Schaeffler India Ltd (NSE: SCHAEFFLER) Q2 2025 Earnings Call dated Oct. 24, 2024
Corporate Participants:
Gauri Kanikar. — Investor Relation
Harsha Kadam — Managing Director and Chief Executive Officer
Hardevi Vazirani — Director of Finance and Chief Financial Officer
Analysts:
Mukesh Saraf — Analyst
Harshit Patel — Analyst
Manish — Analyst
Rishi Vora — Analyst
Mahesh Bendre — Analyst
Mayank — Analyst
Dipesh Agrawal — Analyst
Nirali Gopani — Analyst
Presentation:
Operator
Ladies and gentleman, good day, and welcome to the Schaeffler India Limited Q3 CY ’24 Earnings Conference Call. As a reminder, all participant lines will be in listen-only mode and there will be an opportunity for you to ask question after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Ms. Gauri. Thank you, and over to you, ma’am.
Gauri Kanikar. — Investor Relation
Good morning, everyone, and welcome to Schaeffler India Limited’s earnings conference call for the third quarter and nine months ended 30th September 2024. Today, we have with us Mr. Harsha Kadam, our Managing Director and Chief Executive Officer, and Ms. Hardevi Vazirani, our Director of Finance and Chief Financial Officer.
MR. Kadam will first take us for a short presentation on the results, after which we can open the floor for questions. Thank you, and over to you, Mr. Kadam
Harsha Kadam — Managing Director and Chief Executive Officer
Thank you. Good morning. Good morning to all of you.
Hardevi Vazirani — Director of Finance and Chief Financial Officer
Good morning.
Harsha Kadam — Managing Director and Chief Executive Officer
So I’m Harsha Kadam, the MD and CEO of Schaeffler India. And I would like to now take you briefly through the presentation and I hope you all are referring to the file that was already uploaded. As always, I would like to start-off my presentation by sharing the recognitions that we have received from our esteemed customers and some of the business partners that we engage with.
I am on slide number two and we — in the quarter, we were recognized by five awards. To start with the first one was from Toyota for zero PTM award, which means that in the quarter — for the year 2023, whatever we have supplied so-far was zero defect products and this is something that we cherish as an award coming from Toyota means a lot to us and this was mainly for their parts that we supply to their engine and transmission.
The second award was from another STU customer, Skoda Volkswagen. And Skoda Volkswagen recognized Schaeffler for completing the Eco Edge assessment 2024 and which was organized jointly with Confederation of Indian Industries on September 2024. And this was in the area of sustainability in our operations and the Eco Edge assessment evaluates various environmental, social and governance parameters integrated into the Schaeffler’s operations. This recognition signifies that Schaeffler’s sustainability initiatives are regarded as exemplary within the Skoda Volkswagen network of value chain partners.
The other award, the third one in-line is from a new customer called LNWG Group and this was awarded for the outstanding performance and execution of the project to start the business by developing bearings at a good speed and LN is a white group company based in Austria and they are into manufacturing gearboxes and generators — sorry, motors and generators for the wind application as such.
The fourth award that we got in this quarter was from the CSR network from one of our plants under our Schaeffler Technical Enhancement Program, which is a skill development program that we run under our Corporate Social responsibility initiative and the Hosur plant received the award in recognizing the excellence in CSR and ESG leaderships for the skill development initiatives, which has been creating significantly good impact in the community that we operate in.
The last award that came in the quarter was from the Institute of Supply Chain Management and Schaeffler India has been named as one of the top-30 supply Chain champions by the Institute of Supply Chain Management, underscoring the company’s resilience, agility and the strong customer focus. And through their revaluation process, assessment over — on the performance of over 400 companies was carried out and the digitalization initiatives that we have driven in our supply-chain process, something that was exemplified and as Schaeffler we have been recognized for that. Also, the integration of the digital ecosystem that we have created both on the back-end and the front-end is something that has been well appreciated and recognized by ISM.
I would like for now to throw some light on the economy and the industry and I am on Slide 4. So talking about the GDP rate growth rate in India, while many of the external agencies have been rating the India’s growth story on the GDP, the Reserve Bank of India’s Monetary Policy Committee also continues to forecast around 7% to 7.2% growth rate for the Indian economy in the fiscal year ’25 as well.
Although it has moderated a bit from the previous numbers of 7.2% coming down to 7%, but then it’s still one of the fastest-growing countries comes out clearly and the growth momentum continues to be sustained. When one looks at the index of industrial production in 2024 due to the healthy run-of-the metal products, the electrical equipment and also the furniture industry, while on the other hand, we did see some softening on the mining industry, mainly due to very heavy rainfall during the monsoons. So overall, the growth in the manufacturing as such, the basic metals did pretty well, computer electronics doing well. So overall, mining was just about 4.8%. Manufacturing sector grew by about 3.6%, whereas the energy or electricity around 7%, 7.5%.
Inflation on the other hand, when the CPI inflation bit moderate, but the food inflation continues to be a point of concern in the country and which hit an all-time high during the month of September. So the year-on-year inflation rate-based on the All India Consumer price index number is at 5.49% for the month of September. So it still continues to remain within the Reserve Bank India’s tolerance band of 2% to 6% as such.
On the other hand, when one looks at the automotive industry and the production numbers, that unfortunately has seen some sluggishness in the production. Overall production de-growth in the third quarter in the automotive space was about 2.5%. The year-on-year degrowth in the third quarter for the passenger vehicles, if one were to look at it, which is the largest volume contributor in the automotive space is at 0.7%. While on the other hand, the commercial vehicles de-grew by 16% in the quarter and tractors, this certainly show a bit on the uptick with about a 3.2% growth.
Moving on, one looks at the core sectoral performance and what you see is — if one were to just look at the quarter and here the September numbers are still to come in, hence, I’m just looking at the two months of July and August and what you would see is the softening even in the cement production numbers when compared to the first-quarter or the beginning of the year. We have seen more or less status quo on the steel production numbers, whereas mining I did mention has seen a drop due to the heavy rainfall at monsoon in the mining areas as such. Energy, on the other hand continues to be on the increase, clearly indicating that the manufacturing and the rest of the services economy continues to still do well.
I move to the next slide, slide number six, which is on the automotive sector performance and here we see some different pictures unfolding. When one looks at the two and three-wheeler production numbers, in the last quarter, certainly the production numbers registered a strong growth of 13.9% in the quarter and even the electric vehicle sales have certainly grown in the third quarter due to better penetration and higher adoption rate as such. While on the other hand, the passenger vehicles I already talked about, if one were to look at the July, August, September trend, it has slowed down a bit and certainly it is not even at the level of the first quarter of this year.
Now indications are that we will continue to see some sluggishness in the passenger vehicle segment in the quarters to come as well.
Commercial vehicles, on the other hand also has tried to show some uptick in the month of September, but it is still at very low levels when compared to the first quarter. So quarter two and quarter three have registered lower number of production in commercial vehicles. Tractors, on the other hand saw an uptick, as I said, close to about 2.5% growth and what you see here is the month of July, August, September registering roughly about 90,000 tractors being produced in the country per month and which has been significantly much better than in the previous quarters of this year as such. But still at an annualized level, the tractor production is still 3.5% lower than the same-period last year.
With that, I move to the business highlights and I move to slide number 8. And the snapshot of how did we perform in the quarter, looking at the sales revenue that we have generated in the quarter, we registered a flat growth over the preceding quarter, but still have posted a good double-digit growth over the same quarter last year with a 12.1% improvement in our sales revenue. Obviously, while the automotive sector as such did show some sluggishness in the demand, on the industrial sectors, we did see some very strong traction coming primarily in the renewable energy, wind, wind energy sector, the railways, the two-wheelers, the raw-material sectors have all helped in-kind of trying to manage the challenges that we faced in the quarter.
On this backdrop of a challenging quarter, we were able to yet deliver a sustained profitability performance with improved performance on the working capital side, which helped us to bring in better margins into and the cash-flow definitely, as you can see has improved, registering a positive cash-flow of INR100 crores coming into the system in the quarter and we ended the quarter with an EBITDA of INR382 crores coming into the system as such with an 18.5% EBITDA margin and the profit after tax stood at INR247 crores at 11.9%.
Our capex strategy remains long-term strategy and we have consistently continued to invest every quarter and quarter three was no exception. We continue to invest judiciously in the areas where we believe the growth opportunities are visible to us and we will continue to follow the strategy going-forward as well. So all-in all, it was a challenging quarter, Q3. However, as Schaeffler, we as a team were able to demonstrate resilience and ensure that we try and sustain the growth momentum, which is something that we are highly focused upon.
That said, I move to Slide number nine. And as always, our successes and our growth story continues on the back of the consistent and sustained new businesses that we capture in the market. And yet again in the quarter, Automotive Technologies, as you can see, we were able to garner a lot of new businesses, predominantly in the clutch applications and the Dampers and the clutch release systems, particularly in the transmission application as such and both in the commercial vehicles and some of it in the passenger vehicle segment as such.
Talking of the aftermarket business, which we call it as the vehicle lifetime solution. Here again, the new products that we launched in terms of steering and suspension have begun to, you know, show good traction in the marketplace, good acceptance level in the marketplace and some new business tools for the front-end auxiliary drives, timing kits, the wipers and the lubricants as well continues. And we will continue in our strategy in the aftermarkets to continue to bring more products as the vehicles come back for servicing. So our portfolio expansion as a strategy remains strong.
Moving to the Industrial Solutions and Bearings and where bearings is the mainstay of the portfolio here. So we have garnered some new business wins in the two-wheeler space as such, plus we have also garnered the strategically strong projects, which we have won in the raw-material sector and both on the spherical roller bearings as well as on the cylindrical roller bearings.
So all-in all, it was a strong quarter in terms of creating a pipeline of business continuity, which bodes well for the succeeding quarters as we come into those quarters as well.
I move to Slide number 10 and where I would talk about the financial highlights going-forward. So on Slide 11, what you see is the total revenue growth, as I said, the quarter-on-quarter was at 0%, more or less at the same level, but the year-on-year growth was at about 12.3%. Now where did this growth come from? As you can see from the — to the right, the table that tells you, the automotive technologies over the preceding quarter grew only 0.8%, but over the same-period last year, grew at about 10.7%.
The lifetime solutions, we did have some challenges in the quarter, but it is a pretty contained and localized matter. And as you can see, we registered a negative 2.3% over the preceding quarter, but over the same-period last year, we were able to post 7% growth. Bearings and Industrial Solutions on the other hand, we had some good run-in some of the specific sectors, which I have already mentioned. Registered a 5% growth over the preceding quarter and a 13% growth over the same-period last year.
While on the other hand, our exports business still continues to remain at a lower level than what we have expected. And as you can see, it registered a 14.6% negative over the preceding quarter, but at an annualized — sorry, over the same-period last year, it is still at 17%. So all-in all, at annualized nine-Month period when you look at it, automotive Technologies we have grown by 10.4% over the nine-month period last year. The Vehicle lifetime solutions at 5.5%, bearings and Industry resolutions at 15.2% of strong growth and the export business growing at 7.5%.
So this has helped us to shore up and sustain the sales mix that we have. Now what you see here is bearings and industrial solution shows an increase from the previous quarters and registering about 45% of the total turnover. One of the reasons here is our reclassification and reallocation of all the bearings into bearings and Industrial Solutions, which we did the structuring already a couple of quarters back. So overall, I must say reasonably good quarter considering the challenges that we have faced all through the quarter as such.
I move to Slide number 12 and here, I would like to talk about the financial performance and the earnings quality and what you see is the EBITDA. So as I did mention earlier, for the quarter three of 2024, we were able to bring in INR382.8 crores into the system, registering an EBITDA of 18.5%, which definitely was a little lower compared to the preceding quarter of 18.6% and even compared to the Q3 of 2023, which was at 18.9%. However, the year-on-year growth in absolute numbers as you can see has been at 9.7%. And where has this come from? And obviously, there is the gross margin improvement has brought in better EBITDA while we did have some expenses that we had to do on the employee cost and some of the other income. So all-in all put together, a much better EBITDA when compared to the same-period last year, which resulted in a profit-after-tax, as you can see at INR247 crores with an PAT of 11.9% for the quarter in Q3.
I move to Slide number 13, which talks about our working capital management. And here again, we were able to — our working capital as a percentage to sales actually read up in the third quarter. Over a nine-month period, as you can see, it stands at 19.8%. However, we were able to within the quarter — over the preceding quarter, we have been able to sustain or bring it down marginally as well. I talked about the capex spend and in the quarter, what you see is we have invested INR207.6 crores into our operations as such for various reasons in terms of future products that we are localizing here in India. And well, if there is an increase in the quarter, it is more of a timing issue as some of the equipment had to be booked into the system and that’s what you see. What is important to note is our capex as a percentage of sales is comparatively at a much higher-level when compared to last year, which was hovering around average 7%, we are now in the range of 8%, 8.5% average.
On the free cash flow, which was the bane for the previous two quarters, we have been able to get our hands around and focus on the cash-flow into the organization. And as you can see, we were able to bring in INR100 crores into the system in the quarter and we are expecting the trend to continue in next quarter as well so that we continue to register a robust free cash flow into the company as such.
I move 14 and just to give you some key performance indicators and on a comparative level, so I did mention that the revenue growth in the quarter, Q3 ’24 compared to the same-period last year was about 12.1% showing year-on-year. And if you were to look over the preceding quarter, it was status quo and flat. Yeah, I did touch already on the EBITDA numbers that we are coming at the nine-month period, we have generated an EBITDA of INR1,020 crores as such with an EBITDA margin of — sorry, INR1,106 crores with an EBITDA margin of 18.5%.
This gets us to an EBIT margin of 15.2%, which is 0.8 percentage point lower than what we had registered last year same-period. Yes, I did already talk about the profit-after-tax and the capex. So the cumulative capex for the year 2024 so-far nine-month period is at INR536 crores compared to the INR410 crores that we spent last year as such. Overall, a reasonably good quarter, so to say in-spite of all the challenges that we placed in — faced in terms of the weakening demand in some of the specific large-volume sectors, yes.
I move on to Slide number 15, which brings in the consolidated financial results of both Schaeffler India Limited standalone as well as the KRSV Innovative Auto Solutions Limited and the consolidated picture. So I already talked about Schaeffler India Limited standalone results.
So let me spend some time on KRSV Innovative Auto Solutions, Private Limited. For the quarter, even KRSV registered a pretty strong growth at INR43.9 crores, which was a clear 20 odd percentage points better than the preceding quarter. So we clearly see the growth momentum picking-up in this new venture as such. And over a nine-month period, the revenue stands at about INR104 crores. However, on the profitability, we still have to breakeven and there are clear action plans drawn up. We are right now on expanding the reach in the marketplace and the connect with our customers and that’s the key focus area to make our presence with PAM India. We have started to open up many more dark stores and hubs. So as to enable the customers to access the products on our platform, you know within the shortest time. So hence, we are on an expansion mode here. So we will definitely get to the situation where you will see — start to post profitability even from this business.
So consolidated Schaeffler India numbers, the revenue stands at for the quarter 2024 Q3 stands at INR2,116 crores and a nine-month period at INR6,096 crores with an EBITDA of 17.7% and 17.9% for the nine-month period. And the EBIT margin is going down to 14.3% because of the impact of the KRSV get to breakeven. So with that, the earnings before-tax, before exceptional items stands at 15.2% in the quarter and at the nine-month period 15.6%.
Slide number 16, which is my last slide. And in summary, it was a challenging quarter in terms of weakening demand, particularly from the passenger vehicle segment. We have seen that happen and some — some of the specific sectors. However, some of the sectors like two-wheelers, the wind energy, the raw materials and railways definitely had a very positive traction. So we were able to navigate through the challenges and that also tested our agility, which the team came together to manage it pretty well.
And our domestic business definitely performed better than the export business and that is the proof of the resilience that we have been showing in the domestic market. The quality of earnings, we were able to sustain with the continued focus that we have set on managing the cost as well as the counter measures that we have put in-place to remain competitive. So with that, you know, we will continue to focus on new business development, which has always been our imperative and the working capital management and cost management, which definitely is a priority for us even in the quarter that we are in now the last quarter of the calendar year. And as a motion technology company, we definitely continue to keep the focus on generating and adding value to all the stakeholders that we are responsible for.
With that, I come to the end of my presentation. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] Ladies and gentlemen, we will wait for a moment while the question queue assembles.
The first question is from the line of Mukesh Saraf from Avendus Spark. Please go-ahead.
Mukesh Saraf
Yes, sir, good morning and thank you for the opportunity. My first question is on the e-axle auto that we had won last year and I think the — what we had stated is that the revenues will start flowing in from second-half this year. Yeah. So just trying to understand, have we started commercializing that product and what’s the status of that?
Harsha Kadam
Thank you for the question, Mr. Saraf, and as you know, the home allocation and validation process is done entirely by the customers. And as I am speaking now, a number of vehicles are being tested already on the road all across the country and in every region, nook and corner of the country our customers are in the test. Until all the validation and homologations are completed the vehicle would definitely not get launched rightfully.
Yes, the initial plan was the vehicles to be launched, but now I hear it’s going to be launched sometime in the first-quarter of 2025. So I guess we will have to wait.
Mukesh Saraf
Got that. Understood. And second question is, I think on 1st October, now the parent has now merged with Vitesco. So anything that you would want to comment on what’s the plan of action here for Vitesco India Limited. Is there a plan of integrating that, merging that with Schaeffler India? Anything that you can comment on that?
Harsha Kadam
So yes, the functional integration of Vitesco globally as Schaeffler AG is completed as of 1st October. Rightfully, we will be able to comment on the timelines only once we get a clear direction from headquarters from Germany as such. Surely you will get to read it and hear about it as it unfolds.
Mukesh Saraf
Right. Thank you. Just last question on exports. We have seen some sequential decline in exports. You had also mentioned that in your comments, so can you give us some outlook there on exports because obviously capex side, we are continuing strong capex, which also includes some transport exports. So could you kind of outline what we can expect over the next year or so in terms of exports.
Hardevi Vazirani
And so considering the exports for the quarter, we saw the drop only in Europe region and right so the Group also announced in its pre-closing call for quarter three that bearings and Industrial Solutions has seen some market environment challenges and that the industrial sales of Europe has seen some challenges. So it is mainly the Europe market. We had put our efforts on Asia, China, Americas as well where we did not see any drop. The drop mainly came from Europe.
Mukesh Saraf
Right, right, right. Any, any sense you have on the kind of I mean — because of the kind of order book we have in Europe, when can we start improving, when can we start seeing an improvement running in European exports?
Harsha Kadam
I guess we’ll have a wait-and-watch how the market unfolds in Europe as you know.
Mukesh Saraf
Okay. Sure.
Harsha Kadam
The market is sluggish currently.
Mukesh Saraf
Right, right. Got it. Thank you so much for this time and goodbye.
Harsha Kadam
Sure. Thank you.
Operator
Thank you. The next question is from the line of Harshit Patel from Equirus Securities. Please go-ahead.
Harshit Patel
Thank you very much for the opportunity. Sir, automotive technologies and industrials and bearings, these are our two largest segments. Could you give us an approximate idea on the margins or the margin difference between these two segments.
Hardevi Vazirani
Unfortunately I think that level of information we do not [Speech Overlap]
Harshit Patel
No, understood but at least directionally both the BLS as well as exports, both these smaller segments would be making substantially higher margins than these two large ones. Would that be right?
Harsha Kadam
Sorry, Harshit, if you can repeat that question again.
Harshit Patel
Sure. Sir, our two smaller segments, namely vehicle lifetime solutions as well as exports, both these would be making substantially higher margins than the two large ones, the DIS and the auto technology.
Harsha Kadam
You answered the question yourself. And the aftermarket business definitely brings in better margins, yes. And the export obviously because of the foreign-exchange effect will definitely be much better margins as such as well.
Harshit Patel
Understood. Sure. Sir, my second question is, we had won that two in one EXL project that you just mentioned as well from an EV customer last year. So subsequent to that, are there any other system-level contracts that we have won in the EV space so-far post that?
Harsha Kadam
We are actively working with a number of customers you know and we have the capability to give at a component level or a subsystem level or even a system-level offering. We have those competence in India.
However, what we find is the fragmentation of the technology in the market space. There are customers who are focused on pure EVs. There are customers who are focused on hybrids and there are customers who are still focused on IC engine. So this has its own set of challenges when it comes to investments because you obviously need that scale of economies, which will come if there are enough volumes. So from a competence and capability point-of-view, we are already there. We have started engaging appropriately with customers, even our hybrid technology products, we have been working very closely and we are back some good new businesses as well there in the hybrid technology area.
Yeah. So the capability exists. We are working with customers and enough opportunities that we are already on the table with which — with the customers with whom we are already engaged.
Harshit Patel
Sure. Just lastly on — is there any update on the Hosur greenfield capex? Are we on-track to start the production early next year? Also which products will be manufactured here? I mean, what would be the product range segregation between Pune plant and Hosur plants?
Harsha Kadam
Yeah. So the Hosur greenfield project is on-track [Indecipherable] and certainly, we will start to manufacture a early next year that is on as planned. What we want to start-off with — start-off is with — by producing products initially at a component level there, primarily for the transmission application, which is clusters again that will start-off. And we will definitely scale-up the plant with all the new products that we are trying to bring in, not to mention the EV as well, because the system-level would require motors, it would require gear boxes. So rightfully, we have the wherewithal and the equipment there. It’s a question of having the right volumes in the marketplace so that we can start to make those investments in our new greenfield projects plants.
Harshit Patel
Understood. Thank you very much for answering my questions and all the best.
Hardevi Vazirani
Thank you.
Operator
Thank you. The next question is from the line of Manish from Nirmal Bang Securities Private Limited. Please go-ahead.
Manish
Yes, sir. Thank you for the opportunity. My — I have only one question. Your comment around the — there is a — quarter three has been soft in terms of demand. So in the coming second-half of the current fiscal, how do you see the demand trend to see — especially in the passenger vehicle as well as the tractor segment.
Harsha Kadam
Yeah, thanks for the question, Manish. And normally, as you know, October, November are the months when due to festival seasons, the passenger vehicle and the two-wheelers, these are the sectors that tend to peak. What we are not seeing that — but we are not seeing that happen this year, unfortunately. Fundamentally, the reason is with a lot of push sales that was done in the preceding quarters that the dealers, the retailers and the wholesalers are saddled with a very-high inventory levels on the passenger vehicles.
The inventory level is probably close to 80 days and so even if the sales number would be very-high in the quarter, that is this quarter, October to December, primarily it would be due to the liquidation of all the inventory that is lying, yes. So will the production numbers pick-up? Now that is something we have to wait-and-see, yeah. Because unless the inventories start to go down, the productions wouldn’t definitely be on-track as such. So we believe that it is still going to be a little muted quarter when it comes to vehicle production numbers and we anticipate this is going to happen for the next quarter as well as the first-quarter of the calendar year is always start-off on always a lower note.
So what should have happened should happen in this quarter and in this quarter the production number is going to pick-up, it’s going to be a little later.
Manish
And what about the tractor?
Harsha Kadam
Sorry I didn’t get that, please.
Manish
Yeah tractor, I’m talking about tractor
Harsha Kadam
Yeah, so tractor we have seen the last three months the production numbers have slowly started to incrementally go up, which is a good sign. Obviously, it’s evident that the good monsoon that the country has had is enabling the production numbers to start going up. However, there are other factors within the tractor segment, which is still liquidity, cash availability, the finance availability that is going to determine how quickly it’s going to pick-up. So we believe it’s going to grow slowly, but definitely the indications are that tractors would be on a slow-growth path as such.
Manish
Okay, sir. Thank you.
Operator
Thank you. The next question is from the line of Rishi Vora from Kotak Bank. Please go-ahead.
Rishi Vora
Hi, thank you for the opportunity. My first question is regarding the industrial bearing segment. Sir, can you give us some color on how some of the segments did during the quarter, especially railways, wind and anything else you would like to call-out?
Harsha Kadam
So thanks. Thanks for the question,. And let me start-off with the industrial segments where we are very strong and that’s the wind energy as such. We had a strong traction and growth in the wind energy production numbers of the gearboxes and so on. So that has helped us to grow much faster in the quarter as such. Overall, we are seeing a good traction coming from the wind energy. Even the railways, for example, did reasonably well in the quarter. Then the raw-material sector due to some of the infrastructure projects. So obviously, there have been quite a lot of investments that our customers have started to do and the projects that they execute enable us to grow in the raw-material sector, which is the core metal industry. So we have seen some good traction coming from these sectors, which have definitely pulled up the bearing business as such. Two-wheelers is another one, which we have seen some good strong traction there. Also our clear focus on the aftermarket within the industrial space did pretty well, I must say.
And we have continued our focus in introducing new partner end-user program that we launched six months back, we have started to consolidate that initiatives with our distributor community. And as such, this is starting to pay-off and we are seeing the results. So the distribution business too has registered a very strong growth in the quarter. And even at a nine-month period, we believe things have started to improve. So whether it is over the preceding quarter or the same-period last year, Q3 2023, our distribution business has done pretty exceedingly well, I must say.
So all-in all, there were some sectors which did very strong, where the — could have been better — the performance could have been better from a demand situation is in our Power Transmission segment and the Industrial automation segment, we could have been better. We still have not seen a strong uptick like we have seen in some of the other industrial sectors.
Rishi Vora
Understood. So our auto and industrial bearing segment this quarter has grown by 10%. So is it fair to assume that the industrial part of the business would have done better than that?
Harsha Kadam
Yes. The industrial part of the business definitely has gone better.
Rishi Vora
Understood. And just on exports, right, why did you — you did call-out that the European market was a drag this quarter, but at least in terms of end-consumer segments, can you give us some color on which are the key end-consumer segments for us in all these geographies and over there where — when which segment we are seeing demand weakness?
Harsha Kadam
So, Rishi, I want to clarify here that our exports business we will have no visibility to the end-customer, so to say, because what we produce here, we ship it out to our sister plants and sister facilities across the world and they in-turn handle the sales that happens to the customers. So my visibility stops at my sister-company.
Rishi Vora
But at least by the type of bearings which we supply, we’ll have some idea about the end-consumer market, right?
Harsha Kadam
[Speech Overlap] if it’s not so easy because if you were to take a schedical role of bearing, it can go into a cement industry, it can go into a steel industry, it can go into a power sector. So very sector, so it’s a little difficult.
Rishi Vora
Understood. And just last question, if you look at our 9M performance, our EBITDA margins have kind of declined by 80 bps to 90 bps, and part of the reason would be the consolidation of course. But you know how should we look at margins going-forward? You know, is there about tailwinds for margins to improve from here or where — where are we seeing some bit of pressure on margins?
Hardevi Vazirani
So if we look at nine months of this year with nine months of last year, we have seen in EBITDA margin a dip of 0.5 percent points. And within this, the employee benefit expenses have contributed by 0.3%, but within this 0.5%, 0.3% is employee benefit expense, which is mainly because of the inflationary pressure, that is the increments, the personnel increments which were given out this year in-line with the market.
And the second reason is there are some onetime — a onetime income which were booked last year in terms of tooling income, in terms of service income, which we don’t see this year coming because those are all one-time, one-off incomes that were booked last year. So these are the two main reasons of the EBITDA change.
Rishi Vora
Understood. Understood. Thank you. Thank you so much. That was helpful. All the best.
Operator
Thank you. The next question is from the line of Mahesh Bendre from LIC Mutual Fund. Please go-ahead.
Mahesh Bendre
Hi, sir. Thank you so much for the opportunity. Sir, despite of such a challenging environment, business environment, we have grown double-digit almost across, I mean, business segments as well as geographies. So given the current situation where auto industry is actually struggling for the growth, given the diversified nature of our offerings, is it fair to assume that we will keep outperforming the market growth over the next few quarters? Thank you.
Harsha Kadam
I think that’s for you to draw the conclusions, but our performance over the last quarters tells that, yes, our growth story — our growth numbers are definitely ahead of the some of the sector growth or the industry growth. So if you take the index of industrial production is hovering around 4.5% to 5%, but our own industrial performance has been much better than that. Same is the case with the automotive sector, which is almost half the business that we operate in, while the industry has remained, if you look at passenger vehicles at a nine-month period has grown but in single-digits, but we still continue to do a double-digit growth.
Our endeavor has always been to continue to grow in double-digits. Yes, for that, we will have to be very agile and look we’ll try and get on to more business opportunities that we keep our focus on, so that we can ensure a continuous pipeline of business flow that happens irrespective of the changes and the and the dynamics in the marketplace. So that definitely helps us.
One other aspect is, as Schaeffler, we have a good balance between our bearings portfolio and non-bearing portfolio. So bearings, as you know, is about 60% of our business and non-bearings would be roughly about 40%. So this too, the business mix and the portfolio mix definitely helps us to kind of try and sustain at a company-level, if not at a sector level, some of the sectors could underperform, some of the sectors definitely outperform. So we have been able to balance this out well and I don’t see any reason why we cannot continue to deliver the double-digit — sustained double-digit growth rate.
Mahesh Bendre
Sure. And sir, about the Hosur plant, which will become operational next year, some of the products you mentioned about the clutch and other EV parts, those are not currently, that’s now manufactured for India as in our basket as of now, right?
Harsha Kadam
Are you talking about the new plant or the existing new plant?
Mahesh Bendre
New plant.
Harsha Kadam
Yes. See, we are continuing to localize a lot of our products to be produced in India, more so in the automotive space. And so clutch is no exception. So the new plant definitely, we will continue to bring in the new products as well. Also with the capacity constraints that we have ran into in our existing plant where there is no more space to bring in more additional machinery. So the new plant is going to help us to complement the demand — that is increased demand that we see even in our existing portfolio.
Mahesh Bendre
Sure. Thank you so much, sir.
Operator
Thank you. The next question is from the line of Mayank from AM Investments. Please go-ahead.
Mayank
Thanks for the opportunity. I have first question regarding the nine-month growth rates if you could provide for the railway, wind, two-wheeler segments.
Harsha Kadam
Two-wheeler and which sector was that?
Mayank
Rrailway, wind, two-wheelers, auto aftermarket and maybe you can give you the overall breakup in terms of the end-markets that took hold.
Harsha Kadam
All I can say is, you know, we did register all the three sectors that you touched upon at a nine-month period, we definitely have registered a very strong growth. Yeah,
Hardevi Vazirani
That’s a double-digit.
Harsha Kadam
It’s a double-digit growth coming from all the three sectors, railways, two-wheelers, I would say even raw-material the core natural industry sector also and the wind energy as such. Distribution in the quarter, I talked about the aftermarket, industrial distribution. In the quarter has registered a strong performance and still at an annualized nine-month period, it is still at a single-digit, but we expect — we will continue to keep the focus to ensure that the distribution part of our business, which is a very important part of our growth strategy continues to be in the double-digit growth rate.
Mayank
Okay. On — particularly on the wind side, sir, how is the market both in overseas in India where we had seen some installment due to the Chinese competition. So how is it right now?
Harsha Kadam
Yes, the — if you look at-the-market, a large part of the market for the wind equipment manufacturers was predominantly Europe, Latin-America and US. With all that is happening in Europe, with the two wars, ongoing wars and with all the impositions of sanction. Yet we see I guess all the inventory levels that were sitting there has all been now moved up. So we have seen a strong resurgence in the demand. Obviously, in-spite of what is happening there, the geopolitical development, I guess people are finding ways how to still continue to execute the projects. And so we are seeing a strong demand both for the wind equipment manufacturers as well as for the gearbox manufacturers.
The good thing is as Schaeffler, we have a very strong presence globally with these steel customers and the same flows into India as well. So we are able to leverage the relationships and the engagement level that we have established in Europe as well with these customers here in India as well. That’s certainly is helping us. Talking about the Chinese competition, there are a few that have started to come into India. Here again, some of them have started to set-up manufacturing base. But right at this point in time, they are still very small. We’ll have to wait-and-watch how that competition would develop as such.
Mayank
Okay. And lastly, sir, I mean, [Indecipherable] nine months on this quarter, could you just categorize could it differentiate between volume growth and value growth?
Harsha Kadam
Yes, okay. Volume growth and value growth.
Hardevi Vazirani
Unfortunately not. I don’t think
Harsha Kadam
We can’t give that information.
Mayank
Sorry. Okay, okay. No issues. That’s it from my side. Thank you.
Operator
Thank you. The next question is from the line of Dipesh Agrawal from UTI AMC. Please go-ahead.
Dipesh Agrawal
Yeah. Good morning, team. My first question is you mentioned there is —
Operator
Sorry to interrupt you, sir. I would request you to please use your hand, sir.
Dipesh Agrawal
Yeah, am I audible?
Harsha Kadam
Yes, better.
Dipesh Agrawal
Yeah. So sir, my first question is you have mentioned the weakness in exports is due to Europe. Can you help us understand how is the inventory levels out there?
Harsha Kadam
Are you talking about the inventory levels in Europe?
Dipesh Agrawal
Yes, for your product.
Harsha Kadam
Yeah, unfortunately, as you know, as I said earlier in the previous when the question was asked, we do not have the visibility of the stocks that they carry there. Our role ends once we ship the material out at based on the order books that we get. So that’s where it stops. So I’m afraid I don’t have an answer beyond that?
Dipesh Agrawal
Sure. And sir, when you are looking to grow exports in Southeast Asia, where are we in that journey? How large that business can become? Can it be become a similar-size to your European exports in a few years.
Harsha Kadam
Difficult to tell. For one we got the portfolio of the products that we make which Europe needs, we see that either the volumes are not there for some of the products in Southeast Asia, because the players, the customers, their design of equipments are all different. Yeah, that is one challenge. Two, also when you look at sector level, you will find some of the sectors are very different. You find two-wheelers is a very strong sector in Southeast Asian market. That is something we are also trying to see and we now start to enter those markets as such, that’s an evaluation that we are trying to do. So it has a little bit of a different demography when compared to the European market.
So, yes, we are making sincere efforts to get into the Southeast Asian market. We have seen some successes already in terms of getting new businesses for our exports within the Southeast Asian markets. I think the efforts have to — we have to keep continuing on this journey to secure more orders, orders and wins for us to ensure that we try and derisk or balance out between risk.
Dipesh Agrawal
Sure. And sir, lastly, what would be the roadmap for the turnaround [Indecipherable] — by when do you expect it to turn-around? Until then, what is the cash support which it may look from Schaeffler in terms of loss funding?
Harsha Kadam
Yeah. Let me start-off by answering and then Devi can contribute as well. So as we know, [Indecipherable] was a very clear strategic acquisition, knowing that it is an e-commerce platform, which is a very different model of business than what we have been doing all these days. Yes. And moreover, the acquisition per se itself, it was a start-up company. So two things are different. One is the business model and second is the setup of the whole as an organization. So it being a startup, it needs to be run as a startup if we have to make this a success story. Currently, our focus is on scaling up the operations and expanding the footprint, which we are actively working on to increase the reach as well as the depth of market reach and by appointing number of dark stores and hubs across the country.
As you know, [Indecipherable] was a startup, predominantly focused only on two cities when we acquired Bangalore and Chennai. And now from there, I’m happy to say that over the last one year since the time of the acquisition, we have expanded into almost close to 12 or 13 new cities, wherein we have started to now set-up dark stores and we also set-up some hubs so that we have a hub-and-spoke arrangement. We are now building up the organization structure there. So we are now augmenting the appropriate functions to enable and facilitate the growth that we wanted to happen.
So rightfully, this is required a different approach altogether than the regular business that we do and Devi, [Indecipherable].
Hardevi Vazirani
I mean, all of ours are aware that any start-up business requires three to four years time to breakeven. And so in our business plan, we had planned that breakeven on earnings will be end of 2026. We are still keeping this projection intact so they will be starting to generate their own cash-in 2027 onwards.
Dipesh Agrawal
Sure. Thank you, and all the best.
Operator
The next question is from the line of Nirali Gopani from Unique PMS. Please go-ahead.
Nirali Gopani
Yeah, hi, thanks for the opportunity. Sir, next question is on the capex. So if I remember correctly, in the beginning of calendar year 2022, we had announced a capex of INR1,000 crores and revised it to INR1,500. And if I sum-up the capex until now, I guess we have crossed that INR1,500 mark. So how should we look at this number going ahead?
Hardevi Vazirani
So this year we will realize most of the growth relevant and localization relevant capex. And next year we will step-back a little bit and ensure that we realize all the benefits for which the capex has been — capex spend has been done. So next year, we will slow-down a little bit. So INR1,500 crores that we have announced, we have realized that from ’22 until ’24 and rather slightly over that. And next year we will slow-down a little bit on capex spend.
Harsha Kadam
So, if I may add also now, yes, we did declare that we will be spending INR1,000 crores over the next three years and we revise to INR2,500 crores, but we must also factor-in that there have been considerable business wins that we have been getting. Take, for example, the or the e-motor axles that we have won. Now the e-axle project that we won was not in the year 2022, when we made that announcement. And accordingly and appropriately, we have to make some additional investments because of the new business wins. Hence, you see the numbers going beyond what we estimated. And when we say INR1,500, it’s an estimated number that we keep in mind, but there could be changes depending on the business needs and requirements that would come up, additional investments or rather being sales, there could be a scaling down as well going-forward depending on the business needs.
So that’s how — so we definitely will remain agile and flexible here when it comes to investments.
Nirali Gopani
That’s great. So if I understand correctly, the part of this capex would have been for capacity expansion, partly for localization or to say improve our efficiency. And when you say that next year, we’ll see a little bit of scale-down and wait for the results to come on the capex which has been done. So how should we as investors look at this happening, say, from the numbers point-of-view or any directional guidance that you can give on the same?
Harsha Kadam
So whenever we said that we go to be kind of judicious and watch the market, the business means and then accordingly adjust our investment pattern, it goes without saying that whatever we have already investments that we have already made, the realization of that we — they have to start delivering and our focus will continue to remain on the investments that we have already made, how will we ensure that these are fungible that we can use it better leverage the capacities that we have already put. So the focus will remain on ensuring that the commitment that we made when we got the investment is something that we deliver to. So this is going to be the priority going-forward as well. Of course, if there is a new business win, which would warrant some new investments to be made, we will definitely make that.
Nirali Gopani
Right. Just one last question, what would have been the investment for our Hosur plant?
Harsha Kadam
Around roughly approximately about INR300 crores.
Nirali Gopani
INR300 Crores. Okay. Okay. Thank you for answering my question.
Operator
Thank you. Thank you. Ladies and gentlemen, we will take that as the last question. I would now like to hand the conference over to Ms Gauri for closing comments.
Gauri Kanikar.
Thank you, everyone. Thank you for joining us today. If you have any further queries, please do reach out to me at gauri.kanikar@schaeffler.com. Thank you and have a good day. Thank you and have a good day.
Operator
[Operator Closing Remarks]