Lumax Auto Technologies Limited (LUMAXTECH) Q4 FY22 Earnings Concall Transcript

Lumax Auto Technologies Limited (NSE: LUMAXTECH) Q4 FY22 Earnings Concall dated May. 17, 2022

Corporate Participants:

Anmol Jain — Managing Director

Sanjay Mehta — Director and Group Chief Financial Officer

Vikas Marwah — Chief Executive Officer

Naval Khanna — Executive Director

Analysts:

Abhishek Jain — Dolat Capital — Analyst

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Harshil Shah — Anvil Research — Analyst

Resham Jain — DSP Investment Managers — Analyst

Riya Verma — Oracle Securities — Analyst

Pritesh Chheda — Lucky Investments — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Lumax Auto Technologies Limited Q4 and FY ’22 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].

I now hand the conference over to Mr. Anmol Jain, Managing Director, Lumax Auto Technologies Limited. Thank you, and over to you, Mr. Jain.

Anmol Jain — Managing Director

Thank you. Good morning, ladies and gentlemen. A very warm welcome to FY 2022 earnings call of Lumax Auto Technologies Limited. I hope you all are safe and healthy. Along with me on this call, I have Mr. Vineet Sahni, Lumax Group CEO; Mr. Sanjay Mehta, Director and Group CFO; Mr. Vikas Marwah, CEO; Mr. Naval Khanna, Director, Lumax Management Services; Mr. Ashish Dubey, CFO; Mr. Ankit Thakral from Corporate Finance; Ms. Priyanka Sharma from Corporate Communications and SGA our Investor Relations Advisor. The results and presentations are uploaded on the stock exchange and the company website. I do hope everybody has had a chance to look at it.

Moving on to key industry highlights. I think as we all know, the financial year passed by had been very challenging from COVID related curves to supply chain and chip shortage issues, the automotive industry was disrupted badly. The prices of key commodities have also risen exponentially since 2020. Continuous price hikes by OEMs to recover these input cost escalation has led to India’s auto market at a decade low, impacting demand adversely.

Lumax Auto Technologies has witnessed tremendous growth amidst all these challenges in FY ’22. We have been able to post our highest ever revenue and profitability in the financial year ’21-’22. As per data published by SIAM, overall industry production witnessed a growth of only 1% in FY ’22 from the previous year. Despite some recovery from a low base, sales of all 4 segments of the auto industry are even below the 2018-2019 levels. Passenger vehicles, commercial vehicles and 3 wheelers have witnessed a growth compared to a low base of the industry in 2021, but the 2 wheeler segment declined by 3% from the previous year.

We are delighted to share with you that the Company’s application along with its various joint venture partners for the PLI scheme has been approved by the Government of India. Tremendous growth opportunities exist for each of the product lines and we will be aggressively working on all the products approved under the PLI scheme to meet our strategic objectives.

Let me now take you through the performance of each business entity. The standalone entity caters to integrated plastic modules, aftermarket business, chassis and swing arm for 2 wheelers, trailing arm for 3 wheelers under the metallic business and 2 wheeler lighting. The standalone entity has contributed 77% of the total consolidated revenues for FY ’22. Lumax Mannoh Allied Technologies, the 55% subsidiary which manufacturers manual AMT and automatic gear shifter systems and has the market leadership position, contributed 13% to the total consolidated revenues. The company has successfully started export of made in India automatic gear shifter for a global platform during the current financial year. Going ahead, we are working closely with our JV partner for a wider outreach globally.

Lumax Cornaglia Auto Technologies, the 50% subsidiary manufacturing air intake systems and urea tanks commanding 100% share of business with Volkswagen and Tata Motors, contributed 7% to the consolidated revenues. The company has received business nomination for plastic fuel tanks from one of the major OEM, the SOP of which is expected in Q4 of FY ’23. Lumax Metallics Private Limited, the 100% subsidiary, manufacturing seat frames, contributed 3% to the total consolidated revenues. Subsequent to the quarter on May 3, 2022, the subsidiary company had filed the draft scheme of merger with NCLT of its 100% subsidiary Lumax Metallics Private Limited with the parent company for efficient utilization and synergy of resources.

The appointed date of merger will be April 1, 2022 subject to necessary regulatory approvals. On Lumax FAE Technologies, the company has received LOIs from 2 major OEMs, from — for oxygen sensors, SOP of which is expected in FY ’23. The annual revenues of these LOIs would be more than INR100 crores annually at the peak volumes. The company is currently engaged in the development and validation of these sensors. Lumax JOPP Allied Technologies, is a 50% subsidiary engaged in the design development, and manufacturing of gearshift towers, automated manual transmission kits, all gear sensors and forks. The production has started to pick up as per the OEM schedules.

The company is also close to securing firm orders for T-actuators from certain major OEMs, the first by a local company in India. Lumax Ituran is a 50% joint venture with Ituran Telematics of Israel. From January 1, 2022, the joint venture company has become a subsidiary of the company in accordance with Ind-AS 110 consolidated financial statement. Accordingly, its revenue and profitability is included in the consolidated financials from the current quarter. Lumax Alps Alpine India Private Limited, a 50% subsidiary for the manufacturing and sale of electric devices and components, including software related to the automotive industry has started its commercial production at Gurugram, Haryana in the current financial year from December 1, 2021. The actual revenue in the current financial year is INR10 crores.

I’m happy to share some details on the new launches made during the quarter, having your company’s products. The company launched the gear shifter for the new Baleno of Maruti Suzuki and the Nexon model of Tata Motors under the passenger vehicle category. Whilst [Phonetic] the challenges and volatility shall continue but we are confident on weathering through them with our innovation agility and diversity of products and locations.

Now I would like to hand it over to Mr. Sanjay Mehta, Director and Group CFO to update you on the operational and financial performance of the company.

Sanjay Mehta — Director and Group Chief Financial Officer

Good morning, everyone. Let me brief on the operational and financial performance. For FY ’22, integrated plastic modules contributed 24% of overall revenue, followed by aftermarket at 19%, chassis at 18%, gear shifter 13%. Lighting products at 11%, emission products at 7% and others at 8%. 2 and 3- wheelers contributed 43% to overall revenue, passenger car at 20%, aftermarket at 19% and CVs at 9%.

The consolidated revenue stood at INR417 crores for Q4 as against INR388 crores last year’s Q4, up by 7% against the industry downfall of 16%, which is due to increased sales in almost all the OEMs coupled with growth in aftermarket division. For 12 months FY ’22, the company reported revenue of INR1,508 crore, which is the historic high against INR1,108 crores during the same period last year, up by 36%. The company reported consolidated EBITDA of INR164 crores in FY ’22 which is against a historic high as against INR114 crores in last year. The EBITDA margin for FY ’22 stood at 10.8% as against 10.3% in FY ’21, up by 50 bps [Phonetic].

Profit after tax and after minority interest stood at INR69 crores as against INR47 crores in FY ’21. The capex incurred during FY ’22 is INR68 crores, including INR20 crores on account of right to use asset. The actual capex therefore — actual outlay is INR48 crores during the FY ’22. The Board of Directors have recommended a dividend of 175% by INR3.50 per equity share subject to approval of stakeholders in the ensuing Annual General Meeting of the company.

Now we open the floor for the questions.

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 Abhishek Jain from Dolat Capital. Please go ahead.

Abhishek Jain — Dolat Capital — Analyst

Thanks for the opportunity and congrats for a strong set of performance. Sir, in gear shifter business, we have seen impressive growth in FY ’22. So how is the manual versus AT and AMT mix? And you won new business for the Baleno and the Nexon in this quarter. So how much incremental revenue do you see from this new orders?

Anmol Jain — Managing Director

So thank you very much. The gear shifter business did post a very good set of growth in the FY ’22. In terms of your question on manual to automatic, 67% to 70% would have been the manual transmission and about close to 30% to 35% would be the contribution by both automatic as well as AMT. And I think the ratio in FY ’23 would probably tilt a bit more towards the automatic. So it probably will end up by about 60%, 65% manual, and the remaining in automatic and AMT.

Specifically to what is the contribution of the Baleno and Nexon, I would request Vikas, if you could throw some light on that please.

Vikas Marwah — Chief Executive Officer

Yes. So Abhishek Ji, going ahead on a full-year volume, there will be an incremental about 7% impact on the total revenue from the base figure that we see today that would be incremental because of these 2 high selling models. And then going ahead, we are also expecting more horizontal deployment of these particular models. So therefore, they’re very strategic wins for your company to be on.

Abhishek Jain — Dolat Capital — Analyst

So how much is the share of the business from these 2 models?

Vikas Marwah — Chief Executive Officer

So, as I mentioned, it would be about — it would be — total about 16% would be the contribution that would be coming from the total gear shifter sales in a full year volume for these key models alone.

Abhishek Jain — Dolat Capital — Analyst

I’m talking of the share of the…

Anmol Jain — Managing Director

To give you a number about maybe close to INR30-odd crores would be — should be the value of these INR30 crores to INR35 crores, which is about 15% of the total gear shifter business today.

Abhishek Jain — Dolat Capital — Analyst

Sir, I’m asking about this share of the business in the Baleno and the Nexon in the gear shifter business. And who are the other competitors you had?

Anmol Jain — Managing Director

Abhishek, we would be single source. Vikas?

Vikas Marwah — Chief Executive Officer

Yes, we are single source. We are single source.

Abhishek Jain — Dolat Capital — Analyst

So who was supplying earlier to these companies?

Vikas Marwah — Chief Executive Officer

We had our competitor who had a marginal share of about 15% as an alternate source, we cannot name the other players. So he had a 15% share. But your company has now been trusted with a 100% share on these models.

Abhishek Jain — Dolat Capital — Analyst

Okay. And sir, in the plastic molded part, you have also forayed into the supply of the — into 4-wheeler side also. So just wanted to know how much contribution in FY ’22 from the 4-wheelers and how much incremental revenue you are looking from this business, especially for the 4-wheeler?

Anmol Jain — Managing Director

So approximately 10% of the plastic business in FY ’22 came from 4-wheelers, 90% largely was still in 2 wheelers. And in terms of going forward, growth, I would say that we would be expanding at least by close to 40% to 50% of the 4-wheeler plastic business within the overall plastics business.

Abhishek Jain — Dolat Capital — Analyst

So what is the current opportunity size and what kind of the revenue you are targeting from in next 2 to 3 years from the 4-wheeler side? Because this space is quite big and you are the Tier 1 supplier to the Maruti and you were talking about that you are also talking with the Hyundai and Kia. So just wanted to understand the revenue potential from this business.

Anmol Jain — Managing Director

So to give you a filler, I think I’ve always said our strategic objective is to number one diversify from a 2-wheeler plastics to a 4-wheeler. And as you’ve seen that over the last 2 to 2.5 years, we’ve made some inroads into both Maruti as well as Hyundai Kia. And today we have about 10% of the total plastics pie coming from the 4-wheeler category. Going forward, I think our strategy remains unchanged. We want to go up from a parts supplier to more of a system and an module supplier, at least for the 4-wheeler pie. And also move towards more kinematic products.

So with those ships, I mean there are deep discussions already being engaged with the OEMs, but they do take time to fructify and convert into order book. So I would say that over sense of 2 to 3 years, we would have a significant growth in the plastics to the overall Group growth. And like I’ve always said, inorganic opportunities also exist in the plastic space, which the company is also dwelling upon and considering.

Abhishek Jain — Dolat Capital — Analyst

So how much investment you have done in — between the 4-wheeler, plastic modulated parts? And if we are looking for some inorganic opportunity, so what investment you are looking in that particular business?

Anmol Jain — Managing Director

It would depend on the opportunity. As I said, the opportunities in the inorganic space would be more strategic in nature. I would not be able to give you any details in terms of numbers or investments yet. However, earlier question of yours, I mean in terms of the growth, as I’ve already mentioned, that the 4-wheeler pie from 10% going forward in the next year or 2 years should at least contribute to 15% of the plastic total pie. So there would be a higher growth in a percentage terms of the 4-wheeler business of plastics compared to the 2-wheeler business.

Abhishek Jain — Dolat Capital — Analyst

Okay. Sir, my next question is the seat metal business which has seen a very impressive growth in FY ’22. So, just wanted to know what is the contribution from the seat frame business? And you have own several business in this particular area. So how big this business is going to be, especially for the seat frame business?

Anmol Jain — Managing Director

So the business of the metallic fabrication, which has grown by almost 50% on a year-on-year basis, it’s largely driven by the 2 wheelers, chassis and swing arm business and it does not have a growth of the seat frame business. As I mentioned earlier, we had been able to go deeper into our wallet share with our major OEM which is Bajaj Auto. We have also risen up from the entry level export by category to the premium KTM bikes, where the contribution per vehicle is also much, much higher. So those are all factors which has led to these impressive numbers in terms of the year-on-year growth.

Going forward, we do expect that this business will also post growth, which would be better than the Bajaj Auto’s own growth plants, because as I said, we will be getting deeper into the wallet share. So we’re not just dependent on the organic volume growth year on year, but also gaining some traction in terms of our share of business with Bajaj overall as a pie.

Abhishek Jain — Dolat Capital — Analyst

But sir, in the last quarter you had mentioned that you have owned several business from the seat frame. And especially you own the business from the XUV 700. So just, it is very surprising that seat frame business is quite low right now.

Anmol Jain — Managing Director

So the seat frame orders are absolutely — you’re absolutely right, they are still secured, but they have yet not been productionized. There have been some delays on these model launches. But we do expect that in FY ’23, the seat frame business also compared to FY ’22, would be much higher, at least by close to maybe about 30%, 40%, 50% on a year-on-year basis.

Abhishek Jain — Dolat Capital — Analyst

Okay. Sir, my last question is related with this air intake business. So that has seen impressive growth because of the adding new products, the urea tank. And quarterly run rate has gone up to the INR30 crores. So how is the outlook ahead? What kind of the revenue you are targeting for next 2 years?

Anmol Jain — Managing Director

So let me give you a very different perspective, Abhishek. I think if I look at my order book as a company, currently I’m holding an order book of close to INR600 crores. And out of the INR600 crore pie, almost INR350 crores is new orders and the remaining is the replacement orders. Answering specifically to the emission part or the air intake system part, out of the INR600 crores, almost 10% or INR60 crores is related to this business, which includes not just the plastic fuel tanks, which I made an opening remarks about but also certain customer expansion on our existing products. So we do expect that we will be growing across our product lines and divisions in the coming year as well, in other words, strong order book.

Abhishek Jain — Dolat Capital — Analyst

So your quarterly run rate is around INR30 crores. So going ahead, what could be the quarterly run rate? As you mentioned that there is only INR50 crores, new orders you have.

Anmol Jain — Managing Director

So going forward, the run rate — are you specifically talking about the emission business, right?

Abhishek Jain — Dolat Capital — Analyst

Yes, emission business.

Anmol Jain — Managing Director

So the quarterly run rate would be probably about the same which would be close to between INR10 crores to INR12 crores per month.

Abhishek Jain — Dolat Capital — Analyst

Okay. So we won’t see the — more than 20% growth in the coming years because that per month number…

Anmol Jain — Managing Director

There is ill — there is still a lot of volatility. If you guarantee me that there will be 20% more production because of chip availability, I can tell you that, yes, we will probably do 20% more. But given the fact that there is a lot of uncertainty, I think the good part to see is that there is a strong order book, which the company enjoys across product lines. And as best as possible when the OEMs do churn out these numbers, we are single source on most platforms. So we will get this growth to the company as well.

Abhishek Jain — Dolat Capital — Analyst

Thank you, sir. That’s all from my side.

Anmol Jain — Managing Director

Thank you.

Operator

Thank you. Our next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services. Please go ahead.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Hi, sir. My question pertains to the PLI benefits, which we have got. So can you throw light on what all products do we plan to make under this incentive?

Anmol Jain — Managing Director

So, thank you. So just to give you an overall feel, out of all the products, which the government has approved, 5 of our joint ventures fall under this category. Under Lumax Mannoh, we have the automatic transmission, the CVT the DCT. And the Lumax Cornaglia, we have the urea tank. We have the oxygen sensors and the Lumax FAE. We have the Telematics and the ADAS systems under Lumax Ituran. And we also have the angle importer or something called the steering angle sensor, which is one of the key products under Lumax Alps Alpine.

So there are the bunch of basket of products which are approved under the AAT Lift [Phonetic]. And in terms of investments, I think we will be going forward to making the necessary investments, we already have made certain investments in FY ’22 and we will further expand these investments in FY ’23 according to the government guidelines to extract the maximum benefit out of the localization as well as getting the benefits from the government in the subsequent years.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Okay. Okay. So this, I mean this would not include our electric vehicle devices and components except for what you mentioned in terms of steering angle sensor.

Anmol Jain — Managing Director

So, steering angle sensor is a part which goes inside the steering, it is EV agnostic. It is not specific to the EV, it is there in the current range of vehicles as well. But as a product, it is something which has been added to the list.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Okay. Okay, got it. Second question pertains to the long-term view on the business. So FY ’22 we ended with about INR1,500 crore revenues. And based on the order book, which we have plus the visibility on the new products based on the recent JVs and alloy on hand, how do you see this INR1,500 crore shaping up over next 3 years based on the visibility we have?

Anmol Jain — Managing Director

I think we have always maintained that our first endeavor is to grow faster than the industry. And I think in this particular current year FY ’22, we are very fortunate that despite all the volatilities and challenges, we were able to post a 36% growth in terms of our revenue. I think obviously, this was also on a lower base, which was there in FY ’21. I think in FY ’23, I would say that we will continue the growth momentum, because of the order book and because of these LOIs in hand. But obviously because of the base has gone up, I would probably say somewhere close to 20% should be our outlook in terms of the growth in the topline.

Hopefully, there are no sudden surprises because there are geopolitical issues going on, there are chip shortages, which are still going on, supply chain disruptions. So it’s all are still in concern, as we’ve seen in the last couple of months. I think that would be my outlook for the next year. In terms of giving you a 2 to 3 years horizon, I would probably say that we do expect to continue this growth, which we are talking about at 20% or so on an annualized basis despite the higher base. So I would say that you know if all goes well, the auto industry bounces back to ’18, ’19 levels, surely we will be able to grow at a CAGR of maybe 15% to 20% on a year-on-year basis.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Got it. And second — last question would be with respect to our current capacity. So broadly I mean across key segments, what could be our utilization for FY ’22? And at a broader company level from the current investments which we have already made with respect to capacities and capabilities, what kind of revenues can be generated without material investments from here on?

Anmol Jain — Managing Director

So in terms of capacity utilization, it hugely differs from across product lines, but on an average, I would say that we would be hovering between 75% to 80% across all our product lines. There would be some specific specialized products where we would be probably as high as 90%. And obviously there would be certain, which has very low like oxygen sensors, which has not really started in mass production. So we are sitting on idle capacities with respect to certain joint ventures in certain specific products as well.

But I think it’s a very difficult answer to give in terms of how much incremental revenue we can get from an existing capacity utilization, because as I said, something like oxygen sensors where we have an LOI of more than INR100 crores annually at peak volumes. We have those capacities already in place. So that would probably come with almost negligible additional investment. And the company still will invest in FY ’23 in terms of getting into new products like I mentioned plastic fuel tank.

I also talked about getting into further deepening the wallet share of Bajaj Auto with maybe some new frame business and also the telematics which we’ll see the production — mass production start of one of the key order wins, which we had last year. So all this would entail certain CapEx, but nothing significant. And I think the 20% odd forecast, which I mentioned would be done with almost decent CapEx close to maybe about INR70 crores to INR75 crores in FY ’23.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Got it, thanks. I’ll fall back in queue.

Anmol Jain — Managing Director

Thank you.

Operator

Thank you. [Operator Instructions]. The next question is from the line of Harshil Shah from Anvil Research. Please go ahead.

Harshil Shah — Anvil Research — Analyst

Hello to everyone. Hello?

Anmol Jain — Managing Director

Yes, Mr. Shah.

Harshil Shah — Anvil Research — Analyst

Yes, hello team. My question is related to aftermarket. So can we — aftermarket, can it be like around — we have reported around INR280 crores, INR290 crores of turnover, right sir for this year?

Anmol Jain — Managing Director

That’s correct. We’ve reported, I believe INR293 crores.

Harshil Shah — Anvil Research — Analyst

INR293 crores. Sir, are we planning to introduce new products?

Anmol Jain — Managing Director

So I think I have always maintained aftermarket and I’ve been maintaining the same stance Mr. Shah, for the last 2 to 3 years. I think our endeavor in the aftermarket is that we want to leverage the strong brand goodwill which Lumax enjoys. And we’ve gone to almost double our aftermarket revenues. This was the guidance I had given over the next 3 to 4 years, almost 2 years ago. And I think we have grown handsomely in the current financial year as well. We’ve grown by almost 35%.

I think going forward, I do believe that we will be able to continuously grow at about between 25% to 30%-odd by adding new products and not just by adding new products in the current category, but also further expanding our product range into new category. So, yes, there are certain products, which are under review, and in FY ’23, we would be launching certain new products as well.

Harshil Shah — Anvil Research — Analyst

Correct. And sir, one more thing. Sir, if we remove aftermarket from a standalone business, I am assuming your aftermarket will be around 14%, 15% kind of margin business. So if you remove aftermarket and our standalone margin stands around 5.5%, 6%.

Anmol Jain — Managing Director

Well, that is not necessarily true, because I have other standalone — other businesses like the fabrication, the chassis business, also the plastic module business which also operates in double digits. So while, yes, your observation is correct that the aftermarket would be at a higher EBITDA than the other OEM businesses, but it would not dramatically fall if we were to carve out aftermarket.

Harshil Shah — Anvil Research — Analyst

Correct, sir. But what do you see, our margins — standalone margins will go to causing this softening commodity price scenario now.

Anmol Jain — Managing Director

Well, I think I would look at it differently. I think despite all the commodity price challenges, etc., we’ve been able to weather the storm and expand our margins. And we do not foresee, and if you look at the raw material consumption, it has been pretty much in line with the previous year. There has not been a significant increase there. I think the raw material escalations are largely brought back into the company from the OEMs. But yes, there is a lag of about 3 to 6 months in certain cases. But I don’t see any reason why the cost escalation specifically on the input costs would have impact on the standalone entity margins.

Harshil Shah — Anvil Research — Analyst

Okay, sir. Of course we see our subsidiaries are doing phenomenal job, at present they are doing around more than 15% margin. If we remove the consolidated from standalone, the subsidiaries are doing really well. So only my concern was like can this margins — my concern as an can this margins go from 12% to 13% EBITDA margins?

Anmol Jain — Managing Director

Well, I think our endeavor has always been to get to teenage margin. So, yes, our endeavor is to get a EBITDA margin of close to 13% in the near term. I think if you look at the margin expansion, the margins have expanded over the last 4 quarters. And I think we would like to consistently maintain at least going forward with all these escalations and all, at least above 11% should be my expectation to be maintained even in the coming year.

Harshil Shah — Anvil Research — Analyst

Correct, sir. And sir, one more thing. Sir, what was the total value of exports in a total turnover? And from Lumax Mannoh particularly?

Anmol Jain — Managing Director

So the total value of exports in FY ’22 stood at about close to INR22 crores, out of which, Lumax Mannoh was about 20% of that.

Harshil Shah — Anvil Research — Analyst

20% of that. Okay, sir. And what is the potential of this plastic tank business, sir, in Lumax Cornaglia?

Anmol Jain — Managing Director

So, Vikas, do you want to take that, what is the market opportunity of the plastic fuel tanks?

Vikas Marwah — Chief Executive Officer

Yes. So the plastic fuel tanks will come into commercial production from April ’23. It’s a very highly advanced plastic technology products. So the product development time and the machine ordering takes about 9 to 12 months of lead time. We have been entrusted with 2 higher selling volume models of a major, major commercial OEM and the first year volumes, then the value contribution would suffice to around INR22 crores, INR24 crores, expecting a good commercial year FY ’24. And going ahead, there are 6 more models, which are lined up. So potentially with this particular OEM alone, the incremental contribution in terms of revenue to Lumax Cornaglia could be anywhere, around INR50 crore. So therefore it’s a very, very strategic and an important entry.

Harshil Shah — Anvil Research — Analyst

And again, high-margin business better than the standalone business?

Vikas Marwah — Chief Executive Officer

Yes. So if you see all the new product introductions that have happened since 2020, be it in terms of the urea tanks or the new DCT gear shifters and Lumax Mannoh, and now this plastic fuel tank, everything has been targeted upwards of 13% EBITDA.

Harshil Shah — Anvil Research — Analyst

Okay, sir. And sir, my last question is on the debt side, sir. What is the net debt? And what is the cash on book, sir, gross debt, cash on book and net debt?

Anmol Jain — Managing Director

So in fact we have a net debt zero and having the surplus of around INR83 crores. If you take that debt as a separate, then I am having INR125 crores of debt, out of that, INR16 crore is the long-term and balance is for working capital.

Harshil Shah — Anvil Research — Analyst

Okay, sir. That’s it from my side. Thank you.

Anmol Jain — Managing Director

Thank you.

Operator

Thank you. Our next question is from the line of Resham Jain from DSP Investment Managers. Please go ahead.

Resham Jain — DSP Investment Managers — Analyst

Yes, hi, good morning. So I have a couple of questions. So first is the PLI which you’ve talked about, that this INR75 crore of capex for FY ’23, does it include the PLI related capex as well?

Anmol Jain — Managing Director

Yes, it does.

Resham Jain — DSP Investment Managers — Analyst

How much is that amount, PLI related capex?

Anmol Jain — Managing Director

So in FY ’22, the company already incurred about INR17 crores of capex, which was towards PLI. And I believe that in FY ’23, out of the INR76 crores, we would probably be incurring close to about INR25 crores, which would be about towards the PLI.

Resham Jain — DSP Investment Managers — Analyst

And PLI typically for given a capex, the revenue is also like in a way prefixed, how much revenue you need to do. So with this PLI capex, how much incremental revenue can happen through PLI?

Sanjay Mehta — Director and Group Chief Financial Officer

So recently, I think the PLIs we have to maintain 10% of the increase in the revenue of this AI — product of AAT. So we have calculated, I think in the beginning, it maybe the lesser, but way forward, and the total incentive what we are getting on the basis of [Indecipherable] is almost around INR230 crores to INR240 crores.

Resham Jain — DSP Investment Managers — Analyst

Okay. Understood, understood. Okay, great. Thanks.

Anmol Jain — Managing Director

So, localization content, which we need to ensure through these investments, we achieved that localization content in order to avail that benefit.

Resham Jain — DSP Investment Managers — Analyst

Okay, great, sir. Thank you.

Anmol Jain — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Riya Verma from Oracle Securities. Please go ahead.

Riya Verma — Oracle Securities — Analyst

Hi, sir. Thank you for taking my questions. Sir, I have 3 questions. Firstly, could you give us an outlook on the second drive revenue opportunities going forward based on our interactions with OEMs, do we see improved traction in any particular segment?

Anmol Jain — Managing Director

So giving an outlook based on our OEM trends, I see first and foremost, the shifts across model mix is constant in 2 wheelers as well as passenger cars, which means that the entry level models are not faring well and the mid to premium models are doing much, much better and the demand for those are way more than the entry level. I don’t want to get into the reasons for that, but that’s the sense which we’re seeing across both 2 wheelers as well as 4 wheelers. In terms of 4 wheelers, the demand is still strong and maintained strong. There are definitely supply issues with respect to the chip shortages and that’s the reason it’s still dried up.

And also whatever is produced in the factory is pretty much sent out the door of the dealerships, there is very minimal inventory in the pipeline, which is a good sign. So I do feel that 4 wheelers will still post some good growth in FY ’23 despite the volatilities which are going to continue with respect to geopolitical availability of certain natural resources or the chips etc. In terms of 2 wheeler, I think overall as an industry, it would still be challenging given the fact that a significant pie of the overall 2 wheeler market is still in the commuter and the entry-level segment.

So given that demand is not really strong, I would say the 2 wheeler would be a challenge overall. But there would be certain OEMs which would definitely fair better than the other based on their let’s say dependability on certain segments or dependability of the mass market and India as a whole.

Riya Verma — Oracle Securities — Analyst

Okay. And are we seeing the evolution of EV industry in the near futures? Are we seeing enhanced demand for EVs and in turn demand for the product category?

Anmol Jain — Managing Director

So it’s a very good question and it’s something which is constantly evolving. So I would say as follows, that if we look at the EV segments, obviously passenger vehicles will still be a distant future to becoming a strong penetration of EV, of course Tata Motors is one OEM, which has taken lead and is going very aggressively. But I think the other OEMs, it will still be a while till EV becomes a sizable pie of the market as far as passenger vehicle goes. There would be a faster adoption of EV into the 2 wheelers surely. And I think that is all something which we are very clearly seeing, but of course this is still limited to the scooter segment.

And again, right now we are looking at only the mid to high-speed segment, which is the registered segment and the organized segment. I think there is a shift. But I think I would still wait for the legacy players like the Heros and the Bajajs of the world. I think they are also — they have no choice but to get into this space. But I think only then the market will really start to shift towards EV in terms of the volumes. But clearly, the year-on-year percentage increase on EV is far more than the ICE engine purely because of a low base.

In terms of the company, I think the company is quite excited about the opportunities which EV throws at the company. Most of our products are EV agnostic, which means that we do not have a threat when the industry is moving towards EV gradually. But as I mentioned earlier, I think the company is also very strongly in pursuit of certain opportunities, which are EV critical. So, the company does want to get into the EV space in products, which are specific to EV across 2 wheelers and 3 wheelers as well as maybe passenger cars. Currently the company is still undergoing deep feasibility study in terms of what should be our strategy towards the EV critical products.

Riya Verma — Oracle Securities — Analyst

Okay, sir. Thank you.

Anmol Jain — Managing Director

Thank you.

Operator

Thank you. [Operator Instructions]. We’ll take our next question from the line of Abhishek Jain from Dolat Capital. Please go ahead.

Abhishek Jain — Dolat Capital — Analyst

Sir, there’s a couple of questions from this quarter number. Employee expenses has gone down quarter-on-quarter. What is the reason? Is there any one-offs?

Anmol Jain — Managing Director

The employee’s welfare, well, if I look at my total manpower cost as a percentage, it has dropped in FY ’22 to under 11%. So is there a specific question, you’re looking at for the quarter or for the full year? Because even…

Abhishek Jain — Dolat Capital — Analyst

For this quarter.

Anmol Jain — Managing Director

If I look at the quarter 4, specifically, my total manpower cost is pretty much the same. And as a percentage to sale, it has dropped because of the incremental revenue growth.

Abhishek Jain — Dolat Capital — Analyst

So employee expenses has gone down from INR43 crores to INR40 crores in Q4, quarter-on-quarter basis?

Anmol Jain — Managing Director

That’s correct, yes. Because there were certain expenses towards the staff welfare on account of Diwali festival and mainly the [Indecipherable] effect.

Sanjay Mehta — Director and Group Chief Financial Officer

Abhishek, one of the item we have shown in that extraordinary expense in Q4 relating to the separation of debt. So, I think one-off item is debt only, which is not included, I mean, separately shown in the results.

Abhishek Jain — Dolat Capital — Analyst

Okay. So that means that quarterly run rate would be the INR43 crores to INR44 crores for the FY ’23?

Anmol Jain — Managing Director

So, in FY ’23, I think how I would look at it Abhishek is that in terms of our manpower cost as a percentage to sale would largely remain similar, which means that obviously there will be certain inflationary cost which will rise on a year-on-year basis in terms of appraisals and union agreements etc, but largely the incremental revenue growth should be able to offset most of it.

Abhishek Jain — Dolat Capital — Analyst

Okay. So we won’t be able to get a benefit of the operating leverage in FY ’23 because of the increase in the cost in employees expenses.

Anmol Jain — Managing Director

Well that is a constant thing. I would not say that we will not be able to get benefit. I think despite a 36% growth on a year-on-year basis, which entails a huge amount of resources in terms of volume growth, in terms of engineering growth, still our manpower cost as a percentage to sale has fallen over a year-on-year. So I would say that there is obviously always a constant endeavor to improve our efficiencies at the manufacturing plants in order to get more per head.

Abhishek Jain — Dolat Capital — Analyst

Okay. And sir, during this quarter, we have seen a sharp jump in depreciation. So how much capitalization of assets happened in this quarter?

Anmol Jain — Managing Director

So out of around INR50 crore capitalization, most of the calculation has happened in Q4, that is around INR30 crores to INR35 crores. And another reason for the increase in depreciation in particular quarter, there was a certain change in life of some of the assets in one of the JV company which is as per the technical assessment and advised by the statutory auditor.

Abhishek Jain — Dolat Capital — Analyst

Okay, sir. So that will be the one-off sort of thing?

Anmol Jain — Managing Director

Little bit of that will be the one-off amounting to around INR70 lakhs.

Abhishek Jain — Dolat Capital — Analyst

Okay, sir. And sir, in this quarter also contribution from the Lumax Industry has gone up. Is it for aftermarket business on this?

Anmol Jain — Managing Director

So, yes, absolutely aftermarket has posted a strong growth compared to Q3 to Q4. So again this is significantly because of the lighting. Because lighting is what is supplied to the aftermarket.

Abhishek Jain — Dolat Capital — Analyst

Okay. Sir, few years, few quarters ago, you had closure of business for the sensors. So are you looking to start that business again?

Anmol Jain — Managing Director

I’m sorry, I didn’t understand. Which sensor business did we close?

Abhishek Jain — Dolat Capital — Analyst

So electric parts business PIV 4 [Phonetic] and you were supplying to the Lumax Industry. Now Lumax Industry has just started its own captive supply. So I was talking about that part.

Anmol Jain — Managing Director

So we didn’t close that business. I think, I explained that time that was a strategic call driven by our customers where electronics was becoming more and more important in the whole lighting by the product. And that’s why because at the request of our customers, we did accept that request and we made it as a backward integration in the other company and that’s why it was sold to that company at the market value.

With respect to your question, whether we will continue? I think the bigger question is Abhishek that we will continue to develop whatever technological capabilities are needed to advance our products into the OEMs for our current set of products as well as for new set of products. So even if they mean that we will have to further expand our electronic footprint for this company, then we will do so. And I think we’ve already seen certain things on the Lumax Mannoh joint venture where we are getting into EV gear shifters. We are getting into automatic gear shifters which also have a higher electronics content. So to answer your question, I think it is complementing within the Group. And wherever the need is, we will definitely go and do that as a part of backward integration.

Abhishek Jain — Dolat Capital — Analyst

Okay, sir. And sir, my last question is related with the EV segment. So which all products are you looking to introduce to tap the growth of EVs, especially the — are you supplying anything to the Chetak?

Anmol Jain — Managing Director

So we are not supplying anything on the current Chetak, but we are in discussions for with many OEMs, not just one OEM for producing and developing our products for this future EV requirements, both in 2 wheelers as well as in 4 wheelers.

Abhishek Jain — Dolat Capital — Analyst

So, are you looking some inorganic opportunities that side, sir?

Anmol Jain — Managing Director

Not in the EV space, we are looking at organic opportunities in the EV space. But in inorganic space for other businesses we are surely pursuing opportunities inorganically.

Abhishek Jain — Dolat Capital — Analyst

Sir, can you throw some more light on which products you are going to add in that side?

Anmol Jain — Managing Director

I didn’t understand your question.

Abhishek Jain — Dolat Capital — Analyst

So for each products are you going to start supply in the EV segment, then you are working on the R&D side.

Anmol Jain — Managing Director

So Abhishek, as I mentioned, the EV critical products are yet under feasibility. We still have not finalized which products which are EV critical would we want to enter. The engagement which we have currently with the OEMs are for our existing products, which are EV agnostic, which means that they do not have a threat on EVs but they have further opportunities for EV. So that are the products which are currently under discussion. But specific to EV, we are still in the process of making our strategy, which is clear and I hope that by end of this fiscal year, we should be able to announce certain strategic moves on the EV part.

Abhishek Jain — Dolat Capital — Analyst

Thank you, sir. Thank you. That’s all from my side.

Anmol Jain — Managing Director

Thank you.

Operator

Thank you. [Operator Instructions]. The next question is from the line of Pritesh Chheda from Lucky Investments. Please go ahead.

Pritesh Chheda — Lucky Investments — Analyst

Sir, I joined a bit late, I don’t know if it was asked, but some total based on your assessment for the visibility that you have in terms of from the OEMs. Plus, whatever new product addition led growth that would come in, what kind of topline growth do you see in FY ’23?

Anmol Jain — Managing Director

So yes, I gave this guidance earlier and I will take that in 2 parts. I think FY ’22 was a phenomenal growth of 36%. This was basically on also a lower base, which was there in FY ’21. Obviously FY ’23, we are not looking at similar numbers. But I still to expect maybe if the uncertainty and volatility is to continue, I would probably give a outlook of give or take 20% of FY ’20 — in FY ’23 over FY ’22 2 in terms of top line growth.

In terms of margins that we will probably maintain our FY’ 22 margins or probably even expand them to beyond 11% for the full year. In terms of the revenue, we also have a very strong order book of close to INR600 crores, which the company enjoys. Almost close to INR350 crores out of this INR600 crores is new business which is not a replacement business, which means that there is a strong upside on the total revenue pie. Part of this will come into FY ’23 and part of this may come in FY ’24.

Pritesh Chheda — Lucky Investments — Analyst

Okay. So which means that a 3-digit PAT figure for us [Technical Issues] is more likely 2 years from now. So let’s say in FY ’20.

Anmol Jain — Managing Director

A 3-digit?

Pritesh Chheda — Lucky Investments — Analyst

PAT figure post-minority minority.

Anmol Jain — Managing Director

A 3-digit PAT figure back post minority, well, I would say surely there has been significant. For the full year, I think I would not be surprised that in the next maybe about 1 to 2 years, we should probably start reporting a 3 digit and this is within the guidance that we are talking about completely organic growth.

Pritesh Chheda — Lucky Investments — Analyst

Yes. Okay. Thank you very much, sir. Thank you.

Operator

Thank you. Our next question is from the line of Harshil Shah from Anvil Research. Please go ahead.

Harshil Shah — Anvil Research — Analyst

Hi, sir. Sir, it’s just a observation, sir, Sir, we believe buybacks is more tax efficient way of distributing profits and then it will also reduce equity over a period of time. And it’s taxable at 42% in the hands of shareholders and the promoters as well. So you can think about it just acquisition. And also can you give us a broad industry outlook 2 wheeler 4 wheeler, PV. How do you see things now?

Anmol Jain — Managing Director

So I’ll give you the industry outlook and maybe I can request Mr. Khanna to give you some light later on, on the whole talk about like we [ PAT ] Sanjay Mehta. So in turns of the 2-wheeler outlook and the passenger outlook, as I mentioned earlier, I think with first seeing a fundamental shift, which is more people buying mid to premium level models. This is happening in 2 wheelers as well as in the passenger car segment. But in terms of the overall demand, I think passenger vehicle segment is still buoyant.

There aren’t much inventory in the pipeline. So because of the semiconductor shortages and also the new launches, I think there is a strong demand in the market. And whatever is produced by the OEMs is readily going out the doors at the dealerships. So that’s a good problem to have. And I don’t expect any reason why in FY ’23 most of the OEMs should be reporting good set of numbers in terms of their overall growth in revenue and vehicle numbers.

In terms of 2 wheelers slightly, there is a different approach. I think the overall market because it is highly focused on the commuter segment, that demand itself is big, which means that overall industry, overall segment as such will probably be not growing significantly. We are proud of the expect maybe some single-digit growth. This is my personal take on it. But within the computer segment certain OEMs will definitely grow much more better because strategically they are different separately placed in terms of their dependability on the commuter segment or dependability on the motorcycle segment or dependability on India as a country.

So, certain OEMs will fare better, but I think the sentiment overall in the 2-wheeler industry is still weaker, passenger cars is very strong. And I think commercial vehicles, I’ll add has definitely seen an uptick and we are seeing volumes coming back. I think, partly it’s also to do with the huge government push on infrastructure spending commercial vehicle is directly related to that. That’s my take on the industry outlook.

And what was your other question?

Pritesh Chheda — Lucky Investments — Analyst

And sir, only the — it’s just a suggestion to you. Being the promoter, the profits that you distribute through by way of dividend is taxable at the rate of 40%, 42% in the hands of investors depending on your tech class basically. So if you do buyback, we will be paying only the 10% long-term capital gain time.

Naval Khanna — Executive Director

So this is just the suggestion, you can just have a look at it. Are you saying this is — this is Naval Khanna here. Are you saying buyback for the promoters?

Pritesh Chheda — Lucky Investments — Analyst

No. Probably not. So we are distributing INR3.5, you are giving INR3.5 dividend, right sir?

Sanjay Mehta — Director and Group Chief Financial Officer

Correct. Instead of giving dividends like INR7 crores, INR6.8 crores shares, INR7 crore share, sir into INR3, INR25 crores, INR26 cores is the total payout. We can do tender offers and you know everyone again participation the promoters, of the shareholders. So that will be with the efficient way of distributing the profit.

Pritesh Chheda — Lucky Investments — Analyst

Okay. We will examine this, definitely we will examine it.

Sanjay Mehta — Director and Group Chief Financial Officer

You have to pay is a long-term capital gain tax there we will have the grandfathering benefits.

Pritesh Chheda — Lucky Investments — Analyst

Okay. We will examine this. Thanks for the suggestion.

Anmol Jain — Managing Director

Yes, thank you. Thank you for that.

Operator

Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the conference back to Mr. Anmol Jain for closing comments.

Anmol Jain — Managing Director

I would like to thank you all for joining into the call. I really hope that we were able to answer all your questions. If there are any further queries, you may please get in touch with us or SGA. We will be happy to address all your queries. Thank you. Stay safe and stay healthy.

Operator

[Operator Closing Remarks]