Sharda Motor Industries Ltd (SHARDAMOTR) Q3 FY23 Earnings Concall Transcript

Sharda Motor Industries Ltd (NSE: SHARDAMOTR) Q3 FY23 Earnings Concall dated Feb. 03, 2023

Corporate Participants:

Puru Aggarwal — Chief Financial Officer

Aashim Relan — Chief Executive Officer

Analysts:

Nirvana Laha — — Analyst

Nidhi Babaria — Envision Capital — Analyst

Apurva Shah — PhillipCapital — Analyst

Ankur Shah — Quasar Capital — Analyst

Manpreet Aurora — Aurora Wealth Advisors — Analyst

Sonaal Kohli — Bowhead — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Sharda Motor Industries Q3 and Nine Months FY ’23 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Puru Aggarwal, President and Group CFO of Sharda Motor Industries Limited. Thank you, and over to you, sir.

Puru Aggarwal — Chief Financial Officer

Thank you, Mallika. Good afternoon to all. A very warm welcome to all the participants on this call. We wish you all a very happy new year from the entire Sharda Motor team. This afternoon, I’m joined by Mr. Aashim Relan, our CEO; and our Investor Relations advisers, SGA.

I’m hoping that you have seen our results and have received our investor presentation by now. The presentation is also uploaded on stock exchange as well as company’s website for reference.

Before delving into the quarters results, I would like to touch upon some highlights on the industry. The auto sector continued its growth path with a strong demand during the festive season in the quarter. Daily demand has remained largely unaffected, with OEM order backlogs remaining stable and new model launches scheduled in the near future. As a result of increased fleet utilization and freight rates, CV sentiment has begun to improve once more. While large fleet operators account for the majority of demand, small fleet operators demand has gradually decreased.

When it comes to tractors, agri segments remained positive across regions owing to healthy reservoir level, higher crop yields and favorable financing. All these facts which has led to the pent-up demand is now fading and the sector is facing rising interest rates. However, this sector is witnessing decreasing commodity prices.

Commercial vehicles volumes have shown an uptrend point to increased economic activities and infrastructure developments. The volumes for YTD FY ’23, that is April to December period, has been positive with Y-o-Y growth of 43%. Passenger vehicle volumes for April to December period also registered a strong growth of 32% compared to the same period last year.

Another key segment, tractors, registered a 12% growth for April to December period compared to the same period last year. The two-wheeler and three-wheeler registered 12% and 7%, respectively, for the same period. With the demand for affordable transportation and emphasis on reducing carbon emissions, electric vehicles also play an important role in India’s transition to a more sustainable future as evidenced by E2W and E3W. E2W and E3W sales are increasing across India, including in Tier 3 and Tier 4 cities.

Having shared my thoughts on the industry, I will now move to operation and financial performance of the company. We registered a revenue of INR686 crores which is a growth of 19% as compared to Q3 FY ’22. Our EBITDA for the period, which is — in the quarter, is INR64 crores as compared to INR62 crores in Q3 FY ’22. It grew by 3% on y-o-y basis. Our PBT for the quarter was INR62 crores after accounting for shares in profits in JV and Associates. The PBT grew by 16% compared to Q3 FY ’22.

The PAT for Q3 FY ’23 was INR46 crores, which is a growth of 19% as compared to Q3 FY ’22. On the nine-month basis, our revenue, EBITDA and PAT grew by 23%, 23% and 39% with INR2,012 crores, INR201 crores and INR146 crores, respectively. On the balance sheet front, we continue to maintain healthy liquidity position of more than INR588 crores in cash and cash equivalents, including investments and bank finances as on December 31, 2022.

With this, we can open the floor for Q&A.

Questions and Answers:

Operator

Thank you. [Operator Instructions] We have the first question from the line of Nirvana Laha [Phonetic], an Individual Investor. Please go ahead.

Nirvana Laha — — Analyst

Hi. Good evening, Aashim, and thank you for the opportunity. So my first question is, most of the OEMs, both PV and CV, have reported good strong growth on q-on-q basis, but our stand-alone numbers in terms of revenues and JV profits have declined q-o-q. So can you tell us the reason for this?

Aashim Relan — Chief Executive Officer

Hi. This is Aashim. Wishing everyone a very Happy New Year, and good evening. So just if you can repeat the question, are you talking about q-on-q growth that has been reported or you’re discussing about — versus last year?

Nirvana Laha — — Analyst

No, q-on-q, Aashim. So most of the CV and PV players have reported q-on-q either flat or growth. So — but our revenues seem to have declined. So any reasons for that?

Aashim Relan — Chief Executive Officer

Okay. Are you referring to Q2 versus Q3?

Nirvana Laha — — Analyst

Yes, yes. Q2 versus Q3.

Aashim Relan — Chief Executive Officer

Okay. So I think we have some different numbers. What we can do is maybe just offline we can align with your numbers on the Q2 versus Q3. And in general, we haven’t seen something like that. But if there’s some number variation that maybe — we can maybe discuss this offline, and we’ll revert back.

Nirvana Laha — — Analyst

Okay. So I was just looking at the two major OEMs on the PV side and the two major on the CV side. But okay, I’ll get back to you on that.

Aashim Relan — Chief Executive Officer

There is some alignment of data that’s needed. I will understand the data you have because whether it’s production, what you’re looking at. And I think we’ll get back to you, if you just e-mail this and with numerics then we’ll get back.

Nirvana Laha — — Analyst

Sure. And regards to this, Aashim, at one point of time, you had said that you would share some kind of index or metric to help with this correlation because you had said that the sales don’t correlate. So can we expect something on that so that we — this question doesn’t get repeated? I understand there’s some lag.

Aashim Relan — Chief Executive Officer

Absolutely. Absolutely. So what we are planning to do, we are working anyways with our customers. And for newer products, we are looking emphasizing on value-added sales, so that this gets cleared off once and for all. And I think we are just about there. And hopefully, we’ll have some success where then it would be a very transparent way of looking at it. So we’ll get back regarding that, but the work is underway.

Nirvana Laha — — Analyst

Okay. Thanks. And with regards to the JV for the commercial vehicles, so did we slowdown on revenues this quarter compared to last two quarters? Or did profitability somehow take a hit?

Aashim Relan — Chief Executive Officer

No. So I think we haven’t slowed down on revenues. And just because the profitability, we are just about coming into profitability right now, so the numbers are very small. I think every quarter it is INR1 crore or INR25 lakhs, INR50 lakhs. So it’s very tough to — with that base have a plus/minus on that. In terms of revenues, we’ve done fine. And there has been no such slowdown in terms of revenues. There’s always on a quarter-on-quarter basis some bit of variation that would be on profitability numbers, but nothing too much. And the base is so small, so that’s why maybe we see things like that. But in terms of revenues, we’ve roughly done the same or maybe even a little bit higher.

Nirvana Laha — — Analyst

Okay. So last quarter, you had mentioned that the engines are facing some keeping troubles because there are new engines and the traction is not as good. So any updated comment on that?

Aashim Relan — Chief Executive Officer

Yes. So these were new engines, which I mentioned. What we are working now with the OEMs is to make all our products modular, right, so that they can go into the old engine, new engine. And then the mix will not have such an impact. So the work is underway, and we are developing with our customers’ modularity, so that we can utilize the same product across engine platforms.

Nirvana Laha — — Analyst

Okay. And where would we be on that journey? Like have the prototypes, etc., have been done? And has it been a — so do we have an in-principle approval to go ahead for older engines as well? How do we understand that?

Aashim Relan — Chief Executive Officer

Yes. So we have the approval that we can utilize them modularity wise. And in terms of that, we’ve kickstarted the development work. Now, it will go through the phases of testing, etc. And we should be getting some success in that soon. But it’s too early to say yet. But in principle, yes, we are working with our customers to cross supply our products for commercial vehicles across engine families. So as long as the engine family, the size is the same, it can be modularly used. So we should get some success then, work has already started.

Nirvana Laha — — Analyst

Okay, great. And any indicative time line you’d be comfortable in sharing on when these things normally can —

Aashim Relan — Chief Executive Officer

There is no indicated time line, but it totally depends on the bandwidth of the OEMs and the testing agencies. But the work has started, and we should be getting success. Maybe as we know more on our firm time line, I’ll keep sharing, but the kick start has already happened.

Nirvana Laha — — Analyst

Okay. And any developments on the export side on either of the two subareas, subcomponents or small engine exhausts?

Aashim Relan — Chief Executive Officer

Yes. So we’ve received a very good response. In fact, we have a very high number of RFQs with us, and we have already quoted for them and are expecting some test orders. And this has also given us the opportunity to get some domestic business from these global companies as well. So on both sides, we are expecting some test orders to begin. And on the success of that, of course, then the opportunity becomes much bigger. In addition to that, now we have an established business development team focused on exports. So we should have some good traction. But still too early to say, but we have a very good amount of RFQs in the pipeline now.

Nirvana Laha — — Analyst

Okay. Just one final question. So how many employees do we have in this exports BD team, if you can share that?

Aashim Relan — Chief Executive Officer

So I don’t have a breakup of the numbers, but a specific team has been placed for export BD.

Nirvana Laha — — Analyst

Okay. Are they based out of India?

Aashim Relan — Chief Executive Officer

No, it’s right now based out of India, full time. And we are also developing a network of consultants globally. But in just our type of business, not so many people are required. It’s the caliber of the people, so we managed a good team. And we are already seeing a good traction from that. And it begins with test orders and as it develops into bigger things, then we’ll keep you posted. But it’s looking good, and I think China Plus One trend is definitely going to favor in general, India in the next couple of years.

Nirvana Laha — — Analyst

Okay. That’s very encouraging, Aashim. I have some more questions. I’ll come back in the queue. Thank you.

Aashim Relan — Chief Executive Officer

Thank you so much. Thank you.

Operator

Thank you. We have the next question from the line of Nidhi Babaria from Envision Capital. Please go ahead.

Nidhi Babaria — Envision Capital — Analyst

Thank you, sir, for taking my question. If you can help me understand the lithium battery segment and what exactly are we doing in that? Is it the subassembly thing which you are doing or still manufacturing, and what will be the revenue contribution from the same?

Aashim Relan — Chief Executive Officer

Sure. Thank you so much for the questions. In the case of the lithium-ion battery business, we are simply assembling the batteries into packs. Right now, it is in pre-revenue stage. And we have a joint venture along with Kinetic, Kinetic Green Producers, two wheelers, three wheelers and very shortly we’ll be producing golf carts. So as per the joint venture agreement, we begin the activity of simply assembling the batteries as well as the BMS and providing it to them as Phase 1. Currently, it is pre revenue, so we don’t have any revenues on this quarter from this venture.

Nidhi Babaria — Envision Capital — Analyst

And what type of opportunity do we have with this segment? Like what type of revenue expectations are there from this segment and from when can this start to contribute?

Aashim Relan — Chief Executive Officer

Sure. So as of now, we are not giving guidance in terms of any kind of revenues as this is something very new to the company, and this is a new venture. In general, as long as all testing goes well and so far, the results are very encouraging. We should start getting some marginal revenues towards the end of Q4. But we are awaiting for all prototypes to be cleared by the testing agencies. And those are underway. And of course, now there are new AIS inventory compliant norms, which our prototypes were readjusted to and the testing is going on.

Nidhi Babaria — Envision Capital — Analyst

Okay. And who would be the peers for this segment and why like — how are you going to capture the market? Is it just going to be the Kinetic JV that you will be working with them, or you will also be focusing to add clients from other EV players like Ola or anyone else?

Aashim Relan — Chief Executive Officer

So for Phase 1, our focus is on Kinetic and Phase 2 will be to look at other players also, and get either the same product, but most of them do this in-house. So a part of this product is what we’ll be targeting. But that is Phase 2. As of now, Phase 1 would be to Kinetic.

Nidhi Babaria — Envision Capital — Analyst

And what amount of investments have we done for this JV?

Aashim Relan — Chief Executive Officer

It is very small investment so far, and our projection shows that the capex requirement will be very small for this Phase 1 of it, as this is a capex-light model that we have opted for. And for Phase 1, we don’t see any major investment in the JV so far. For Phase 1 and 2, there may be, but right now, it’s too early to tell. Phase 1 looks to be a very capex-light kind of business model.

Nidhi Babaria — Envision Capital — Analyst

When you say capex light, is it just the assembly thing that we will be doing in our existing facilities or assembly will be done on the customers’ plans? And we won’t be needed to more investment?

Aashim Relan — Chief Executive Officer

Yes. We are working on both options, that both options are available. But in general, facilities is a very marginal investment because both sides have adequate space available. And that we will see based on logistics costs. But in general, capex, it’s a very asset-light model on Phase 1.

Nidhi Babaria — Envision Capital — Analyst

Also, if you can help me understand what are the growth drivers for the company for coming two, three years? And what type of margin guidance do you want to give concluding with the capex guidance?

Aashim Relan — Chief Executive Officer

Yes. Sorry, if you could just repeat your question, please, the last part of it?

Nidhi Babaria — Envision Capital — Analyst

So growth — revenue growth drivers for coming two years? And what type of margins should we see for the same coming two, three years and the capex guidance?

Aashim Relan — Chief Executive Officer

Okay. So I’ll just start with capex. For capex, we expect it to be similar to previous trends. And when the legislations come, it could be slightly higher. But it will be within utilizing our — cash will be more than adequate when it comes to capex. And now in terms of growth drivers, first on the emission vertical, there are multiple legislations that are coming up in the next two to three years, number one being BS6.2, which starts on 1st April. So we are definitely going to be maintaining our market share, may be even slightly increasing in our products, which, in general, will increase our content per car, LCV, etc. So that is going to be growth driver number one.

In addition, TREM4 and TREM5 norms are coming. TREM4 norms have already started, TREM5 norms are going to start in the next couple of years. And in the case of the TREM5 market, the entire domestic tractors will also require our emissions products. So it’s a large opening for the company from an addressable market point of view. And in this case, we are expecting a very solid market share and touchwood, we are doing very well on the business development side here. And we have already been nominated for a lot of programs here. Then the next growth driver is, of course, on the subcomponent side. So we have started this initiative to export subcomponents as well as emission systems for smaller engines. And for that, in the previous question, as I mentioned, we have good traction of BD team asset. Of course, it will begin with test orders, but then the addressable market sharply increases.

And another thing to highlight here is that our company is the probably smallest company in the world with the intellectual property required for emission products for all these segments. And hence, the addressable market is much bigger than India, and this will be another growth driver for us.

Then in addition to this, as a growth driver, we do have our suspension vertical, which is right now not addressed. So with the build by approach, we will be working not just on suspensions, but also other powertrain-agnostic products. And for that, we are looking at deploying some capital in the form of M&A. Given our balance sheet, we have a very good runway there to invest into powertrain-agnostic products.

And the last growth driver which is more on the CV side, which is the Phase 1, which we have already discussed. And we want to focus on the two-wheeler, three-wheeler segment and as we gain experience, that would also in the next couple of years will become a growth driver.

Nidhi Babaria — Envision Capital — Analyst

Okay. So if you can help me with some growth numbers specifically or some revenue guidance of, let’s say, by FY ’25, you will be reaching some x amount of revenues with all these growth drivers? And what type of margin do we expect?

Aashim Relan — Chief Executive Officer

Sure. So in terms of specific numbers, we don’t share in terms of guidance. Margins, we expect similar margins going forward as well. But no specific numbers that we give out as guidance.

Nidhi Babaria — Envision Capital — Analyst

Okay. If you can help me understand the reason for our gross margins to decrease by 127 basis points on a q-on-q basis. And similarly, decrease in our EBITDA margin, and what could — like what could lead to these margins to go down further in the coming quarters? Or the margins — if margins are going to improve in the coming quarters?

Aashim Relan — Chief Executive Officer

So I would say that best to look at auto industry margins on a y-o-y basis and not on a Q versus Q basis. But either way, there’s the depending margin, where just general product mix variance that has happened. And also, we have a lot of startup and changeover cost, which has come in this quarter because all our BS6.2 products are underway, prototypes are being made, lot of development work TREM4 and TREM5 is going out. So a little bit of that has also added. But it’s much better to be looking at trends on normal term basis to make it more accurate.

Nidhi Babaria — Envision Capital — Analyst

Okay. So for these products, what type of raw material pass-through do we have with our clients? And what type of order book do we get from the customers?

Aashim Relan — Chief Executive Officer

Sorry, I got the point of — sorry, if you can just repeat the last two lines?

Nidhi Babaria — Envision Capital — Analyst

Raw material pass-through contract, which we have with customers and order book — revenue order book from the customers?

Aashim Relan — Chief Executive Officer

From the pass-through point, generally, it is raw material as index. So it is — whether it goes up or down, generally, we get it from the customers. And in case it goes down, then we have to get back to the customer. And the second order book thing, I could not understand what you’re looking for?

Nidhi Babaria — Envision Capital — Analyst

So when, say some x, y, z client gives us order for exhaust system or suspension system, do we give us some specific order book for whatever products they are taking from us.

Aashim Relan — Chief Executive Officer

Yes, I think — I’m not sure what the question is, but in general, we get an order book, and it’s not any specific order book we get. We get nominated for a program. And as they give us guidance numbers on what would be the volumes of that program and how long will that last the program. So a general guidance is given, but then the production and the supplies is based on the demand for that product, which comes on a monthly, quarterly and annually basis.

Nidhi Babaria — Envision Capital — Analyst

Who would be our major client?

Aashim Relan — Chief Executive Officer

That is just all the automobile companies that are there are our clients, and we are consistently looking to add clients on that.

Nidhi Babaria — Envision Capital — Analyst

If you can give me any percentage breakup between any of the…

Aashim Relan — Chief Executive Officer

For guidance, we don’t mention client names on investor calls. So we will just broadly keep it at a good mix of the clients. Because we don’t in investor calls mention any client names for their confidentiality and privacy.

Nidhi Babaria — Envision Capital — Analyst

And who would be our peers?

Aashim Relan — Chief Executive Officer

Sorry?

Nidhi Babaria — Envision Capital — Analyst

Overall, for all the segments, who would be our major peers?

Aashim Relan — Chief Executive Officer

Major, who?

Nidhi Babaria — Envision Capital — Analyst

Peers, competitors.

Aashim Relan — Chief Executive Officer

Sure. And we have two competitors, American and a French company. Those are our main competitors. Both are Fortune 500 companies based out of India, but they have a presence in India. Those are our main competitors. We do have some smaller competitors, Japanese, etc., for one or two customers. But largely, we have two competitors.

Nidhi Babaria — Envision Capital — Analyst

No domestic peers?

Aashim Relan — Chief Executive Officer

No. There is no significant domestic player in our product line.

Nidhi Babaria — Envision Capital — Analyst

Okay. Because I thought suspension and exhaust system, especially suspension is being done by a few other auto ancillaries also in India.

Aashim Relan — Chief Executive Officer

I was referring to, yes, exhaust systems and emissions. For suspension, there are a few players. I don’t have their names with me, but there would be a few players for suspension. I was referring previous question to exhaust.

Nidhi Babaria — Envision Capital — Analyst

And what would be your market share for exhaust system?

Aashim Relan — Chief Executive Officer

It’s different across different segments, but a rough estimate will be 30%.

Nidhi Babaria — Envision Capital — Analyst

And what would be the market share for other American and Japanese players?

Aashim Relan — Chief Executive Officer

The balance would be split majorly between the American and the French company, and the Japanese in one or two segments we have. But we don’t have the specific numbers like this across. But I would suggest you can list down your questions, and we will then revert back to you. You can e-mail them and with specific numbers.

Nidhi Babaria — Envision Capital — Analyst

Okay. Any kind of expansion —

Operator

This is the operator. Ma’am, there are participants in queue. I’m sorry to interrupt. Please could you come back?

Nidhi Babaria — Envision Capital — Analyst

Yes, sure. Thank you.

Operator

Thank you. We have the next question from the line of Apurva from PhillipCapital. Please go ahead.

Apurva Shah — PhillipCapital — Analyst

Yes. Thanks for the opportunity. So continuing on the margin front. So even if I look at the year-on-year, so there is like at least 80 bps dip on the gross margin front. And on the EBITDA margin, it’s 1.3 percentage bps. And normally, what we said is we would be in a position to maintain the margin. But what can be the tax range, whether it would be 9.4, 10.54 or 10.5? Because on the revenue of maybe INR2,700 crores, INR2,800 crores, 1% swing maybe 28 to 30 needle [phonetic]. So Aashim, can you throw some exit line on the margin front?

Aashim Relan — Chief Executive Officer

Sure. So I think in a long-term basis, we are very likely to maintain our margins. Now on a q-on-q basis, and also on a YTD basis for this quarter, general dip that has come in is also a factor of general product mix variance. And then this quarter also has had startup costs that we have linked to the production and development of BS6.2, which will now begin production in Q4. And as well as we are working on a lot of development of TREM4, TREM5 broader prototypes. So a little bit would be there. And in general, that we are looking to maintain our margins. But of course, on a quarter-on-quarter basis…

Apurva Shah — PhillipCapital — Analyst

What could be that — it could be 10.5 or higher? I’m not concerned about the quarterly number. First, I’m just looking for the sustainable margin trend, which could be 10.5 higher or what?

Aashim Relan — Chief Executive Officer

Sure. So I’ve no formed number like this that we have as a floor or a ceiling in terms of margins. But in general, we expect to maintain, right? And there’s no specific number like this that we followed that it will be there. And of course, market scenario is volatile in general. So it’s very hard to pin down on a particular number.

Apurva Shah — PhillipCapital — Analyst

Okay. And it’s really good to hear after so long time, we are working on the index, which will give some sort of clarity to investor community. So just a clarity there. So that index would contain only value-add versus nonvalue-add, or also that would contain data where we can compare your growth versus industry growth or growth of our major customers.

Aashim Relan — Chief Executive Officer

Sure. So I think with the index, it would become more possible to track. It’s in general, very easy — I mean very difficult to correlate between exact customer numbers and our numbers and especially on a q-on-q basis on a longer-term basis, it’s easier to do. But it would definitely improve the situation in terms of transparency, and we understand that, and we’re working very hard along with our customers to come up with some formation where we could provide that. And in general, for our newer products, we are more and more trying to focus but at this point it does not come in general.

Apurva Shah — PhillipCapital — Analyst

So Aashim, why I’m asking this — like if I look at your nine months number, so as you mentioned in your initial remark, as CV grew by 43%, PV grew by 32%. But if I look at our revenue, so that has grown by 23%. I can understand like it would be directly correlated to the model. But in general, because 90% of revenue is coming from these two segments. So in general, what seems is our growth is lower than the industry growth? So probably, if you can work something on that index, that could add up to the transparency rather than like moving here and there. I hope that clears my point.

Aashim Relan — Chief Executive Officer

Sure. Understood. And we are working on the same.

Apurva Shah — PhillipCapital — Analyst

Okay. And one thing on the Eberspaecher JV. So can you give the number for quarterly and nine months and similar number for last year, year-to-date?

Aashim Relan — Chief Executive Officer

Sure. I don’t have these numbers in front of me, but we will share with you on quarterly and — sorry you said quarterly and nine months and last year, we’ll share that. I don’t have them put in front of me right now.

Apurva Shah — PhillipCapital — Analyst

Great. And just last one point on the cash utilization. So if I look at your last four, five years balance sheet. So we have been always cash-rich company. So maybe we had almost INR150 crores to INR200 crores of cash in maybe 2017, ’18 time, and which has grown to almost 3 times now, which is around INR600 crores. And looking at your run rate and you don’t require capex. So maybe we will be generating at least INR150 crores to INR180 crores of cash flow every year. So Aashim, when you have some guidance on the — how would you utilize the cash, because we have been hearing for the inorganic things since long? But at least if that also is addressed, so that could give some more clarity. Because there is no question about your strength or the execution capability. But this piling up of cash, you have to address some time, right?

Aashim Relan — Chief Executive Officer

Absolutely, right? So we currently are working towards it, right. And our full focus is — and our preference is to utilize this for an M&A opportunity for powertrain agnostic products. But there’s no such time line as we want to be extremely careful with the dates plus valuation and the [Technical Issues]

Operator

This is the operator, excuse me. Management, your line is breaking.

Aashim Relan — Chief Executive Officer

Is it better?

Operator

Yes.

Aashim Relan — Chief Executive Officer

Am I audible?

Operator

Yes. Please go ahead.

Aashim Relan — Chief Executive Officer

Okay. So yes, so it would be very easy for us to go for any deal, but we are being very careful about it. Nevertheless, we are cautious that it is a good amount of cash surplus that we are holding and we need to deploy it carefully or return it back. And for that, we have introduced a dividend policy also, which we started, I think, just about one year ago. And all things put together, I think we will start deploying this cash and also returning it also to the shareholders in a higher rate.

Apurva Shah — PhillipCapital — Analyst

Sir, I fully respect you in terms of the conservativeness and not carried away by having the cash on the book. But still, I think you have to address in terms of how would you like to utilize in terms of which area or maybe some time frame. Because when you say powertrain agnostic, it can be a vast area. So where we are focusing on maybe some EV parts or something else, or what would be the opportunity size we would be looking for. At least that will help us to understand and assess your company maybe for the next two to three or five years down the line. Because by sitting on the similar page, we want to be in the position to understand and assess the company for the future growth path.

Aashim Relan — Chief Executive Officer

Okay, sure. So we are looking to utilize it by powertrain agnostic. It means that parts components, which are cross used across different powertrain. And there are just about nine or 10 of those major parts, right? And we are in the market [Technical Issues]

Apurva Shah — PhillipCapital — Analyst

Your voice is breaking. Hello?

Operator

Mr. Relan, this is the operator. Your audio was breaking, sir.

Aashim Relan — Chief Executive Officer

Is it better?

Operator

Yes. Now it is better, sir. Thank you.

Aashim Relan — Chief Executive Officer

Apologies for the audio. So we are — yes, we are looking at the powertrain agnostic parts, which we expect there are just eight to 10 major of them. And very tough to give any concrete time line for that because right now, we are in the situation of having good cash surplus, but we don’t want to deploy it in the strong areas, right? Just for the heck of deploying of it. So being very conservative there. And we’ll keep updating as there is progress on it. And at the same time, we have established a good dividend policy also, which we will continue to focus and also returning back to shareholders in a frankly manner.

Apurva Shah — PhillipCapital — Analyst

So returning to shareholder would be —

Operator

This is the operator. Sir, we would require you to come back.

Apurva Shah — PhillipCapital — Analyst

Okay. Thank you and all the best.

Aashim Relan — Chief Executive Officer

Thank you so much. Thank you.

Operator

We have the next question from the line of Ankur Shah from Quasar Capital. Please go ahead.

Ankur Shah — Quasar Capital — Analyst

Yes. Thanks. Sir, can you give us the cash levels as on 31st December?

Aashim Relan — Chief Executive Officer

Sure. I think Puru-san, you have the exact number?

Puru Aggarwal — Chief Financial Officer

Yes. It is INR588 crores, including cash, cash equivalents and bank balances.

Ankur Shah — Quasar Capital — Analyst

Sure. Secondly, sir, on an as it is basis, considering the sales remains the same and the sales mix remains similar, what is the impact of RD for the next year for our company, like on an overall basis?

Aashim Relan — Chief Executive Officer

So on product side, content would probably increase by 10% in gasoline and roughly 20%, 25% in diesel. So depending on the mix and also the formation of RD, on how customer sales go, there would be a little bit of an upswing in terms of the numbers.

Ankur Shah — Quasar Capital — Analyst

So on an average, like is it good to assume that even if the customer volume growth doesn’t go well, or even if it stays steady, we will, on an average, grow by 10% to 12%. Is that a right assumption?

Aashim Relan — Chief Executive Officer

I think to put a specific number on it is difficult. But yes, it will be a tailwind, right? So it will be a tailwind. To what degree it’s a tailwind, we’ll have a few variables. But yes, it will be a tailwind in terms of our performance.

Ankur Shah — Quasar Capital — Analyst

Sure. And sir, just on the cash utilization front. Obviously, I heard the previous answers. But just trying to understand your philosophy whether you’re looking at Indian company, you’re looking at as a technology sort of acquisition, you’re looking at a platform. Because that is actually a question on the terminal value of the company. So if you can give some specifics because I think it’s been quite some time on the cash piling up?

Aashim Relan — Chief Executive Officer

Okay. Sorry, what specifics are you looking for?

Ankur Shah — Quasar Capital — Analyst

Like how are we planning to use this cash in the sense that are we looking for a platform sort of an acquisition? Let’s say, there is a company which is under operation, it already has OEM customers. Or let’s say, we are looking at the technology which is ready and we are ready to scale up that technology. What is the kind of mindset we are building to have these acquisitions? Or are we internally thinking of developing products and — like even if that is a possibility?

Aashim Relan — Chief Executive Officer

Sure, right. So I think the acquisition front, what we are looking at is powertrain-agnostic products. And probably from your testing, it would be more platform linked where already the product is available and there with customers rather than a very new technology because of the ticket size. And in terms of internally for our emissions vertical, we don’t require a heavy amount of capex, we do require capex, and we’ll keep funding that, of course. But we are also looking at various ways to strengthen our suspension vertical through a partnership or also to add some investments in that side.

Ankur Shah — Quasar Capital — Analyst

Sure. Thank you. All the best.

Aashim Relan — Chief Executive Officer

Thank you. Thank you so much.

Operator

Thank you. We have the next question from the line of Manpreet Aurora [Phonetic] from Aurora Wealth Advisors. Please go ahead.

Manpreet Aurora — Aurora Wealth Advisors — Analyst

Good evening. Thanks for taking my questions. So the first question I have is just trying to understand the total addressable market across PV, CV and then tractors. So out of the INR2,600-odd crores that we do today in stand-alone, how much would be the contribution of — rather percentage of the PV plus LCV?

Aashim Relan — Chief Executive Officer

Sure. So in our stand-alone numbers, it is PV and LCV. So as the revenue split, about 90% comes from exhaust, 6% from suspension and others, it’s about 4%. And when we look deeper into the exhaust numbers, about roughly 45%, 50% is PV and 45%, 55% — sorry, 50%, 55% is CV — which is LCV. The CV segment doesn’t come in our stand-alone results. That comes in the JV results.

Manpreet Aurora — Aurora Wealth Advisors — Analyst

Right. So if 90% of INR2,600 crores, it comes to around INR2,340 crores. And if I assume that we have 30% market share, then total market around comes to INR7,800 crores of a total addressable market on the PV-LCV side. And on the CV side, we were doing around INR180 crores to INR200 crores. So you said we will be breakeven at around INR200 crores. So — is that a correct understanding? And since we are breakeven now, are we doing around INR200 crores of annual run rate?

Aashim Relan — Chief Executive Officer

Sure. So to address your first part, that is — our numbers include the catalyst and the brick. So that exact math won’t work out how you have shared in terms of passenger market. But we specified [Technical Issues]

Operator

Excuse me, sir. I’m really sorry to interrupt, sir, but your audio is breaking.

Aashim Relan — Chief Executive Officer

Okay. Is it better?

Operator

Yes, now it is better, sir. Thank you.

Aashim Relan — Chief Executive Officer

Okay. So I’ll just repeat the answer. So for the first one, our numbers include the catalyst and the brick. So the exact math doesn’t work out in terms of addressable market. On the second side, when it comes to breakeven or slightly above breakeven, we are roughly at that number in value-added sales when we look at the CV side, on the JV front. And that is showcasing now that they are making a small profit as well.

Manpreet Aurora — Aurora Wealth Advisors — Analyst

Okay. And so there also, our market share is around 10% to 15%?

Aashim Relan — Chief Executive Officer

Yes, it would be around that.

Manpreet Aurora — Aurora Wealth Advisors — Analyst

Okay. And so total value-added sales, again, doing the math like that…

Aashim Relan — Chief Executive Officer

I think back-end maths maybe would be better just for the paucity of time that you can share it by e-mail, because it would then be a little bit better for me to do it offline.

Manpreet Aurora — Aurora Wealth Advisors — Analyst

I understand. So where I was going towards on the tractor side, the addressable market because in earlier calls, you have mentioned that it is equivalent to what we’re doing in PV, LCV. And we do around 8 lakh tractors today. And around, if I assume 8 lakhs of average price per tractor, it goes to around INR64,000 crores of market. Assuming a 5% of that as an exhaust system cost, it comes to around INR3,200 crores of market. So I was just trying to see where the addressable because the PV-LCV segment looks much larger than the tractor. So if you can help me understand if the market price is the same or a little less.

Aashim Relan — Chief Executive Officer

Okay. I could not infer the math on this side that you’ve done. What I would request is if you can just share this by email, because it’s very specific with lot of assumption. And we’ll get back to because I could not infer the back-end math of this rate. But if you share it, we’ll definitely get back to that.

Manpreet Aurora — Aurora Wealth Advisors — Analyst

Sure. Thanks a lot. The other thing was, again, on the tractor side. So our current product is not required for the current tractors that are out there, only when TREM5 kicks in. So we are only now on the 50-horsepower and above. And for the other ones, we are not there in the market today. Is that correct?

Aashim Relan — Chief Executive Officer

So for our product, as on pre-1 January, 2023, it was not required on any domestic tractors. But now from January 1, TREM4 has been implemented. So very small share of tractors require our product. In TREM5, roughly all the tractors will require our product, and we would be participating in the full market for TREM5.

Manpreet Aurora — Aurora Wealth Advisors — Analyst

So currently, in the 50-horsepower and less, there are existing players fur supplying exhaust systems? And if you can…

Aashim Relan — Chief Executive Officer

Exhaust system is not required. It’s not required yet on those products in the Indian market. Globally, yes there are players who do supply to that market in the countries which have this legislation already. But in India, right now, it’s not required. It will be required for TREM5.

Manpreet Aurora — Aurora Wealth Advisors — Analyst

No. So what I was trying to understand was the current tractors out there also don’t require any exhaust system or they have an exhaust system?

Aashim Relan — Chief Executive Officer

They require a thing what they call the muffler. It’s a different product. They don’t require any emission system. They have better way to put it as they don’t require any emission system like us. They do require some different kind of products like a painted muffler or something like that. But it’s slightly different, and that’s a very low value-added product. But the emission system, that will be required from TREM4 and TREM5, and largely from TREM5.

Manpreet Aurora — Aurora Wealth Advisors — Analyst

Okay, okay. Because we have been reading about players like Mangla Tubes doing a joint venture with Cornaglia and then SM Auto with Proventia with a Finnish player. And then you also mentioned that one of our friends and American competitors are also present in this space. So once this TREM5 is triggered, then do you see more competitive intensity compared to now what it is or?

Aashim Relan — Chief Executive Officer

It’s going to be the same in terms of intensity, slightly lighter and we do expect the same competitor profile that we have right now to maintain there. And for TREM5, most of the development work is already done. So we have a very good feel for the business development side on that. So we see a very similar kind of competitors. And there were some periphery parts like mufflers and all for that — which we don’t participate in. For that, I think some of these companies might be working on.

Manpreet Aurora — Aurora Wealth Advisors — Analyst

Okay. One last question on the CNG side. So again, the CNG prices coming down, we’re hearing that on the CV side, LCV and HCV also, some players talking about moving to CNG as a fuel. So how do you see that impacting Sharda in terms of exhaust systems? Positively, negatively, neutral?

Aashim Relan — Chief Executive Officer

Sure. So I think it is largely neutral. CNG in general, CNG production, what we’ve seen on the market has gone through a lot of volatility based on the prices. But most of the OEMs are preparing for all powertrain scenarios, and one of them is CNG, and we are actively working with almost all of our customers for the CNG platforms also. And it is likely to be neutral when it comes to switch over from CNG if it happens. And in general, we are seeing a lot of development work for the future and CNG coming in.

Manpreet Aurora — Aurora Wealth Advisors — Analyst

Okay. Just a follow-up on that, Aashim, because customers will — users will — are usually going to move away from diesel to CNG, and our diesel offering is relatively — has more content per vehicle. And if CNG comes in, do you see some your downward pressure there on the content per vehicle?

Aashim Relan — Chief Executive Officer

No. So CNG also has a good content per vehicle, and CNG is a newer technology. So it is hard to see what our tech platform will each OEM utilize. So it goes into the technicalities onto their engine. But in general, I think all powertrains is what the preparation is going on for.

Manpreet Aurora — Aurora Wealth Advisors — Analyst

Okay. Sir, thanks for taking my question. I’ll come back in the queue.

Aashim Relan — Chief Executive Officer

Thank you. Thank you so much.

Operator

Thank you. Ladies and gentlemen, due to scheduled time, we will take the last question from the line of Sonaal from Bowhead. Please go ahead.

Sonaal Kohli — Bowhead — Analyst

Aashim, Happy New Year. Am I audible to you?

Aashim Relan — Chief Executive Officer

Yes. Yes. Wish you a very Happy New Year. You are audible.

Sonaal Kohli — Bowhead — Analyst

Great. A couple of questions. Firstly, what would be your capex for 2023 and 2024? In the first nine months, how much of this capex is already done?

Aashim Relan — Chief Executive Officer

Sure. I think the exact capex figure for the nine months is INR59 crores, INR60 crores so far. Puru-san, just if you can just validate.

Puru Aggarwal — Chief Financial Officer

Yes, you’re right. It’s close to INR60 crores. Yes.

Aashim Relan — Chief Executive Officer

Yes. Yes. And roughly at this run rate, we are expecting to go for the next couple of quarters.

Sonaal Kohli — Bowhead — Analyst

So as far as the PLI scheme is concerned, does this take into account the capex for that? And any development or any clarity on the PLI scheme for you?

Aashim Relan — Chief Executive Officer

Yes. So the PLI scheme yes, A lot of the products which we are doing capex also come under the PLI scheme, which we approved for. But the PLI process requires a clearance from testing agencies and a lot of other activities. So more and more clarity is coming in on how to go about PLI, but that is still underway, and we expect at least one or two more quarters where till we get a finite clarity on PLI. So as of now, we are not considering anything in our books with PLI to be on the conservative side, but we are actively working on this scheme. And some of the capex we are doing do involve the products that come in the PLI scheme.

Sonaal Kohli — Bowhead — Analyst

But is it safe to assume that our larger capex can potentially happen if we have full clarity on the PLI?

Aashim Relan — Chief Executive Officer

Sorry, sorry?

Sonaal Kohli — Bowhead — Analyst

What I’m trying to understand is, once you have full clarity on the benefits of PLI and for your products, is it that the run rate for capex could potentially increase after you have that clarity?

Aashim Relan — Chief Executive Officer

Yes, we will maintain, and it could be — we’ll maintain the same only. It’s just that within the PLI scheme, definitely, we have a few products that come in. And once we get exact clarity how to go about it, we’ll be in a better position in a couple of quarters to discuss PLI. But a lot of work is going on. And PLI will be an added benefit only from a financial perspective.

Sonaal Kohli — Bowhead — Analyst

But what I was trying to understand is, there must be a minimum capex requirement for PLI, and that would mean that you may have to accelerate your capex to — if you were to pick those benefits. Or it’s too early for you to answer those questions?

Aashim Relan — Chief Executive Officer

Understood. We are within, you know we are keeping [Technical Issues]

Operator

I’m sorry to interrupt. This is the operator, your audio is breaking.

Aashim Relan — Chief Executive Officer

Yes. So we are within the thresholds of the PLI capex so far, and we expect to maintain that also.

Sonaal Kohli — Bowhead — Analyst

Sure. Thank you. Three more questions. Firstly, any plans for Noida plant sale and considering it’s near the airport, has the market value of that increased significantly? And is it more like INR150 crores, INR200 crores? Or this is a very aggressive assumption from my side?

Aashim Relan — Chief Executive Officer

Sure. So we are not yet disclosing any further valuation, but definitely, we do have that. And in addition to the cash, that does come into our calculus on M&A. But till we have a finite use for that, I think we would not go ahead with it. As you rightly noted that it’s all in prime areas, and it is — has some upside to that.

Sonaal Kohli — Bowhead — Analyst

As far the tractor market is concerned, one of the participants had asked you a question and maybe it wasn’t clear, but what I think I’m trying to say is that the size of the tractor market is roughly 8 lakh to 10 lakh. And if the per vehicle exhaust system, is it like INR30,000, INR40,000 per vehicle. And therefore, can we say the size of market is somewhere between INR2,500 crores to INR4,000 crores — some broad perspective on it. We are not talking about value-added sales. We are talking about overall sales and you would have some perspective because now you would have some trend for orders. So you have some very rough idea. We understand that it’s difficult to give an exact number and the market size could vary by 20%, 30%. But that’s normal for us to incorporate as analyst. But a very, very rough cut would definitely help all of us?

Aashim Relan — Chief Executive Officer

Okay. Understood, right. I don’t have a rough cut number prepared like this. But in general, it is a good market size. And also, that should be very positive about it and the business development cycle is looking very good. So we will definitely be able to maintain or increase market share to what we look at in the tractor market. I don’t have this kind of a rough cut estimate number, but let me work on it, and I will share this.

Sonaal Kohli — Bowhead — Analyst

So that will really be of great use to everyone. We understand that being a very conservative company, you may not want to give a number because nobody knows what that number would be in the future. But a very, very broad range also helps us as analysts to understand the size of the potential. Nobody would hold the company to that number specifically because obviously, we all understand we deal with so many other companies in the other sectors where the information is not available. So it will be great if you can share in next quarter.

Two more things, sir. Firstly, as far as cash is concerned, maybe many people have suggested, but maybe you could have a policy that you’ll keep on owned cash of INR5,000 crores, INR8,000 crores, whatever number you’re comfortable with for future acquisitions? And beyond that, you will distribute a certain percentage of your future profits till you find further uses of that. So maybe something on those lines over the next six months, maybe whatever that number you guys are internally comfortable with where, whether it’s INR1,000 crores, INR500 crores, doesn’t really matter. But a broad direction perspective, that maybe we’ll keep up to this number. So that it helps the company at the right time, having cash is always a big edge because these opportunities come unannounced and you want to have enough cash. But some broad sense. That’s what I think the other participants are looking for. They are not asking to do an acquisition immediately or in next one year, because obviously until you find the opportunity, there’s no point in spending and throwing money. And that’s a very sensible policy to have. So that was just another suggestion of mine, sir.

And as far as your data is concerned or value-added, nonvalue-added EBITDA, we’re actually pleasantly surprised because whatever we are tracking internally, it is now matching for last three quarters. So I’ll be happy to discuss with you whenever we speak next offline. But for the last three quarters, your data is exactly matching with your EBITDA at a broad level. On margins, I understand will never match because it’s a function of the product mix and pass-through of various costs. So thank you so much for this opportunity.

Aashim Relan — Chief Executive Officer

Okay. Thank you so much, and thank you so much for the suggestion as well. And we will definitely have an internal discussion and work towards that, but I appreciate it. And also on this index, as we said, we are working towards that annual sharing.

Operator

Thank you. Ladies and gentlemen, that was the last question and we will now close the question queue. I would now like to hand the conference over to Mr. Puru Aggarwal for closing comments. Please go ahead.

Puru Aggarwal — Chief Financial Officer

We thank you for your participation in our earnings call today. We hope we have been able to address all your queries. However, if you have any further questions, you can get in touch with our IR advisers, Strategic Growth Advisors. Thank you, and have a good evening.

Operator

[Operator Closing Remarks]