Minda Industries Ltd (MINDAIND) Q3 FY21 Earnings Concall Transcript

Minda Industries Ltd (NSE:MINDAIND) Q3 FY21 earnings Concall dated Feb. 04, 2021.

Corporate Participants:

Sunil Bohra — Executive Director and Group Chief Financial Officer

Amit Jain — Chief Executive Officer – Advance Electronics Domain and Chief Technology Officer

Analysts:

Nikhil Kale — Axis Capital — Analyst

Ronak Sarda — Systematix — Analyst

Ashutosh Tiwari — Equirus Securities — Analyst

Siddhartha Bera — Nomura — Analyst

Vimal Gohil — Union AMC — Analyst

Mukesh Saraf — Spark Capital — Analyst

Aditya Jhawar — Investec Capital — Analyst

Basudeb Banerjee — Ambit Capital — Analyst

Anubhav Rawat — Monarch Network — Analyst

Shashank Kanodia — ICICI Securities — Analyst

Nishit Jalan — Access Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Minda Industries Limited Q3 FY ’21 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. Sunil Bohra, Group CFO, Minda Industries. Thank you, and over to you, sir.

Sunil Bohra — Executive Director and Group Chief Financial Officer

Thank you very much. Good afternoon, and a warm welcome to all of the participants. I hope you and your near and dear ones are — all keeping safe and healthy. On the earnings call today, I’m joined by my colleague [Technical Issues] to talk about our existing EV portfolio and future EV product pipeline; Mr. Ankur Modi and Mr. H.S. Rana [Phonetic]. We hope you have had a chance to look at our financial results and presentation that is uploaded on the stock exchange as well as the Company’s website. We will briefly discuss about the business landscape and then update on our performance in the preceding quarter, following which we will be glad to respond to your queries.

Starting with the industry update, as you know, the auto industry performance for the quarter from October to December continued its growth momentum with October being one of the best months during the quarter. This was backed by sustained retail sales momentum post festivals, low channel inventory and a soft base and a drive in preference for personal mobility and continued positive sentiments in rural and semi-urban markets. Manufacturing and distribution activities have been getting ramped up gradually since second quarter, in line with the rest of the economy. However, the impact of the pandemic on the supply chain continues to inhibit a complete return to production normalcy. Nevertheless, the most automotive industry segments have reported successive improvement in offtake throughout the second half of 2020 on the back of initial bounce provided by a pent-up demand, followed by the preference for affordable personal mobility and continued rural resilience.

E-commerce and the need for last mile connectivity have served the MCVs growth throughout with trucks being the latest category to rebound on a pickup in the freight rates and with near-normal economic activity domestically. On the flip side, segments related to public transport such as buses and passenger three-wheelers continued to lag heavily due to closure of schools and offices for most part amidst ongoing concerns over social distancing, which also has started off easing to some extent. Commodity prices have seen a sharp increase during the quarter and will remain headwind going forward until the commodity price adjustments are aligned with our customers. The proposed PLI Scheme of INR57,000 crores for the auto sector [Indecipherable] a major development in the latest quarter, with the intent of this scheme for auto sector being furthering the Make in India initiative and making it also export-oriented from largely an import-dependent industry for some critical components. Overall, the demand is expected to be sustained on the back of rural markets, which have higher income visibility due to good monsoon, higher kharif acreage and better MSPs. The mobility demand surge, driven by COVID risk, is expected to normalize as public transport restarts across regions. Overall, the medium to long-term outlook looks positive for the industry.

Moving onto budget updates, while we all know about the budget announcements, so let me highlight about a few pointers from the budget that pertain to us and the auto industry, and I’ll try to be brief. The voluntary vehicle scrappage policy has been included in the budget. This will encourage the consumer demand towards new and environment-friendly vehicles. Similarly, the Ministry of Roads and Highways had proposed a Green Tax on old vehicles for reducing pollution, and this highlights the efforts of the government to shift the energy consumption towards the renewable sources. All these are good lead indicators that the reforms are going to broaden the scope of work for Minda Industries. The Finance Minister has also announced that custom duties on specified auto parts like ignition wiring sets, safety glass, parts of signaling equipment, etc. will be hiked to 15%. This will certainly promote domestic manufacturing of automobile components in the country and reduce the quantum of imports. Volumes in the CV segment is yet to recover fully from the COVID, and the government has given a welcome push by announcing a new scheme worth INR18,000 crores to support augmentation of public bus transportation services. With Harita Seating in our portfolio, this augments well for us and we will be monitoring the situation closely to see how we can benefit the most from these opportunities. Overall, we believe the budget was more focused on building future India with a lot of emphasis on infrastructure building, which is a key necessity and ingredient for industry to flourish and create employment opportunities to meet the needs of growing India.

Now, I’ll request our colleague, Mr. Amit Jain, to talk about our EV products. Over to you.

Amit Jain — Chief Executive Officer – Advance Electronics Domain and Chief Technology Officer

Yeah, thanks Sunil. So, in line with the global trends of what’s called CASE — connectivity, autonomous, shared mobility and electrification — we at Minda Industries have also been tracking these macro trends, and more specifically, for India, looking at how these trends start up. And one of them and the most important for us today is electrification. And we — in this call, I’ll try and mention a few points about how Minda looks at electrification and what we are doing here.

On electrification [Phonetic], if you refer to Slide 4 in the back, we have been working to upgrade our existing Group products to meet requirements specific to electric vehicles like low energy consumption, light-weighting. We have several products in this segment that we’ve gone into production with, which includes LED headlamps, tail lamps, side indicators, low current switches and electronic horns. We’ve also launched a few new products for electric vehicles from our range of products like sensors. We have launched new sensors specific to electric vehicles like APS, or accelerator position sensor, brake pedal sensor for regenerative braking, EV battery temperature sensors and also vacuum sensors for EV brake systems.

If you refer Slide 5, over the last couple of years, we’ve also been working on a complete new range of products for electric vehicles, which were earlier not a part of our portfolio. These products are synergistic to our Group and are mainly in the area of electrical and electronics. These products are mainly focused on the low voltage electric vehicles, which are primarily for two wheelers and for three wheelers. We believe that this segment of two wheelers and three wheelers will have the largest and the quickest adoption in the electric vehicle segment and primarily because there is less dependency on charging infrastructure, and as well as the range of these vehicles would be enough for more city driving conditions. On our focus in these new products for two wheelers and three wheelers include ECUs, DC/DC converters, onboard and off-board chargers, telematics control units and smart plugs.

We’ve also been working on developing battery management systems for lithium-ion batteries along with our technical partner, Auto Motive Power in the US. Out of these range of products, ECUs, telematics control units and spark plugs are already in production, and they went into production this year and a few products like battery management systems and onboard chargers will go into production in the next few months, mainly in the next financial year ’21-’22 for some of the major OEMs in India. We believe the change to policy and the entry of established players into a very fragmented EV market currently will see a very strong growth of two-wheel and three-wheel EV vehicles. Most of our products like ECUs, telematics control units, smart plugs and battery management systems can also be upgraded for the four-wheel segments. So, we see some strong future growth of all our platforms in these segments also.

So, I think that’s all from my side on the electric vehicle outlook for Minda Industries. Over to you, Sunil.

Sunil Bohra — Executive Director and Group Chief Financial Officer

Yeah. Thanks, Amit. So, while we all know that the EV volumes in India are not significant as of now and that most of our products are agnostic to type of energy vehicle operates, it is an important asset to always stay atop and it will also help us capture additional opportunities that EV segment may provide to us.

Coming to our performance, you may refer to Slide 8 and 9. At a consolidated level, during Q3 of FY 2021, the Company reported a revenue of INR1,802 Crores as against INR1,327 Crores for Q3 of FY 2020, registering a growth of 36% year-on-year. This, as you will note, is significantly higher than the overall industry volume growth of 17%. The revenue for Q2 FY 2021 was INR1,465 Crores, implying a quarter-on-quarter growth of 23%. We have witnessed growth across almost all of our growth portfolio. Healthy demand, coupled with higher kit value per vehicle, is enabling us to continue to outperform the industry.

EBITDA for Q3 FY ’21 was at INR264 Crores in comparison to EBITDA of INR163 Crores for corresponding quarter, i.e. Q3 of FY 2020. The EBITDA margin also has improved significantly on year-on-year basis from 12.3% to 14.6% in the current quarter due to better operating leverage and sustained cost control. EBITDA for the preceding quarter, i.e. Q2 of FY 2021, was at INR215 crores. And as you may note, the EBITDA margin is same as in Q2 despite the full impact of manpower cost reinstatement, which happened in the current quarter. The profit before tax for Q3 FY 2021 was at INR164 Crore as against PBT of INR78 crores in Q3 of FY ’20, registering a growth of 110%.

Depreciation has been higher as new plants of alloy wheel and sensors has been commissioned and capitalized during the quarter. Finance costs have increased marginally quarter-on-quarter basis on account of interest on loan for above expansion, which were capitalized till last quarter. The profit after tax, so it is Minda Industries’ share for the quarter, was at INR108 crores, as against INR45crores in the corresponding quarter last year, an increase of 142%. We are happy to communicate that Board has also declared an interim dividend of 17.5% of face value to reward and distribute wealth to its shareholders.

Moving to the product lines, you must please refer to Slides 10 and 11. Starting with switching system, the segment achieved revenue of INR631 crores for Q3, contributing about 35% of total consolidated turnover. In fact industry growth and demand for premiumization in switch continues to drive our growth in the category with new order intake for various switches like steering wheel switch, second gear switch, driver side switch for new customers and also from power windows and door switches, etc. So, we have been adding new customers for switches, which currently we have not been serving. In our two-wheeler switch, we have acquired a new customer, John Deere, with orders for USB chargers and ignition switch.

Moving to lighting business, it achieved revenue of INR426 crore for Q3, contributing to 24% of our total turnover. We continue to receive more orders for LED lighting in two-wheelers, commanding a better pricing with recent order coming from Yamaha. As communicated earlier, we will need to set up a greenfield plant for meeting increased demand in four-wheel lighting business. Our teams are working to build a master plan for the same.

Moving to Light Metal Technologies or LMT business, it has achieved revenue of INR270 Crores for Q3, contributing to 15% of our total turnover. On our two-wheeler alloy wheel project at Supa, the third line have also been commissioned. Previously, two lines had been commissioned at end of Q2 FY ’21. We have also started commercial sales from the line already commissioned with revenues of around INR30 crores in the current quarter. The large and fourth line is expected to be commissioned by March, and we expect stabilization to take couple of quarters thereafter to reach optimal utilization levels.

Moving to acoustic or horn business, the business has achieved a revenue of INR188 Crores for Q3, contributing 10% of our total turnover. Our European subsidiary, Clarton Horn, has received new orders for electronic horns from a Korean customer and a US customer.

Moving to other product businesses, it has achieved a revenue of INR288 Crores for Q3, contributing to 16% of all overall top line. The other products revenues mainly comprises of sales from sensor business at around INR55 Crore, similar amount from blow molding parts business and around INR33 crores from Isis. We have received received orders from our recently commissioned temperature sensor also from Yamaha. For wheel speed sensor as well, apart from Korean market, we are in process of getting approvals and new orders from the Indian customers. We have healthy order pipeline for our blow molding parts business with new orders from another Japanese customer. In fact, our current capacities are not sufficient to meet the demand order hike. We will be required to align that capacity. We will discuss the same further in our subsequent slides.

Total borrowings as of December 31, 2020 were at INR1,083 crores compared to INR1,150 [Phonetic] crores for Q1 FY ’21. While we were able to reduce our working capital as of March 31, ’21, last fiscal year-end, which was also positively impacted due to last 10 days being non-operational due to COVID, with increased volumes and there has been increase in working capital levels with respect to March ’31 [Phonetic] and also addition of new working capital in our alloy wheel Supa plant. We have also invested around INR250 Crore of capx in year to date. Despite all the same and supported by proceeds from the rights issue, the borrowings have reduced and approx. INR190 Crore of cash was available as at December 31, 2020, resulting into a net gearing at around 0.37.

Moving to Slide 12, in terms of our revenue pie for the quarter ended December 31, 2020, OEM business accounted for 86% of total revenue and aftermarket business is around 14%. Our aftermarket segment continues to see outperformance as mentioned in the last quarter with sales in current quarter improving more than 50% with respect to corresponding period last year. I’m happy to mention here that our direct aftermarket sales in the last quarter has reached annualized revenues of close to INR1,000 crores per annum. In terms of segment mix of four-wheelers, [Indecipherable] contributed around 52%, while the rest is four wheelers, which is at 48%.

Moving on to next slide, in continuation to our update on consolidation of business of Minda TG and TG Minda in previous quarter and to reap efficiency of consolidation, the Board has approved dilution of 1.1% stake in Minda TG Rubber India Private Limited by fresh issuance of shares to TG Japan, our JV partner, instead of sale of shares by the Company as it was envisaged earlier. Overall, it does not have any impact on the strategy which we have informed in the last quarter.

Moving to Slide 14, with regards to Harita Seating Systems, the NCLT, Delhi has pronounced its decision for merger this week, and we are awaiting copy of the final orders from NCLT, Delhi. In NCLT Chennai, the date for pronouncement of decision is yet awaited wherein the hearings have been completed. We expect the date for pronouncement of decision in next few weeks. The Minda Kyoraku’s capex, as we referred a little while back, our blow molding parts business under our subsidiary Minda Kyoraku has been doing extremely well with healthy order book. Considering the orders already won and expected orders, we will be required enhance our capacity to meet these orders. Further, we also need to have an in-house paint shop facility. In view of the above, MKL will be incurring expenditure of around INR87.3 crores for enhancement of capacity and setting up in-house paint shop at Bangalore. In order to ensure we don’t have two facilities in Bangalore, wherein in the current plant, we don’t have the space for setting up paint shop in the current location, we will be setting up a new greenfield plant and we will move the existing facility also to the new location, so we have all the operations in one location but with a bigger space and with further potential to increase capacity, should the need be in future. This would not require any investment from parent company, which is Minda Industries, as Minda Kyoraku will be having sufficient cash to fund the expansion. The expansion will be completed by April ’22.

That’s all from our side and now we can open the floor for Q&A. Thank you.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Nikhil Kale from Axis Capital. Please go ahead.

Nikhil Kale — Axis Capital — Analyst

Yeah. Thanks for taking my question. Firstly, congratulations on a very good set of numbers. So my first question was on the top line. So, I think in terms of our segments, the switch division has clocked 30% plus kind of overall growth. So if you could just provide more color on what has driven this growth? Is it more on the CV side or on the two-wheeler side? And how do you see this going forward?

Sunil Bohra — Executive Director and Group Chief Financial Officer

So, the growth in switches, Nikhil, as you rightly mentioned, it is north of 30%, 35%, and the growth is primarily both in four-wheelers also and in two-wheelers also. And it is supported with new customer additions. As you would have noted in past few quarters, we have been referring to new customer additions in four-wheelers. And also in two-wheelers, we have added a lot of more components. A, definitely it has benefit of BSVI; and B, it also has benefit of new products like the side stand switch, which we have been speaking some time back, which has started gradually now. So, with all this, there has been also improvement in our share of business with some of the customers. So, I think all of the factors have helped.

Nikhil Kale — Axis Capital — Analyst

Okay. And just on a related part there, you mentioned a few new orders on the switch side. So, by when can we start like — can we expect those to kind of meet the revenues in the next couple of quarters and what will be the quantum? Is there any significantly big order there?

Sunil Bohra — Executive Director and Group Chief Financial Officer

So, first of all, Nikhil, all these businesses which we speak about for the orders, normally, they are like 18 months to 24 months ahead because once you get a business, it’s normally for the new production lines. And in terms of value, the various components which we just spoke about, this was primarily — it’s not that there are new products, but they are like products which we are — we got business from another customers for whom we have not been suppling, say for example, Mahindra or [Indecipherable], some of the switches, which we were earlier not supplying, they’ve been added. And total order value for this component is roughly around INR60 crore a year.

Nikhil Kale — Axis Capital — Analyst

Thank you. And my last question was on the margin front. So again, on the margin front, I think it’s been a very good performance. And I know that you don’t get into segment-wise details. But just if you could just provide some qualitative color. Have you seen a broad-based improvement in margins across all segments? And specifically, on the CV area, you mentioned in the past that margins there, which were in the high 25% plus kind of margins, they will not sustain and they would normalize. So, has that started to happen? I believe you had some competitive pricing in certain products that you are supplying to Maruti, has that started to happen, or is it still some way back?

Sunil Bohra — Executive Director and Group Chief Financial Officer

Yeah, so that has started to happen. But with the increase in volumes, if you observe, Nikhil, that there is definitely a operating leverage, which helps. So, with the significant growth in sales, while there have been efficiencies, which we have bought in the system by reducing the operating cost or reducing the — what you call the prices of the material we procure to whatever extent you could do, there have been efficiencies, which we have been able to bring. I think I just said last time also in terms of specifically alloy wheel. So, alloy wheel we will — in terms of operating cost, we will be actually in the top decile in terms of global operating cost. I think we are being benchmarked by the others [Indecipherable] in our alloy wheel plant. So, that also gives a lot of advantage in terms of the margin. And in terms of overall number, it still enjoys the kind of margin you spoke about despite the new businesses, which are coming at a competitive pricing.

Nikhil Kale — Axis Capital — Analyst

And just about the other segment, also, are you seeing margin improvement there?

Sunil Bohra — Executive Director and Group Chief Financial Officer

So, other segment, also, if you see, the overall margin so far has improved. But if I may have to pick a segment, which is still there is scope for improvement is our lighting and acoustics, the international part.

Nikhil Kale — Axis Capital — Analyst

Okay.

Sunil Bohra — Executive Director and Group Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of Ronak Sarda from Systematix. Please go ahead.

Ronak Sarda — Systematix — Analyst

Yeah. Hi, thanks for the opportunity, and congrats on a great set of numbers. Sunil, first question on the LMT segment. If I knock off the INR30-odd crores incremental top line from two-wheeler plants, the Y-o-Y growth is largely flat this year. Is there some kind of supply chain constraints are we facing because Maruti’s product mix had largely normalized during the quarter?

Sunil Bohra — Executive Director and Group Chief Financial Officer

So, if I see only four-wheel, so four-wheel segment, which is Minda Kosei, right, so Minda Kosei compared to last year has been significantly more. I think their total sales is higher by more than 30%.

Ronak Sarda — Systematix — Analyst

Okay.

Sunil Bohra — Executive Director and Group Chief Financial Officer

It’s actually 33% to be precise.

Ronak Sarda — Systematix — Analyst

Right. Okay. My mistake.

Sunil Bohra — Executive Director and Group Chief Financial Officer

So, maybe we can cross-check your number separately.

Ronak Sarda — Systematix — Analyst

I’ll do that. So the four-wheeler segment has seen almost kind of 33% growth and looks okay. Perfect. Okay. And secondly, on the balance sheet side and cash flow side, if you can help us understand what are the kind of capex you are looking for current year and next year now, given you have — adding the blow molding capex to it? And would we kind of generate free cash flow during the year? Or what’s your sense given the working capital normalization? So, how do you see the cash flow side for the full year?

Sunil Bohra — Executive Director and Group Chief Financial Officer

Yeah. So, Ronak, as I said a little while back that in terms of first capex, I’ll take your two, three questions one by one. So, current year, we have done a capex of roughly around INR240 crore. And I think overall, for the rest of the year, it should be around INR300 crore, plus, minus few percentage points, and that’s what I think we have been guiding earlier. We are not cutting our growth capex because large part of hte capex is it is growth capex, primarily sensor and alloy wheel project.

As far as our future capex goals, normally we comment on this along the annual results because we have just started our budgeting exercise. So while I may not be able to give you a broad number now, but definitely, we will be free cash positive in the next year. And also in the current year, I’m pretty confident that despite we have got working capital, which has sort of taken back, so if you see our last year, we had a huge free cash flow, primarily because the last 10 days of lockdown. I’m sure, every company has been a little conservative in releasing the payments. So while there has been receipts, payments were little controlled here. So, that had led to maybe abnormal situation at the end of the year, which led to some better free cash flows. But that cycle has A, reversed; B, with the increase in volumes that has also taken little more working capital. And also, when you start a new plant like Supa, which is like a huge plant, there also you need [Indecipherable] in terms of better than inventory. So, all these things have taken a lot of money. But if I have to take out my project capex, I’m pretty confident that end of the year, we should be free cash flow positive.

Ronak Sarda — Systematix — Analyst

Sure. And the final question on the electric vehicle portfolio, which you just highlighted, so what’s the sense, I mean…

Operator

Ronak, please speak a bit loudly. You are not audible.

Ronak Sarda — Systematix — Analyst

Sure, sorry. So, looking at the EV product portfolio, what’s your sense for the next three years? Where could this be in terms of contribution to overall top line? Do we have a target in that sense? And is it equally — will it be equally profitable to the current margins? Or should we see this as slightly dilutive in the near term?

Sunil Bohra — Executive Director and Group Chief Financial Officer

So, Ronak, I completely understand the logic of asking this question, but if I may say so honestly, it will be a bit premature for us to comment on the kind of revenue we have or the kind of margin we have for future because the EV market itself is evolving, and as you see today, it is almost negligible. So, I’m sure next few years, four, five years, the market will evolve in itself. And why we have sort of chosen to show a big picture today is that we all know that most of our products are going in almost all the EVs. Barring filters, almost all of our products will go into EV or a non-EV. There are additional opportunities, which we are working, and that’s what we thought we share upon. Maybe I would request Amit to share his thoughts on what does he see in three years’ time.

Amit Jain — Chief Executive Officer – Advance Electronics Domain and Chief Technology Officer

Yeah. Thanks Sunil. So, I think, from my perspective, the focus of products that we have in terms of EV have been in places where we believe that there is enough government push to discourage imports. So, there is now these OEMs who are wanting local products, and we’ve focused on some of the high-value products. If you look at it, we are not looking at low-value products, but we are looking at high-value products. And we believe that some margins in these should be decent. As Sunil said, I can’t comment too much about it right now because they also are under pressure from Chinese suppliers and stuff and we are evolving. We are adding more features and we are trying to make sure that we are able to give better value to some of these OEMs. And I think at the same time, the whole EV scene is going to evolve. We are trying to find more value of people investing in a EV, which is today more expensive than their ICE equivalent. So, there is this whole evolution happening with respect to price, features and what the consumer would demand. But our focus is, look at the traditional OEMs and their entry into EV, look at high-value products than low-value products and also look at where we can counter the imports through the subsidies and others that the FAME-II policy is pushing for. So — and I think that’s what I can share right now.

Ronak Sarda — Systematix — Analyst

Perfect. Thanks a lot, and all the best.

Sunil Bohra — Executive Director and Group Chief Financial Officer

Thank you, Ronak.

Operator

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

Ashutosh Tiwari — Equirus Securities — Analyst

Yeah. Hi, sir. Congrats on the strong set of numbers. It’s really amazing numbers that you have delivered. Firstly, I understand, lighting, because [Technical Issues]

Operator

Ashutosh, we request you to please use the handset.

Ashutosh Tiwari — Equirus Securities — Analyst

Is it better now?

Operator

Yeah. Slightly better.

Ashutosh Tiwari — Equirus Securities — Analyst

Yeah. So, I’m asking that if I look at the switch growth that you have mentioned, both four-wheeler and two-wheeler have grown very strongly. Especially in the two-wheeler switches, what exactly is the content increase because of this — you mentioned side-stand switch and BSVI upgrade in the switching [Technical Issues].

Sunil Bohra — Executive Director and Group Chief Financial Officer

So, Ashutosh, you know that this exercise we normally do at end of the year in terms of what is the product-wise value increase, so I’m sorry, I will not be able to share exact details as of now.

Ashutosh Tiwari — Equirus Securities — Analyst

But the question is, because we have seen almost 35%, 40% growth in the switches vertical Y-o-Y, and obviously industry has not grown so much, so is it the addition of switches or in the same switches, typically, there is a content increase there?

Sunil Bohra — Executive Director and Group Chief Financial Officer

It’s both, Ashutosh.

Ashutosh Tiwari — Equirus Securities — Analyst

Okay.

Sunil Bohra — Executive Director and Group Chief Financial Officer

As I said, I think last time also we said that we added some switch like a gear shifter switch, which was not there earlier. So, we have been adding more switches which increased our volume, and also addition of newer customers. So, it’s both which has helped.

Ashutosh Tiwari — Equirus Securities — Analyst

And switches, generally the — basically, compared to lighting, was an high-margin business [Technical Issues] some incremental margin as well?

Sunil Bohra — Executive Director and Group Chief Financial Officer

Yeah.

Ashutosh Tiwari — Equirus Securities — Analyst

And sir, on the two-wheeler alloy wheel side, we did INR30 crores, you mentioned, in the last quarter. Going into next year, what kind of — what you can assume from there based on whatever ramp-up we are seeing in the segment? Also, you mentioned new orders, so is it from same OEM or new OEM you added?

Sunil Bohra — Executive Director and Group Chief Financial Officer

So, we have actually been talking to other OEMs, and we have been sort of almost at the verge of closure. And — so, I think as of now, while our capacity is 4 million and this will get ramped up, as I said, by mid of next year full capacity, almost September. So, if you see six months, we should get a big revenue, which should be something around INR230 crores to INR240 Crores, plus six month, if I take average of around INR100-odd crores — INR150 crores, then we should see our revenue next year in the range of INR350 crores to INR400 crores. And also in terms of capacity, the kind of response we’re getting from new customers, we might look to pull forward our second phase, which we said that we will announce maybe after a year or earlier. But considering the various requests from customers for the two-wheeler alloy wheel, we actually are evaluating internally — we have not taken a decision and that’s why I did not cover initially. We might look to prepone our second phase of the Supa plant, which goes from 4 million to 6 million units.

Ashutosh Tiwari — Equirus Securities — Analyst

Okay. And sir, in this — basically, we have — you mentioned new order from Mahindra and Renault, I believe. So, that is related to switches or lighting?

Sunil Bohra — Executive Director and Group Chief Financial Officer

Mahindra, I remember it was for switch. Renault, I don’t think I mentioned.

Ashutosh Tiwari — Equirus Securities — Analyst

[Speech Overlap]

Sunil Bohra — Executive Director and Group Chief Financial Officer

John Deere.

Ashutosh Tiwari — Equirus Securities — Analyst

And the lighting, the increase is mainly driven by new order that we got from Maruti and also LED content increase, right?

Sunil Bohra — Executive Director and Group Chief Financial Officer

No, the new orders, as we said Ashutosh, will get commercialized only in FY ’22-’23. And as I mentioned that the kind of orders we have won, I think last call also mentioned, that current sales is looking like INR400-odd crores and the new business strength is like INR200-odd crores. So, we will need to expand our capacities, and the team has been working, as I said a little while back. And we might take to set up another facility in Gujarat, people are working on it. As of now, it has not been put up to Board for consideration, which is still on the papers. But most likely, we will need to sort of set up a facility for meeting the increased demand, which is definitely I’m sure you will appreciate a good sign that the business is sort of getting newer, newer sort of volumes to grow.

Ashutosh Tiwari — Equirus Securities — Analyst

And sir, lastly on this — on this two-wheeler alloy wheel order from Korean OEMs, when will that deliveries will start?

Sunil Bohra — Executive Director and Group Chief Financial Officer

So, that, as we said, this four-wheel alloy wheel, not two-wheeler.

Ashutosh Tiwari — Equirus Securities — Analyst

Yeah. Four-wheeler. Yeah. Four-wheeler.

Sunil Bohra — Executive Director and Group Chief Financial Officer

Yeah, yeah. So, that is expected to start somewhere around the festive season, as we said, linked to their model launch, which is related for this festive season upcoming in FY ’21.calendar year ’21.

Ashutosh Tiwari — Equirus Securities — Analyst

Okay, sir. Thanks a lot, and all the best. Keep on surprising on the numbers.

Sunil Bohra — Executive Director and Group Chief Financial Officer

Thanks Ashutosh.

Operator

Thank you. The next question is from the line of Siddhartha Bera from Nomura. Please, go ahead.

Siddhartha Bera — Nomura — Analyst

Hi, sir. Thanks for the opportunity and congrats on a great set of results. Sir, first question is on the — again on the EV side. So, will it be possible to share the — for the vehicle, how much content will we be making, including the products which we have shown?

Sunil Bohra — Executive Director and Group Chief Financial Officer

Amit, do you want to guess now or…

Siddhartha Bera — Nomura — Analyst

Broadly, sir, I mean.

Amit Jain — Chief Executive Officer – Advance Electronics Domain and Chief Technology Officer

I think it’s hard to tell that because I think there is various combinations there. But on an average, three-wheeler, for example, I’m hoping to see anywhere from — I mean if I include all the Group products, maybe it’s a larger number, over 15,000, but I think on the new products that we possibly would be adding would be in the 7,000 to 10,000 ranges. I’m talking of kit value where we would be contributing to that particular vehicle, but still in the works, so this is just very, very broad directional.

Siddhartha Bera — Nomura — Analyst

Understood. And what all kits have you included here; the sensors, LED light switches and components or what are the things included here?

Amit Jain — Chief Executive Officer – Advance Electronics Domain and Chief Technology Officer

No, I think when I’m mentioning that what are new products in the range of anywhere between 5,000 to 10,000, I’m talking of products that we don’t make in the Company today, but we would be looking at introducing going forward.

Siddhartha Bera — Nomura — Analyst

Okay. Understood. Basically the products under development, which we have shown in the slide. That’s probably you are indicating.

Sunil Bohra — Executive Director and Group Chief Financial Officer

That’s right.

Siddhartha Bera — Nomura — Analyst

Understood. And coming also — and these products — so, we will be having our own IP for these products? Is that the correct way to understand?

Amit Jain — Chief Executive Officer – Advance Electronics Domain and Chief Technology Officer

You said own IT?

Siddhartha Bera — Nomura — Analyst

IP rights, Intellectual Property rights. So, we will have the IP rights for these products also?

Amit Jain — Chief Executive Officer – Advance Electronics Domain and Chief Technology Officer

Yes, we would. These are all home-grown products for which yes, we would have the Intellectual Property rights.

Siddhartha Bera — Nomura — Analyst

Understood. And anything on the passenger vehicle side also you are looking? Or this will be largely focused on the two, three-wheeler segment?

Amit Jain — Chief Executive Officer – Advance Electronics Domain and Chief Technology Officer

I think as I mentioned, some of these products when I look at say things like smart plugs, things like battery management systems or I did mention the TCUs or telematics control units, could be used both for two-wheel, three-wheel, as well as four-wheel. Other products like chargers and others would need considerable amount of redesign to be used for four-wheelers. So, that is something that we have in our road map. But it’s too early for me to talk about their development.

Siddhartha Bera — Nomura — Analyst

Understood, Sir. And lastly, on the overall — I mean, directionally the three categories, which we have shown production, development and steady, some timelines — can you share like when we will start booking revenues for these products, say, in the next four, five years?

Amit Jain — Chief Executive Officer – Advance Electronics Domain and Chief Technology Officer

So I think, few of the products that I’ve already mentioned, I think if you look at the font colors, which have already gone into production. So, we did some volume this year obviously. All these OEMs are just picking up. So, they are not doing great set of numbers for me to talk about, but some of the other projects which I said are under development, which were highlighted, all go into production in ’21-’22. So, by mid of ’21-’22, they would go into production. There are products that I have mentioned under steady, I believe, are a year and a half out right now.

Siddhartha Bera — Nomura — Analyst

Okay, great, sir. Lastly, on the sensor side, so sir, we have been indicating that sensors is likely to ramp up much strongly. So, are the sensors for electric because in addition to the ones which we are already planning to ramp up? Or this is included in the sensors which we have talked about in the past?

Amit Jain — Chief Executive Officer – Advance Electronics Domain and Chief Technology Officer

I think this would be included in the sensors that we’ve talked about in the past, but these are maybe right now not a great deal of volume to be able to also talk about as a separate set, but I would imagine that Sunil has mentioned numbers, this would be included in those.

Sunil Bohra — Executive Director and Group Chief Financial Officer

Yeah, it is there, Siddharth, so as you have been saying. So sensors actually have done, I think, one of the best in the segment. So, compared to last year sales, Q3 was — Q3 sensor sales almost doubled in terms of revenue.

Siddhartha Bera — Nomura — Analyst

Okay. And sir, annualized, how much you we’ll be doing sensors, and how should we look at the ramp up?

Amit Jain — Chief Executive Officer – Advance Electronics Domain and Chief Technology Officer

So, from annualized number of INR130 crore, INR120 crore, we are over INR200 crore now.

Siddhartha Bera — Nomura — Analyst

Okay. And that should go up to what level?

Amit Jain — Chief Executive Officer – Advance Electronics Domain and Chief Technology Officer

As we said, over three to five year period, our overall objective has been to take it to a range of INR400 crore to INR500 crore.

Siddhartha Bera — Nomura — Analyst

Okay. Great. Thanks a lot, sir. I’ll come back in the queue.

Sunil Bohra — Executive Director and Group Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of Vimal Gohil from Union AMC. Please, go ahead.

Vimal Gohil — Union AMC — Analyst

Yes, sir. Thank you so much for the opportunity and congratulations on great set of numbers.

Sunil Bohra — Executive Director and Group Chief Financial Officer

Thank you.

Vimal Gohil — Union AMC — Analyst

Sir, my question is on — first question is on LED. You seem to be doing really well out there, despite some of the competition over there is extremely high. And we have — we already have some well entrenched suppliers in large OEMs like Maruti. And I’m talking about Japanese suppliers. So, how do you intend to counter that? That’s my first question.

Second one is on an account — on the P&L. I see a sequential decline in the share of associates. So, what should we read over there? And if you could just comment on your gross margins that despite raw material pricing pressure, your gross margins were in good stead. Was it because of mix or is there anything else to read into it? And last one will be, if you could just comment — make your comments on the PLI, how is Minda Industries looking to capitalize on impending opportunity going forward? Thank you.

Amit Jain — Chief Executive Officer – Advance Electronics Domain and Chief Technology Officer

Yeah. So, thanks Vimal. I think you have four questions and let me try and answer all four of them one by one. Going by the same sequence, you said how do we counter the LED business and there is lot of new entrants. So, as we have been speaking Vimal, for past couple of years, that the lighting is the most competitive business in India, where we have all the global majors in the country, if we talk of Lumax, Stanley or Motherson Magneti Marelli or IJL Koito. So, you take the name, and I think almost all the global lighting manufacturers are there in country and everyone had some technological tie up overseas globally. But we have been holding our fort without any global tie up, based on our own. And that is why if you remember last year when we have acquired Delvis, the whole strategy for acquiring Delvis was to fill that technology gap, which we have been observing. And once we filled that gap last year, you would have seen that the kind of businesses we have won. And they are all competitive businesses in the country. So, we are in a competitive landscape where we have to deal with not only the new players, but also the existing players. And I’m happy to say that we have handled that pretty effectively and efficiently to increase our share of business in the lighting segment and garner newer business, which is also primarily from the Japanese OEMs. That’s on the LED.

Second, your question was on share of associates, why it is going down. Yes, in associates, last year, I think, last quarter we had roughly INR10 crores and this quarter roughly INR9 crores. There is a drop of INR1 crore there. This is primarily because of couple of businesses. Again, we have faced some challenges. As in the past, we have seen some improvement, but there are a couple of instances, where the because of certain demand etc., we had to airlift material. There has been a significant logistic cost and some material price hike, which is primarily in two businesses, which is Minda TTE and Minda Onkyo. So, these two businesses, we have raised some tenants in terms of profitability and maintaining the supply chain demand also had some significant costs via airlift of the material. That’s on associate.

And in terms of gross margin, yes, your point is right that we have been able to withstand the storm, primarily because, A, we have if you see the kind of inventory in the pipeline is almost like 30 days or so, which does help you. And as I said in the beginning, we do have this kind of headwinds going forward in Q4 because the price adjustment with the customers normally has a lag of a quarter or half year or a year given to some customers. So, adjustment happened in January or in April. So, going into next quarter, we do expect some — to face some headwinds and currently, we are working on it, how to neutralize those headwinds, how do we address proactively, request the customers for price adjustments. But specifically, on Q3, yes, we have been able to sort of face the challenge of spikes and as you know, the spike actually happen gradually. So, it is not that the full quarter we have seen the price increase from day one. Yes we exited because of a very high price. So there definitely is a benefit of A, the low-cost inventory to enter into the quarter, and also the kind of some negotiations or renegotiations we have been able to do and also some inventory which we have been able to procure on a timely manner to sort of bear the price high coming on our books. So, that’s on the gross margin.

In terms of PLI, first of all, definitely I can confirm that whatever are the boundary lines, which have been drawn for PLI, we qualify almost on all the conditions. We are only waiting to see what are the contours of the scheme, but definitely the three, four key parameters or policies compared to the scheme, which is maybe a global [Indecipherable] scheme or export-oriented scheme, so we are already there and once the schemes are announced, I’m sure it will give a bump up to all the companies in the country, not only Minda, where it will enhance the competitiveness globally. So, while the government is giving a subsidy, I’m sure the idea for that subsidy or support is to be more globally competitive. Yes, part of it you would like to retain to your bottom line, but I’m sure some part of it we’ll try and see to garner more business globally. And we are working with a lot of our customers, irrespective of the PLI scheme.So, how do we make India as a exporter. We have set up our marketing team. We have enhanced our marketing efforts in ASEAN. And now, we will be soon setting up another office in Thailand. And we have, what you call, increased our marketing efforts in Europe, as we mentioned earlier. And we are working on restructuring our marketing team in Europe. So, to see how do we get more pie of exports because we have long-term relationships with our customers in Europe and ASEAN, but somehow we have been limiting ourselves to only few products. The strategy is now not only to get new customers, but whatever existing customers we have, how do we sort of market them more and more products and instead of getting new customer, existing customer, since we are already there, the idea is to be competitive there and provide the quality what they are looking for and export from India. But as I mentioned, this is something which you start today and you work with the customers and you get into the business cycle for the new model, it takes something like two years to three years. So, it is not something that today PLI schemes comes, and tomorrow you start supplying. But it helps on timeline, so that’s the overall a big picture on the export and the PLI scheme.

Vimal Gohil — Union AMC — Analyst

Fair enough, sir. Sir, just one last question, I missed out on the gross debt number that you gave. Could you just repeat that for me, please?

Amit Jain — Chief Executive Officer – Advance Electronics Domain and Chief Technology Officer

Hope it was INR1,080 crore or something.

Vimal Gohil — Union AMC — Analyst

Okay. Fair enough. And that has come down, right, as compared to what we had in March?

Amit Jain — Chief Executive Officer – Advance Electronics Domain and Chief Technology Officer

Yeah, around INR100 odd crores.

Vimal Gohil — Union AMC — Analyst

Okay. Fair enough, fair enough. Thank you so much, Sir. All the very best and keep surprising.

Amit Jain — Chief Executive Officer – Advance Electronics Domain and Chief Technology Officer

Thank you.

Operator

[Operator Instructions] The next question is from the line of Mukesh Saraf from Spark Capital. Please, go ahead.

Mukesh Saraf — Spark Capital — Analyst

Yes sir, good evening and thank you for the opportunity. Firstly, sir, the question is, in general on the capex intensity that we have seen in the last two, three years, and obviously, our ROCE kind of dipped in this year significantly. So, what is the kind of thought process there because we — the plan, what you have been telling us so far is to now sweat out these assets and get the ROCE back on track. So, is there any change there given that now we have — we are looking at again capex in around MKL and probably some of these new products that you had shown especially on the EV side of it, so there are some of these products under development and under study. So, is there any big change in this next two, three year capex plans and how the ROCE can kind of improve again?

Sunil Bohra — Executive Director and Group Chief Financial Officer

Yeah. So, thanks Mukesh for your questions. So first of all, as we have been saying that we will be reaping the benefits, and I’m sure once you analyze the returns of this quarter in detail, you will actually observe that while [Technical Issues] that Q3 is not a certainty or assurance for full year, but if you have to just analyze the Q3 numbers, the ROCE for this quarter is over 20%. So, it definitely gives you a comfort that we have been sweating our assets. But once you keep on increasing sales, and if you remember, we have said that for additional 20%, 30% sales we are already there. And if you see, we are actually in that region. And now, some of the businesses — not all businesses, some of the businesses, because of the new, what you call, the growth which we are seeing, it will need some money to be invested, like the example, which we took of Minda Kyoraku. We actually, if we have land, we would have actually done in the existing plant, a greenfield — a brownfield expansion because we had to not only cater to the increased needs but we had to set up a paint shop. But because of lack of space, we have no choice but to shift this plant to a new location. So, I think what it does, it gives us an opportunity to not only move to a new location, but also maybe a little bigger location, maybe we did not had that thought process that in future we will need so much of land. So, once we go to a new location now, we will keep some additional land for even further growth in our head. And so this, I would say it is not something, which is a huge surprise, it was definitely. If business is growing, you have to make sure that there are infrastructure to support the business. And it is primarily, I would say, while we are spending some money, it is more plant expansion and business expansion, rather than going to a totally greenfield location, while it looks apparently so.

And even the other thing, which we spoke about light, and you’ll appreciate, if we have to grow from where we are to increase SOB, I’m sure, existing plants, you will not design to give you a 50% higher revenue. But I can assure you one thing that the kind of the lumpiness we have seen in capex, personally, I’m not sure if we will see that. But whatever growth comes, if this growth is backed with customer commitment, I’m sure you would be more than keen to see that growth than us, and we will be very prudent in investing our money. In fact, if you remember, even for alloy wheels for two-wheeler, we said that we will wait for a year and then take a call on the Phase 2 expansion. But we have so much of requests from customers for additional volumes, we are going back to our drawing board and seeing how early we can expand that plant because then it will be a brownfield expansion and your delta normally for any brownfield expansion returns are much better than a greenfield expansion. We will be definitely prudent, Mukesh, and thanks for raising this question. It also emphasizes that we have to be very, very cautious about spending capex. So, that’s very, very clear.

In terms of new products, you asked whether there will be going to be big change in capex plans. As of now, it is unlikely, Mukesh, because these products, which Amit has also shared, they are mostly aligned, as he said, to some of our existing products. Amit, you may confirm, if I’m not right. And there might not necessarily every product will need a greenfield plant.

Amit Jain — Chief Executive Officer – Advance Electronics Domain and Chief Technology Officer

Yes, that’s right Sunil. I think we are not talking of new plants or major expansions. I think our current controller division and our EMS company, called Minda Katolec, are capable to handle this.

Mukesh Saraf — Spark Capital — Analyst

Sure. Understood. Thank you for that. And second question is, on the raw material cost itself, given that we have such a large mix of products, including lots of plastics, etc., How much of steel — if you could just give a ballpark, how much of steel be as part of our raw material costs? I mean, steel, metal, largely steel.

Sunil Bohra — Executive Director and Group Chief Financial Officer

I don’t think it’s still significant because we never speak about steel, honestly, because it’s primarily the — what you call tress metal parts, which are not very significant to volume. Amit, do you have any idea about how much of steel we use normally in our products.

Amit Jain — Chief Executive Officer – Advance Electronics Domain and Chief Technology Officer

I’m sorry, I didn’t catch the question. How much what?

Sunil Bohra — Executive Director and Group Chief Financial Officer

Steel.

Amit Jain — Chief Executive Officer – Advance Electronics Domain and Chief Technology Officer

I think it’s not much. I think except maybe Harita, where we use a lot of structural steel, but otherwise, I don’t think we use a lot of steel in our parts.

Mukesh Saraf — Spark Capital — Analyst

Sure. Understood. And just — because you brought up Harita, we have seen significant growth in Harita’s numbers in the third quarter. Is there any comment you can give? Is it the existing business for Harita, or any new business that they have kind of started [Technical Issues]?

Sunil Bohra — Executive Director and Group Chief Financial Officer

Mukesh, I would say maybe we will speak about Harita in the next call because, I hope, by then we have everything in our control.

Mukesh Saraf — Spark Capital — Analyst

Sure. I look forward to that. Thank you so much, sir.

Sunil Bohra — Executive Director and Group Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of Aditya Jawahar from Investec Capital. Please, go ahead.

Aditya Jhawar — Investec Capital — Analyst

Hi, thanks for the opportunity. Just one clarification. The two-wheeler alloy wheel plant in Supa, you mentioned that the capacity is about 4 million. So, that — does it mean that for the new OEMs, the order will start executing once we add the capacity? And the number of INR400 crore peak revenue, there is upside to that considering the new order that we have won?

Sunil Bohra — Executive Director and Group Chief Financial Officer

Okay. So, we are trying to balance even new customers from the existing capacity. As you know, Aditya, 4 million wheel is based on certain weight. As we spoke earlier, it is based on the melting capacity of the plant which is something around 13,000 tonnes a year. So, it is based on the weight of the wheel. If the weight of the wheel is higher, the number of wheels maybe a little lower, maybe 3.5 million, 3.7 million. And if the weight of the wheel is less, it can go up to 4 million wheels a year. So, in terms of annual revenue, at 4 million wheels, our expected top line is roughly around INR450 crores. That’s what the plan was. And we intend to start our new customers also with some small volumes from the existing 4 million so that we don’t wait to add another customer till the Phase 2 is started and commissioned, because that will another maybe a year, year-and-a-half.

Aditya Jhawar — Investec Capital — Analyst

Okay. Can you just — sorry, just to — amongst non-care electrification. So, we have a line of sight of 4 million from the existing customers?

Sunil Bohra — Executive Director and Group Chief Financial Officer

Yeah.

Aditya Jhawar — Investec Capital — Analyst

Okay. And [Technical Issues]. Okay, thank you. And just on the gross margin part, you would have seen commodity inflation has been quite sharp. And you mentioned that some of the customer contracts are between three to one year. So, since we are in middle of the next quarter, is there a number that you can share that what percentage of contracts you have been able to negotiate so that the difference between the contract price and stock price comes down? And what could be the likely impact of commodity inflation in the near term? So, as Aditya, you have noted that we have a lot of commodity, a lot of customers, and also it is different for different customers. Some of the customers, we will be able to have this different from first — the end of the year itself wherever there is a quarterly price adjustment. Where there is longer — as of now, we are — you’ll appreciate, we are more in a request mode because if you go back, contract obviously, customer also has a pricing pressure and we have to appreciate it. We are trying to find a goodwill [Phonetic] where the pressure of the commodity price increase can be balanced. Overall, definitely in Q4 we will see some of the impact to be absorbed by the Company. As of now, I don’t have a number overall for the global average because you’ll appreciate we’ve [Indecipherable] businesses, and every business has got multiple customers. So, as of now, I don’t have that number handy as to how much will be in percentage number and average impact for the quarter, but definitely, there is going to be some impact. And final question, will you be in a position to share revenue contribution of Maruti for nine months?

Sunil Bohra — Executive Director and Group Chief Financial Officer

Sorry, can you be a little loud. I am not able to clearly hear.

Aditya Jhawar — Investec Capital — Analyst

Yeah, sorry. Yeah. So, will you able to share the revenue contribution of Maruti for nine-month FY ’21?

Sunil Bohra — Executive Director and Group Chief Financial Officer

Sorry Aditya, we don’t track on a quarterly, monthly basis. Not even comment honestly. You’ll appreciate it’s confidential data and it’s not advisable to share.

Aditya Jhawar — Investec Capital — Analyst

Okay. Thanks. That’s it from my side. All the best.

Sunil Bohra — Executive Director and Group Chief Financial Officer

Thanks Aditya.

Operator

Thank you. The next question is from the line of Basudeb Banerjee from Ambit Capital. Please go ahead.

Basudeb Banerjee — Ambit Capital — Analyst

Congrats for the good set of numbers. I joined late in the call. So, I missed out. Just going by the numbers prime facie, first question came to my mind is, sequentially 23% revenue jump and your margin is still the same, whereas gross margin impact is yet to see through the P&L. So, anything which I missed out earlier in the call or if you can explain that?

Sunil Bohra — Executive Director and Group Chief Financial Officer

No, I don’t think you have missed out anything. So, there are two, three things which have helped us, Basudeb, in terms of maintaining our margins. First is, as you know that we have reinstated our manpower cost from September 1, so there definitely a negative impact to that extent in the quarter compared to the preceding quarter. But because of the volume growth, I’m sure there is some support because of operating units. And also as we mentioned last time, there’s some of the cost reductions which we have been able to do — we have been able to negotiate for the full year. So, the benefit of that cost reduction exercise continues to reap.

And in terms of RM price increase, as we mentioned that definitely there is support when you move into the quarter from August 1 to December 31, the prices increases have been gradual. So, definitely, once we see today, the prices are at very elevated level, but when we entered the quarter, you do have some entry, which is almost — it is also at, which is previous quarter owned inventory, plus we have been able to buy some inventory to hedge against the expected rise in the commodity prices. So, that also has helped in terms of managing the overall material cost and managing the same.

Basudeb Banerjee — Ambit Capital — Analyst

So, for example, if I see other expense line item, INR164 crore, moving to INR212 crore sequentially, which is almost 30% against 23% revenue growth. So, is it because of the two-wheeler plant getting commissioned on a meagre revenue and fixed costs are full blown up? How to look at that?

Sunil Bohra — Executive Director and Group Chief Financial Officer

So, definitely, that is one of the aspects, Basudeb, when we see what we call quarter-to-quarter delta. But if I see specifically, from the other expenses cost, there is definitely a higher cost because of a lot of air freight being incurred for the sudden ramp-up. It’s almost like if, I remember correctly, six quarters. So it’s a INR6 crore of impact in the quarter because of airlifting of material because of the sudden rise in the demand, which somewhere you have to absorb, somewhere you share with the customer. But the net impact was roughly INR6 crore, which normally you would not see and this continues even in the current quarter. There have been higher expenses towards power and fuel etc. because with the volume increases, all these expenses also will get increased. Some of the travel cost, etc., which were not happening previously, all those things have gradually been ticked up with the opening of the economy. So, there has been, I’m sure, all the reasons for this cost increases, which is and in addition, as you rightly mentioned, about the commissioning of the Supa plant. So, all these things put together, has led to the other expenses increased a little more than the share in the revenue.

Basudeb Banerjee — Ambit Capital — Analyst

Understood. So, almost you can say INR10 crore, INR12 crore other expense could have been lower if things were relatively normal. So, that would have added on to the margin with this level of revenue?

Sunil Bohra — Executive Director and Group Chief Financial Officer

You may say so. But with higher activities, I think it is better that to have more sales.

Basudeb Banerjee — Ambit Capital — Analyst

And sir, salary revamp getting normalized. So, it seems QoQ is a 20% jump. So, it is 20% salary reinstatement or some temporary additional labor because of ramp up in production. So how to look at that?

Sunil Bohra — Executive Director and Group Chief Financial Officer

So, as you know, Basudeb, that almost half of our operators, we keep — we try to keep on our variable cost basis to adjust to the volume volatilities. So, with the increase in volumes, you have to increase your temporary manpower, which you may call temporary, but it’s actually a sort of semi-permanent, which is off-roll employees because they are contract manpower to take care of the volume volatility. So, once you increase the volumes, to produce those kind of numbers — and most of our products like switches, lamps, etc., they are like our horns, they are also assembly line operations. So, with the increase in volumes, actually your manpower cost increases proportionally. So, the large part of the increase of the 20% comes from the what you call operator’s cost or the blue color cost.

Operator

Mr. Banerjee, request you to join the queue for any follow-up, as we have several participants waiting for their turn.

Basudeb Banerjee — Ambit Capital — Analyst

Same topic.

Operator

Hello, Mr. Banerjee, please request you to join the queue for any follow-up.

Sunil Bohra — Executive Director and Group Chief Financial Officer

Yeah. But I hope I have answered to his question.

Operator

Okay I’ll just un-mute. Yeah, Basudeb, your line is unmuted.

Basudeb Banerjee — Ambit Capital — Analyst

Simply with Q4 being seasonally better quarter for cars, look at Maruti’s production outlook, or even for two wheelers, so with further revenue ramp-up potential in Q4, how should one look at again the same employ cost and another expense? As you highlighted, employ cost, one should pro rate with revenue ramp-up because of the contractual labor. How to look at other expenses for Q4? Should it remain static with revenue moving up, or how should one look at it?

Sunil Bohra — Executive Director and Group Chief Financial Officer

No, first of all, it won’t be fair for me to comment whether revenue for Q4 will look [Phonetic] up because in last two quarter, October has been a record number for most of the OEMs, and those numbers are yet to be seen. So, without commenting on whether October — sorry, Q4 will be higher than Q3, which looks a bit challenging, but in case if it were to be, some of the costs which are there in others or employees will see increase because to the extent they are variable in nature, like fuels, power and consumption, etc., etc. There are some variable costs, which will increase in case the volume were to increase further.

Basudeb Banerjee — Ambit Capital — Analyst

Okay, sir. Thanks.

Sunil Bohra — Executive Director and Group Chief Financial Officer

Yeah. Thanks Basudeb.

Operator

Thank you. The next question is from the line of Anubhav Rawat from Monarch Network. Please, go ahead.

Anubhav Rawat — Monarch Network — Analyst

Yeah, hi, sir. Good evening. Congrats on a good performance. Just a couple of questions. So, sir, this quarter, could you just throw some light on which associates and subsidiaries did well for us and which ones lagged?

Sunil Bohra — Executive Director and Group Chief Financial Officer

So, as I said a little while back, I think the only couple of JVs which have lagged, the associates is in Minda TTE DAPS and also Minda Onkyo. These are the two JVs, which have actually pulled us a little bit down compared to Q2, Q-over-Q.

Anubhav Rawat — Monarch Network — Analyst

Okay. But year-on-year — on a year-on-year basis?

Sunil Bohra — Executive Director and Group Chief Financial Officer

I think on a year-on-year basis, almost all of them have been okay. [Technical Issues] exactly about these two entities also, I think, MTTE and Onkyo, compared to last year, Onkyo is almost same and other was MTTE, Minda TTE, yeah, that’s also almost in line with the last Q3.

Anubhav Rawat — Monarch Network — Analyst

Okay. So, it’s flat basically for both of them.

Sunil Bohra — Executive Director and Group Chief Financial Officer

Yeah.

Anubhav Rawat — Monarch Network — Analyst

Okay. And sir, going forward so, how is our order book looking? So, in the near future, how do you see production ramping up?

Sunil Bohra — Executive Director and Group Chief Financial Officer

So, as you know about that, most of our products are linked to the destiny of our OEMS and if the volume increase, our volume [Indecipherable] but additionally, what is important for us is how do we increase our share of business, how do we increase our asset value and how do we sort of deliver on our new products. So, on all these fronts, I think we have been working very, very positive and aggressive. In terms of new products, they will continue to add to the top line, which is the alloy wheel, sensors, etc. In terms of existing products also, we have seen the new kind of switches. We have added LED. Whatever we added, we expect this momentum what we have build in Q3 to stay in the coming quarters.

Anubhav Rawat — Monarch Network — Analyst

All right. Just one last question, sir. So, can you give some new — what is the actual scenario on this alloy wheel import? Is there a ban or is there an ADD? How will it affect us going forward?

Sunil Bohra — Executive Director and Group Chief Financial Officer

There is no ADD on alloy wheels. On the four-wheeler, theoretically there is, but practically I would say no, because while there is an ADD but the three large exporters from China, on them the ADD is negligible, it is $0.08 per kg, which is almost I would say zero. And on two-wheelers, there is no anti-dumping duty. So, on alloy wheel practically there is no anti-dumping duty as of now.

Anubhav Rawat — Monarch Network — Analyst

Okay, and there is no import ban on also, right?

Sunil Bohra — Executive Director and Group Chief Financial Officer

No.

Anubhav Rawat — Monarch Network — Analyst

Okay, so despite that, we will continue to grow?

Sunil Bohra — Executive Director and Group Chief Financial Officer

Yes.

Anubhav Rawat — Monarch Network — Analyst

Okay. Sure sir. Thank you.

Sunil Bohra — Executive Director and Group Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of from Shashank Kanodia from ICICI Securities. Please, go ahead.

Shashank Kanodia — ICICI Securities — Analyst

Yes, sir. God evening and congratulations for a stupendous performance.

Sunil Bohra — Executive Director and Group Chief Financial Officer

Thanks Shashank.

Shashank Kanodia — ICICI Securities — Analyst

Yes, sir. I have just three main questions sir. First and foremost, sir, we have grown ahead of the industry, right. So, yourself mentioned that, 17% kind of volume growth, sales growth roughly 36%, so is there a some element of inventory being jagged up at the OEM level of the component that we manufacture fearing a lockdown or any temporary disruption in manufacturing activity?

Sunil Bohra — Executive Director and Group Chief Financial Officer

Okay, that’s one.

Shashank Kanodia — ICICI Securities — Analyst

Secondly sir, we have — this is the second quarter of sustainable 14.5% — 14.7% EBITDA margins. With cost pressures now coming in play, what is the sustainable range of margin trajectory that we’re seeing in future, which you could guide us? And third, with PCBs in shortage in the global market as well as domestic, do we have any role to play? Can we play any role in that arena?

Sunil Bohra — Executive Director and Group Chief Financial Officer

Okay. So, I will take first two, and maybe for third I will pass on to Amit to share his thoughts. So, first of all, in terms of inventory, your point was whether there is any customer who is increasing inventory. The answer to that actually is reverse. The customers are actually asked us to keep little more inventory. Normally we keep three days at least. And now some of the customers have asked us to keep seven days at least to sort of save ourselves from any supply disruption. And that is also one of the reasons for higher levels of inventory, and I just to mentioned that in the beginning. So, customer normally, if you see, they always want just-in-time delivery. And most of the customers are taking supplies more than once a day. So customer put — adding inventory is not an option as of now because it’s a delivery which goes straight on the line. So, that’s on inventory, whether being build up at the customer end.

Second, your question was in terms of EBITDA margin at 14.7% back to back quarters, despite cost pressure is it sustainable. Yes, it’s definitely a very, very big challenge to sustain this kind of margin, because you know till last year our average margin profile has been around 12%. And from there, we have moved to 14.7%. And with the economy opening up, some of the fixed costs as we were talking little while back with Basudeb, some of the fixed costs we will see sort of getting in as we see normalization, with the vaccines sort of working as the fear factor goes out with the travel including etc., etc. So, some of the costs we do expect to increase.

In terms of RMC, yes, there are pressures. So, in the immediate quarter, yes, we might see some pressure because of the higher raw material cost. And in terms of medium to long-term, I would suggest that we maybe wait for a quarter, please bear with us. Maybe we give you better clarity once we talk for the full year, because by then we will be through with our annual budgeting exercise. But I can’t communicate directionally. We are working to see how do we sort of try and maintain this 13% to 15% kind of margin profile for the sustainable future.

Shashank Kanodia — ICICI Securities — Analyst

Sure. Sir, on the PCB front, did we have any role to play?

Sunil Bohra — Executive Director and Group Chief Financial Officer

Amit, do you want to take that?

Amit Jain — Chief Executive Officer – Advance Electronics Domain and Chief Technology Officer

Yeah, I could, but I just would like to understand the question better. Do you mean how does global PCB shortage impact our business, or could we do something about global PCB shortage? What was exactly the question.

Shashank Kanodia — ICICI Securities — Analyst

Yes, sir. It’s a more of can we — what can do regarding the global PCB shortage. So, is it a line of action for us, wherein we can expect us putting on capacity or do we have know-how of it? And secondly, consequently, with less probably PCBs in the system, does it also impact the electronic content that we supply to the OEs?

Amit Jain — Chief Executive Officer – Advance Electronics Domain and Chief Technology Officer

Okay. So, I think then I think this is more of not a lot of detailed analysis from our side, but maybe my viewpoint right now, is I think one, we’ve never looked at manufacturing bare PCBs. We do assemble PCB boards, so that means we buy bare PCBs and then populate components and actually convert that into products, but we don’t manufacture bare PCBs. The bare PCBs is a you know, is a market that’s very stiff in terms of competition, has its own challenges with respect to environmental pollution and others — other issues. So, right now, no, we are not looking at getting into bare PCB manufacturing, but we do convert PCBs into final assemblies.

Your second question that you asked is whether — I’m sorry, could you repeat your second question?

Shashank Kanodia — ICICI Securities — Analyst

Yes. Whether the global shortage limits the content of electronic content that we supply to the OEs?

Amit Jain — Chief Executive Officer – Advance Electronics Domain and Chief Technology Officer

No, it is actually it does not. I mean, an OEM if it’s using a particular ECU today and we supply the ECU then, we will have to supply the ECU, otherwise the vehicle doesn’t work. So, I don’t think it’s an optional product when you talk about electronics in the car, and I don’t see the content that we supply change. And I believe the whole PCB shortage is a short-term impact and we don’t see any of our businesses getting immediately affected due to PCB shortages right now.

Shashank Kanodia — ICICI Securities — Analyst

Right sir. Lastly, if I can to Sunil sir. Sir, the Harita Seating merger has been pending for quite sometime, right. Every quarter we get almost next hearing and stuff. So, is there any bone of contention because these are different lines of businesses vis-a-vis the Minda standalone entity?

Sunil Bohra — Executive Director and Group Chief Financial Officer

So, your point is valid. So, as I said, this week, this Monday, actually NCLT has pronounced its decision for the merger, which was positive. But one is the pronouncement of the decision and the other is getting the actual copy of the document, which hopefully, we should get I hope by tomorrow — by this — tomorrow or Monday. And NCLT Chennai should also follow suit. We don’t know why it got delayed, because hearings have been completed long back. It was just waiting for decision to be pronounced. So, I’m sure you’ll appreciate when things are in NCLT, there is not way to even put a request to expedite that. But having said that, a, definitely there is no issues, which anything which we are aware of, plus NCLT Delhi, has already affirmed its decision. It’s just matter of getting a copy of the order.

Shashank Kanodia — ICICI Securities — Analyst

So, in Q4, can we expect the consolidation of [Indecipherable]?

Sunil Bohra — Executive Director and Group Chief Financial Officer

Sorry?

Shashank Kanodia — ICICI Securities — Analyst

In Q4, I think the next quarter, can we expect consolidation of numbers for Harita Seating?

Sunil Bohra — Executive Director and Group Chief Financial Officer

Absolutely. In case — once we get the — what we call the order from both Delhi and Chennai, then I’m sure we will have to consolidate.

Shashank Kanodia — ICICI Securities — Analyst

Thank you so much, sir and I wish you all the best.

Sunil Bohra — Executive Director and Group Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from Nishit Jalan from Axis Capital. Please, go ahead.

Nishit Jalan — Access Capital — Analyst

Hi, sir. Thank you for taking the question. If I just look at your third quarter revenues, you mentioned that industry growth was 17%, while you did 30% plus, but if I look at nine-month revenues, industry declined by about 17% to 18% and your decline was about 11%. And this also still includes Delvis acquisition this year. So, just wanted to understand the outperformance compared to industry has been much, much higher in this quarter, while if I look at a nine-month basis, the outperformance almost is still there, but it’s at a moderate level. So, just wanted to understand what happened specifically in this quarter, or how should we look at it going ahead?

Sunil Bohra — Executive Director and Group Chief Financial Officer

I’m not Nishit, sure on the nine-month number where delta is only 7%, 8%. But in terms of Q2, I think we all appreciate that there has been a new product, which has been added other than the list. There has been [Indecipherable] also being consolidated plus some of the new businesses, which we have won from our new customers, that also has helped and that’s what I said that we expect this momentum, which has build to continue because — which is the result of getting more business and customers last year because there is a lag of almost a year, year-and-a-half till you actually get the sales realization and also some of this impact of BSVI also has helped us in the current quarter where there are some new products, which have productionized along with this festive season.

Nishit Jalan — Access Capital — Analyst

Okay. And just one last small question. On two-wheeler alloy wheel, given the plant has started, was there some operational loss in this quarter? Or we are profitable right from the first quarter itself?

Sunil Bohra — Executive Director and Group Chief Financial Officer

No, you can’t be profitable from first quarter, Nishit.

Nishit Jalan — Access Capital — Analyst

Yeah, that’s what I thought. So, what kind of operating loss have we incurred this quarter?

Sunil Bohra — Executive Director and Group Chief Financial Officer

So, this quarter, I think our total PBT loss was something around INR10 crores, INR12 crores. Because it has component — large component of depreciation and interest. So, if you have to exclude that, then operating loss would have been like INR4 crore, INR5 cores.

Nishit Jalan — Access Capital — Analyst

You mean, EBITDA loss, right?

Sunil Bohra — Executive Director and Group Chief Financial Officer

Yeah.

Nishit Jalan — Access Capital — Analyst

That’s helpful. Okay. Thank you, so much.

Sunil Bohra — Executive Director and Group Chief Financial Officer

Thank you.

Operator

Thank you. Ladies and gentlemen, that would be the last question for today. I now hand the conference over to Mr. Sunil Bohra for closing comments. Thank you, and over to you, sir.

Sunil Bohra — Executive Director and Group Chief Financial Officer

Yeah. Thank you. So, I would like to thank you everyone for joining on the call and thanks for appreciating and it definitely builds lot of expectations for us to do more. I hope we have been able to respond to all your queries adequately. For any further information, we request you to please get in touch with us. Stay safe, stay healthy. Thank you very much.

Operator

[Operator Closing Remarks]