Rico Auto Industries Limited (RICOAUTO) Q3 FY23 Earnings Concall Transcript

Rico Auto Industries Limited (NSE:RICOAUTO) Q3 FY23 Earnings Concall dated Feb. 15, 2023.

Corporate Participants:

Arvind Kapur — Chairman, Chief Executive Officer

Kaushalendra Verma — Executive Director

Rakesh Kumar Sharma — Chief Financial Officer

Analysts:

Vijay Gyanchandani — Lead Analyst

Aman Vij — Astute Investment Management — Analyst

Unidentified Participant — — Analyst

Deepak Poddar — Sapphire Capital — Analyst

Pritesh Chheda — Lucky Investment Managers — Analyst

Mukesh Modi — Modi Fincap — Analyst

Presentation:

Operator

Ladies and gentlemen good day and welcome to the Rico Auto Industries Q3 FY ’22 earnings conference call hosted by S-Ancial Technologies. [Operator Instructions] Please note that this conference is being recorded.

I will now hand the conference over to Mr. Vijay Gyanchandani. Please go ahead, sir.

Vijay Gyanchandani — Lead Analyst

Thank you. Welcome to Rico Auto Industries Q3 FY ’23 earnings conference call. From the management we have today. Mr. Arvind Kapur, Chairman, Chief Executive Officer, and Managing Director; Mr. Kaushalendra Verma, Executive Director; Mr. R. K. Miglani, Executive Director; Mr. Rakesh Kumar Sharma, Chief Financial Officer; and Mr. B. M. Jhamb, Company Secretary.

Now I request Mr. Mr. Arvind Kapur to take us through the key remarks after that we can open the floor for the Q and A session. Thank you and over to you.

Arvind Kapur — Chairman, Chief Executive Officer

Good evening. My name is Mr. Arvind Kapur and welcome you all to today’s conference. The third quarter has been as for what we had expected, except one or two changes which came about because of mergers that had happened, I’ll talk about that also. The third quarter, normally the month of December especially is a little slow because most of the OEMs, they have a shutdown and for a week or ten days there is almost zero production. And also in the market because of the model change in India, we regard this year as a model change from 2022 to ’23. So people have a tendency of buying lesser vehicles at the end of the month. So that’s the reason that most of the OEMs also shutdown their plants.

So by and large it was as per expectations and both in the domestic front as well as the export front. In the domestic front now, what we see for this particular quarter is that the two-wheeler is a little challenging and we are hoping that it bounces back. And in the last meeting, we had the Finance Minister, Madam Speaker, Mrs. Nirmala Sitharaman said that two-wheeler is a common man’s vehicle and I think they requested that the GST should be brought down, which I don’t think she’s going to agree too well, but she said, I agree with you, but I don’t know whether I’ll be able to do it.

So we have been pushing it and through the ministry, through our ministry as well, we are trying to push that and with that we hope that the team starts picking up. The export front, I had mentioned to you earlier that it had become a big challenge and about a year back we were air freighting [Phonetic], etc., mainly because the shipment time that was being taken from India to the U.S. as well as Europe, that had almost tripled. And in the case of U.S., there was total jam at the docks and also the railways were not picking up the material as they should be [Phonetic]. So it has become a challenge and so we had a lot of material on the sea, so that we don’t have to air freight any further.

So we did push a lot of material and now the situation is fairly normal and the ships are reaching on time. And we have excess stock in our warehouse both in the U.S. as well as in the Europe. And so we have slowed down. We don’t want excess inventories there in our warehouses. So we are stabilizing inventories and bringing it back to what was normal. And so for this quarter we will make less shipments, even though the pickup from our customers is as good as normal. In fact, in some cases they have picked up a little more.

In Europe, surprisingly, the market is still good and despite the war zone and the other problem that we faced was that Euro had crashed and so we did have a lot of issues as far as from INR79 to INR78, it came down to about INR70 and today it is again bounced back and thank God for that. So that is one challenge that we did face in the last couple of quarters and we are hoping that this will remain stable now and there won’t be any surprises that we would see.

[Technical Issues] the results that we declared now it is on the 5 January this year at ’23 that the NCLT gave us the order for merger of RCL to Rico Jinfei. And because of that, and the appointed date was 1 April ’21, we had to reinstate all the previous quarters. And that’s why you see some changes that would have happened in the previous quarters and that had to be done. [Speech Overlap] I just got the news that apart from the first merger that I was just talking about, RCL to Rico Jinfei that was cleared on the 1 January, just a couple of minutes back the other mergers that we were talking about, RIL to Rico Investment, RAFA and RASA with Rico Auto that has also been cleared. That has just been cleared about half an hour and hopefully we’ll get the order very soon now. So that’s the new news that we are sharing with you, you guys are the first guys we are actually sharing this. And we were hoping that this would happen actually last month, but it didn’t happen, but very happy about that.

So because of the merger of RCL to Rico, we had to reinstate all the previous quarters and that has been done. If you look at the commodity prices, they are fairly stable. So you will also see that in the results that our material consumption has actually come down, raw material consumption has come down and we are hoping that this would remain in this bracket for a longer period, and that will help us.

On the EBITDA front, we had showed you that we will be in the double digits. We have come into the early double digits and you’ll see an improvement even in the next quarter, in the current quarter and also the quarters that will come in the future. We had given a target to you all that that is what we internally want to achieve. We are very confident that we will achieve that.

The other thing is that all the investments that we had been making in the past, all these they got materialized and the plants have — the start of production has taken place. And all the projects that taking of the Toyota, Maruti and even the other customers, all the projects are in place now and we are in the process of ramping up. And so capitalization has also started taking place.

On the defense side, there are many projects that we have in hand that we are bidding for. The one project that we had mentioned to you earlier was fuses and we are fighting for it for the last almost four to five years. But there’s a ray of hope, it is getting delayed and delayed. Now I think they are again going to call all of us for testing and that is the latest information that we have and earlier we were told that they’re going to ask the public sector and undertaking to do it only. But since our protests, they have accepted the fact that they will also put us through the testing. So we are very happy on that and we are confident that once that happens we will fare much better than the other companies that have actually given their fuses. So very happy on that.

Besides that, there are other projects that are going on with the Navy, with also the Army and there are very, very interesting projects which are coming up and we are participating in most of them now.

[Technical Issues] On the manpower cost, the cost has gone up slightly and that is partly because we have tried to replace the older people with the younger people. And so there was some cost in clearing the accounts of the people who were expensive and replaced by younger, smarter people. So we have done that and that’s the reason. That was a one time cost of INR1.5 crores additional which has happened in that. And in the finance cost also there was an additional INR1.5, mainly because of this Euro fluctuation volatility. So there are INR3 crores which is an additional expense which we’ve incurred this time.

Sales is as per what our expectation was and we are hoping that this quarter also the sales will remain good. The car industry is doing very well, the commercial vehicles are doing well, the exports are doing well and the offroad vehicles also well. The challenge is only the two wheelers and we are hoping that they will also start picking up. That’s it for me. I think we can open up our questions.

Questions and Answers:

Operator

Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. [Operator Instructions] We will pause a moment while our question queue assembles. Thank you. The first question we have today is from Aman Vij from Astute Investment Management. Please go ahead.

Aman Vij — Astute Investment Management — Analyst

Yeah, good afternoon, sir. My first question is on the export side. So if you can give a rough breakup in terms of geography. Also, what was the sales growth in different geographies for Q3 as well as nine months? And also what kind of growth are we seeing for the next year? You can talk about that on export site.

Arvind Kapur — Chairman, Chief Executive Officer

Just one minute. [Technical Issues] See between it will spread up U.S. and Europe, it is almost 50, 50? Not exactly 50, but almost 50 in the export front.

Aman Vij — Astute Investment Management — Analyst

And nine months, sir, what was our number this year versus last year? And then in Q3 also export if you have the numbers for last year.

Arvind Kapur — Chairman, Chief Executive Officer

Just a minute, let me try to pull out the information. This quarter it was compared to last year, it was INR121 crores last year and last year quarter and this year it is INR125 crores.

Aman Vij — Astute Investment Management — Analyst

Sorry, how much?

Arvind Kapur — Chairman, Chief Executive Officer

For nine months last year was INR329 crores and nine months this year is INR382 crores.

Aman Vij — Astute Investment Management — Analyst

Sir, for Q3, what was the number? Last year was 121. This year I couldn’t get the number.

Arvind Kapur — Chairman, Chief Executive Officer

125.

Aman Vij — Astute Investment Management — Analyst

Okay, sir the question was regarding this only. So there was not much — H1 maybe saw very good growth…

Arvind Kapur — Chairman, Chief Executive Officer

There’s another company which also exports, one of our subsidiaries. So the final figure for the last year and this year is, last year was INR333 crores and this year INR387 crores in consolidation.

Aman Vij — Astute Investment Management — Analyst

Sure, sir. My question was related to Q3 and there was not much growth that happened. If you can talk about the same.

Arvind Kapur — Chairman, Chief Executive Officer

Q3, you must realize that Europe practically like September you will have France, October then Germany goes on leave and then they go on leave in October, and November, they keep on going to leaves. So that happens. And then the month of December in any case is slow because of the last few days, due to Christmas, etc., etc. So the overall pickup normally is less than the last quarter.

Aman Vij — Astute Investment Management — Analyst

And sir for Q4, what kind of growth are we expecting in exports as well as for the full year? FY ’24, next year. What kind of exports number do you think we can reach?

Arvind Kapur — Chairman, Chief Executive Officer

I think next year we have given a target of — just a minute we had mentioned the figure [Technical Issues] Next year we expect about INR600 crores [Indecipherable].

Aman Vij — Astute Investment Management — Analyst

Okay. Q4, are you seeing any uptake or it is still slow? Like…

Arvind Kapur — Chairman, Chief Executive Officer

I mentioned to you that because of excessive stocks we might be shipping from India, because we are trying to reduce our stocks there. But let’s say we are pushing and then let’s see what happens.

Aman Vij — Astute Investment Management — Analyst

Sure, sir. My second set of questions are on the defense side. So it was good to hear that the Ministry of Defense has allowed the private players again to do the test. So sir when do you…

Arvind Kapur — Chairman, Chief Executive Officer

They had actually thrown out the private players. Even though the tender was meant only for the private players? [Technical Issues].

Aman Vij — Astute Investment Management — Analyst

So wanted an update on the timing. So when is the trial expected to start and end? And are they expecting any orders this year?

Arvind Kapur — Chairman, Chief Executive Officer

This year on the fuse front, not very certain, because now they’ve agreed on the trial and the trial will take place both in the summer camps as well as in the winter areas. So that is where the desert is. [Foreign Speech] So how are they going to handle that? That is what we are questioning them also. And because of that the whole thing is delayed. But the army needs these fuses very urgently. That’s the other side of it. And — but this is as far as the part fuses are concerned. But besides this we are expecting some other orders that are from various shooting ranges, etc., that we are waiting for and we are hoping that those will come through.

Aman Vij — Astute Investment Management — Analyst

So sir, combined do we expect any sales in defense segment in FY ’24 that is next year or only in FY ’25 we’ll see some sales?

Arvind Kapur — Chairman, Chief Executive Officer

[Foreign Speech] but by and large it will be next year.

Aman Vij — Astute Investment Management — Analyst

And next year you think INR100 crores to INR200 crores or INR100 crores plus can be…

Arvind Kapur — Chairman, Chief Executive Officer

I’m not saying anything but still we have things in hand. We are not saying anything because Army is very unpredictable. Things can get delayed and over-delayed. That was supposed to come out four years back and so it was only delayed the four years.

Aman Vij — Astute Investment Management — Analyst

Sure sir. So just one last clarification on this part. Apart from Army, doesn’t other organizations like CRPF and Ministry of Defense also have requirements for these fuses? Or only Army is a possible customer. So we can’t…

Arvind Kapur — Chairman, Chief Executive Officer

No, no, no, we are talking of the Navy, Air Force and The Army. We are talking of all three and of course CRPF and others, those also they have a requirement for these ranges and all that also we are discussing. [Foreign Speech] mainly because of the fuses but we are also talking about the fuses with the Navy.

Aman Vij — Astute Investment Management — Analyst

Okay, but trial will be common for this Army, Navy and all those things which will happen.

Arvind Kapur — Chairman, Chief Executive Officer

No, they all have their own independent trials.

Aman Vij — Astute Investment Management — Analyst

Okay, but the biggest order is expected from Army only whenever it comes.

Arvind Kapur — Chairman, Chief Executive Officer

Yeah, yeah, yes.

Aman Vij — Astute Investment Management — Analyst

And if there is delay, can we start trying to sell to CRPF and any other organizations apart from Army?

Arvind Kapur — Chairman, Chief Executive Officer

[Foreign Speech] CRPF doesn’t buy. It is only the Navy that buys these fuses. CRPF doesn’t buy.

Aman Vij — Astute Investment Management — Analyst

Okay. Sorry. Navy requirement will be how much sir, how much compared to Army? Like half, one-fourth…

Arvind Kapur — Chairman, Chief Executive Officer

It is probably one-third of that. We were trying to see the ratio. It was about one-third, one-fourth of the Army.

Aman Vij — Astute Investment Management — Analyst

Sure, sir. These are the questions from my side. I’ll get back in the queue.

Arvind Kapur — Chairman, Chief Executive Officer

But value-wise, it might be more because their demand is little tougher and the prices are more.

Aman Vij — Astute Investment Management — Analyst

Okay, sir. That is good to hear. Thank you.

Arvind Kapur — Chairman, Chief Executive Officer

Thank you.

Operator

Thank you. The next question we have is from [Technical Issues]. Please go ahead.

Unidentified Participant — — Analyst

Hello.

Arvind Kapur — Chairman, Chief Executive Officer

Yeah.

Unidentified Participant — — Analyst

Yes, sir. I am audible?

Arvind Kapur — Chairman, Chief Executive Officer

Yeah, yeah absolutely.

Unidentified Participant — — Analyst

Sir, thank you for the opportunity, and congratulations for the great set of numbers. Sir, firstly, my question is on our overall top line growth. So for FY ’23, when we talked last time, we were having targets of around 29% growth. So if I’ll compare it from FY ’22 to around INR1,800 crores of revenue, so we were targeting around INR2,400 crores of revenue for FY ’23 and roughly around INR3,000 crores for FY ’24. So if I look till nine months, it is just roughly around INR1,700 crores of [Indecipherable]. So, is it possible for us to clock around INR700 crores of revenue…

Arvind Kapur — Chairman, Chief Executive Officer

See the first time, we had said INR2,360 crores. That’s what we have said, [Technical Issues] till INR2,400 crores and because we were trying to push that we should market as much as we can and at that time we were also thinking that the two-wheeler industry will also pick up. Unfortunately, that is not picking up. And because we have all the capacity, no investments are required for the two-wheeler industry. If they double the production, we can start to supply double from the next year. Anyway, we are still working on it. We are not giving up. But INR2,400 crores still remains the target. But we will be crossing INR2,300 in any case. That’s the minimum that we will be crossing.

Unidentified Participant — — Analyst

Okay. And we’ll be sticking to around INR3,000 crores for FY ’23. So there is no change in that?

Arvind Kapur — Chairman, Chief Executive Officer

Yes, that is the target for next year. And we have the visibility to [Technical Issues] large extent on that.

Unidentified Participant — — Analyst

Okay, great to hear, sir. Secondly sir, my question was on margin. It’s good to see around [Indecipherable] basis points of raw material gross margin expansion on a quarterly basis. So have all the commodity benefit has been recorded in this quarter or still there is some effect pending or some compensation you have to receive from the customer?

Arvind Kapur — Chairman, Chief Executive Officer

These fluctuations in the commodity price is not very high now [Foreign Speech] so they take the average of the three months and then they divide. [Foreign Speech] that will be very minor compared to whatever is happening.

Unidentified Participant — — Analyst

Right. So basically we need to be around somewhere 72% to 71% [Technical Issues] and going forward.

Arvind Kapur — Chairman, Chief Executive Officer

I didn’t get you. Please repeat.

Unidentified Participant — — Analyst

Sir, [Technical Issues] raw material to sales ratio to remain in the range of 70% to 71%.

Arvind Kapur — Chairman, Chief Executive Officer

Yeah, around the same range.

Unidentified Participant — — Analyst

Okay, so are we comfortable at achieving 10% plus margin going forward right?

Arvind Kapur — Chairman, Chief Executive Officer

No our target is even more in the next quarter you’ll see when the results come.

Unidentified Participant — — Analyst

Okay, so we’ll be targeting around 11% to 12% percent, right?

Arvind Kapur — Chairman, Chief Executive Officer

Well, we’ll do better than whatever we have done now.

Unidentified Participant — — Analyst

Okay. And lastly sir, my another question will be on content per week. If you can share between what is our average content with respect to a two-wheeler and PV, that would be great.

Arvind Kapur — Chairman, Chief Executive Officer

Come again. [Technical Issues] to find content per vehicle. I’ll tell you a reason for that. In some vehicles, it will be 20%, in some places it will be 1%, 2% or 5%. It varies from vehicle to vehicle and model to model. Very difficult to define the vehicle content. [Foreign Speech] I think they are making a mistake by defining it. It’s not possible to define it.

Unidentified Participant — — Analyst

Okay, sure.

Arvind Kapur — Chairman, Chief Executive Officer

We are supplying components to Maruti and Maruti vehicles are INR5 lakhs, INR7 lakhs onward INR10 lakhs. Then we supply parts to BMW. Now BMW vehicles are all grown [Phonetic] and plus — how do we define what percentage of — so that becomes another challenge. Even though the parts are often double, the price of the parts that we supply to Maruti and others. It is because it is very difficult to define that.

Unidentified Participant — — Analyst

Right.

Arvind Kapur — Chairman, Chief Executive Officer

We are focusing a lot on electric and if you will notice that the new orders that have come in is about INR1,500 crores. And now it’s a bit of electric as well as IC engines. Both are getting orders. We’re not leaving either. Our focus is IC engine. Our focus is sorry, electrification and electric vehicles. But IC engines [Foreign Speech].

Unidentified Participant — — Analyst

Sir, lastly, can you share order book or any order list for the Q3? For last year, the HCNR order book was around INR1,350 crores. So is there an increase in that?

Arvind Kapur — Chairman, Chief Executive Officer

I just sent that. The order book now is at INR1,600 for the year.

Unidentified Participant — — Analyst

So increased INR250 crores for the current quarter.

Arvind Kapur — Chairman, Chief Executive Officer

Yeah, yeah.

Unidentified Participant — — Analyst

Okay, sir, thank you for the opportunity. That would be all from me.

Unidentified Participant — — Analyst

Thank you. The next question we have is from [Technical Issues], please go ahead.

Unidentified Participant — — Analyst

Hi, sir. Good afternoon and thank you for the opportunity. I have a few questions firstly, if you can help me understand you said that exports for the quarter were at broadly similar levels as the last year, same quarter. So if you can help me understand that, is it primarily inventory which is causing this impact? Because we have been sort of expecting that the export business is on a strong trajectory and that is one new order. So what exactly is driving YoY slower growth in the export business? And in that context for FY ’23, what is your expectation now for the export business?

Arvind Kapur — Chairman, Chief Executive Officer

The last quarter in any case, for export is always on the lower side. If you look at the averages…

Unidentified Participant — — Analyst

Actually. I’m just comparing it YoY, so I’m assuming that the seasonality exists in both the periods. So I’m just trying to understand in that context what is driving this slower growth?

Arvind Kapur — Chairman, Chief Executive Officer

Last quarter in any case is little slow, but we are also adjusting for the inventory that surely is there because we had almost three months of stock in transit and also in our warehouses. And so we were trying to reduce that because we are required to maintain one month stock there. And so we had almost three, in some cases, four months of stock, which is when transit. And so we want to cut down that absolutely. Couple of reasons, one is that when it’s lying in the warehouse, the iron parts, after four or five months, there’s a tendency of catching rust. So we don’t like any rejection, any rework to be done there in the warehouses there. So for that reason — that is one reason, then aluminium can pick up white rust. That is the other phenomenon that is there, even though our packing is good for six months. But that possibility always there depends on how much time it spends on the sea. That plays a very important role. And so that is one. And number two, why do we need to pay extra for warehousing costs for one month it is okay — we have settled, but beyond that, we pay extra. So we wanted to reduce the cost there also. That is what is happening. This is one reason. But the months of October, November, December is always on the lower side every year.

Unidentified Participant — — Analyst

So has this adjustment to a one month inventory period being achieved in exports in the quarter three numbers?

Arvind Kapur — Chairman, Chief Executive Officer

No. We keep on running a plant to a lower level of production and we keep on shipping also. But we are shipping lesser than before, and we are hoping by March and we’ll be able to exhaust most of the inventory.

Unidentified Participant — — Analyst

Okay. So basically…

Arvind Kapur — Chairman, Chief Executive Officer

What happened is we ship both iron components and aluminum components. Now, if at all there’s a shortage of any component and we got that laying at sea and we are unable to deliver to the customer, we are required to airlift. So the choice was that — so what we did was we took the priority on the iron components. We started shipping, pumping more of the component onto the containers at sea so that they get there in time because they are almost three to four times the rate of the aluminum component. If we are required to airlift, I would rather airlift aluminum components than the iron components. So that is one focus that we had. So iron components, we actually had for four months last year. So that we are depleting now. The aluminum was three months, but we will deplete that also.

Unidentified Participant — — Analyst

Okay, so for FY ’23 now, I mean, FY ’22, we did about INR455 crores of exports. What is the number that you expect for this year now and for next year?

Arvind Kapur — Chairman, Chief Executive Officer

We’ve already done about [Technical Issues] and last year we will be close to INR400 crores and for this quarter also there would be — INR500 crores and next year we are expecting INR600 crores.

Unidentified Participant — — Analyst

So next year target is about INR600 crores now on the export business.

Arvind Kapur — Chairman, Chief Executive Officer

Yeah, INR600 crores on exports.

Unidentified Participant — — Analyst

Got it, got it. Sir next question I have is on the contribution of export all the key segments in terms of two-wheeler and four wheeler. What was the contribution in this quarter and how has that grown each of these segments?

Arvind Kapur — Chairman, Chief Executive Officer

The two-wheeler is around 31% plus if we take everything it turns over 33%. The, 51% is four-wheelers, that is, the cars, autos, commercial vehicles is above 10% and others about 6%, the top load vehicles etc.

Unidentified Participant — — Analyst

Got it. Can you share either the growth or the similar percentage in the same quarter last year?

Arvind Kapur — Chairman, Chief Executive Officer

I can send it to you. We can do that.

Unidentified Participant — — Analyst

Okay, that is helpful. And how much would have been the EV contribution in this quarter?

Arvind Kapur — Chairman, Chief Executive Officer

Beg your pardon?

Kaushalendra Verma — Executive Director

EV contribution?

Unidentified Participant — — Analyst

The sales which come from…

Arvind Kapur — Chairman, Chief Executive Officer

EV, it would be 12% plus. And next year we should be around 17% next year. And like I mentioned earlier, we are very close to getting another very, very large order. And hopefully, by the next time — March is the deciding date and we are betting very aggressively on that. So hopefully the next quarter we might be able to tell you something.

Unidentified Participant — — Analyst

Got it. Got it. If you could also update about the scale-up that we have been able to achieve with Toyota and what is the outlook for that business next year?

Arvind Kapur — Chairman, Chief Executive Officer

Toyota is very good because in fact they are ramping up their sales. So whatever capacities they’d ask us to put. We did put up those capacities and then they wanted us to increase it by another 50%. And the feeler we are getting is that they want even more capacities on that. And what we are trying to do is, try to accommodate most of the capacities in the current machines investment that has been done with minimal investment that would be required to be done. So we’re looking at that — we are working on that possibility so that we are able to achieve that. And Toyota is going for full scale and we were asking them as to why don’t they jack up these capacities earlier and why are they delaying it. So they said that they have a problem with the magnets which are imported either from Japan and or from China and getting delivery of those — [Foreign Speech] what they’re ramping up. So that is the challenge they are facing and one or two other components, the challenge they are facing which comes from Japan. So we are ready to blast out. But they are having issues with that. Their demand is huge and because they could start using it for both for Mercedes as well. We are hoping that they are able to solve the issues.

Unidentified Participant — — Analyst

Got it. Lastly, in terms of the operating performance in this quarter, while the revenue did come down Q-on-Q, because of the seasonality, you were still able to deliver double digit margins. So and gross margins have also improved nicely. So if you could help understand that now going into Q4 while you’re expecting commodities to remain same and the leverage because of revenues being higher, can you actually deliver 12% plus kind of EBITDA margins or are there any factors which could have some neutralizing impact on the margins as well which I’m missing?

Arvind Kapur — Chairman, Chief Executive Officer

Our internal target is more than 12%, but not for this year. But that is what our internal target is and we did mention that in one of the conferences that our internal target is above 12% and we hope that we can achieve it in this quarter, but I don’t know. But we are assuring you that we will be in the double digits and better than the results we decide today.

Unidentified Participant — — Analyst

Okay sir, thank you so much. I’ll go back in the queue.

Arvind Kapur — Chairman, Chief Executive Officer

One other point I like to make sure is that we made one item plus for two wheels and earlier we were selling mainly to Hero, but now we do sell it to the aftermarket as well. And we are negotiating with all the other two-wheeler makers in India and we are hoping to get a share of the business from there. It’s a cycle and as this item starts coming in our margins start improving automatically. We’ll go further up even in the two wheel industry despite the challenges of two wheeler industry.

Operator

Thank you, sir. The next question we have from [Technical Issues]. Please go ahead.

Unidentified Participant — — Analyst

Hi sir, good evening. I’m already glad that most of the things that we are doing is already in line with our estimates and our guidance except for the two wheeler and the Hero part. I just wanted to know if the margins upcoming defense segment is going to be something different than what we are already doing now. That is the range of 9% to 12%. Is it going to be something different from this?

Arvind Kapur — Chairman, Chief Executive Officer

The defense is always much better than the commodities of the auto industry. Auto industry components are known as commodities. So the defense is always much better, much, much better. There’s no there’s very little comparison.

Unidentified Participant — — Analyst

So any ballpark figure like in what range would it lie, 10%,15% to 20%.

Arvind Kapur — Chairman, Chief Executive Officer

I can’t really commit here.

Unidentified Participant — — Analyst

I understand it’s too early to give such guidance, but I just wanted to know just because you already don’t have any order book figures so we won’t be able to figure out anything. I just wanted to…

Arvind Kapur — Chairman, Chief Executive Officer

We kept a margin of almost 20% to 23%, to be honest. And when there was a fluctuation in the price of steel, the margins actually came down and now the steel has gone back. And so we are again back to same level that we are talking of. So when we quote, there are seven, eight items in that. So somewhere at 25%, somewhere at 22%, somewhere at 28%. So it depends.

Unidentified Participant — — Analyst

Right, okay, so that’s what I wanted to know. Thanks a lot.

Arvind Kapur — Chairman, Chief Executive Officer

Yeah, and for some of the traded items, we give a flat 10% to 15%. That’s the other thing, where we just trade and pass it on.

Unidentified Participant — — Analyst

Okay.

Operator

Thank you, [Operator Instructions] The next question we have is from Deepak Poddar from Sapphire Capital. Please go ahead.

Deepak Poddar — Sapphire Capital — Analyst

Hello, yeah, thank you very much, sir, for the opportunity. Sir I just wanted to understand first off, now in terms of margins, you said that quarter and quarter we should see margin improvement, right? So I think earlier we had quantified I think in the range of 50 to 100 basis point increase in margin on a quarter and quarter basis. So how do we see that as we speak now?

Arvind Kapur — Chairman, Chief Executive Officer

No, I don’t remember really defining in every quarter you see 50 to 100 basis point, but that every quarter you see an improvement and we’ve been touching double digits by the year end but we are happy to do it now despite the sale being lesser than the previous quarter and this current quarter would be even better than that. And next on you will see further improvements. So a lot of things that we’ve taken up or that has been done here. To give you one simple example, I’m getting a little bit technical now. In the casting area, in the iron casting area, we had yields of up to 45%, 50%. We’ve been able to improve that to 65%, even 70% in some cases. So that itself impacts the margins a lot and also frees up a lot of capacities. We are doing a similar thing both in the aluminum side as well as the iron side. So all this is happening.

Deepak Poddar — Sapphire Capital — Analyst

Okay, understood, what sort of — 12% to 13% percent margin next year, is that a fair number to work with? In FY ’24?

Arvind Kapur — Chairman, Chief Executive Officer

I don’t want to make any announcement now, but I would rather [Technical Issues] and be happy on that.

Deepak Poddar — Sapphire Capital — Analyst

Okay, understood. And when you’re talking about these margins, are you including other income as well? Is it excluding other income?

Arvind Kapur — Chairman, Chief Executive Officer

Excluding other income is 10.2 and including 10.4?

Deepak Poddar — Sapphire Capital — Analyst

Correct. Because this quarter I think our other income was on the lower side. Otherwise other income have a sensitivity of 1%.

Arvind Kapur — Chairman, Chief Executive Officer

Yeah, that was because of the adjustments, because of merger. So this is only reinstatement that impact. So other income and other costs remain almost the same as we declared last time. So because of the reinstatement, some adjustments are there. So that is why — and let me tell you the other income to come down further because the further mergers which are taking place, which I just announced, that would also reduce the other income.

Deepak Poddar — Sapphire Capital — Analyst

Yes, okay. Because of the merger, now my other income will come down. I mean, currently it was about INR1.5 crores. So it will be less than INR1 crores going forward.

Arvind Kapur — Chairman, Chief Executive Officer

No, it will remain in this range because of — because of the merger.

Kaushalendra Verma — Executive Director

We have further mergers happening.

Arvind Kapur — Chairman, Chief Executive Officer

Yes, and [Technical Issues] the profitability of the other company will also start merging into this company.

Deepak Poddar — Sapphire Capital — Analyst

Okay, understood. So is that the reason our depreciation and interest also is on the higher note on a quarter and quarter basis?

Arvind Kapur — Chairman, Chief Executive Officer

You are absolutely right. If you see our numbers, those were published in quarter two or H1. Those numbers have been reinstated and that is showing a huge difference in finance cost and you see that is reflecting in other income also. So both sides it has been adjusted. So that is what I was referring to. So it is because of that reason. As far as depreciation is concerned, that is mainly on account of capitalization of all our projects that are during later part of Q2 and during Q3 also. So depreciation is on that account mainly and finance cost is just an adjustment.

Deepak Poddar — Sapphire Capital — Analyst

But going forward, is that the range you are working with in terms of depreciation and interest?

Arvind Kapur — Chairman, Chief Executive Officer

In terms of depreciation, yes, that is the range. And in terms of interest it should be in the same range but here INR1.5 crores is one time cost only. That is on account of Euro volatility that has happened. So some reduction in [Indecipherable] cost can be there in Q4 as compared to Q3 but it will remain almost the same.

Deepak Poddar — Sapphire Capital — Analyst

So INR1.5 crores volatility maybe — so currently it was around INR15 crores so maybe INR13 crores to INR14 crores might be a good range to work.

Arvind Kapur — Chairman, Chief Executive Officer

That is under the expectation that probably RBI will start reducing also because during past few quarters RBI has increased at least five times the repo rate to the tune of 225 to 250 bps. So that has impacted our interest cost. So once it starts coming down, our interest cost will come down definitely but otherwise you should expect it in the same range.

Deepak Poddar — Sapphire Capital — Analyst

Sir understood. And my final question is on tax. How do we see the tax rate?

Arvind Kapur — Chairman, Chief Executive Officer

The tax rate currently applicable on us is — it comes to around 34.5%. But what is going to happen is that this also you will see after merger, these are also improving on the account of business there a lot of deferred tax liabilities we have taken, which I think after merger will get reduced. So that will have a positive impact on us. And apart from that, it will take around two, two and a half years time to recover all our net credits, etc. those are lying to our credit. So once we utilize those credits then we will adopt the new regime of 25%. So there’s there is going to be a reduction in tax cost.

Deepak Poddar — Sapphire Capital — Analyst

Okay, so effectively tax rate for next two, two and a half years will be in that range only?

Arvind Kapur — Chairman, Chief Executive Officer

Yeah, it will be in this 34% range but there is going to be a lot of adjustments in deferred tax. So actual interest rate will keep coming down next quarter onwards. And ultimately we will end up paying only 25%.

Deepak Poddar — Sapphire Capital — Analyst

Yeah, yeah. So cash outflow will be in the range of 25% only?

Arvind Kapur — Chairman, Chief Executive Officer

Absolutely. So cash outflow is not there at present also, it is at a lower side only because we are adjusting lot of deferred tax.

Deepak Poddar — Sapphire Capital — Analyst

Yeah, you’re adjusting lot of deferred tax. And after two to two and a half of years, when your entire deferred taxes has been utilized, then you will move on to the next I mean the new regime where we are effective taxes…

Arvind Kapur — Chairman, Chief Executive Officer

We are just waiting for that.

Deepak Poddar — Sapphire Capital — Analyst

So you want to pay more than 25%, that’s the current rate. Okay, fair enough, sir. I think that’s it from my side. All the very best. Thank you so much.

Arvind Kapur — Chairman, Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from Pritesh Chheda from Lucky Investment Managers, please go ahead.

Pritesh Chheda — Lucky Investment Managers — Analyst

Sir, tax rate including the default will be 25%?

Rakesh Kumar Sharma — Chief Financial Officer

Yes. Once we adopt the new scheme.

Arvind Kapur — Chairman, Chief Executive Officer

[Foreign Speech] So it is 22% right now. Now on the balance sheet, if you see it is 34% around that range, it will remain like that. But that is not the actual cash outflow that is going in. If you see our cash flow, there is very less amount of tax as compared to what is appearing in the PNL account because of the deferred tax liability.

Pritesh Chheda — Lucky Investment Managers — Analyst

So what should be the including deferred tax liability taxed next year?

Arvind Kapur — Chairman, Chief Executive Officer

Ultimately, it should be in the range of 25%. Because once we utilize is all our credits we will…

Pritesh Chheda — Lucky Investment Managers — Analyst

[Speech Overlap] next year what it should be sir?

Rakesh Kumar Sharma — Chief Financial Officer

It should be 30-25.

Arvind Kapur — Chairman, Chief Executive Officer

In PNL it will be in the range of 34% only except [Technical Issues].

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay, my second question is [Indecipherable] how much from the new plant have we supplied from this quarter?

Arvind Kapur — Chairman, Chief Executive Officer

[Speech Overlap] So it is about INR40 crores this quarter and it is going up every month.

Pritesh Chheda — Lucky Investment Managers — Analyst

So basically out of INR400 crores of [Indecipherable] that we got, we have already started supplying INR40 crore per quarter, right?

Arvind Kapur — Chairman, Chief Executive Officer

INR200 crores annual and we have started supplying INR40 crores.

Pritesh Chheda — Lucky Investment Managers — Analyst

Yeah. Okay. You mentioned that interest kind of INR3 crore one time, right?

Arvind Kapur — Chairman, Chief Executive Officer

No, no [Speech Overlap] INR1.5 crores that is not account of euro volatility that we had to bring it on MTM. The other portion that you said, that is the adjustment that you said because of the merger, there is accounting adjustments reflecting if you compare it with the previous quarter.

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay. Then on your INR2,400 crores annual number or INR2,350 or 2,400 whatever you want to mention, there was a 15-day plant shutdown for a lot of OES this quarter, so that itself means 14%, 15% growth Q-o-Q if there’s a normal quarter next year or next quarter. So based on that, we actually had to [Indecipherable] and we have this [Indecipherable] ramp up to happen. So is it largely comfortable to reach INR2,300 crores or INR2,350 plus number? Is this [Technical Issues]

Arvind Kapur — Chairman, Chief Executive Officer

INR2,300 plus 100%.

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay. And if you are doing a 10% margin at a INR550 crores revenue, you’ll obviously do a better margin when you do INR650 crores revenue, right?

Arvind Kapur — Chairman, Chief Executive Officer

Yeah. As the revenue goes up, you’ve seen the margins improving also, but also the cuts that we are making in our system and the efficiency levels improvement that are happening here.

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay, next on the — just like Toyota we have got incremental orders from BMW which will help you register the growth in your exports next year. What is the progress on those BMW incremental orders in terms of…

Arvind Kapur — Chairman, Chief Executive Officer

One we had already got in announced in the last meeting also that is almost INR100 crores a year. That’s — we have already thought. That’s for the electric vehicle and it’s the other open components which are on the pipeline and the teams are here for audit. That audit was excellent. And so by March they would make a decision.

Pritesh Chheda — Lucky Investment Managers — Analyst

So at least those INR100 crores incremental order is what you are building in your revenue number, export revenue number moving from 500 to 600.

Arvind Kapur — Chairman, Chief Executive Officer

No, that comes the year after that. That gets in a year after that.

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay, for BMW orders export comes year after that.

Arvind Kapur — Chairman, Chief Executive Officer

We have not factored that into the Nexus [Phonetic] report.

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay, so existing customer and existing product line is where you have to build in this 20% growth for exports next year.

Arvind Kapur — Chairman, Chief Executive Officer

Existing customers and there are some new orders from other customers besides BMW, and also the electric vehicle ramp up. As the Nexus initial ramp up. That’s the other thing that is happening.

Pritesh Chheda — Lucky Investment Managers — Analyst

That’s not BMW. That’s other than BMW, right?

Arvind Kapur — Chairman, Chief Executive Officer

No, no, one more. We are already supplying electric vehicle for orders of BMW and PSA and Renault. We are supplying to all three of them. So the ramp up is taking place in PSA as well as BMW and [Speech Overlap] is not electric, right. And so that ramp up is already taking place in those supplies. When I am talking of the next order, those are the next generation of components that are going to be developed and for that what we are getting for which we’ve already got one order.

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay. And when you supply to a new model or a new platform just like the Toyota which you have started supplying and there’s an incremental business to be built on finally the margins should be better in these orders right, versus your existing product line.

Arvind Kapur — Chairman, Chief Executive Officer

Absolutely. The new products have always better margin than the older one.

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay. And lastly, sir, you mentioned, I understood, on the interest potential of 15% [Phonetic], which should be a number closer to whatever 13% and 13.5% and a half the depreciation number at 29.5, you have already capitalized your entire CWIP or there’s anything to be left to be capitalizing CWIP.

Arvind Kapur — Chairman, Chief Executive Officer

Whatever [Speech Overlap] new balance equipment that come in, which would be done again.

Pritesh Chheda — Lucky Investment Managers — Analyst

Sorry, what is new?

Arvind Kapur — Chairman, Chief Executive Officer

Any balancing equipment that would [Indecipherable] inspection equipment or some washing equipment, etc.

Pritesh Chheda — Lucky Investment Managers — Analyst

So when you do not have a large capex plan over the next two years and all your whole capex is maintenance of INR50 crores or INR60 crores that you mentioned in the past quarter, we can safely annualize this INR30 crores quarterly run rate as your depreciation number for next year?

Arvind Kapur — Chairman, Chief Executive Officer

Yes.

Pritesh Chheda — Lucky Investment Managers — Analyst

Yes, right. So you will be in a situation where your top line will grow 20%, your margin will expand and you have a similar interest and depreciation number, with a 24% tax rate.

Arvind Kapur — Chairman, Chief Executive Officer

Yes, that’s right.

Pritesh Chheda — Lucky Investment Managers — Analyst

Sir, my last question is we don’t make much number on the casting side. The ferrous casting which is 20% of our business, we don’t make any…

Arvind Kapur — Chairman, Chief Executive Officer

It is less than 15% now. And Ferris components also are machines.

Pritesh Chheda — Lucky Investment Managers — Analyst

So, do we make any EBITDA on ferrous business where the capacity utilization is less or it’s a zero EBITDA?

Arvind Kapur — Chairman, Chief Executive Officer

We’ve been able to free the capacity by improving the yield. That’s what I just mentioned.

Pritesh Chheda — Lucky Investment Managers — Analyst

So are you making any EBITDA percentage, EBITDA — positive EBITDA there or you’re not making [Indecipherable]

Arvind Kapur — Chairman, Chief Executive Officer

The ferrous side is a challenge, but now this is new which is it that we bought with the yield. There’s a tremendous change that comes there.

Pritesh Chheda — Lucky Investment Managers — Analyst

So those zero EBITDA will move higher, right on the ferrous costing, that’s what you’re mentioning. [Technical Issues]

Arvind Kapur — Chairman, Chief Executive Officer

Certainly, certainly, yields a lot of difference that doesn’t grow but almost 50% of the yield that we were using earlier, from 40, we got to 60 plus.

Pritesh Chheda — Lucky Investment Managers — Analyst

So has this closed down in your quarter three number or it will slow in your incremental numbers?

Arvind Kapur — Chairman, Chief Executive Officer

The number of patterns to be done are over 20 sets of patterns. So we’ve been able to do, I think, about seven to eight of them already and every week there’s a new pattern which is being introduced. So it’s a process.

Pritesh Chheda — Lucky Investment Managers — Analyst

And lastly, what will be your debt repayment next year?

Arvind Kapur — Chairman, Chief Executive Officer

It is in the range of INR100 crores, INR90 crores to INR100.

Pritesh Chheda — Lucky Investment Managers — Analyst

Will we see any debt repayment this year in FY ’23?

Arvind Kapur — Chairman, Chief Executive Officer

Yes, this year also it is around INR90 crores, we have to repay out of that INR70 crores have already been repaid during these three quarters.

Pritesh Chheda — Lucky Investment Managers — Analyst

So this interest cost is after the repayment. So your debt number has come down, and yet the interest cost has gone up, right?

Arvind Kapur — Chairman, Chief Executive Officer

No, debt number has not really come down as of now. It will start coming down after about one year or so from now.

Pritesh Chheda — Lucky Investment Managers — Analyst

So now you said there is a debt repayment of INR100 crores this year and there’s a debt repayment of INR100 crores next year.

Arvind Kapur — Chairman, Chief Executive Officer

No, but there is fresh rate also that we have to arrange for these whatever capex has happened and for operations also, working capital needs to going up. So because of that reason, as of now the debt levels remain at almost the same level.

Pritesh Chheda — Lucky Investment Managers — Analyst

Same level?

Arvind Kapur — Chairman, Chief Executive Officer

Yes, yes, yes…

Pritesh Chheda — Lucky Investment Managers — Analyst

So we will see the actual debt repayment next year.

Arvind Kapur — Chairman, Chief Executive Officer

Yes, [Speech Overlap] coming down after a year or so that means after four quarters.

Pritesh Chheda — Lucky Investment Managers — Analyst

So your debt repayment will come after four quarters. But now you do not have any capex next year, sir, you do not have a capex next year?

Arvind Kapur — Chairman, Chief Executive Officer

No, we don’t have.

Pritesh Chheda — Lucky Investment Managers — Analyst

So still there won’t be any debt repayment in FY ’24.

Arvind Kapur — Chairman, Chief Executive Officer

Because of the working capital needs. Because the working capital as our exports go up, you must realize that we get a payment after 120 days and this is 30 days of shipment, 30 days of stock, 30 days after that the payment comes in 10 to 15 days delay. So it’s almost 110 days, we factor in when we do our export costing. So as the exports go up, our working capital [Indecipherable] also goes up. But we are trying to get that funded also from BMW directly. And we’ve been successful with one of the companies [Speech Overlap] but we are attempting to do that so that our total debt comes down.

Operator

Thank you, sir. The next question we have is from Mukesh Modi from Modi Fincap. Please go ahead.

Mukesh Modi — Modi Fincap — Analyst

Good afternoon, sir. Congratulations for the reasonable set of numbers. My most of the questions are being asked about the export and interest and depreciation. The couple of them which are left suppose Jinfei how much — we have reached for 4 million capacity. Or what is the capacity utilization in Jinfei and electronics?

Arvind Kapur — Chairman, Chief Executive Officer

The total capacity rated for Jinfei is 4.5 billion and at the moment we are at about 2.5 [Phonetic] to 3 million at the moment. And this year will be further increasing the capacity because we started talking to all the customers now. Earlier we were with Bajaj and Hero. Now we are adding on Honda and scooters also. So overall you see the capacity going up.

Mukesh Modi — Modi Fincap — Analyst

By FY ’24, [Technical Issues]?

Arvind Kapur — Chairman, Chief Executive Officer

The targets are 3, 3.5 and [Technical Issues]. Because there are more volumes there. The more we produce, the better profitability.

Mukesh Modi — Modi Fincap — Analyst

Correct. And sir what about Rico Fluidtronics?

Arvind Kapur — Chairman, Chief Executive Officer

Rico Fluidtronics, in fact last year their turnover was INR60 crores to INR65 crores and this year it will be INR100 crores to INR135 crores and next year again there’ll be an improvement because these are the new orders we got from Maruti and we started executing those.

Mukesh Modi — Modi Fincap — Analyst

And for both of them, their EBITDA is positive, right sir?

Arvind Kapur — Chairman, Chief Executive Officer

Beg your Pardon?

Mukesh Modi — Modi Fincap — Analyst

Both these companies are EBITDA positive?

Rakesh Kumar Sharma — Chief Financial Officer

Yes.

Arvind Kapur — Chairman, Chief Executive Officer

And capex you said is around maintenance capex INR50 crores for next year. Only around INR50 crores? Yeah, about INR50 crores to INR60 crores, [Foreign Speech] INR40 crores [Foreign Speech].

Mukesh Modi — Modi Fincap — Analyst

Is there any news on land mobilization?

Arvind Kapur — Chairman, Chief Executive Officer

Now the market is improving and the [Foreign Speech] growing and so we started talking to people. Let’s see what happens, because we are ready.

Mukesh Modi — Modi Fincap — Analyst

Okay. But that can reduce our debt considerably.

Arvind Kapur — Chairman, Chief Executive Officer

Of course, that will eliminate our debt, it will not just reduce it.

Mukesh Modi — Modi Fincap — Analyst

I think that’s it from my side. I don’t have much to ask for. Already everything has been asked. Thank you very much and wish you all the best.

Arvind Kapur — Chairman, Chief Executive Officer

Thank you. Thank you so much.

Operator

Thank you. The next question we have is from [Technical Issues]. Please go ahead.

Unidentified Participant — — Analyst

Yeah. Am I audible?

Arvind Kapur — Chairman, Chief Executive Officer

Yes.

Unidentified Participant — — Analyst

Yeah. So, first of all, thank you and congratulations for the wonderful set of numbers. Most of the questions are already answered. Just one thing I just want to know, what is the three year — two or three year plan the company has set aside in terms of the revenue and the margins? You have already mentioned that you will be in double digit margins. So let’s say by 25%, 26% or 27%. What is the view of the management?

Arvind Kapur — Chairman, Chief Executive Officer

See we would like to grow by minimum, our internal thing is that we should grow minimum by 15% year on year. But this year, of course, it was higher than that, it was around 25% plus and next year also I think if we are able to proceed with several of these turn targets we will grow more than that. And thereafter but again, 15% is what we factored in at the moment. And that’s what we are [Technical Issues].

Unidentified Participant — — Analyst

So can we assume…

Arvind Kapur — Chairman, Chief Executive Officer

But we will surprise you. We will be able do much better than this.

Unidentified Participant — — Analyst

So would it be fair to assume that I mean, notify as the year growth this year is 25%. So it be fair to understand that 20% — is a fair enough number.

Arvind Kapur — Chairman, Chief Executive Officer

[Foreign Speech]

Unidentified Participant — — Analyst

That’s very nice. That’s very nice. So thank you so much. That’s it. And congratulations for the good set of numbers and best of all for the future growth.

Arvind Kapur — Chairman, Chief Executive Officer

Thank you so much.

Operator

Thank you. The last question we have comes from [Technical Issues]. Please go ahead.

Unidentified Participant — — Analyst

Hello sir, good evening. I just had one question on the defense side. I just wanted to understand that what all products you do on the defense side, apart from fuses.

Arvind Kapur — Chairman, Chief Executive Officer

See, one of the fuses of course, and then one is the firing ranges that I mentioned. And then there’s an automatic system for the tanks that we are bidding for. These are some of the things that we are very actively involved at the moment.

Unidentified Participant — — Analyst

What would be the revenue contribution from the defense sir, last year and these nine months?

Arvind Kapur — Chairman, Chief Executive Officer

[Foreign Speech] it is very minimal. But defense is such a challenging requirement. So much patience and many times, we had given it seven years [Foreign Speech] before we really penetrate into the defense. And now since we have been on it for that many years and now we are getting more and more confident the penetration into defense and Navy and other paramilitary forces. So we are working on all of them and there are climbers and there are various other frontiers which are there. I think we’ll give you some good news soon.

Unidentified Participant — — Analyst

Sir do you have any target percentage in mind that defense revenue should come so far?

Arvind Kapur — Chairman, Chief Executive Officer

I didn’t understand. Please, repeat.

Unidentified Participant — — Analyst

Sir any target percentage of your revenue, let’s say three years down the line, or four years down the line, you are targeting at least 20% or 10% of your revenue from defense. Do you have any such targets in mind right now or it is too early to say?

Arvind Kapur — Chairman, Chief Executive Officer

[Foreign Speech] it is too early to decide. [Foreign Speech] that will be almost 20% of our turnover [Foreign Speech] it depends when they actually start leasing orders. We have not factored any growth numbers.

Unidentified Participant — — Analyst

Whatever will come, that is a bonus for us.

Arvind Kapur — Chairman, Chief Executive Officer

That will be bonus.

Unidentified Participant — — Analyst

Okay, thank you, sir, and all the best.

Arvind Kapur — Chairman, Chief Executive Officer

Thank you.

Operator

Thank you. There are no further questions at this moment in time. I would now like to hand the conference back over to the management team for any closing comments. Sir?

Arvind Kapur — Chairman, Chief Executive Officer

Thank you so much for today’s — for hearing us today and we hope to give you even better results the next time. And I was happy to announce the NPLT, the new merger that has been approved just today itself and I think that will also help to improve some of our numbers and we are hoping that we’ll give you better and better results in every quarter. You see a change every quarter. These are all 100% subsidiaries of which will start merging into Rico. That will happen now and subsequently we are looking at the possibility of merging all the auto components into one, but that’s later on days. Thank you so much and hope to see you soon.

Operator

[Operator Closing Remarks]