Schaeffler India Ltd (SCHAEFFLER) Q2 FY23 Earnings Concall Transcript

Schaeffler India Ltd (NSE:SCHAEFFLER) Q2 FY23 Earnings Concall dated Oct. 19, 2022

Corporate Participants:

Gauri Kanikar — Head of Investor Relations

Harsha Kadam — Managing Director and Chief Executive Officer

Satish Patel — Director Finance and Chief Financial Officer

Analysts:

Mukesh Saraf — Spark Capital — Analyst

Rishi Vora — Kotak Securities — Analyst

Sonal Gupta — L&T Mutual Fund — Analyst

Sandeep Tulsiyan — JM Financial — Analyst

Manjeet Buaria — Solidarity Investment Managers — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Schaeffler India Limited Q3 CY ’22 Earnings Conference Call. As a reminder all participants lines will be in the listen-only mode. [Operator Instructions]

I now hand the conference over to Ms. Gauri Kanikar from Schaeffler India Limited. Thank you and over to you, Ma’am.

Gauri Kanikar — Head of Investor Relations

Thank you. Good day everyone, thank you for joining Schaeffler India Limited’s earnings conference call for the third quarter and nine months ended September 30 2022. We have with us today from the management, Mr. Harsha Kadam, our Managing Director and Chief Executive Officer; and Mr. Satish Patel, our Director Finance and Chief Financial Officer.

Mr. Kadam will first take us through a short presentation on the results, after which we open the floor for questions. Thank you and over to you Mr. Kadam.

Harsha Kadam — Managing Director and Chief Executive Officer

Yes. Good evening. This is Harsha Kadam and I’m joined with our CFO.

Satish Patel — Director Finance and Chief Financial Officer

Hello, good evening, Satish Patel here.

Harsha Kadam — Managing Director and Chief Executive Officer

Well, let me start by briefly taking you through the presentation and I hope all of you are able to see the slides. I’m on the first slide, where I will be covering the Q3 performance and the 9 month period as well.

I’m moving to Slide number two, where I would be throwing light on the economy and the industry. Then I will talk about the business highlights for the third quarter and the 9 month period of 2022. I will then move on to cover the financial highlights of the third quarter and the 9 month period of 2022 and then a couple of topics, which I would like to throw some lights as well.

Moving on, I move to Slide number three, where I would like to touch upon the economy and the situation in India. And as you can see from the chart on the slide, the GDP growth, which posted a very strong number in the second quarter of this calendar year at 13.5%, moving into the third quarter. With the prolonging war in Ukraine and the tightening up of the global monetary policy and also the imposing of economic sanctions and certainty — if certainly weighing down heavily on the economic outlook in India as well.

As you all know, the World Bank has already downgraded the GDP forecast for the current fiscal year to 6.5%, which was — in the earlier forecast was 7.5%. With both the international headwinds and the domestic headwinds, coupled with the growing international inflation as well as the domestic inflation, India is already feeling the impact in some of the sectors and that surely is also reflecting on some of the sectoral performances within Schaeffler as well.

One in cases, the Wind Energy sector where a number of our customers have cut down their export orders, due to the pressures on the ongoing situation in Europe. Also the Wholesale Price Index, which is at a double-digit and twice that of the consumer price index, also points that while the credit and liquidity stimulus packages are in place, the retail inflation will continue to be there for some time.

With all this, the forecast numbers [Indecipherable] 6.5% of GDP growth. The index of industrial production, which is very subdued in the third quarter, provisional number being up 0.7%. We have seen some uptick in the automotive production, in some of the sectors, while some of the sector still have not picked up. All this points to situation that the third quarter we had some subdued demand situation in the country as such.

I move to the next slide, where I would like to give some more details based on each of the sectors and what you see on the Slide number four, it is the sectoral performance in the industrial space. When you look at the cement production in the country month-over-month, the first quarter of the year, cement production was at its highest. But when you look at the third quarter, you will see that gradually there is a production drop that has happened in the third quarter.

While at an year-to-date level, you still find that cement production is 10% better than the same period last year. When you look at coal production, it is lot more evident that the first quarter was a very strong performance in coal production, averaging about 85 million tonnes. When you look at quarter three, that has already come down to close to 55 million tonnes averaging in the quarter. And that but still, because of the strong performance in the first quarter at an year-to-date level, it is still showing 14% higher production rate of coal in the country.

Top of steel, which contributes almost 18% through the industry. You will find that the steel production to have remained more or less at the same level as last year in the third quarter. The power generation, which is another strong indicator, which contributes close to 20% weightage and you’ll see that even the power production or electricity production in the country in the third quarter has reduced marginally. With all this, yes, there were quite a few challenges and headwinds that we have been facing.

Let’s now look at the auto sector as to how it has performed and for that, I’m move into Slide number five. I’m on Slide number five and here again, what you see is a little different picture. The overall two and three wheelers had a subdued second quarter performance, but when you look at the quarter three, the numbers have started to pickup. And the two and three wheeler sector, which was in negative numbers posted last year, you will find us come rebounded back with a 4% better performance at year-to-date level.

Look at the passenger vehicles and the same you would find strong growth in the third quarter in the passenger vehicle segment. And on year-to-date level, posting an year-to-date level of 22% better than the last year’s performance. Commercial vehicles started-off on a strong trajectory in Q1, but when you come into Q3, the numbers are a little lower than Q1.

One of the sectors where there was hope and anticipation that it is going to recover, has also started to show some small signs of recovery and that happens to be the tractors. For the first time in many months, we are seeing the tractor numbers pickup marginally, but then overall year-to-date level, it is still below — 9% below when compared to the last year.

With that situation, clearly when one were look at the numbers and compare that with the 2019 numbers, what it was and we still see that we are not even there at the 2019 levels. However, some of the sectors as I already said, showing positive signs of recovery. And going forward, I move to the next slide, which is Slide number six and I move to Slide number seven, sorry. And there I would like to give a summarized picture on what happened in the third quarter of 2022 when it came to Schaeffler India.

Despite all the challenges that we had in the market environment and our sustained performance was due to the fact that we have a repeating balance portfolio mix between the auto and the industrial sector. Not to mention, of course, both the sectors have tried and automotive has been definitely we have posted much better performance, while industrial for the quarter was a little below the same period last year, I’ll come to that in a while.

While with all these challenges, we have been — we have managed to sustain and hold of financial performance and have been able to deliver the margins as you can see on the boxes on the right side. We continue to keep our focus in engaging with our customers and as you know, in every earnings call, I do share the new business wins and the new initiatives that we take up and actively engaging with our customers and this quarter as well, we were able to launch the REPXPERT.

The mobile technical training van in the automotive aftermarket space. I will cover that in my succeeding slide. One other highlight is the Corporate Governance scorecard, where we went through an evaluation process and we continue to remain in the leadership position, which I will throw light further down in my slides.

We do believe that the headwinds what we see, our phasing on the global market and outlook as well as the inflation would continue to [Indecipherable] us for some quarters to come. However, with all these challenges, we have been able to post reasonably good performance in terms of the sales growth as you can see. We were able to post 18.1% higher sales revenue over the same quarter last year. But over the preceding quarter, our sales got more challenging, we were able to just post 0.4%, clocking in INR1,756 crores for the quarter let’s see after.

This resulted in an EBIT margin of 15.7% for the quarter which definitely as you can see there better than the same 14.9% that was there in the same quarter last year, bringing in an additional INR275.6 crores to the bottom line. The profit after tax margin stood at 12.3% compared to the 11.5% on the same quarter last year and bringing in INR215 crores to the bottom line.

We did face some challenges on the free cash flow within the quarter and we were 33.5% lower when compared to the last year same quarter period. This is clearly attributable to the cash flow issues that we’re facing as well as some of the inventories that have piled up as well the working capital as well going up.

I move to the next slide, Slide number 8. I would like to share with you some of the new business wins that we have secured within the quarter be it in the automotive technology space. We were able to secure some business wins in the commercial vehicle sector for the double plus systems, not to mention, of course, some of the needed roller bearings and the ball bearings in the passenger vehicle segment as well.

Talk of the automotive aftermarket, while we have no new product launches, but however our efforts to consolidate our growth trajectory in the new products that we have launched in the previous earlier quarters continues and we have been able to secure volume wins for the newly launched products. As well as the point that I shared, we have started to engage with front and mechanics and garages to ensure that we create the pull for our products from the market side through the REPXPERT effort that we’re putting through.

And the traded goods that we have launched in terms of shock absorbers, lubricants and wipers, we continue to expand our market presence as well as the reach and the consolidation process continues to go on. On the industrial side as well, we have secured some key businesses for the cylindrical roller, spherical roller and [Indecipherable] rollers in our off-road segment.

Not to mention that last size bearing in energy segments that we are back some good orders. As well as the linear guys — the quick center that we have put up as managed to open big orders from our industrial automation machine tool industry customers and which is further augmenting the demand situation which we see weakening in some of the other sectors.

Having said that, I move to the next slide to throw some light on the REPXPERT and what you see here is the plan, which is self-contained with all the training modules, hands-on training that is given by our expert engineers in the field and this was officially launched on the 7th of September this year and the plan is to cover roughly 90,000 kilometers across the country and adjusting 1,100 garages and for 81 days this is going to be on the road. We’re going to run our training sessions for the repair garages, for the fleet workshops, for even the multi brand garages and the retail markets as such. And total in all we would be covering about 36 cities in all to ensure that we extend the reach further into the marketplace.

With this I move to Slide number 10, wherein I would start to talk about the our financial highlights. I am on Slide 11 now and looking at the revenue from operations we have sustained our performance in terms of sales revenue in the third quarter in spite of the challenges that we are facing both on the domestic front and the global market situation as such. So as you can see INR1,756 crores that we have posted in the quarter, which is a clear 18.1% over the same period last year however as I earlier said, 0.4% over the preceding quarter.

Now if I were to compare the revenue bridge as to how did we moved from last year to this year. A lot of contribution has come in terms of the volume growth from the auto tech space as you can see INR157 crores for the quarter coming in from the auto tech space and rest coming — large part of it coming from the export businesses, which is another INR107 crores. Another INR5.5 crores coming from aftermarket space.

Industrial was the only sector where we had a dip in the sales revenue for the quarter, coming on the back of some of the weak demand in the wind sector and some of the steel raw material sectors. When if I were to compare the sectorial performance over a nine month period I refer to the chart on the right hand upper corner there. When you look at the year-to-date period, you would find the automotive technologies in spite of the weakening growth in the first quarter and now a recovery that you see, still able to post 23.9% better performance for the same period last year.

The automotive aftermarket grew by 21.4% and industrial with a strong first quarter start but a weak second quarter and third quarter, we still are at 17% better performance than the same period last year. Exports on the other hand which is clearly a direction — a focused strategic direction that we have taken, as you can see sustain the growth at 62% over the nine month period as well.

So, I talk about the balanced portfolio of the business that we are able to driving the marketplace and as you can see with the changes that you’re seeing in the quarter, our automotive technologies contributes 41% stay the sales revenue, while the industrial contributes 34% and our exports have been able to sustain this in the last three quarters at 15%, 16% level. And the automotive aftermarket takes the share of 9% of total sales revenue.

With this I move to the next slide, which is Slide number 12, and here I would like to touch upon the earnings quality for the quarter and as you can see as, I said earlier, in the third quarter we were able to bringing INR275.6 million EBIT value at a margin of 15.7%. And this was clearly at 24% better performance year-on year. Even at the nine month period as you can see, the EBIT margin for 2022 still stands at 16% compared to 13.7% over the same period last year.

If I look at the EBIT bridge as to whether this margins come from, straight volume increase gross margin include INR925 million or INR92.5 crores and we did have some smaller improvements in terms of employee cost, in terms of other incomes and taking that over to INR275.6 crores for the quarter this year. This resulted in a profit after tax coming into quarter three as you can see at 12.3% profit after tax margin which is a clear 26.1% better performance at on year-to-date level and a year-on year growth performance. If one were to look at the nine month period performance profit after tax stood at 12.8% and the same period last year was 10.9%.

I move to the next slide, which is Slide number 13 which throw some light on the working capital development and the CapEx. So with the subdued demand that we saw, we definitely see some increase in inventory levels, hence you see some marginal increase in the inventories in the third quarter compared to the preceding quarter. However at nine months period as you can see also the working capital as a percentage to sales stood at 19.9%, at the same period last year was 18%.

One point, which I would like to tell you, the volume growth obviously needs to be serviced as well. So some part of the inventory increases and the working capital increases was already factored in to ensure that we sustain the service levels to our customers. When we look at the CapEx spend in the third quarter close to IRN100 crores was spent in the quarter alone and as you can see, our clear focused consistent investment effort that we have been doing every quarter continues and as a percentage to sales over the nine month period this year, we are at about 6.2% and if one were to compared to last year which was around 3.5%.

I did mention about free cash flow in my earlier slide, this could have been a better picture here. Well, we are making efforts to ensure that we recover the lost ground in the third quarter of this year in this coming quarter and thereby get in line with the targets that we’ve set on the free cash flow as well.

I move to the next slide, Slide number 14, which is thrown some light on the key indicators and the key figures. I have been already talk about an 18.1% growth in sales revenue in the quarter and if one were to look at our nine month period clearly 25% growth over the same period last year. And this resulted in an EBITDA margin of 17.19% when compared to the 17.3% of last year. Rightfully, the EBIT margin closing at 16% at the nine month period compared to the 13.6% and this resulting in a profit after tax margin of 12.8% compared to 10.9% over the nine month period. And as, I said earlier, CapEx spend as you can see for the nine month period has been INR316 crores, which compared to last year at the same period stood at INR136 crores.

With this I move to the next slide. And I would like to touch upon couple of highlights points. I’m on Slide number 16, and I would like to talk about — we went through an evaluation by the institutional investor advisory services. We had gone through this process way back in 2019. And clearly given that India as a member of the G20 Forum. This evaluation framework is built around the G20 and OECD principles of corporate governance, which is a globally accepted benchmark practice for corporate governance and we went through this process of evaluation by IIAS, and I’m very happy to share that we have [Indecipherable] if not better marginally better our leadership position by scoring 76 percentage point.

The same number last year — last time we went through the process, we were at 75 and this is a clear commitment from our side that we will continue as an organization and as a company emphasizing that we are very committed to high standards of corporate governance and we will continue to keep our focus on corporate governance.

Having said that, I move to the last slide which is in — which is a summary slide and share what we see is, our revenue performances in-spite of the sluggish macroeconomic demand situation as well as the local inflationary domestic situation. We have sustained our performance and we will continue to make efforts to better this in this quarter. Our balanced mix of BSE has — and the countermeasures which we have continued to sustain in the last quarter, has enabled us to deliver the margins in-spite of the headwinds that we have faced.

The CapEx, which is on track as per our commitment. And our strategy continue to book and shows that we consistently deploy capital judiciously. And while we will remain cautiously optimistic in-spite of the weakening global demand as well as lot of unpredictability and uncertainty.

With that I come to the end of my presentation. I open the floor for question-and-answers.

Questions and Answers:

Operator

[Operator Instructions] The first question comes from the line of Mukesh Saraf from Spark Capital.

Mukesh Saraf — Spark Capital — Analyst

Yes sir, good evening and thank you for the opportunities. My first question is on the revenues. You had mentioned that the industrial segment revenue was unique, because of the wind energy segment. But, I’m just trying to get some sense on, how do you see the future because wind probably is not that large in the overall scheme of things for us? Do you see some other segments offsetting that in the future, especially with the private CapEx in the country going up the PLI schemes et cetera? Could you give some sense on how this industrial segment for us can pan out?

Satish Patel — Director Finance and Chief Financial Officer

Yeah. Thanks Mukesh for the question. Yes, as — you said it right. We have seen the export of wind equipments from the country, has becomes subdued fundamentally on the back of the sanctions that are getting imposed in the Europe and the rest of the world. So having said that what we have seen as all the wind equipment manufacturers who use India as a manufacturing base and export out of India. We have seen the demand going down as such.

Now, is this going to remain? I believe, yes, considering the fact that with the sanctions going to be there until they find different way to channelize the products that have to go to those countries. I believe that, yes, we are going to face headwinds in this sector for some more time to come.

However, we do also see that the domestic demand for wind still continues to be there, albeit it does not have the same high levels that used to be there in the export market, but we have not seen a drop in demand for the wind equipments, nor the products that go into the domestic wind equipment supply. So we believe to summarize that, yes, this headwind would appear to remain for some more time.

Mukesh Saraf — Spark Capital — Analyst

Got it. And in relation to that. I mean, given that exports has weak, because of the global macro situation. We’re still seeing exports for us, the direct exports from still holding on strongly at 60% growth Y-o-Y. Is there a reading here for us that this exports here might not sustain at this level in terms of growth, because of this global situation already impacting wind segment?

Harsha Kadam — Managing Director and Chief Executive Officer

All, I can say, Mukesh at this point in time as our third quarter by exports auto and exports did pretty well and we see the order books even in this quarter pretty good. So we see no signs of concern for this quarter as well. As you know that, this export is being done clearly with a very clear strategy and investments accordingly in line with that, plus the relocation of the production happening. All of this put together at least for this quarter as well we do see — definitely see no cause for worries in our own exports.

Satish Patel — Director Finance and Chief Financial Officer

This Satish Patel here. Yeah, just one more point to add as regards the exports is the 1.3% growth that Harsha mentioned in the quarter for exports and others. If you look into the real export growth, because this totaled 1.3% includes other revenue as well and other revenue has declined by about 15%, which is small in proportion. Our exports actually grew by over 7% quarter-on-quarter.

Mukesh Saraf — Spark Capital — Analyst

Got it.

Satish Patel — Director Finance and Chief Financial Officer

In [Indecipherable] exports, there is a growth. Yeah, the revenue decline is because of the timing difference of scrap disposal some things, but when we talk about exports, there was really a growth of about 7% for the quarter.

Mukesh Saraf — Spark Capital — Analyst

Got that. And just last one if I may, just squeeze in on the margins we are seeing a couple of things playing out here. The OEM revenues going up aftermarket flattening out and obviously raw material cost, steel et cetera coming off. So how do we look at margins with these things playing out where OE mix might actually impact margins, whereas steel will might actually benefit margins? Do you think directionally there is a plateauing out in terms of the improvement in margins from here?

Harsha Kadam — Managing Director and Chief Executive Officer

Margins are concerned for the quarter. Margin is a reflection of the mix as well as the cost level — part of the previous quarter, because the steel price actually did not increase beyond what already increase in the preceding quarter. In terms of how the margins would look forward. In terms of sustainability, certainly would depend upon the mix going forward for both the businesses automotive and industrial as well as aftermarket and the exports. We are quite confident that the cost level in terms of the level of countermeasures and the cost discipline that we have brought in, that would continue.

However, we should keep our fingers crossed with regard to the steel price and the inflation that might cause some impact going forward. As of now, we do not see, because the current quarter there is little sort of a reduction in the — increase of the steel price and inflationary impact, not significantly impacting the overall performance.

Operator

The next question is from the line of Rishi Vora from Kotak Securities.

Rishi Vora — Kotak Securities — Analyst

Just a follow-up on exports. You did highlight that, there is some relocation of export that is happening maybe from abroad to India. So can you just elaborate on that on what is happening is apparent shifting increment? Is a Schaeffler India winning incremental orders? Is also apparent looking to shift more capacities in India over the medium-term?

Harsha Kadam — Managing Director and Chief Executive Officer

Yeah. So as regards exports, we had also mentioned in the previous call last quarter that, there have been certain relocation programs and those are progressing as per the plan. So those relocations have been in-progress and that is one of the contributor of actually increasing the content of exports in the total pipe. With regard to the overall demand situation, yes, there would be certain impact coming from the global scenario, but that is unlikely to impact the level of performance that we have achieved in exports, because large amount of that is actually comes from the structural aspects of relocations.

Coming to your specific question about relocation. Yes, those are on track and we are expecting in fact, those two progress also as per the plan. We have also earmarked specific capex for exports for those relocation projects, as well as further capacity expansion in CRB and similar other type of products and the capex is also on track. So we are expecting capacity also coming out of the plants for exports.

Rishi Vora — Kotak Securities — Analyst

Sure. And secondly on RM. So from fourth quarter from this current quarter, do we expect RM basket to cool-off or do you expect that it will still remain at a flattish a level? And on top of that additional question is, how accounting — like what is your agreement with OEMs in terms of RM pass-through. So do you make of fix percentage point margins on your product or you make fixed cost profit or bearing supplied to your end customer at least on the OEM front? So any color on that would helpful.

Harsha Kadam — Managing Director and Chief Executive Officer

So I think your question is in two parts. One is the impact on the steel price in RM and the how long this would be there. So far how much and how long. The second part of the question was related to how we recover from the market. As regards the impacting RM so far, there have been a quite significant impact, largely came last year already and that impact continue whatever happened last year continue this year.

Additionally there were further steel price increases in this year. However, in this quarter, there has not been any further increase. So that is a good news as far as the quarter is concerned that, there have not been increase and for at least another quarter we are not expecting increased though it depends on several external aspects.

Coming to the recovery, it would be very difficult to provide you detail how exactly we recover, but in general we can’t comment that, we do have a strong recovery mechanism both in terms of indexation as well as negotiation and we have been able to actually so far persuade our customers in the market to accept and pass on the steel price for the significant input cost increase. This doesn’t happen because the input cost increases significant quite material. It is not in the normal range and this has been situation across the industry, in fact, our customers have also been able to recover from the market as you would have seen.

The prices of the end products automotive vehicle have also been increase in the range 2% to 4% and one of the major element for this is actually the commodity price increase. So it is across and yes, we are in the supply chain have been able to recover quite a significant portion of that.

Rishi Vora — Kotak Securities — Analyst

Just one clarity sir. On the RM front, steel prices have corrected over the last two quarters and still in fourth quarter you are saying that RM will remain flattish. Is it that we have some inventory still there in the system and that’s why we expect RM basket to remain flattish? Or is there is some other factors which is resulting in a [Indecipherable] RM basket?

Harsha Kadam — Managing Director and Chief Executive Officer

So the inventory turnover is quite fast for that category or for raw material. So it is less than a month actually. So it is — whatever happens in terms of the price, does impact whichever direction it moves, does directly impact the quarter.

Satish Patel — Director Finance and Chief Financial Officer

I just wanted to clarify two issues here that. It is not that the steel prices have reduced. It is just that the rate of steel price increase which was there in the earlier quarters has reduced. It used to be in double-digit increases, now it has come down to a single-digit increase and that’s the difference.

Operator

The next question is from the line of Sonal Gupta from L&T Mutual Fund.

Sonal Gupta — L&T Mutual Fund — Analyst

Sir just on the export side wanted to understand, in terms of your contract, are these Euro denominated. I mean, do we have any FX related currency risk?

Harsha Kadam — Managing Director and Chief Executive Officer

Large chunk of our exports happen in EURO currency and there are also two categories or two types of transactions. One is directly in EURO currency, other is in INR currency, because we do have imports as when significant imports in EURO and on the imports also we have imports both. In foreign currency which is in EURO as well as in Indian currency, which is INR.

So because of this sort of our for currency impact, because of the rupee currency and also because of the natural hedge. The volatility which is there in the currency is more or less neutralized, the impact of that is neutralized. But yes, we do have higher chunk of our transactions in EURO than any other.

Sonal Gupta — L&T Mutual Fund — Analyst

Got it. And on the RM side for these exports also do we have a pass-through?

Harsha Kadam — Managing Director and Chief Executive Officer

Yes, RM is a global impact meet imports or exports or domestic consumes or domestic purchases is all around and on — now whatever is the impact I think we have been able to that..

Sonal Gupta — L&T Mutual Fund — Analyst

Export indirectly. Indirectly sale exports.

Harsha Kadam — Managing Director and Chief Executive Officer

Yes, exports — our exports are to our group company. Our group companies in terms of business trend in the market, however on the steel price impact globally is..

Sonal Gupta — L&T Mutual Fund — Analyst

Factored in the cost.

Harsha Kadam — Managing Director and Chief Executive Officer

Factored in. Yes, that’s what the clarification that we need to provide.

Sonal Gupta — L&T Mutual Fund — Analyst

Got it, sir. And just lastly, given that, we have seen a significant bump-up in capex as per your guidance. I mean this year we are seeing clearly a significant increase in capex. So over — I mean, do we see that, we should start seeing a big lift in revenues next year from the investments we are undertaking?

Harsha Kadam — Managing Director and Chief Executive Officer

Satish.

Satish Patel — Director Finance and Chief Financial Officer

Yeah, large chunk of capex is for capacity and capacity would mean higher generation output and thereby revenue. Yes, that’s — that goes obvious without seeing. And we have been on track so far on the capex. We also announced that we would be spending over INR400 crores this year and we are very much on track.

Sonal Gupta — L&T Mutual Fund — Analyst

Yeah. What I was trying to understand is that, installation time and the ramp up time is like 12 to 18 months or is it longer than that sort of trying to understand?

Harsha Kadam — Managing Director and Chief Executive Officer

No you said it right, it’s about 12 to 18 months and the projects which are already on track, we anticipate next year one of the projects to culminate into series production to start. So the other one is that a little start stage right now. So I guess, yes, 18 months is destination.

Operator

The next question is from the line of Sandeep Tulsiyan from JM Financial.

Sandeep Tulsiyan — JM Financial — Analyst

Yeah, very good evening. Sir my first question is pertaining to the Q-o-Q growth that we have reported. The numbers are largely flat. While given the steel price increase that we would have seen as per the standard practice, we would have passed it through in terms of [Indecipherable]. I mean, there’s indexation as well as aftermarket where it is company indicated prices. So if you could break down what price has rolled-out over the last two quarters? And in fact in some basic price increase of steel [Indecipherable] it assumes that there would have been a sequential volume decline sequentially. So is that a correct assumption if you could share some more insight on that?

Harsha Kadam — Managing Director and Chief Executive Officer

Sandeep, if you can clarify the last part of the question. Sorry, we couldn’t get that.

Sandeep Tulsiyan — JM Financial — Analyst

Yeah, so basically f we look at the sequential growth, sales has remained flat even if you assume a nominal price increase company would have taken in low single-digits, it implies there was a volume decline overall on a sequential basis as you could highlight the key reason for zinc[Phonetic]?

Satish Patel — Director Finance and Chief Financial Officer

Yeah. So to answer your question when you compare quarter three vis-a-vis quarter two, both the quarters. So therefore the growth whatever minimally that you see is actually the volume growth as well. Both the quarters have the impact of the recovery, so because of recovery taking out, you would not decline in volumes. Because you take out from both the quarter and then there will still be increase in the performance in revenue, which would be because of the volume.

Harsha Kadam — Managing Director and Chief Executive Officer

Our recovery effort continues whatever is the case. But this is what we see is, the big impact due to the slowdown in some of the sectors wind and raw materials we have seen a bit of slowdown. Predominantly on the industrial side, even tractors we saw some drop. So these have contributed to the topline being flat when compared to the preceding quarter. But the steel price whatever it is those recovery efforts parallelly are going on.

Sandeep Tulsiyan — JM Financial — Analyst

Understood. The second question is pertaining to the auto aftermarket if you look at the quarterly run-rate over past five quarters, it’s largely been around at INR150 crores per quarter a revenue that we are doing. And in the meanwhile over past five quarters, I’m sure there would have been significant amount of price increases that have gone by as we have expanded our product basket including lubricants and other products as well which we have been highlighting every quarter. So why this segment is stagnating at this current level? How should we look at the growth in this segment where can it increase? So what are the key reasons why you’re not able to expand any dealer expansion issues we are facing? So could you give some perspective on this auto aftermarket?

Harsha Kadam — Managing Director and Chief Executive Officer

Well. First, let’s say, make two points here. The automotive aftermarket has business cycle of its own. That is one. So you would normally see when you look at the trend quarter-on-quarter, you will find the last quarter of the year being pretty strong in terms of demand as well. That is one.

The second point I wanted to bring costs more to clarify that, with — the automotive aftermarket top line has not been flat, it is only — if you were to look at the second quarter performance over the first quarter of this year, you would have found 20% growth we have demonstrated. So now the third quarter over the second quarter just about a percentage point more. And we anticipate that the last quarter of this year, definitely it should be much stronger as first.

Sandeep Tulsiyan — JM Financial — Analyst

Okay. Understood. I was more over looking at the trend over past five quarters, it’s averaged at INR150 crores, so it has not grown on a year-on year basis as well, so was the point of asking the question?

Harsha Kadam — Managing Director and Chief Executive Officer

Well. The numbers I’m looking at Sandeep is, last year the average reduced to be about INR125 crores a quarter. If you look at [Speech Overlap].

Sandeep Tulsiyan — JM Financial — Analyst

Okay. Fair enough. It’s lumpy and there might be some fluctuations on a quarterly basis. Last question if I can squeeze in is on the content per vehicle which we have been highlighting that, one content per week from EUR40 per vehicle to EUR80 or that remains. Where we are in that cycle? And in previous call you highlighted that the companies are taking some particular orders at sub-system level. Some component level we are trying to move-up in the value chain. Can you share some examples where we have been successfully been able to [Indecipherable] more? And what with this do to our over per vehicle target? How should we look at this entire transition?? And that’s my last question.

Harsha Kadam — Managing Director and Chief Executive Officer

Yeah as, I said earlier, the content per vehicle — we have a clear plan to grow the content per vehicle and accordingly, there are products which we are bringing — which are moving into more into the sub-system level and that is happening and some of the new business wins in terms of our transmission business which you see. Recently that we have secured on the DCT or the dual clutch transmissions. You will find exactly that direction to improve the content per vehicle offering.

What I would like to also point out is, these could vary the content per vehicle varies between the segments within the automotive space, the light commercial vehicles, the heavy commercial vehicles have different content per vehicle and depending on the products we have and the openings we are — the new business wins that we make, clearly determines what’s the content per vehicle.

So we have varying content on the vehicle. Growth happening in the different segments so to say. Tractors, we were having the dual-clutch was a growing market and if one were to look at the quarter three, the demand for dual-clutch actually went down, because the specific modules were not being produced in that quarter. So that had an adverse impact on the content per vehicle in the tractor segment. Whereas in the others who are in a much favorable situation where we have grown a bit. So you have varying mix coming out when we look at the content per vehicle.

Operator

[Operator Instructions] The next question is from the line of Manjeet Buaria from Solidarity Investment Managers.

Manjeet Buaria — Solidarity Investment Managers — Analyst

Okay. I had one question which relates to the exports business for the company. When I read the call transcripts and management communication before July 2020, what was explained for Schaeffler globally has a philosophy that every region has its own manufacturing facilities for those readers. And it was expected that exports out of India will remain at 8% to 10% of companies yields for the India entity. So I just wanted to understand, what was structurally changed over the last two years? This seems to not hold anymore where exports has become a big opportunity for us and given the parent seems more, okay with that exporting more out of India for other geographies. Was this localizing the manufacturing? Thank you.

Harsha Kadam — Managing Director and Chief Executive Officer

Yes. Your point is very valid. Couple of year back, we would have said that, exports would be in the range of 10% and Schaeffler does have strategy and philosophy, producing in the quarter for the quarter and that remains unchanged, even now also that strategy and philosophy remains unchanged. We do have a products and in the quarter — sorry, in the region and this is obviously because of the content of the steel in the raw material which is A category costs and that remains above 50% so. And the price level of that is not significantly different across the globe.

However during those calls in those years, we have also mentioned that as a strategic Schaeffler also focuses on products for the country where there is a critical mass and west. And getting that story further, we have in subsequent calls also clarified that as far as India is concerned there are certain products, where India has a critical mass India can serve the other global Schaeffler plant similar countries and also the competence exist in India’s cylindrical roller bearings and certain other type of bearings was a very good example.

In addition to that when Schaeffler, the global a review of the strategy, it was actually found appropriate that, in other countries this type of products are in not so much of critical mass and requires relocated to India. And the second was in addition to the competencies also the cost. For certain products we have developed the cost competence in addition to the engineering competence and that actually makes also relocations quite feasible. So that is the main focus.

In addition to that, yes, one more point is that, some of the markets which are not so much accessible in the past have actually opened up more than what where there in the past. And one good example is the Asia-Pacific and in Asia-Pacific now we have quite a high ratio of exports inclusive of all the South Asian countries, South — East Asian countries and also in China. So that has also some more opportunity to opportunities unlike in the past.

Manjeet Buaria — Solidarity Investment Managers — Analyst

I have one follow-up question sir. If we take this total products where India stands target for cost advantage of critical mass advantage or for some technology advantage. Everything put together is globally the 500 for Schaeffler parent. What percent of that are we supplying right now? So I’m just trying to understand our penetration of these products where we have some edge in the global scheme of things?

Satish Patel — Director Finance and Chief Financial Officer

Yeah. I do not have that. I understood your question, but I do not have that number ready. But, yes, where we have competence actually the contribution of our exports is significantly higher. So it is significantly higher. So I would say, it can range in 30%, 40% of the global requirements, at least 20% of the global requirements. But I would not be able to give the exact number for those products. I don’t have that data in front of me. But, yes, wherever CRB, for example. The contribution of India is significantly higher.

Manjeet Buaria — Solidarity Investment Managers — Analyst

And one follow up — final question. If you take really long-term perspective a decade, two decades. Can you just structurally go up to like 60% 70% percent of global contribution for parent or are there certain strategic reasons why –for which the parent not want us to be so high? Thank you, that was the last question.

Harsha Kadam — Managing Director and Chief Executive Officer

No. There is no limit to that. I mean as long as we are able to sustain that level of competence, both cost engineering and technology and able to serve, I think there is no limit. However, how much would that be, that would be very difficult to answer.

Operator

Thank you. As there are no further questions from the participants. I would now like to hand the conference over to Ms. Gauri Kanikar for closing comments.

Gauri Kanikar — Head of Investor Relations

Thank you everyone. Thank you for joining us today. If you have any further queries, please do reach out to me on gauri.kanikar@schaeffler.com. Thank you and have a good day.

Operator

[Operator Closing Remarks]