Minda Industries Ltd (MINDAIND) Q4 FY23 Earnings Concall Transcript

Minda Industries Ltd (NSE:MINDAIND) Q4 FY23 Earnings Concall dated May. 19, 2023.

Corporate Participants:

Aakash Minda — Executive Director of Finance and Strategy

Dhananjay Kumar Mishra —

Analysts:

Abhishek Jain — Dolat Capital — Analyst

Radha Agarwalla — B&K Securities — Analyst

Mihir Desai — Pendulum Investments — Analyst

Harish Shah — HS Investment — Analyst

Saral Seth — Indsec Securities and Finance Ltd — Analyst

Rajesh Kumar — — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q4 FY’23 Earnings Conference Call of Minda Corporation, hosted by Dolat Capital. [Operator Instructions] Please note that his conference has been recorded. I now hand the conference over to Mr. Abhishek Jain from Dolat Capital. Thank you and over to you, sir.

Abhishek Jain — Dolat Capital — Analyst

Thank you, Jacob. Good evening, everyone on behalf of Dolat Capital, we are pleased to welcome you to Minda Corporation 4Q FY’23 earning call. We thank the management for providing us the opportunity. From the management side, we have with us Mr. Aakash Minda, Executive Director of Finance and Strategy; Mr. Neeraj Mahajan, Group President, Marketing; Mr. Vinod Raheja, Group CFO; Mr. Anshul Saxena, Group Head Strategy and Mergers and Acquisitions, and Ms. Pushpa Mani, Lead Investor Relations.

Before we begin this, [Indecipherable] statements, some of the statements made in today’s earnings call may be forward-looking in nature. Such forward looking statements are subject to risks and uncertainties, that may cause actual results to differ from the anticipated outcome.

Now we hand over the call to Mr. Aakash Minda for opening remarks, post we will start the presentation. Over to you, sir.

Aakash Minda — Executive Director of Finance and Strategy

Hi, good afternoon. Am I audible?

Abhishek Jain — Dolat Capital — Analyst

Yes sir, you are.

Aakash Minda — Executive Director of Finance and Strategy

So, good afternoon, everybody. Thank you, Abhishek and Dolat Capital for holding the conference call for Minda Corporation. I would like to begin.

Good evening, everyone, and welcome to the Quarter Four and Financial Year ’23 Earnings Conference Call of Minda Corporation. On behalf of the company, I thank you all for joining us on this conference call, and hope all of you are keeping safe and healthy.

In fiscal year 2023, the overall industry experienced double-digit growth across vehicle segment, except two-wheelers, where the growth has been sluggish due to rural demand and under pressure on the back of negative rural sentiments, [Indecipherable], inflationary pressure, rise in vehicle cost and increasing fuel prices. Despite the same, Minda Corporation recorded another year of resilient and better than industry performance with revenue from operations of INR4,300 crores, a growth of 45% year-on-year basis. EBITDA margin for the year improved by 83 basis points to 10.7%. We delivered double-digit EBITDA margin for 11 straight quarters.

Normalized PAT for the year stood at INR219 crores with a PAT margin of 5.1%. The growth was driven by addition of new customers and products, premiumization across products, leading to increase in kit value, an increase in business with existing and new customers.

In line with the company’s philosophy to reward its shareholders, the Board of Directors have declared a final dividend of 40% on the face value that is INR0.80 per equity share in the total dividend for the year to 60%, that is INR1.20 for equity share.

Now, I would like to take you all through the key developments during the year. The company entered into two strategic technology partnerships with Dayton Electric from Korea for Advanced Driver Assistance Systems and the LocoNav for telematics software solutions. These partnerships not only make us complete solution provider, but also place us ahead of the technology core.

Second, at Minda Corp, we are continuously committed to drive innovation. The company has filed highest-ever quarterly patents with filings of more than 20 patents across various business verticals, taking the total patent count to more than 250.

Third, this year remained a marquee year for the two-wheeler smart key businesses, which continue to gain traction and took more than 10% of the total two-wheeler locks at revenue with key customers including all the leading names in IT and two-wheeler OEMs globally.

The company inaugurated the state-of-the art plant in quarter three FY ’23 and it’s planning to add other plants as per capacity additional requirements. These plants do not only help increasing our production capacity and keep us closer to the customer, but have also well equipped with advanced machines with cutting edge technology.

Next, in line with the company’s focus on its offering in the electric vehicles space, it added prominent new customers in the electric vehicle portfolio in domestic as well as export segment. In the financial year ’23, EV order book accounted for more than 20% of the total order book.

Our order book remains very strong, in line to achieve 20% to 25% year-on-year growth for the next two to three years. In the financial year ‘2023, Minda Corporation generated a healthy lifetime order book of INR7,800 crore, giving an annual revenue of more than INR2,000 crores across segments and products. Out of this, 20% came from the EV industry, the leading OEMs and platforms, representing our various products, growing acceptability and readiness for EV mobility going forward.

During the year, we made a financial investment of INR400 crores in Pricol from open-market acquiring 15.7% stake. We have filed for CCI application for stake acquisition, up to 24.5% at this stage, in-line with all governance and compliance requirements. We continue to be very bullish on the instrument cluster business and has a product segment to grow.

We are focused to solidify our market position by providing high-quality, innovative products and securing new business from our customers in our — including various products such as lock set, vehicle access, wiring harness, driver Information system and certain EV products. Moreover, all our products are undergoing [Indecipherable] resulting in enhanced value.

Now, I will take you through the key highlights of investor presentation. I request you to please refer to the presentation which is uploaded. I move to the slide 3 which is sharing about Stock for Minda Corporation. At the Group level, we are reporting about INR5000 company with 16,000 workforce, 34 plants and having more than nine partnerships in the automotive space.

Going to the next page, shares about Minda Corporation global and domestic presence which shows strong foothold on the domestic segment across automotive regions in North, West and South as well as international operations of Vietnam, Indonesia, and having office in Japan.

Moving to the next slide of highlights of quarter four and full-year performance. For the quarter four FY ’23 the revenue growth for the quarter continues to outperform the industry performance, double digit EBITDA margin for 11 straight quarter on a sequential basis. Total lifetime order book in the quarter stood at INR2,000 crores with more than 11% export orders. Highest ever quarterly patent filing with more than 20 patents during this quarter. Two-wheeler smart key continued to gain traction with more than 10% of the total two-wheeler locks revenue. For the full-year, Minda Corporation revenue growth to 45% year-on-year, despite a challenging macro and microeconomic situation.

EBITDA margin improved by 83 basis-points to 10.7% on year-on-year basis. We won businesses across segments and EV constituting almost 18% to 20% of the order book. With 32 patients filed during the year, total patents in the company now stand at 250 plus and signed two technology partnerships for new technology products.

Moving to the next slide, slide 6, which shows a snapshot of the consistent and sustainable market-leading profitable growth. On the top part that is quarterly revenue EBITDA impact, if I look at year-on-year, the revenue has grown by 13%, EBITDA had grown from INR108 crores to INR117 crores by 9%, and PAT — normalized PAT has grown from 54 to look at the 56, a growth by 4%.

If I look at the annual growth from INR2,976 crores, the company has posted INR4,300 crores, which is up 45% jump. And in EBITDA, from 9.9% to 10.7% in absolute terms to INR295 crores to INR461 crores, which is a 57% jump. And PAT margins go from INR137 crores to INR219 crores with 60% jump.

Moving to the next slide, slide 7, which is a key business highlights and order wins across various products. Our new technology products of integrated vehicle access continue to lead the market. We have won orders for the EV diagnostic product for export as well as domestic OEMs.

First time products on wiring harness will be ready in two months. The new technology products in EV and in the commercial vehicle sector as well as two-wheeler segment, and in the cluster division with the new technology or TFT and LED system. These are the market businesses starting production in FY ’23.

Moving to the next slide, which is showing a snapshot of the Minda Corporation. The total number of shareholders at the end of this year was about 90,000. The promoters are over 65% and other institutions all the remaining. On the left, we show the various customers and manufacturing facilities.

Moving to the next slide, on slide 9, which shows the industry performance. Automotive sector grew on quarter four, year-on-year basis by 1%, almost flat. Two-wheeler de-grew by 3%. On year-on-year full-year basis, automotive industry grew by 12.5%, two-wheeler by 9%, PV by 25%, three-wheelers by 12%, CV by 28%, and trucks by 11.5%. Overall, demand continues to remain slow in segments despite the various challenges on semiconductor and other macro concerns.

Moving to the next slide, which is the revenue breakdown. Obviously, India continues to remain the largest share with 84%, 85% in this year compared to last year. Europe and North-America are about 3% to 10% and Southeast Asia at about 6% to 8%. By end-market, the two-wheeler and three-wheeler segment continues to be about 44% to 45%, passenger vehicle is about 14%, commercial vehicles are about 25% to 30%, and aftermarket is about 13% [Phonetic] to 15%.

By business vertical, the mechatronics and aftermarket is about 48%. Information and connected system, which is wiring harness [Technical Issues] 36% and 16%.

Moving to the next slide, which is Slide 11, which shows from last year to this year, the vehicle access business continues to be about 26%, wiring harnesses is about 30%, cluster is about 12%, and DCD or die casting is about 17%, another [Indecipherable] 15%.

So, we are still the market-leader in two-wheeler lock set and wiring harness business, pioneer in keyless entry solutions moving from mechanical cluster to incorporate latest technologies in TFT display, the company is one of the key players in two-wheeler and CV segment. Of late, also getting traction in CV segment [Technical Issues]. In diecasting division, we focus on niche products which are more market accretive.

Moving to slide 11 on the order book status, as showed earlier, we have booked orders worth INR1700 crores this year with replacement business of about INR3,600 crores. And lifetime new business is about INR4,200 crores, and 20% of this is marked by [Indecipherable]. More than INR1,000 crores worth of export orders across various products and segments also during this year.

Moving to the next slide of the consolidated performance for the year, on quarter four year-on-year basis, the revenue grew by INR948 crores to INR1,075 crores giving an year-on-year [Indecipherable] of 13.4%. EBITDA grew from INR108 crores to INR117 crores with year-over-year increase of 8.5%, and EBITDA margin went from 11.4% to 10.9% across various challenges.

The PBT grew from INR72 crores to INR67 crores, and it normalized back at INR54.56 crores. On year-on-year, on year basis, the total revenue of INR2,976 crores grew to INR4,300 crores, which is 45% up. EBITDA has grown by 56.7% from INR295 crores to INR61 crores. For full year, EBITDA percentage has grown from 9.9% to 10.7%.

Normalized PAT has increased from INR137 crores to INR119 crores, up by approximately 60% and 50 basis points. On domestic part, in quarter four and full year, industry grew by 1.7% and 12.5% respectively. Minda Corp grew at 13.4% and 27%. Exports grew in-line with the top-line going forward which continues to be driven by addition of new customers across geographies.

The EBITDA margin was delivered in spite of the commodity price showing rising trend and semiconductor supplies have started easing out. Board of Directors have declared a final dividend of 40% or INR0.80 per equity share, total dividend for the year at 60%, that is INR1.20 per equity share.

Slide 14 on the consolidated leverage position by comparing year-on-year, net worth of the company has increased to INR1,591 crores. The long-term borrowings stand at INR235 crores, and the short-term borrowing is at INR318 crores. Gross debt overall has gone from INR391 crores to INR553 crores. Overall, the net debt to net worth is at comfortable 0.25%. Capital employed at the group level is about INR1,550 crores. ROC has increased from 18.4% to 20.8%.

Moving to the next slide, which is slide 15, on the business vertical performances. If I look at the business vertical, which is the mechatronics and aftermarket, on a quarter-on-quarter basis, the sales have grown from INR547 crores to INR535 crores, and EBITDA has gone from INR13.8 crores to INR13.9 crores.

Revenue grew by 10% on year-on-year basis due to the increasing share of business and [Indecipherable] against market growth of 1.7%. Margins declined due to stagnancy in exports, mainly due to geopolitical situation in Europe. On full-year basis on the right side, this division has performed INR1,687 crores to INR2,061 crores, from 12.3 EBITDA percentage to 13.5%.

In the information and connected systems which is primarily wiring harness and instrument cluster and sensors, on the revenue front, it has gone from INR462 crores to INR540 crores on year-over-year basis, and sequentially from INR522 crores to INR540 crores. The revenue was supported by demand in domestic market. Margins improved due to wiring harness margins continuously on the rising trend due to various factors such as component localization. Minda Instrument margin improved mainly due to semiconductor supply-chain easing out and better operational efficiency. On the full-year, the revenue stands at INR2,239 crores with 8.2% EBITDA margin.

Moving to the next slide, it shows the journey of new alliances in the recent past. So, this is just to share with you again that in the last — in this financial year we have signed two partnerships in ADAS solutions and telematic solutions to complete our technology and focus on offering products and system solutions to the customers.

Now moving to the strategic pillars on slide number 18, we continue to focus on enhancing the core. Innovation and technology continues to be the core in terms of the [Indecipherable] R&D center and partnership with [Indecipherable]. First is how we can enhance electric vehicle build opportunity and all the buildup operations are in the agnostic. Same thing with passenger vehicle offerings with in-house as well as partnerships. Transforming and becoming complete solution provider, focusing on cost leadership in manufacturing, and cost leadership when it comes to technology. The utilization of product innovation in all business segments continue to drive content per vehicle, and most importantly deliver better than industry growth and continue to improve margin profile.

Moving to the next slide, on the [Indecipherable] capability, we are now more than 250 patents. More than 2% continues to be the R&D spend and the following year will continue to increase further, and we have more than 500 engineering counts all across various technological products.

Moving to the next slide, on the electric vehicle opportunity. This is just showing the various products that we offer in the two-wheeler segment, various old and new customer that we continue to add and the potential kit value going from INR4,000 rupees to about INR20,000 in our legacy and products that we are already manufacturing and supplying as well as which are under development.

Moving on to the next slide is the revenue proposition of the Minda Corporation, but just in the interest of time, I will skip this, but the intent and the focus continues to be on how we can perform sustainable and grow year-on-year and quarter-on-quarter, delivering our customers and focusing on innovation and technology.

Last, not the least is our enhanced focus on the ESG framework and how to become carbon-neutral in the next year. Minda Corporation has also won various awards from our customers and across various social responsibility campaign that has been conducted across not only in India but across the world.

With this, I would like to conclude my presentation, and now I would like to open floor for any questions, please.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Abhishek Jain from Dolat Capital. Please go ahead, sir.

Abhishek Jain — Dolat Capital — Analyst

Hello, hello, am I audible?

Aakash Minda — Executive Director of Finance and Strategy

Yes, Abhishek.

Abhishek Jain — Dolat Capital — Analyst

First of all, congrats on the strong set of number. It’s been tough times. My first question is related with information and connected system business. So how do you see the growth going there in the wiring harness business? And what kind of margin guidance do you have in this business?

Aakash Minda — Executive Director of Finance and Strategy

Yeah, Abhishek. Wiring harness continues to be the nervous system of the vehicles. And if you see the latest trend from BS4 to BS6 in various segments such as [Indecipherable] electric vehicle mobility, more-and-more premiumization is happening in the car. The content of the wiring harness is set to go forward, and it depends on the segment as well as on the ICE of any type of the vehicle. But technically, again, I will not be able to give you a number on the particular growth, but it is going to be in line or even better than the industry growth, having more-and-more content per vehicle such as connection systems in electric vehicle mobility and others. On the margin front, we do not give future guidance, but again, our endeavor is to continue to improve the performance on the wiring harness, due to the various initiatives that we have been continuously taking on manpower, productivity, component localization, strengthening our plants and production processes.

Abhishek Jain — Dolat Capital — Analyst

So as the semiconductor prices is going down, can we see a double-digit margin in this business? Wiring harness business?

Aakash Minda — Executive Director of Finance and Strategy

So, semiconductor is more related to our electronics business which comes to the clusters and sensors. And now the keyless solutions and the electric vehicle mobility. In wiring harness, yes, there are some semiconductors depending on the end application and the products, but wiring harness has not been impacted when it comes to the semiconductors. It is the other product lines where there are normal counts.

Abhishek Jain — Dolat Capital — Analyst

And in the wiring harness business, how was the break in FY’23 two-wheelers, CVs, and the passenger vehicles and the [Indecipherable]

Aakash Minda — Executive Director of Finance and Strategy

So, largely it remains in line with the group overall segmentation. So, about 50% comes from the two-wheelers, about 25% to 30% comes from the commercial vehicles, and the remaining comes from off-road and other segments.

Abhishek Jain — Dolat Capital — Analyst

Okay sir. That’s all from my side.

Operator

Thank you. [Operator Instructions] The next question is from the line of Radha from B&K Securities. Please go ahead.

Radha Agarwalla — B&K Securities — Analyst

Hi sir, good evening. Thank you for the opportunity. Sir, my question was on the mechatronics division. So, with respect to the lock set, I wanted to understand what is your share of business with top customers like Bajaj, HMSI, TVS, Hero, Suzuki?

Aakash Minda — Executive Director of Finance and Strategy

So, mam, I will not be able to share the exact numbers. That is a confidential information, but largely wherever and whichever product Minda Corporation works in, either with the customer or in the segment, we are one of the leaders having more than 30% or 35% share of business across segments. In the two-wheeler lockset, which is higher, we are more than about 40% if I may say so at all customer segment level. It may vary from different customer to customer.

Radha Agarwalla — B&K Securities — Analyst

I understand, sir, but could you tell us where the share of business in higher with from which customers and from which it would be lower, maybe higher from Bajaj and lower from TVS. Is that the case?

Aakash Minda — Executive Director of Finance and Strategy

Mam, I think you are setting the question in different other way. As I told you, at the industry level, it is more than 40%. I will not be able to give you a breakup due to confidentiality with our customers, on the customers as breakup.

Radha Agarwalla — B&K Securities — Analyst

Okay, sir. So that Honda Activa is the new series launched by HMSI. So, I believe they have a different kind of lockset. I’m not sure whether we can call it smart locks, but maybe an advanced lock system. Sir, are we supplying that product to them?

Aakash Minda — Executive Director of Finance and Strategy

Mam, as I said, I cannot take a particular customer name for the product. Yes, Honda is one of our customers for the keyless solutions.

Radha Agarwalla — B&K Securities — Analyst

Okay sir. From the industry perspective, I believe in your opening remarks you mentioned that 10% of the revenues is from smart locks. I mean in the industry, you’re talking about. I mean, what is the penetration of smart locks in the industry today, and how do you see it in the next three to four years?

Aakash Minda — Executive Director of Finance and Strategy

Mam, currently the industry in India is about 5% to 10% is the penetration of the smart access solutions. Of course, with exports and the large premium bikes and the EV coming in, the penetration is much higher compared to the lower-end segments and the [Indecipherable]. In the next mid-term to long-term, this will definitely be increasing from two perspectives. The one is premiumization of the vehicles is happening, customer demand is focusing more on our personalization and convenience and comfort, moving from to the high end to the lower end variant of the vehicles, and of course, the export market sentiment to grow as well.

Radha Agarwalla — B&K Securities — Analyst

Sir, how much do you see this 5 to 7% in the next few years?

Aakash Minda — Executive Director of Finance and Strategy

Mam, it depends again, but technically, we can say in the next mid-term to long-term, about 30% to 40% should be the target that we have in line.

Radha Agarwalla — B&K Securities — Analyst

Sir, any modern set you can name which are having 5% to 7% and which we can call a smart lock, and you may not be supplying to them. I’m not asking about your supplies, but, I mean, what are the models that are currently using smart locks in the two-wheeler industry in the Indian market?

Aakash Minda — Executive Director of Finance and Strategy

Mam, one example is Ola electric, Hero Vida, and there are some TVS products. There are Bajaj Chetak, and some other models.

Radha Agarwalla — B&K Securities — Analyst

Okay, sir, Bajaj Chetak, we call that as a smart lock only, right? the button system [Technical Issues] and sir, what would be the price differentiation between normal lock versus smart lock?

Aakash Minda — Executive Director of Finance and Strategy

Mam, a normal lockset is about INR300 to INR400. And the smart locks for keyless solution can depend on the various configurations. But the average rate size is about INR2000 to INR3000.

Radha Agarwalla — B&K Securities — Analyst

And sir, lastly, what would be your maintenance capex per year?

Aakash Minda — Executive Director of Finance and Strategy

Mam, typically, our depreciation is in the tune of about 4% to 5%, and certainly we speak about the maintaining for regular capex is typically about 1%

Radha Agarwalla — B&K Securities — Analyst

Maintenance capex 1%.

Aakash Minda — Executive Director of Finance and Strategy

Yeah, maintenance and other regular capex, not particularly maintenance capex.

Radha Agarwalla — B&K Securities — Analyst

Sir, 1% of of what?

Aakash Minda — Executive Director of Finance and Strategy

Revenue, mam.

Radha Agarwalla — B&K Securities — Analyst

Okay, okay. Understood. Yes, sir. Thank you so much and all the best.

Aakash Minda — Executive Director of Finance and Strategy

Thank you.

Operator

Thank you. Your next question is from the line of Dhananjay Kumar Mishra. Please go ahead, sir.

Dhananjay Kumar Mishra —

Thank you for the opportunity and congratulation on the good set of numbers. Just wanted to understand in EV segment, this kit value which you have mentioned, so competition [Technical Issues] we are close to, I mean, we can provide kit value up to close to 8,000 to 10,000. So have we reached this kit value for any of the customer as up now, or where we are in standing terms of kit value with a particular customer.

Aakash Minda — Executive Director of Finance and Strategy

So, as I mentioned, this will be potentially the last in kit value that we can offer. Currently if I may say that we are offering somewhere between because 10,000 to 12,000 which we currently reached and which is under mass production.

Dhananjay Kumar Mishra —

Can you repeat? I didn’t get the number.

Aakash Minda — Executive Director of Finance and Strategy

10,000 to 12,000.

Dhananjay Kumar Mishra —

That is the potential we can, but have we got order for any customer to this much kit value for a particular model?

Aakash Minda — Executive Director of Finance and Strategy

Yes, we have. I cannot name the customer or the model.

Dhananjay Kumar Mishra —

I was just asking. I mean, whether we — because we have increased this mechatronic, we have increased our listing by 2,000 to 3,000 and in information and connected system we have increased to 2000, so we can provide 8,000 to 10,000 kind of products per EV, that is what I asked. And in terms of just, what was the total capex put together in FY’23 and whether in maintenance on new low capex or what is your plan as you go to FY’24 as well.

Aakash Minda — Executive Director of Finance and Strategy

So, for the last year, for the full-year FY’23, it is INR250 crores.

Dhananjay Kumar Mishra —

Okay, and breakup you can give specifically in each segment we have.

Aakash Minda — Executive Director of Finance and Strategy

So, breakup is generally, if I may say, is about 2% to 2.5% growth into the Indian wing and R&D. About 1% to 1.5% goes to the regular and maintenance capex, about 1% to 2% goes in our plant upgradation or new plants that are developed. This is the breakup of more of less 4% to 5%.

Dhananjay Kumar Mishra —

So, for growth, we don’t need to increase capacity for our particular plant capacity. This is regular maintenance that we will do will take care of growth for next two, three years?

Aakash Minda — Executive Director of Finance and Strategy

No sir, different plants and different product lines have different capacity utilizations, so mechatronics business vertical one in the keyless solution and locksets are about 55% to 60%. In the wiring harness, again, we have about 68% or 60% capacity utilization. In [Indecipherable] about 80%. And EV division is currently still only about 25% to 30%. This is just some of the numbers that I’m giving you as we’re coming up with the new plant, new low-cost automation, as well as refocus now with this current infrastructure, how we can increase our revenues, and having checks and lines and other [Indecipherable] ideas on how we can sweat our assets more generate more-and-more revenue and profitability.

Dhananjay Kumar Mishra —

Okay, and lastly one question, maybe just to diecasting. If you could give the quarterly revenue number per diecasting and for the full-year also, and how it has grown?

Aakash Minda — Executive Director of Finance and Strategy

For the quarter four, for the diecasting, it was INR135 crores. For the full year in diecasting is about INR130 crores. On a full-year basis from November ’22 is at INR2022 crores, so on a full year basis, it has grown by 40%.

Dhananjay Kumar Mishra —

Okay. Okay, thank you. But just one more question, just to recall. So, we have shown intend to increase our stake in the company. So have we — are we also in talk with them, any advance talk is happening or just it is board approvals?

Aakash Minda — Executive Director of Finance and Strategy

It’s a financial investment in terms, Dhananjay, and we have applied for CCI and for governance and compliance. So that’s where it basically stands as of now.

Dhananjay Kumar Mishra —

Okay, that’s all from my side. All the best. Thank you.

Aakash Minda — Executive Director of Finance and Strategy

Thank you.

Operator

Thank you. [operator Instructions] The next question is from the line of Mihir Desai from Pendulum Investments. Please go ahead.

Mihir Desai — Pendulum Investments — Analyst

Thank you for the opportunity. Sir, I had two questions on the macro front. So, I just wanted to check with you, how has the global market landscape impacted your company’s performance?

Aakash Minda — Executive Director of Finance and Strategy

So, besides India, if we look at various reports, at the next 10 years or India Inc, and do to the various concerns of the political issues, etc., of course, the other markets are under pressure, such as Americas, Europe, or others such countries. So, coming to Minda Corporation, definitely exports for this particular quarter are under pressure. But our investment focus is always to keep getting orders. When there is a pressure from the export market, we track our performance.

Mihir Desai — Pendulum Investments — Analyst

Sure, sir. Sir, also I just wanted to check what are the steps that we’re taking to address the supply-chain challenges and disruptions?

Aakash Minda — Executive Director of Finance and Strategy

So, there are various activity or actions that are happening in place. First, our commodity inflation [Technical Issues] to our customers and with strategies that is [Technical Issues] in terms of time and amount. That’s number one. Number two, of course, there are various strategies when China plus yuan de-risking that are happening, so we are looking at localization of our components to our various suppliers and supplier partners. As an organization, now we are working on various important topics such as quality, cost and competitiveness with our business partners. So as a group, we want to sustain the power, supply the partners the way our OEMs have taken and groomed up and grown up over the years. That’s our strategy, so that they grow with us, to support us with the next generation of technologies and the requirements that there. [Technical Issues] financial, health perspective, quality operations, and above all, all compliance perspective, including ESG

Mihir Desai — Pendulum Investments — Analyst

Sure sir, thank you. Sir, also I just wanted to check what is the progress on ongoing research and development initiatives?

Aakash Minda — Executive Director of Finance and Strategy

Sorry, my friend, I think you asked a general question. But it is fair that we continue to focus on our own core products in areas of technologies. The idea is that how we can focus on the case or case with this connected autonomous shared in the [Indecipherable] in electrification. So, all the products are going to the [Indecipherable] booth, and using the comfort, convenience and individual addition and personalization. So, we are now focusing on how all our products can be moved and taking shape with these requirements and trends. So, we are going to [Technical Issues] our products into electronics. And I think with our own design center, now we can focus on personalization in surfaces and different teams are on that aspect.

We continue to also have run multiple new R&D and innovation of products and projects, which are totally advanced and leads the modern India for the world, which are under the integration phase or R&D phase for various technologies in our own product lines and how did look at into new technologies and new partnerships perspective.

On the electric vehicle space as well, electric vehicle mobility, we continue to add products in-house as well as through partners through technology partners, as well as [Technical Issues] on the product capability. Also, as an organization from our R&D center and we are working on filing more and more number of patents, and how to improve the design quality in automotive and coming up with new trend in technology that needs to be new vehicles allowing two-wheeler [Indecipherable]

Mihir Desai — Pendulum Investments — Analyst

Sure sir, thank you. Sir, lastly one broad question which I wanted to ask you is that, as an investor, say currently five years down the line, what would be the strategy of the company and you know from current where we are. How do you look at the company, say five years down the line sir?

Aakash Minda — Executive Director of Finance and Strategy

So, at a very large level, we would like to move from company to complete system solution providers. All the product lines in the domain, what we are doing is, we would like to develop different technologies and complete vehicle solution offering with respect to our three or four product lines and the product domain with finding in the R&D. We are currently running many products and how we are consolidating and integrating them at [Indecipherable] system solution. From that perspective, also having the downstream plan in terms of our operational excellence and the becoming the leadership in that respect. I spoke about the value chain when it comes to the [Technical Issues] partners. On the numbers, of course, we would like to move ahead of the market as the market is going flat, we would like to be higher by about 10% to 15% and we have consistently showed over the last two and half to three years, in [Technical Issues] that we would like to we would like to have [Indecipherable], are committed to grow above 20% to 25% year-on-year of our Minda Corporation. Most importantly, has to be a sustainable growth journey quarter-over-quarter.

Mihir Desai — Pendulum Investments — Analyst

Sure, sir. Thank you, sir, if I have further questions, i will join the queue.

Operator

Thank you. Your next question is from the line of Harish Shah from HS Investment. Please go ahead.

Harish Shah — HS Investment — Analyst

Thanks for the opportunities. I hope my voice is audible.

Aakash Minda — Executive Director of Finance and Strategy

Yes it is.

Harish Shah — HS Investment — Analyst

Yeah, thank you so much. Sir, this is basically with regards to how do you see operational efficiency kicking in. Are we taking any digital transformation initiatives? And the second question is with respect to expanding our international footprint. If you can provide any steps that you have taken for that?

Aakash Minda — Executive Director of Finance and Strategy

Yeah, so again, we are into the manufacturing business and automotive. So the operation excellence is the most important factor for us. And especially with the ongoing set-up in technology changes and customer demands, we have to fall much faster in line. For these initiatives, we are firstly, stepping up and providing our state-of-the art plants, so we are improving end-to-end traceability, low-cost automation, robotics, business excellence, IOT and all such digital control in the process and we are partnering up, and already have partnered up with various external companies to strengthen this. And also, we have a very strong internal team to continue on the group business excellence of what we call. Sorry, can you repeat your second question please?

Harish Shah — HS Investment — Analyst

So my second question was regards to trending our international and global presence, if you can just provide any update or any direction towards that aspect.

Aakash Minda — Executive Director of Finance and Strategy

Yeah, so, of course, there are two aspects to that. We are primarily in India and India is what we are focusing is how we can increase the exports some brands and products from India to all over the world, are looking at the various good opportunities that are coming in across the Indian continent. That’s number one. We do not have plans to acquire any company which are having large operation base overseas. So, our focus remains on how we can be in India and work for exports, and have a larger share of revenue from the export businesses in the next years to come.

Harish Shah — HS Investment — Analyst

Okay, thank you. And my last question is with regards to our mechatronic division. How do you see the margin panning up in the coming quarters?

Aakash Minda — Executive Director of Finance and Strategy

So, the mechatronics division, in our presentation also we have showed that it’s about 13% to 14% EBITA. While, of course, we want to grow this, and we will see upcoming quarters and on the B2B,and increase in the content, electronics, etc. First and most important is to stabilize this, and then, we will continue to improve it year on year. With change in technology, we need to first utilize our capacities, get adjusted to the new volumes and the customer demand, deliver most importantly and then focus on going year-on-year.

Harish Shah — HS Investment — Analyst

Okay, thanks for the detailed reply answers, and wish you all the best. Thank you.

Aakash Minda — Executive Director of Finance and Strategy

Thank you.

Operator

Thank you. The next question is from Saral Seth with Indsec Securities and Finance Ltd. Please go ahead.

Saral Seth — Indsec Securities and Finance Ltd — Analyst

Yeah, hi, sir, congratulations for good set of results, and thanks for taking my question. Sir, my question pertains to how do we plan to increase our content per vehicle from here going ahead over next two to three years across segments, because we are seeing decent premiumization, which is happening across the board. So we still feel that there is room for further penetration in our products to increased content per vehicle?

Aakash Minda — Executive Director of Finance and Strategy

Yes, absolutely. It is not even the beginning if I may say for us. As you see, the bikes, cars, etc. are all those that have been [Indecipherable] with that each of our products for vehicle access. So, from a traditional lock and key, as I mentioned earlier, we now are moving to keyless addition, and this is only the 5% to 7% penetration as of now. Going forward, of course, it is only going to increase. When it comes to the wiring harness content, then increasing kit value, as again mentioned earlier as well, the more number of connection system, high voltage cable, and more complex wiring harnesses are definitely going to lead to increase in the content per vehicle. In the instruments cluster and spares, analog clusters are moving to digital and TFT clusters with more personalization and comfort and convenience, which is more of a dashboard or a cockpit when no driver information system connected. So, this is [Technical Issues] clusters are now moving which all of us would like to get connected to our phone and other. That is again a very less penetration and all the technologies are into the only high-end vehicles, however, in two-wheeler or four-wheelers [Indecipherable] they will come into the low-cost commuter segment, which is where we lead volume wise across India. Other product lines that we also continuously adding is again in terms of sensors with increase in the portfolio, Interior Plastics division, we’ve added many products such ADAS, shark fin antenna, [Indecipherable] and other realistic technology, particularly in the TV space and electronics of [Indecipherable] transportation. There is a vast array of products, which are now moving from the traditional car or a two-wheeler to a high-end connected personalized and the advanced vehicles. So, this is how the penetration will increase. And the more-and-more kit value from that operation will increase.

Saral Seth — Indsec Securities and Finance Ltd — Analyst

Right sir. That was very detailed answer. My second question is on the aluminum diecasting. How do you see the business shaping up over next two to three years? We have done well to ramp up this business. Is there any competition in this business or you feel that there is enough room for growth.

Aakash Minda — Executive Director of Finance and Strategy

Well, definitely a lot of opportunity when it comes to the on light-weighting aspect, because when more and more electric vehicle mobility is coming in, and speaking about emission systems and other such things, this is where the aluminum castings or the diecasting comes in. I would like to again share Minda Corporation diecasting division had a 40% year-on-year growth in the last year and more and more exports coming in. So definitely there is a room for growth. We’d like to continue to focus on our domestic as well as export markets. We have a strong team with a good amount of excellent amount of technology to cater to the need. We are well placed going up the mix in four to five years with respect to any technology that is needed in the light-weighting solutions.

Saral Seth — Indsec Securities and Finance Ltd — Analyst

And sir, this aluminum diecasting, how much would be domestic and how much would be exports, sir if you can share that number.

Aakash Minda — Executive Director of Finance and Strategy

So, technically you might say about 60% is domestic and about 35% to 40% is exports.

Saral Seth — Indsec Securities and Finance Ltd — Analyst

And would it be fair to assume, sir, that the margins in this business are higher than the blended margin, sir.

Aakash Minda — Executive Director of Finance and Strategy

Yes, of course, but I would like to also highlight that the capex and the below EBITDA number is in terms of depreciation are also higher in this business compared to levels, because it is a highly capital-intensive business.

Saral Seth — Indsec Securities and Finance Ltd — Analyst

And, sir, any new product launches, which we are doing in aluminum dicasting, wherein we can gain market-share or taking orders.

Aakash Minda — Executive Director of Finance and Strategy

Yeah, the focus is definitely on electric vehicle mobility. There are various players, and there are many opportunities are coming in again from the motor, battery package housing or other converter businesses. There are various product lines that we are looking on for the EV diecasting products.

Saral Seth — Indsec Securities and Finance Ltd — Analyst

And sir, my final question, if I can squeeze in. Sir, what is — I mean, there were questions about margin trajectory, but I would like to understand what are the levers for margins going ahead, is it like sustaining cost optimization or is it raw-material tailwinds or is it better realization that the operational efficiency which could come in, sir.

Aakash Minda — Executive Director of Finance and Strategy

So, I think you answered all your questions yourself, but that’s a mix of all. And again, while there are pressures from the raw materials, while weight increase to various states like we have seen more across the margins that we continue to be under pressure, but as an organization, our focus is on how to gain cost leadership in the manufacturing, from in-house all the way to our suppliers. So definitely the indexation with our partners, how we can focus on increasing productivity, and manpower productivity improvement are more and more dependent on automation and robots. It is something that we will be looking at in future as well as the products that we are going to be working on and are working on, of course, will be needing much more automation rather than manual thing, which will be reducing the amount of our dependency and increasing the quality as whereas our productivity and efficiency and profitability.

Saral Seth — Indsec Securities and Finance Ltd — Analyst

Sure sir, thank you. That was detailed asnswer, I’ll fall back in queue.

Aakash Minda — Executive Director of Finance and Strategy

Thank you.

Operator

Thank you. The next question is from the line of Radha from B&K Securities, please go ahead.

Radha Agarwalla — B&K Securities — Analyst

Hi sir, thank you for the opportunity once again. Sir, my question was on the aluminum diecasting side, so just wanted to understand, I believe that as we move on from aluminum to zinc and magnesium, so the value content or the product improves. So is there a margin difference if we are providing aluminum diecasting products versus zinc and magnesium die-casted products and what would that be?

Aakash Minda — Executive Director of Finance and Strategy

Mam, very challenging question but I think we are primarily into aluminum castings. We are not into magnesium castings. Of course, there are both pros and cons when it comes to the technology per se, but more importantly, the application of each of these zinc or aluminum or magnesium casting is an important aspect. Honestly, I cannot comment on the profit margin across all three.

Radha Agarwalla — B&K Securities — Analyst

Okay sir. And sir, I mean, if we see the magnesium die-casted products, I mean, is the industry, or do you believe the industry will slowly start moving to these magnesium die casting products at least in the premium vehicles, and if yes, then what is penetration now and, I mean, if the industry moves toward it, will it start with the passenger vehicles and so on

Aakash Minda — Executive Director of Finance and Strategy

Mam, magnesium casting is a very difficult process and it is very safety-critical if I may say, compared to zinc or aluminum by the nature of it. So, there are not too many peers in India who do that. But yet, as our technology, it does exist, but the application needs to be evaluated and tested, which will take many years to come in my opinion, as an individual.

Radha Agarwalla — B&K Securities — Analyst

And sir, lastly out of the components that you make in the aluminum die-casting products, I mean, what percentage of that would be the making for products that are in engine subcomponents or transmission subcomponents, and components that will not be required in EV engine. And what would be our strategy to, when the industry replaces the products, what would be strategy to cover that part of the revenue.

Aakash Minda — Executive Director of Finance and Strategy

So, mam, again, these are both type of products that we make. Firstly, ICE engine related, then there are EV batteries or motor related, and then there are products which are EVs agnostic or engine agnostic, which does not matter irrespective of engine. So, there is a variety mix and across segments. Exports also again, on the ICE engine side as well, which has also grown. But we are very clearly launching new EV die-casting products, which will not hamper our ICE engine products in the casting space.

Radha Agarwalla — B&K Securities — Analyst

Understood, sir. Thank you sir.

Aakash Minda — Executive Director of Finance and Strategy

Thank you.

Operator

Thank you. The next question is from the line of Monica Arora from shared in Wealth Advisors. Please go-ahead.So I don’t know, your line is unmuted, please go-ahead with your question. There is no response, we’ll move to the next question. The next question is from the line of Rajesh Kumar from Reliance Wealth. Please go-ahead.

Rajesh Kumar — — Analyst

Hi, thank you for taking my question. My first question is on the working capital, how do you see in future, your working capital days to evolve? What are the company’s tax back?

Aakash Minda — Executive Director of Finance and Strategy

So, the challenge in the automotive industry is continuously increasing the working capital. One of the key metrics is that we also monitor and working towards that. And as I mentioned, one of the important factors in Minda is our suppliers, our other credit partners. This is where we are working with them on how we can strategize, to decrease our inventories, inventory days, as well as their payment terms as well. And there are of course MSME norms with the government [Indecipherable] which is one aspect that we’re working on across various segments. Number two is of course on our work in progress inventory and FG inventory that we look at. Inventory is definitely an important aspect with more-and-more in box electronics now coming in and the customers are mandating and requiring us to have high number of lead time items in our inventory. That is where the number of days go up.

When it comes to the customer aspect of it, definitely there are set norms, customers are good paymaster then their traditional ones. There is mention in that, but yes, in some cases, we manage them appropriately as engaged. But we’re constantly reaching out to them on how to reduce our debtor days on that aspect. So, of course, you can see our working capital days have gone up from 30 to 40, but we are working on this front as I mentioned to come down significantly.

Rajesh Kumar — — Analyst

Thank you, sir. My next question is on — we have entered into two strategic partnerships in FY’23, can you help us in giving some color, how this has panned out so far, and their potential impact on the business going ahead.

Aakash Minda — Executive Director of Finance and Strategy

So, when it comes to the Dayton Electrics, it is going to be along the ADAS solutions. So, this is a company from Korea, and what we are targeting here now is we basically have zero application in India from that. Consequently, our team is working with our Korean counterpart on the application for the Indian environment as well and Indian end customer usage, that’s what we are continuously working on because the products that are developed by the Korean are international users. That’s one. On the second side, of course, we are working on the customers and demonstrating our samples fitting on to their vehicles to get more and more interest to that front.

When it comes to the telematics, LocoNav company, our Minda Corporation is having the hardware and LocoNav is also in the cloud and the software solution to that. So as a joint system solution offering, we are working with various partners, sorry with the customers, and work for them to complete solution on this aspect. So, after our products are in the market fitted on the vehicles, whether it is in EV or in ICE engine performance.

Rajesh Kumar — — Analyst

Sir, my next question is how about your targets for the strategic partnership and especially post Pricol? How will you be able to finance it?

Aakash Minda — Executive Director of Finance and Strategy

So, as I mentioned, this is a financial investment, so we will see when the opportunity is coming, what will be done and what can be done. But of course, we are much more confident on our performance and our balance sheet than ever with the way we already sent this off, is that you can see the numbers. And the next year [Indecipherable] was also much, much higher for us and we are the organization who are committed to deliver more-and-more free cash flow.

So we will see when the opportunity comes, whether it is any and all JVs or PLAs or M&A and you evaluate them at the right course of action. But as an organization, we are focusing on bringing in new partners through our JVs and PLAs for computing power system solution and offering advanced technology, and we will come back to the market whenever there are developments, which will be soon. Of course, when it comes to M&A, we are open to all opportunities that come our way, we have the full bandwidth, and that develop the management capabilities to grow further through M&A as well. But yes, we are very clear on that. We are not going to do, we’re not looking at any companies which are outside India, and also in the product range of product lines of Minda Corporation, which are the domains that we are already working, so there are some clear norms that we have set up for M&A, as well as the technology systems and partnerships.

Rajesh Kumar — — Analyst

So, on ROCE, what is the level you are targeting in the longer run, and what are the strategic levers or your strategies to achieve the same.

Aakash Minda — Executive Director of Finance and Strategy

So, our ROC has again currently moved from, if you see over the last few years, we have gone from 15% to 20% this year in the last three years only. And if you look at the FATR of the organization, we are somewhere on the 4.2 to 4.5 times, and this year, we have done about 0.4 times. So, the detail of the product and our product-line strategy, this is how we continue to invest in the products which are going to continuously give us higher ROCE numbers, and this is a key parameter and metrics before any capital allocation model that we do for any new project or even a new partnership or a plant. [Speech Overlap]

Rajesh Kumar — — Analyst

Okay. thank you sir, that was my last question. Thank you.

Aakash Minda — Executive Director of Finance and Strategy

Thank you.

Operator

Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Aakash Minda for closing comments.

Aakash Minda — Executive Director of Finance and Strategy

So, thank you very much. Going forward in FY’24, we are very confident of growing better than the industry, also forming the industry with our own capabilities and technologies and customer engagements. We continue to focus on delivering the numbers and performance on consistent and sustainable basis. And we are developing our ability to navigate the market challenges by relentlessly focusing on new products, R&D innovation and strategic tie-ups to cater to the evolving demand of the automotive space.

Our strategic approach will remain on fortifying our core products and expanding our product and customer base, both by attracting new clients and deepening our relationships with the existing ones. We are fully poised and confident of margin-accretive growth in the years to come. Thank you for your support.

Operator

Thank you. [Operator Closing Remarks]