Lumax Industries Limited (LUMAXIND) Q3 FY23 Earnings Concall Transcript

Lumax Industries Limited (NSE:LUMAXIND) Q3 FY23 Earnings Concall dated Feb. 14, 2023.

Corporate Participants:

Deepak Jain — Chairman & Managing Director

Sanjay Mehta — Group Chief Financial Officer

Anmol Jain — Joint Managing Director

Analysts:

Ashutosh Tiwari — Equirus Securities — Analyst

Sunil Kothari — Unique Asset Management LLP — Analyst

Nikhil Upadhyay — SiMPL — Analyst

Nidhi Babaria — Envision Capital — Analyst

Naval Khanna — Executive Director, Lumax Management Services

Komal Ladha — YellowJersey Investment Advisors — Analyst

Abhishek Shah — Valcore Capital Advisors LLP — Analyst

Abhishek Jain — Dolat Capital — Analyst

Vignesh Iyer — Sequent Investments — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Q3 FY 2023 Earnings Conference Call of Lumax Industries Limited.

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 guarantee of future performance of the company, and it may 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. Deepak Jain, Chairman and Managing Director of Lumax Industries Limited. Thank you, and over to you, sir.

Deepak Jain — Chairman & Managing Director

A very good morning to everyone. I hope everyone is in good health.

Today, along with me on this call, we have Mr. Anmol Jain, Joint Managing Director. From the finance team, we have Mr. Sanjay Mehta, Mr. Shruti Kant Rustagi; and Ankit Thakral. We also have Mr. Naval Khanna, and Priyanka Sharma, our Head, Corporate Communications, along with SGA, our Investor Relations Advisors.

The results and investor presentations are uploaded on the stock exchange and the company’s website, and I do hope everybody has had an opportunity to go through the same. I’ll give — I’ll start by giving some insights on the economy front, followed by the industry and business updates.

2023 continues with volatility bases on climate changes, geopolitical tension, high inflation and also high interest rates. The mood in the World Economic Forum were sober. However, India seems to have a silver lining and placed much better than other global economies. India’s GDP growth is forecasted to be in the range of 6% to 7% in the coming years and consistent growth in the economic activity is supported by local consumption and a conducive policy environment, along with a stable political democracy.

Over the next decade, India is expected to outperform many fast-growing large economies. And at the same time, the country’s OEMs and component manufacturers strive for global dominance. Multiple trends and policies are shaping the future of the auto — OEM and the Auto Component industry.

Automotive products will benefit immensely from the suppliers’ ecosystem in India due to its size, competitive cost structure and also recent government policy measures. The transition is anticipated to be accelerated by energy and labor cost constraints in the European and U.S. industrial enterprises and also by the China Plus One strategy and supply chain de-risking.

Talking about the budget ’23-’24 announcements, the Honorable Finance Minister focused on enhancing consumption by reducing direct income tax. And on the other hand, there was also a 33% enhancement on the capital outlay expenditure, which will directly benefit the overall expansion of the auto industry.

Specific interventions like enhanced income tax rebate, budget allocation for car scrappage policy and import duty exemption for manufacturing lithium batteries are projected to increase demand for Entry 2 level in pass cars, as well as lowering the price of EV purchasing. As prosperity and consumption increases, India’s consumer class is projected to increase from 27 million households in 2014 to 89 million households in 2025. And the Auto industry is anticipated to prosper as well as the expanded consumer class purchases more and better vehicles across all market categories to meet their rising mobility needs.

The Auto numbers recently published by FADA showed an encouraging trend. The automotive retail sales stand approximately 18.5 lakh, up by 13.5% compared to the same period a year ago. All the categories show a robust growth year-on-year, with sales of two-wheeler increasing by 10%, three-wheeler by 59%, passenger vehicles by 22% and commercial vehicles also registered a growth of 16%.

The sentiments are better than last year, but the rural market is yet to recover due to the rise in cost of ownership. However, with inflation coming down and supply chain stabilizing, we expect the rural markets to bounce back.

The company is aligned to execute our order book of INR1,000 crore plus in the next three years, and we have [Technical Issues] the construction of our Pune, Chakan plant, for which we expect the SOP to be in Q2 of FY 2024. We remain bullish about the domestic Indian industry, particularly in the passenger car segment, which contributes to the majority of the company’s revenue.

Now, I would like to hand over the call to Mr. Sanjay Mehta for operational and financials.

Sanjay Mehta — Group Chief Financial Officer

Good morning, everyone. Our share of LED Lighting for nine months FY ’23 stood at 34% of total sales and the Conventional Lighting is 66%. We are optimistic of increasing our share of LED Lighting going forward due to increase in demand for premium vehicles and increase in content per vehicle.

With respect to segment mix for nine months as a percentage of revenue, 66% is from passenger vehicles, 28% from two-wheelers and 6% from commercial vehicles. With respect to product mix for nine months as a percentage of total revenue, 67% of revenue is from front lighting, 24% from rear lighting and 9% from others.

Regarding [Technical Issues] performance in Q3, the revenue from operations grew by 33% on a year-on-year basis to INR579 crores. For nine months, revenue stood at INR1,711 crores as compared to INR1,202 crores, a growth of 42% on a year-on-year basis.

Consolidated EBITDA stood at INR57 crores as compared to INR38 crores, a growth of 52% on a year-on-year basis. For nine months, EBITDA grew by 92% on a year-to-year basis and stood at INR169 crores. EBITDA margin for Q3 FY ’23 is at 9.8%, up by 1.3 bps year-on-year. And for nine months, it stood at 9.9%, up by 260 bps year-on-year.

PBT before exceptional expenses and share of associate is INR29 crores in Q3 versus INR17 crores in the corresponding quarter last year, registering a growth of 72%. The profit after tax and share of associate witnessed a solid growth of 115% on a year-on-year basis for Q3 FY ’23, a growth of 329%, for nine months — sorry, and a growth of 329% for nine months FY ’23. For Q3 FY ’23, the PAT stood at INR30 crores and for nine months, it stood at INR82 crores. The capex incurred during nine months is INR64 crores.

With this, we can open the floor for question-and-answer.

Questions and Answers:

Operator

Thank you very much, sir. We will now begin the question-and-answer session. [Operator Instructions] We have the first question from the line of Ashutosh Tiwari from Equirus Securities. Please go ahead.

Ashutosh Tiwari — Equirus Securities — Analyst

Yes, hi. Congrats on good set of numbers. Firstly, if I look at LED share at around 34% nine months, is broadly stable on a Y-o-Y basis despite the fact that probably new model launches, we are seeing higher share of LEDs. And also you also mentioned I think couple of calls back that in new Scorpio, the content is very high, and M&M is one of the drivers of growth in this year. So why is it LED share is not increasing despite all these things improve, basically pointing out towards improvement of LED numbers?

Deepak Jain — Chairman & Managing Director

So, I think, you’re right. I think, if you look at it only from a pass car basis, as well as in terms of two-wheeler, the pass car basically has enhanced. I mean, say it has primarily been in terms of almost, you would say, 66%-34%, that’s what it is. But I think the two-wheeler base, which primarily one of the models that Activa before full LED, that basically is no more on full LED. And that’s why you’re probably seeing a reduction. But overall, I think we are still bullish and it remains that the LED will basically grow, hopefully trending up towards 50%-50%.

Ashutosh Tiwari — Equirus Securities — Analyst

But Activa, actually, if I remember correctly, it has moved to a mix of LED, halogen in BS-VI only. That happened two years back. So that cannot impact the Y-o-Y numbers, right?

Deepak Jain — Chairman & Managing Director

So it won’t impact Y-o-Y, but I think the two-wheeler been going down, I think that is where basically our base goes down from an LED perspective.

Ashutosh Tiwari — Equirus Securities — Analyst

But still you’re confident — like in this INR1,000 crore order book that you mentioned, what would be the share of LED over there?

Anmol Jain — Joint Managing Director

So there are two questions, I’ll just — this is Anmol Jain, Joint Managing Director. First answering to your second question first, the order book of more than INR1,000 crores, almost 50% would be LED. So that should significantly change the mix of LED to non-LED in the next two years to three years until when this order book peaks out in the revenue. Number one, coming back on a year-on-year basis, you took only one example of the Mahindra Scorpio, so that is a LED technology, and yes, the ramp-up has happened. More importantly, there are certain other models where also — which have also given a good growth on Maruti platforms, as well as within Mahindra, there are other platforms like the Bolero, which was the non-LED one. So that has kind of neutralized the growth on the LED. And that’s why on a year-on-year basis, you don’t see a significant shift. But we are pretty certain that in the next two years to three years, once this order book comes in, you will start gradually seeing a shift on higher adoption of LEDs.

Ashutosh Tiwari — Equirus Securities — Analyst

Okay, sure. And can you provide the numbers, like you mentioned nine-month capex of around INR64 crores. What would be numbers of full year and next year guidance for capex?

Anmol Jain — Joint Managing Director

So this year, full year, we should be close to around INR75 crores to INR80 crores as a full year. And next year, we should be close to around between INR225 crores to INR250 crores, out of which the significant part of almost INR175 million is going towards the capacity expansion in Chakan.

Ashutosh Tiwari — Equirus Securities — Analyst

And this INR175 crores, can you give how much revenue to us basically in future, next two-year, three-year perspective?

Anmol Jain — Joint Managing Director

So there are two phases of the new facility. The Phase 1, which will be starting from Q2 of FY ’24. That would give us a peak revenue of roughly around INR600 crores in FY ’25. And the Phase 2, which would be FY ’26 onwards, we are looking at perhaps the peak revenue of around INR900 crores to INR1,000 crores out of this facility. But right now, this INR175 crores should be able to give us a INR600 crore annual revenue as Phase 1.

Ashutosh Tiwari — Equirus Securities — Analyst

So this is like — I mean, part of production for other plants was [Technical Issues] here or this is all new sales you’re talking about?

Anmol Jain — Joint Managing Director

So there is only one model, which will be a shift from an existing facility to this facility. However, most of the new order book and out of this INR1,150 crores order book, 90% is new orders, which will be productionized and commissioned in this facility. So for the most part, it will be new revenue for the company.

Sunil Kothari — Unique Asset Management LLP — Analyst

And this will come in FY ’25, you said?

Anmol Jain — Joint Managing Director

Well, the SOP will start in FY ’24, the peak revenue would be in FY ’25, FY ’26. I would say, almost 75% of the order book would get into FY ’25 and 100% in FY ’26.

Ashutosh Tiwari — Equirus Securities — Analyst

Okay. Okay. And this is like you mentioned the entire Phase 1, Phase 2 put together?

Anmol Jain — Joint Managing Director

The Phase 1 — I am right now talking about the order book, which is there for Phase 1. For Phase 2, we are still expecting to close a few more orders in the coming quarters. So that would be over and above the current order book, but it will be commissioned from the new facility in Chakan in FY ’26 onwards. As you know, the lighting [Speech Overlap].

Ashutosh Tiwari — Equirus Securities — Analyst

But this INR175 crore capex is there fore both the phases or only one Phase 1?

Anmol Jain — Joint Managing Director

I’m sorry?

Ashutosh Tiwari — Equirus Securities — Analyst

This INR175 crore that you mentioned, out of total INR225 crores next year, this is only for Phase 1 or both phases put together?

Anmol Jain — Joint Managing Director

The INR175 crores capex is for Phase 1, which will give us an incremental revenue of about INR600 crores.

Ashutosh Tiwari — Equirus Securities — Analyst

That I got. Yes, that I got. Okay.

Anmol Jain — Joint Managing Director

This INR600 crores is a part of the total order book of about INR1,150 crores.

Ashutosh Tiwari — Equirus Securities — Analyst

Okay, sure. And we have seen improvement in margin stability over the last two quarters. This quarter despite maybe operating deleverage, still we delivered good margin. So how should one look at margins going ahead? Can we go towards that 10.5%, 11% trajectory going ahead?

Sanjay Mehta — Group Chief Financial Officer

We’ve always maintained that at an EBITDA level. Our endeavor is to get into double-digit margins. I think if you look at the quarter three for this year, we are pretty much around the similar double-digit level. And I think going forward, we are quite hopeful with the automotive demand in quarter four and even in next year FY ’24, we should be able to easily deliver upwards of double-digit EBITDA levels.

Ashutosh Tiwari — Equirus Securities — Analyst

Sure. And lastly, what is net debt right now?

Sanjay Mehta — Group Chief Financial Officer

The long-term debt is INR66 crore and the working capital is around INR304 crores. The debt equity ratio is 0.14. And post that new expansion, it will be 0.5% to 0.6%.

Ashutosh Tiwari — Equirus Securities — Analyst

Okay. Okay. You got it. Thanks a lot and all the best.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Nikhil from SiMPL. Please go ahead.

Nikhil Upadhyay — SiMPL — Analyst

Hello. Hello, am I audible?

Deepak Jain — Chairman & Managing Director

Yes, please go ahead.

Nikhil Upadhyay — SiMPL — Analyst

Yes, yes, thanks for the opportunity. And congrats on good set of numbers. Sir, I have two, three questions. One is on the two-wheeler market. Now, if you look at the two-wheeler market construct, most of the industry, the consensus seems to be that the peak of the volumes in industry for two-wheeler seems to be there. So that 21 crore, 2 crore kind of volumes which we had sold in 2018, the industry might not see a peak beyond that. What’s your view on that?

And secondly, if we look at on the lighting side in the two-wheeler, it’s largely a four-player market between Fiem, Lumax, Motherson, Marelli and Unitech. Do you think any more competition would — like would be entering in this market? Or would you say that the market will consolidate between these three, four players? And in this, how do we look at increasing our market share?

Deepak Jain — Chairman & Managing Director

So, first and foremost, I think we do remain optimistic on the India market. There is right now a commentary, which I agree what you are saying, going on in the industry that we have reached or saturated the peaks, which was 20 million. We don’t see that. We feel that this will basically come up, given that if the urban or the rural markets rather start supporting the two-wheeler transition, I think that should come up.

Also, of course, there is this solemn two-wheeler player, the EV, which by industry forecast itself, we talk about 6 million to 7 million going forward. So definitely, we remain bullish on the two-wheeler. Right now, there is a softening into the market for two-wheelers, but if you see the segmentation has changed.

In terms of competition, I would like to just first clarify, it’s not Marelli right now. It is actually Varroc. So the four players would be Lumax, Fiem, Varroc and, of course, there is Unitech because it’s more one customer-specific. There is also a little bit on Minda. So there is competition. I don’t see any new players emerging out which will — on the two-wheeler front, there could be certain consolidation, which may happen with the natural course of market turning up.

Nikhil Upadhyay — SiMPL — Analyst

And if you look at this Unitech, which was the major vendor for Hero and which is under liquidation. So are you seeing any delivery issues for Hero? And are you looking at increasing opportunities to increase our market share in Hero, which can drive our two-wheeler growth?

Deepak Jain — Chairman & Managing Director

Well, I think we are stable on the Hero market share. And if you see whenever basically a supplier is at financial risk, the first thing the OEMs would do is basically de-risk, so that they can actually secure their deliveries. And that’s probably what Hero is planning to do as well based on which we have got certain orders, we will be enhancing our wallet share, but our wallet share had already been at quite a high level at Hero. So we remain stable. But, of course, there are other players who we have actually penetrated into like TVS and that basically enhances our wallet share. HMSI, we remain stable. We do remain stable in Bajaj as a group company. And also, of course, now we probably are looking at another two to three other players, including certain other EV players.

Nikhil Upadhyay — SiMPL — Analyst

And just two more questions. One is on the four-wheeler lighting. Now, unlike a two-wheeler space where there are only four or five players, in four-wheeler, we’ve seen a significant number of players entering in the market. And some of them have scaled up significantly. So — but intuitively, I would have thought that the barriers to entry in a four-wheeler would have been much more than two-wheeler. So why is this different backdrop? And is it competition has scaled up only on pricing?

Deepak Jain — Chairman & Managing Director

No, I think there are two points. So I think two. In the four-wheeler, there is a massive tech change. If you see in the four-wheeler, they are all global players. There are hardly very few local players which are there. They are all actually global players with global alliances following their global customers. So I think that’s where basically what changes the four-wheeler vis-a-vis two-wheeler dynamics. We really feel that the four-wheeler lighting would continue to technologically evolve more rapidly, more so when basically EVs, the market is also moving towards the higher premiumization of the vehicles. So it’s not pricing actually. It is actually going to be more of value addition and technology.

Nikhil Upadhyay — SiMPL — Analyst

Okay. And last question, sir, on margins. Now if we compare the global lighting players where the LED penetration is much higher, almost 70%, 75%, the margins tend to be closer to that like in the 15% to 20% kind of a band. And even if you look at Motherson Marelli India lighting business, that’s also around 17%, 18%. Would you say once we hit a double-digit margin, say, 10%, 11%, which we are like sustaining for last two, three quarters, is there more room to increase for us? And — or is it like — would you say that probably the global standards won’t be the correct benchmark for Indian players to reach?

Deepak Jain — Chairman & Managing Director

So first and foremost, I don’t think the global standards, what you’re talking about, 20% is true for all lighting peers expect probably one. I mean, say the biggest largest player would be Quito, then there is Japan, Stanley, they don’t basically do these kind of margins. However, I would say that there is a scope for margin improvement from Lumax point of view and that’s what we will basically strive for. I don’t really think that about 17% to 20% within the Indian market, which is extremely price-sensitive and competitive, that probably would be true for this lighting business.

Nikhil Upadhyay — SiMPL — Analyst

Okay. And if you allow me one last question. In the last five years, six years, when the penetration of LED has improved from, say, mid-20s to now at the industry level close to around 35%, 40%, have you seen price erosion happening or largely the pricing has remained stable?

Deepak Jain — Chairman & Managing Director

I think the price has remained stable, rather, as I said, value addition has basically — or price per vehicle has also gone up significantly. So that is there. Of course, when you look at adoption of LED, I mean, say three years to four years ago when we started adopting, there is the electronic components, which basically LEDs focus that still a lot import. We do see that once basically the enablers or the PLIs would come in, there will be more electronic component level manufacturing within India, which hopefully should also enhance the localization part.

Nikhil Upadhyay — SiMPL — Analyst

Okay. But then — so that will reduce the RM, the component prices where the — so LED prices should move in tandem with the component prices, but not excessive price erosion should help.

Deepak Jain — Chairman & Managing Director

No, absolutely not. You do see that there is a lot of — when you localize any component at a component level, there are also a lot of tangible, but also intangible benefits. And that basically gives a lot more competitive advantages to us.

Nikhil Upadhyay — SiMPL — Analyst

Sure, sir. Thanks. Thanks for answering all the questions.

Operator

Thank you. The next question is from the line of Nidhi Babaria from Envision Capital. Please go ahead.

Nidhi Babaria — Envision Capital — Analyst

Congratulations, sir, for good set of numbers. And sir, I just wanted to understand, our backward integration, which we did some time back in Bawal plant. So what was the investment, and what is the margin contribution? And how do we see that plant in the coming future contributing to your margin?

Anmol Jain — Joint Managing Director

So this is Anmol Jain. So the investment we did in the Bawal electronic facility was close to about INR100 crores, INR105 crores, and the margin expansion is close to about 120 bps on account of the backward integration.

Nidhi Babaria — Envision Capital — Analyst

And sir, where — like how does this metrics flow in our P&L? Will we be able to see this margin expansion in our gross margins or it could come in our EBITDA margin? And how — like where does the supply chain sits in our entire manufacturing percent?

Anmol Jain — Joint Managing Director

So clearly, it will come in the gross margin. The material consumption would go down. And of course, there will be certain operating expenses, which would have gone up. So it would reflect in the gross margin and, of course, subsequently, the EBITDA level as well. But at a PBT, you would not probably see an incremental jump reasonably because of the depreciation impact.

Nidhi Babaria — Envision Capital — Analyst

And sir, what kind of returns do we expect from these INR100 crores, INR105 crores of investments in next one year to two years? And like this 120 bps margin improvement, from when will it start to reflect in our numbers? Or it has already started to come?

Anmol Jain — Joint Managing Director

So part of it has already started reflecting. I think as we get more and more into localization and more and more backward integration, we will be expanding the capacities of the electronic manufacturing as well in FY ’24. So I think clearly, there is an upside on the margins. And again, this INR100 crores is — investment has not given any revenue increase because the revenue is — as it’s backward integration, it only hits the bottom line expansion.

Nidhi Babaria — Envision Capital — Analyst

Sir, why would — like I’m just trying to understand why — if the plant has already started to commission then why only a part of this 120 bps margin improvement would have started to come and why not the entire — from day one, the entire benefit is getting reflected in our P&L? Like what would be the current understanding to this thing?

Deepak Jain — Chairman & Managing Director

So as I said, the expansion is an ongoing activity. When we talked about a INR100 crore investment, predominantly we had anticipated 120 bps incremental on the operating margins. I said some of it or probably most of it has already been seen in the P&L accounts. But as we increase the capacities, I’m saying that we should be looking at perhaps upwards of 120 bps advantage as a part of this backward integration. So going forward, when I said that the guidance is to get into the double-digit EBITDA margins and expand them further, part of that expansion of margin strategy would come with a higher backward integration of electronics as well.

Nidhi Babaria — Envision Capital — Analyst

Okay. And sir, there is one line item in our other expense, management support fees, which is roughly 1.3% to 1.5% of the sales. What would be this for? And how do we expect the management support fees to go in near future?

Naval Khanna — Executive Director, Lumax Management Services

So management support fee, we are paying to the collaborator, as well as to the Lumax Management Services, which are expanding a lot of services, like I’m on behalf of Lumax Management Services, sitting in this call. So all IT-related services, legal-related services, there are seven or eight services which Lumax Management Services is providing. So these are the combination of both the fees to the collaborator and to the Lumax Management Services.

Nidhi Babaria — Envision Capital — Analyst

Okay. And sir, for this new capex of INR175 crores, how much of this is going to be via debt and how much would be internal accrual?

Sanjay Mehta — Group Chief Financial Officer

INR156 crores is via debt and remaining is the internal accrual.

Nidhi Babaria — Envision Capital — Analyst

Okay. Okay, sir. Thank you. I will come back in the queue.

Deepak Jain — Chairman & Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Komal Ladha from YellowJersey Investment Advisors. Please go ahead.

Komal Ladha — YellowJersey Investment Advisors — Analyst

Hello. I just had a few questions. First, have you got any new clients in this quarter? And how much is it from EV and from traditional vehicles?

Deepak Jain — Chairman & Managing Director

So we have not got any new client, specifically in this quarter. However, we are constantly in conversations with certain clients which are not currently our customers, and we hope to materialize some of it in the subsequent quarters. Your second question on the EV, out of the order book of about INR1,150 crores, close to INR475 crores would be on account of EV, largely driven by four-wheeler and partially driven by two-wheeler electric vehicles.

Komal Ladha — YellowJersey Investment Advisors — Analyst

Okay. And could you give a customer-wise revenue mix?

Deepak Jain — Chairman & Managing Director

About these INR1,000 crore order book, I would not be able to give you a customer-wise breakup. But if you are talking about the customer-wise breakup with respect to the nine months, then Maruti, along with Suzuki Motors Gujarat continues to be the number one customer at about a 32% share followed with Honda two-wheelers and Mahindra & Mahindra at 13% each and then followed by Tata Motors and Hero MotoCorp at 9% and 7%, respectively. So these are the top five customers on a nine-month FY ’23 basis.

Komal Ladha — YellowJersey Investment Advisors — Analyst

Okay. Thank you.

Operator

Thank you. The next question is from the line of Abhishek Shah from Valcore Capital Advisors LLP. Please go ahead.

Abhishek Shah — Valcore Capital Advisors LLP — Analyst

Hi, sir. Thank you for the opportunity. Sir, just trying to understand, in Maruti, who would be the — what would be the existing models that you supply to, say, in this quarter or in the last nine months?

Anmol Jain — Joint Managing Director

So on Maruti, we would be on the Swift platform, we would be on the Alto platform, we would be on the Wagon R platform, we would be on the XL6 platform. I think the easier would be the platform which we are not on. I think currently, we are not on the Brezza platform or the Baleno platform. These would be the two and also on the Grand Vitara platform. These are the three platforms we are not on. But we are in conversations to hopefully secure orders for their forthcoming new platforms in the coming years.

Abhishek Shah — Valcore Capital Advisors LLP — Analyst

Got it. And sir, what about Mahindra & Mahindra — Mahindra & Mahindra and Honda motorcycle?

Anmol Jain — Joint Managing Director

So I’ll take one by one. So Mahindra & Mahindra, we are pretty much there across all platforms, right from the Bolero to the Scorpio and the Thar as well. However, we are not currently on the XUV700. However, we have already been given a go ahead for development as a second source, and that’s something which is a part of our new order book will be commissioned in the new facility in Chakan. So we have been nominated as a XUV700 supplier as a second source already.

And your last question was on Honda?

Abhishek Shah — Valcore Capital Advisors LLP — Analyst

Yes.

Anmol Jain — Joint Managing Director

So on Honda cars, we are not really significantly present in any of the platforms on a head or a tail. We do some small lamps on certain platforms. But we are hopeful to secure orders for their forthcoming models.

Abhishek Shah — Valcore Capital Advisors LLP — Analyst

Sir, Honda motorcycle, sorry, that’s about 13% for us, right?

Anmol Jain — Joint Managing Director

Okay. I was talking about on Honda cars. So Honda motorcycle, I think we have pretty much a strong presence across. I’m not too sure, but we are on Shine, we are on the Activa.

Deepak Jain — Chairman & Managing Director

So there is basically the Activa, we are on the Grazia. We basically were also be on your — the Shine, we probably are also on the Shine both, and then we also on the X-Blade and Scrambler and with Unicorn.

Abhishek Shah — Valcore Capital Advisors LLP — Analyst

Got it. Got it. Got it. Sir, lastly, any new models that we’ve added or been supplying to in, say, FY ’24, which are significant, was noting yourself besides these?

Anmol Jain — Joint Managing Director

So new models in FY ’24 for us, I think the major one, as I mentioned, would be the XUV700. That is a new platform and a new model for us. There are certain others also which are under development. But again, because of non-confidentiality, I would not be able to disclose the model names and customer to you at present.

Ashutosh Tiwari — Equirus Securities — Analyst

Got it. Got it. Sir, lastly, just trying to understand the market size of automotive lighting in India for passenger vehicles, two-wheeler and commercial vehicle? Just a ballpark idea.

Deepak Jain — Chairman & Managing Director

Well, let me say, you can just put it in a way that there are two companies. One is SL, one is Lumax. So both together, which is a SL Lumax associate company, if you’re basically looking at least around about 50% plus. We together are basically doing a revenue of close to around about INR3,500 crores, INR3,600 crores. So you can basically double it, $1 billion.

Abhishek Shah — Valcore Capital Advisors LLP — Analyst

Got it. Got it. And if I would want to know the split, understand the split between the same, I mean passenger vehicle. Is it similar to what we have at our company level or…

Deepak Jain — Chairman & Managing Director

Well, I mean, say if you were to look at it, I mean, so the value add is much more. So I would say the 60%-40% would be interesting.

Abhishek Shah — Valcore Capital Advisors LLP — Analyst

60% would be PV and rest would be two-wheeler and…

Deepak Jain — Chairman & Managing Director

Yes, PV, CV and basically — yes, two-wheeler, three-wheelers.

Abhishek Shah — Valcore Capital Advisors LLP — Analyst

Got it. Got it. Got it. All right, sir. That’s all from my side. Thank you so much.

Operator

Thank you. The next question is from the line of Sunil Kothari from Unique PMS. Please go ahead.

Sunil Kothari — Unique Asset Management LLP — Analyst

Thanks for the opportunity, sir. Really commendable performance at least compared to many previous years where, I think, crossing. I would like to, sir, draw Deepak ji’s attention on Page number 36, I mean, Slide number 36. I would like to understand from you, sir is, say, last five years whether revenue, EBITDA, PAT, everything I think I’m hopeful that we’ll be crossing this peak of last five years now onwards. We have faced so many tougher challenges and difficult time during the last three, four, five years. We also moved from non-LED to LED during these five years. We are also talking about increasing content per vehicle, lighting per vehicle. So how you see — what you would like to do over the next three years, five years may not be in numbers, but some guidelines, some strategy, some — your objective, if you talk from that point of view will be really helpful.

Deepak Jain — Chairman & Managing Director

Sunil ji, first and foremost, thank you very much, as always, for your appreciation and also more importantly, your consistent support. You’re right, I think see for us over the last four to five years, the industry itself has been actually declined, but you see the lighting industry has actually grown. Lumax’s today performance if you see, concurrently, we have been betting on technology, we have been betting on LEDs. We have invested actually over the last two years largely in these two areas. I think with this, we have got a very strong order book. I think a good order book of about almost INR1,100 crores plus, which we should be able to execute in three years. I think key would be for an execution now. And with this execution, if we are able to optimize our cost performance, we should have, what we’ve been always talking about, a stable double-digit EBITDA margin with further expansion scope. So I think that’s the first point.

Second, I think there has been very strategic customer acquisitions like, for example, we’ve got TVS, which we do feel that it will become a big player and a consistent big player on the two-wheeler space. We continue to basically — and let me talk about the pass car because a lot of the revenues from the company is coming in the pass car business. If you see, 90% of the India market is actually controlled by four players. We have Maruti Suzuki, we have basically Hyundai Kia, and I’m clubbing them as one because our associate company, SL Lumax caters to both 100%. We have Mahindras, and we have Tatas. These are the four companies which actually controls 90% of the pass car market.

I personally don’t see a reason where I mean say there will be a large expansion happening in the next three years to five years. I can’t say post five years. It is obviously Suzuki, Toyota alliance which is playing in. Our focus as a company is to maybe grow the market share. We have already done that with Mahindra, next is Tata and retain it with basically Maruti and, of course, SL will basically continue to do it with basically Hyundai and Kia.

With the two-wheeler, we remain buoyant. There is a softness in the market, but I think there is an opportunity to actually enhance the EV space, as well as if EV space continues as bullish as it continues to be, there may be more LED adoption. Clear cut, there are opportunities in the commercial vehicle space and the farm equipment space. And that, I think, the company is already aligned in. So I think, more or less, we are pretty busy. We want to basically make good order book and consistent order book with certain key customers and then focus on basically cost optimization.

Sunil Kothari — Unique Asset Management LLP — Analyst

So over the next three years, five years, one should expect this — I mean, subject to some unavailable situation, the steady growth and stable and slowly improving margin. That is one should hope for. You as a management, also I think must be thinking that way?

Deepak Jain — Chairman & Managing Director

Well, I think very simply — I mean, say if I were to just execute the order book what I have in hand, I mean, say, and in three years, if it basically puts INR1,100 crores on top of today, you would say that maybe in three years, I’m going to grow CAGR of 15%. Hopefully, the market continues to grow, and I’m saying with this is assumption, presumption that the uptick is coming now. Then you probably would have a further enhancement of volume growth. The investments, what we are doing currently, which we’re doing in Pune and the other basically some brownfield expansion, that should help us to support the next two years to three years basically revenue growth.

Sunil Kothari — Unique Asset Management LLP — Analyst

Great. Sir, second point is, your all the four major customer passenger vehicles, they are also now very eager to produce in India and to export through connected international market, and they’re already doing at a respectable level. So looking at that opportunity. And second, Stanley, a Japanese player also very keen to make India as a production hub, production base. So do you see any really big opportunity, not immediately, but over a period from Stanley supports you making as a sourcing base, how you see exports operating over maybe in three, five year?

Deepak Jain — Chairman & Managing Director

See, I think as I said, our first focus is to cater to the domestic demand. I do believe that the domestic demand will be extremely strong, specifically in the pass car segment. And for us to basically penetrate and stabilize basically what our customer expectation is, that’s our first priority. But ongoing dialogue always is there with Stanley, how we can support in their global systems. Currently, Stanley collaborated with India, next year, we’re going to celebrate 40 years of fabulous collaboration. It’s primarily to focus on to their customers in India. But I think with more and more Make in India tempo coming in, if we’re able to basically give the competitiveness and quality, I do not see any reason why Stanley may not look at India for a particular type of technology to be exported to the world. But as of now, these are just all on discussions, nothing which has materialized.

Sunil Kothari — Unique Asset Management LLP — Analyst

Right. And sir, my last question is on SL Lumax. They’ve done really remarkably well on — during 2022, almost INR2,000 crore topline. Our sales during nine months of profit is also very respectable, almost INR27 crore. Would you like to comment on the opportunity, possibility, maybe a visible time frame, maybe 2023?

Deepak Jain — Chairman & Managing Director

No, I think I can very clearly say that SL drives very strongly on the performance of Hyundai and Kia. You have to please understand that, Hyundai unfortunately, over the last, let’s say, five years, four years before, there we’ve [Phonetic] kind of saturated at 650,000 to 700,000. With Kia coming in, they are venting it. And as you already know, there are market news that Hyundai is looking for maybe new plants in other geographies and expanding its capacity.

So I think we are very much committed to be a partner with SL for basically expansion in their Korean — catering to their Korean customers. And I think it’s a very, very strategic partnership for us where they and we, each other synergize to focus on SL Lumax does it for the Korean customers, 100% and Lumax then does it for the other OEMs, which is present in India. So we do consider and we do hope that there will be strong performance with Hyundai, Kia, overall SL Lumax catering to this for the Indian market.

Sunil Kothari — Unique Asset Management LLP — Analyst

Right. And sir, this profitability seems to be now stabilizing at SL Lumax also?

Deepak Jain — Chairman & Managing Director

Well, as I said, I mean, because your expansion is there, there is a profitability which basically is having a leverage and it will basically stabilize, no doubt.

Sunil Kothari — Unique Asset Management LLP — Analyst

Great, sir. Thanks a lot, and wish you good luck. Thank you very much.

Operator

Thank you. The next question is from the line of Abhishek from Dolat Capital. Please go ahead.

Abhishek Jain — Dolat Capital — Analyst

Thanks for the opportunity, sir. Sir, in nine months, revenue growth is around 42%. So how [Technical Issues] realization growth?

Deepak Jain — Chairman & Managing Director

Sorry. Your line is not clear. Can you repeat it and just be a little bit more specific?

Abhishek Jain — Dolat Capital — Analyst

Hello. Hello, sir?

Deepak Jain — Chairman & Managing Director

Yeah. Please go ahead.

Abhishek Jain — Dolat Capital — Analyst

Sir, in nine month, revenue growth is 42%. How much volume versus realization growth?

Deepak Jain — Chairman & Managing Director

So basically, of the 42%, which is around INR488 crores, you could say INR351 crores is volume-based, INR137 crores is value [Phonetic].

Abhishek Jain — Dolat Capital — Analyst

And sir, in realization growth, how much is because of the product mix and what percent is for the RM inflation?

Deepak Jain — Chairman & Managing Director

So, I think there would be probably 100 bps, which basically has impacted in terms of the RM inflation, which we probably are hoping to get with the customers, and we are still in negotiations with them. Balance everything else would be [Technical Issues].

Abhishek Jain — Dolat Capital — Analyst

Okay. And sir, your current capacity utilization has reached to the 85% to 90%. So what is your capex plan for the capacity addition in the coming days, sir?

Anmol Jain — Joint Managing Director

So already mentioned that this year, our capex plan is roughly about INR75 crores to INR80 crores for the full year. These are incremental expansions, brownfield and the major expansion, which is going to be in the next financial year is about INR175 crores for the new facility in Chakan.

Abhishek Jain — Dolat Capital — Analyst

Okay, sir. And what is your capex plan for FY ’24? This is INR175 crores, right, sir?

Anmol Jain — Joint Managing Director

Total would be about between INR225 crores to INR250 crores. We are still in the process of making final budgets for the next year.

Abhishek Jain — Dolat Capital — Analyst

Okay. And how much incremental revenue will come from this Sanand plant of Maruti Suzuki and MG Motors for this fiscal and for the next fiscal?

Anmol Jain — Joint Managing Director

So the Sanand plant next year would be probably peaking out to approximately INR600 crores to INR700 crores on an annual basis. Some part of the production of the Sanand plant would be also shifted to the Chakan plant. And as I mentioned earlier, the INR175 crore capex on the Chakan new facility will give us a peak revenue of roughly about INR550 crores to INR600 crores as on FY ’25.

Abhishek Jain — Dolat Capital — Analyst

Okay. And my last question is related with the forex loss or gain. So in last nine month, how much is the forex gain or losses because of the fluctuation in the currency?

Sanjay Mehta — Group Chief Financial Officer

INR4 crores of foreign exchange loss we have incurred up to nine months.

Abhishek Jain — Dolat Capital — Analyst

How much, sir?

Sanjay Mehta — Group Chief Financial Officer

INR4 crore.

Abhishek Jain — Dolat Capital — Analyst

Okay, sir. Thanks, sir. That’s all from my side.

Operator

Thank you. The next question is from the line of Vignesh Iyer from Sequent Investments. Please go ahead.

Vignesh Iyer — Sequent Investments — Analyst

Congratulations, sir, on a good set of numbers, and thank you for the opportunity. To just understand, sir, if I’m not wrong, your quarter four is the best quarter among all the quarters, right? And just to understand, I did get about the expansion plan, etc. Just to get — understand how — so would it be right to say that we’ll be ending somewhere close to INR2,300 crores, INR2,400 crores revenue for this year and say roughly 15% growth for next two years considering your capex?

Anmol Jain — Joint Managing Director

Yeah, that would be fair to estimate.

Vignesh Iyer — Sequent Investments — Analyst

Okay. And since the Phase 1 of the capex and with the order book in visibility or visibility of the order book. So — and with 50%, 50% LED and conventional, so what would be the — what will be the change in EBITDA mix? Just to get an idea, how — what would be the type of improvement we might see in the EBITDA mix?

Anmol Jain — Joint Managing Director

So, again, it’s very difficult because EBITDA would be an outcome of multiple factors. Product mix clearly being one technological shifts, but obviously, in order to — the process technology, they’re very different. So there may be certain incremental costs as well. But I think I’ve always maintained the guidance that our endeavor is to close towards the team EBITDA, which is, let’s say, 30% or upwards. I think first step this year, we should be definitely looking at a double-digit EBITDA and post that, probably be trying to achieve somewhere around 12%-odd in the next 12 to 24 months. That would be our guidance from an EBITDA expansion.

Vignesh Iyer — Sequent Investments — Analyst

Okay, I get it. Just one last question. Sir, just to understand it, so say, I’m going out and producing LED as compared to the conventionals, what would be the spread between that? I mean, LED would obviously be more EBITDA — better EBITDAs compared to conventional. So what would be that spread between that, EBITDA for the LED to conventional will be?

Anmol Jain — Joint Managing Director

So, it’s not necessarily true. In general, yes, you’re right, EBITDA or because the contribution per vehicle of the LED lamp is much more than that of a conventional lamp. The fixed costs do get proportionately distributed and the EBITDA margins are fairly better on an LED. Generally, it’s true, but not always. So I would probably not be able to give you an exact incremental expansion vis-a-vis a conventional to a LED on a lamp per se. But I think overall, we are very confident that because 50% of the order book is LED, we should be able to easily expand our margins in the coming — forthcoming years.

Vignesh Iyer — Sequent Investments — Analyst

Okay. So it means you have in your mind of reaching the 13% EBITDA — 12% or 13% because you see that the LED is growing 50% of our business, right? More or less the idea is that, right?

Anmol Jain — Joint Managing Director

That’s correct.

Vignesh Iyer — Sequent Investments — Analyst

Fine. Thank you, sir. Thank you, sir. And all the best.

Anmol Jain — Joint Managing Director

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Ashutosh Tiwari from Equirus Securities. Please go ahead.

Ashutosh Tiwari — Equirus Securities — Analyst

Sir, you mentioned that you will be second sourcing XUV700. What would be your share in that?

Anmol Jain — Joint Managing Director

Well, right now, I would say that it would start at about 50-50. And maybe once we are in production, it could also get ramped up to perhaps the 60-40 or 70-30, depending on where the total volume of XUV700 go. But clearly, as a second source, we would be getting into a 50% volume — wallet share.

Ashutosh Tiwari — Equirus Securities — Analyst

And this will start from second half next year, ’24?

Anmol Jain — Joint Managing Director

This would start from somewhere in quarter two of FY ’24, quarter three of FY ’24 depending on the exact product development timelines and approvals. But yes, definitely in Q2, Q3 FY ’24.

Ashutosh Tiwari — Equirus Securities — Analyst

And is it like several part of this INR1,150 crores order book that we have today?

Anmol Jain — Joint Managing Director

Yes, it is a part of the INR1,150 crore order book that we have today.

Ashutosh Tiwari — Equirus Securities — Analyst

So is it like a large part or significant part of that order book?

Anmol Jain — Joint Managing Director

It’s not a very significant large part of that order book. But I mean, it is definitely I think close to maybe about 15%-odd of the order book or so. So it’s not — I mean, it’s significant from one point, but it’s not as significant — it’s not half of the order book or something.

Ashutosh Tiwari — Equirus Securities — Analyst

Okay. And you mentioned INR475 crore order book is for electric vehicles out of that INR1,150 crores. So — and these are existing models or the new model launches from Tata and Mahindra, or it is only Mahindra?

Anmol Jain — Joint Managing Director

No, these are new launches, and these are not necessarily Tata or Mahindra. These are also other OEMs, which have announced their EV plans both in the four-wheeler and two-wheeler. And so, we have secured orders of four-wheelers for the most part out of this INR475 crores.

Ashutosh Tiwari — Equirus Securities — Analyst

Okay, okay, okay. And this INR600 crore revenue from Phase 1, partly will be XUV700. So is it — out of this INR600 crores, is the meaningful sales shifting from Sanand to this plant?

Anmol Jain — Joint Managing Director

Can you repeat that, please?

Ashutosh Tiwari — Equirus Securities — Analyst

So you mentioned INR600 crores will be revenue from the Phase 1 of the Sanand — sorry, Chakan plant. And you also mentioned there’s some part of production from Sanand shift to Chakan. So is it like a large chunk is shifting from Sanand to Chakan or it’s a small business only out of this INR600 crores?

Anmol Jain — Joint Managing Director

It’s close to about INR100 crores, which would be a shifting business. So for the most part, it would be still new business, which would be coming in. And this is largely on Mahindra. As I said, XUV700, as well as certain platforms of Tata Motors.

Ashutosh Tiwari — Equirus Securities — Analyst

Okay, okay. Got it. Okay. That’s all from my side. Thank you.

Anmol Jain — Joint Managing Director

Thank you.

Operator

Thank you. There is a follow-up question from the line of Abhishek Shah from Valcore Capital Advisors LLP. Please go ahead.

Abhishek Shah — Valcore Capital Advisors LLP — Analyst

Sorry, sir, I just missed what — which models in Tata do we supply, Tata Motors? Hello?

Anmol Jain — Joint Managing Director

Yeah. Could you repeat that question?

Abhishek Shah — Valcore Capital Advisors LLP — Analyst

In Tata Motors, sir, which are the models that we supply to?

Anmol Jain — Joint Managing Director

We are having Nexon and Punch platforms for the Phase 1 in Chakan.

Abhishek Shah — Valcore Capital Advisors LLP — Analyst

Okay. All right. All right. Thank you.

Operator

Thank you. There is a follow-up question from the line of Nidhi Babaria from Envision Capital. Please go ahead.

Nidhi Babaria — Envision Capital — Analyst

Thank you, sir, for taking my questions, again. Sir, I just wanted to ask you the Bawal backward integration in which quarter did we started the facilities, which — and how much investments do we plan to do in this same facility in coming years?

Anmol Jain — Joint Managing Director

See [Phonetic], the Bawal facility was started in Q4 for FY ’22. And going forward, you said how much expansion? I mean, I don’t see a significant one. It will be part and parcel of the INR60-odd crores capex apart from the new facility, which is planned for next year.

Nidhi Babaria — Envision Capital — Analyst

INR50-odd crores?

Anmol Jain — Joint Managing Director

No. I said total capex next year, ma’am, as I said, it will be about INR225 crores to INR250 crores, out of which INR175 crores is the new Chakan facility. The remaining, which is around whatever, INR50 crores to INR70 crores, out of that, some part of it, I don’t know the exact number, but not a significant one would be towards the electronic Bawal facility.

Nidhi Babaria — Envision Capital — Analyst

Okay. Okay. And sir, our…

Anmol Jain — Joint Managing Director

Yeah, it would not be INR50 crores, I just wanted to correct you there.

Nidhi Babaria — Envision Capital — Analyst

Okay, okay. So sir, I also wanted to ask, our gross book has increased significantly over past couple of years. But our topline growth hasn’t been the same. So what could be the reason for that? And how do we expect our margins to move in coming years?

Anmol Jain — Joint Managing Director

So you’re absolutely right. So there are two predominant reasons for that. Number one, the investment on the electronics facility. Number two, there was also a shift for a very high volume model of Maruti Suzuki from their Manesar facility to their Gujarat facility. And since lamps being very fragile, we have to produce them next door to our customers. So there was a partial duplication of capacity to service our customers, which did not really give us an incremental revenue, but the gross block did go up. So these are the predominant reasons why you’re not seeing a revenue jump in the last three years. However, we, as I mentioned, have a very strong order book, and we do not anticipate a very hefty investment after this Chakan facility to fulfill that INR1,000 crores, INR1,200 crores order book. So going forward, you will see a shift in our asset turnover ratio as well. In terms of margins, I’ve already mentioned, the guidance for the next 12 to 24 months would be to stabilize the double digits and try to attain 12% to 13% EBITDA margins.

Nidhi Babaria — Envision Capital — Analyst

And this double-digit margin would come by operating leverage? Or are we also planning some more backward integration apart from the current economic — electronic components, which we have already done?

Anmol Jain — Joint Managing Director

It would be a mixture of both. But for the most part, it would be operational efficiencies and obviously, fixed cost rationalization of the incremental revenue.

Nidhi Babaria — Envision Capital — Analyst

Okay. And sir, the royalty fees and management fees and everything, how much are we planning to — how much is it going to sustain in the near future? And is there any plans of renegotiating on our royalty plan?

Deepak Jain — Chairman & Managing Director

No, we — as I said, we are having a 40-year relationship with Stanley Electric. We basically will continue to basically pay this kind of a royalty to Stanley to — for their support for the global technology.

Nidhi Babaria — Envision Capital — Analyst

Okay. And sir, the INR1,150 crore of order book from where is this expected to come on our production line?

Deepak Jain — Chairman & Managing Director

I told you INR1,150 crores is going to be executed in the next three years.

Nidhi Babaria — Envision Capital — Analyst

Will it start from Q4, like Q1 FY ’24 or Q2 FY ’24?

Anmol Jain — Joint Managing Director

So FY ’24 would be roughly 25% of this order book. It would get to 75% in FY ’25 and then 100% in FY ’26.

Nidhi Babaria — Envision Capital — Analyst

Okay. Okay, sir. Thank you.

Anmol Jain — Joint Managing Director

Thank you.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Deepak Jain, Chairman and Managing Director, for closing comments. Over to you, sir.

Deepak Jain — Chairman & Managing Director

Thank you, everyone, for joining on the call. I would also like to say that we do remain very confident on the growing prospects of India and the automotive sector. I hope that we have been able to respond to your queries adequately. And for any further information, I refer to you get in touch with SGA. Thank you very much, and stay safe.

Operator

[Operator Closing Remarks]