.

Dhiral Shah — PhillipCapital (India) Private Limited — Analyst

Okay. And sir, lastly, if you can bifurcate your capex, how much for capacity increment, how much for the backward integration and how much for the [Indecipherable] when you are guiding INR120 crores to INR150 crores each for this year and next year?

Rishi Luharuka — Chief Financial Officer

Dhiral, we do INR20 crores, INR25-odd crores of maintenance capex. Apart from that, everything else would be largely capacity enhancement or it would be for in-sourcing, The exact mix would depend upon the year, as well as the LOI [Phonetic] that is going to come.

Dhiral Shah — PhillipCapital (India) Private Limited — Analyst

Okay. Sure. No worries, sir. Sir, I would love to meet the management if given an opportunity. So will speak to your IR.

Manoj Kolhatkar — Managing Director

Good. Thank you, Dhiral.

Dhiral Shah — PhillipCapital (India) Private Limited — Analyst

Okay, okay.

Operator

Thank you very much. Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Kolhatkar for closing comments.

Manoj Kolhatkar — Managing Director

Thank you, and thank you all for your very thoughtful questions. Yes, we understand your key question and concerns around the margins. We have taken a good note of that. And yes, going forward, the year — as I said, the fiscal year for the country in terms of overall automotive industry, I think, will still be good. Yes, the coming year with ’23-’24, there is likely — there will be a likely backlash from what is happening in the global marketplace. So we have to be a little cautious about ’23-’24 in terms of the volumes. But having said that, I think the overall economy and the country is in good shape. So we’ll still be definitely far better than the rest of the globe.

So look forward to meeting you all again in the next call. And thank you, thank you once again for all your questions. Thank you. Bye-bye.

Operator

[Operator Closing Remarks]

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