Sharda Motor Industries Ltd (NSE: SHARDAMOTR) Q4 2025 Earnings Call dated May. 26, 2025
Corporate Participants:
Unidentified Speaker
Aashim Relan — Chief Executive Officer
Aashim Relan — Chief Executive Officer
Aashim Relan — Chief Executive Officer
Aashim Relan — Chief Executive Officer
Aashim Relan — Chief Executive Officer
Analysts:
Unidentified Participant
Amit Hirani — Analyst
Rishabh Shah — Analyst
Abhishek Jain — Analyst
Ankur Poddar — Analyst
Ravi Naridi — Analyst
Presentation:
operator
Participants, you have been connected to Sharada Motors conference call. Please stay connected. The call will begin shortly. Participants, you have been connected to Sharda Motor Industries Limited conference call. Please stay connected. The call will begin shortly. Thank you. SA
operator
Ladies and gentlemen, good day and welcome to Q4FY25 and full year FY25 Sharda Motors Industries Limited conference call hosted by Equirus Securities. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal in operator by pressing 0 on your Touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Meera Vora from Ecuador Securities. Thank you. And over to you Mr. Voda.
Unidentified Speaker
Thank you, sir. Hi. Good afternoon everyone. On behalf of Equator Securities, I welcome you all to the 4QFY25 post results conference call of Sharda Motors. From the management side we have Mr. Ashim Relan, CEO and Mr. J.D. thakkar Group CFO. So without further ado, I now hand over the floor to Mr. G.D. dhakar for his opening remarks. Over to you sir.
Aashim Relan — Chief Executive Officer
Thank you very much, Meher. Good afternoon everyone. I extend a warm welcome to all the participants. I am joined by our group CEO Mr. Ashim Relan. I trust you have had the opportunity to review our earnings results and investor presentation which are available on our stock exchange as well as on the company’s website. Before going into the company’s financials, I would like to give you a brief overview of the Indian automotive industry’s performance in Q4 and FY25. The sector exhibited steady growth across various segments reflecting resilience amidst evolving market dynamics. In Q4FY25, passenger vehicle production grew by over 5% YoY reaching 14.11 lakh units.
For the full year, preview production crossed 50 lakh units up 3.3% from FY24. Various factors including robust demand, new launches and effective marketing strategies of OEMs have contributed towards this performance. The commercial vehicle Segment saw a 3.3% decline in production in FY25 to 10.32 lakhs units. Though Q4 showed a modest 3.1% YoY recovery. We hope FY26 will bring stronger growth supported by infrared capex replacement demand, scrappage incentives and steady rural activity aided by normal monsoon two wheeler production in Q4FY25 reached 58.47 lakh units, a 5.8% YoY increase with FY25 full year production up 11.3% to over 238 lakh units.
Rural demand now outpaces urban with growing interest in high capacity models and upcoming CNG and EV launches expected to support future growth. Though rising costs and liquidity issues may weigh on recovery. The three wheeler segment continued its upward trend with Q4FY25 production up 9.5%, YoY to 2.6 lakh units and FY25 full year reaching a record 10.5 lakh units up 5.4%. YoY tractor production rose 6.4% YoY FY25 to 10.5 0.8 lakh units and Q4 production grew by 11.7% to 2.4 lakh units. The outlook for FY26 appears positive, supported by rural development.
operator
Sir, can you hear us? Ladies and gentlemen, please stay connected. GD sir, can you hear us? Participants, please stay connected while we rejoin the management. Back to the call. Ladies and gentlemen, thank you for your patience. We have the line for the management reconnected. GD sir, please go ahead.
Aashim Relan — Chief Executive Officer
Yeah. Sorry for this inconvenience. I will now shift the focus to the operational and financial performance of the company. On a consolidated basis, we reported revenues of 749.85 crores in Q for FY25, a YoY growth of 6.6%. For the full year FY25, our revenues stood at 2836.57 crores. YoY growth of 1%. Our gross profit for the quarter came in at rupees 191.18 crores reflecting growth of over 4% over Q4 FY24. And for the full year, gross profit stood at 740.32 crores reflecting 11% increase year on year. Yearly growth of over 11% in gross profit, which is actually the better indicator of our growth performance, outperformed the industry growth.
EBITDA for Q4FY25 stood at Rupees 100.79 crores, showing 1.4% growth compared to the one in the same quarter last year with an EBITDA margin of 13.4%. On a full year basis, EBITDA was rupees 396.37 crores, up 9.7% over FY24 with a margin of 14% in FY25 versus 12.9% in FY24. Profit before tax for the quarter stood at rupees 100.63 crores. After accounting for our share in profit from joint ventures and Associates for FY25, our PBT stood at 419.97 crores. On similar basis, our profit after tax was rupees 83.94 crores for Q4FY25 and rupees 314.92 crores on full year basis.
During FY25, we achieved several key milestones on the organizational and business development front. After successfully setting up global business vertical in FY24, we have initiated the establishment of the lightweighting vertical in FY25. We have also secured significant new orders for these newly established verticals. Besides growing business in existing verticals, some of these orders as you know we have already announced in last couple of calls with you. And a few more have been added in the new investor presentation which is already with you. On shareholder front, we had successfully carried out buyback program during FY25 which you are aware of.
In the recently concluded board meeting on 24th of May, the board has approved the issue of bonus shares in the ratio of 1:1 in addition to dividend of rupees 32.5 rupees per share. All these steps are towards our commitment of rewarding shareholders of the company. With this, we can open the floor for Q and A. Thank you.
Questions and Answers:
operator
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchdown telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles participants. You may press star and one to ask the question. The first question is from the line of Amit Hirani from Philip Capital. Please go ahead.
Amit Hirani
Yeah, thanks for the opportunity. Yes, sir, I wanted to understand the reason for increase in the working capital requirements for this fiscal. Hello, good evening, this is Ashim Desai. So I think mostly working capital requirement is fluctuating. Maybe the reclassification and current assets could be what you’re looking at. And G.D. san, you can just touch upon that.
Aashim Relan
Yeah, thank you very much. So broadly the working capital continues to remain around the same levels from last year. The only difference is our treasury investments which were classified as non current based on their duration last year have been classified now as current assets. And therefore this difference, barring this, these are broadly in line with last year.
Amit Hirani
Okay. And sir, if you can update us on the TRIM 5 final date of implementation, please Any update on this one? Sure. So I’ll take that question. Trim 5 till now remains to be notified by the government for 1 April 2026. However, there’s always a possibility of time adjustment but it’s difficult to guide because the government has not made any changes so far. So as we get the updates we’ll keep sharing but given that the government has so far kept the date as April 2026 we will go with that. Our customers seem to be well prepared.
However I think they are also in a very similar position and would working along with the government to get some clarity on that. Have you received any kind of an order for this tremfi? Yeah, so we’ve received, you know, almost all orders that we had to in terms of the target for Trim 5. However, there is an ongoing conversation between the tractor industry and the government which we are not privy to and we will go as per, you know, whatever our customers finally share with us in terms of development and business award. That is at a very mature stage I would say.
However, you know it remains to be seen how this goes with the government and the tractor companies. Right. The lastly on the CAPEX outlook and where we are likely to spend the same for next two years. If you can write please. Sure. So roughly I think last year we did a net capex of 50 gross capex of 75. This year we would probably do around 75 in capex and probably the year after that also we would be at 75 because we have a good amount of capacity coming in into light rating as well as our customers are more moving west in the west of India so we are adding some capacity there as well.
All right sir, I’ll come back in the give.
Aashim Relan
Thank you so much.
Amit Hirani
Thank you.
operator
Thank you participants. You may press star and one to ask the question. Next question is from the land of Rishabh Shah from Baltarak pms. Please go ahead.
Rishabh Shah
Thanks for the opportunity. So my question is we had spoken about our efforts to grow exports to stampings and subcomponents for exhaust system and the second opportunity we were exploring was emission systems for small gensets and other small engine applications. So can you tell what issues have we faced and why we did not. Why it didn’t scale up?
Aashim Relan
Sure. Thanks for your question. Yes, so I think we’ve not seen faced any issues as such. In fact our export business is set to scale up. We have received a substantial award which we had announced previously for emission components for commercial vehicles and that will go into production in Q4 of this year it is for the world’s largest engine manufacturer as well as a genset manufacturer. So it is a substantial order win and we do have a very good pipeline in terms of business development which is in various stages. So there’s no issue as such.
And we are very hopeful that this vertical will grow much faster than industry. And of course there is a lead time. So maybe you’re referring to the lead time that there is a lead time between the business development cycle starting and then the orders flowing into revenues eventually. And as we were new to export, so we had to set up a team and then establish new customers and so on.
Rishabh Shah
We had talked about this in the quarter one of the financial year 22. So like it’s been three years. That is why the question was what problems we faced while scaring up the exports.
Aashim Relan
Sure. So from a timing side I guess it took more time. I think quarter one of 22 was also Covid still happening. Right. So I think the COVID settlement down and getting into the business development cycle that definitely took some time higher than anticipated. And given how geopolitics environment has been, it has been more, it has taken more time than anticipated. However, this is like an exponential kind of curve that you first need to establish customers, they give pilot orders and then after that you know, it can grow fairly fast. So maybe on the timing front from 22 to now, probably these would be the reasons and as a lesson learned definitely for us was to have a full team dedicated to this and to establish this as a separate vertical.
And that’s something we’ve done so that that team is fully focused into the export vertical. And we have also recruited some people in the US for that.
Rishabh Shah
And my second question is we had given a guidance of 80% revenue from off highway CV and LCV. Where are we on that journey?
Aashim Relan
Sir? Sorry, we had given a guidance of 80% revenue from off highway PV and LCV. Where are we on that journey? So we are roughly at now 50%, slightly under 50% and with the successful export order which has come from commercial vehicles as well as the expansion in the tractor market, energy sensitis, we should be at that 80% number. Currently we’ll be under 50%. We are roughly 45% coming from commercial vehicles as well as the 5A segment and others. And out of the balance 55% also roughly 9, 10% comes from our lightweighting vertical which is powertrain agnostic.
Rishabh Shah
So yes, just could you tell me how, what was it three to four years back and how much it has Changed right now.
Aashim Relan
Sure. I don’t have the three to four years number offhand, but we can share that with you offline and it’s definitely the revenue stream has gone up.
Rishabh Shah
Okay, fine sir, thank you.
Aashim Relan
Thank you.
operator
Thank you. Next question is from the line of Abhishek Jain from Alpha Credit Advisors. Please go ahead.
Abhishek Jain
Thanks for opportunity and congratulations set of numbers. If we see the FY25 numbers, the MV growth is just 1% so just wanted to understand what was the reason for the underperformance and in FY25 and going ahead as that 55% revenue comes from the passenger vehicle and 40% from the CV where the commentary of the most of the OEMs are not very encouraging. In that case, what are the key triggers you have Then you can outperform versus industry growth.
Aashim Relan
Sure. So the best way to look at our underlying growth is gross profit and not the sales number and that’s because of the catalyst and that has a big impact in catalyst prices and mix. So if you look at it, our gross profit growth year on year has been 11% versus the PV industry growth at roughly 3.3.5% and actually LCVs have had a negative growth year on year. So if you blended look at it, it’s roughly a flat year for the industry while we’ve grown at 11%. So it’s a substantial outperformance and sales is not a good indicator to look at our numbers.
But if you look at the gross profit numbers you will see a substantial outperformance of roughly now coming to the PV industry. I think that’s better for the OEMs to guide on because they definitely know more the customers. So I won’t get into that for us how we are looking to outperform this year. If you look at it, we have won some new lightweighting programs. So that will come in between Q3 and Q4 which we’ve shared in our investor presentation. Then our new plant, the suspension plant which we had put jack and plant three that is coming into production.
So that should really start getting into revenues. Then we also have won an order for temperature control pipes which is an adjacency for the CV norms which is now starting revenues in Q3 as well as our export business starts in Q4. And then of course there’s some PVLCB launches. So that’s how we would outperform or hopeful to outperform more than industry but specifically how each customer would do and so on. I think those customers will better be.
Abhishek Jain
Able to buy so how much incremental revenue will come from the new products and the new business mean in FY26 if you can throw some more light on the new business mean and increase in the content for vehicles because of the change in the norms and all these things.
Aashim Relan
Okay. So this year there are no change in norms barring CV norms are coming. And in the CV norms we are added a product which is temperature control pipes. And the balance what I have shared is light weighting which is a septic content and exports. So there is no content or car change per SE in FY26 from that our core domestic business. But definitely lightweighting. Add some content in the new orders as a specific number on an annual basis. That’s something very difficult to hide out.
Abhishek Jain
Okay. And if you can throw some more light on the new business name.
Aashim Relan
Sorry, if you can just.
Abhishek Jain
If you can throw some more light on the new business.
Aashim Relan
Win. Yeah, so that is already shared in our presentation. The presentation that we’ve shared. We have outlined all the new business wins which are from the new verticals. And that is available on the presentation.
Abhishek Jain
Okay. How was the segment wise product mix in FY25 like that, suspension control arms, emission controlling suspension control arms, all these. You wanted to understand the segment only.
Aashim Relan
Sure. So roughly 88% came from emissions, 9 to 10% came from light weighting. And the balance 1, 2% is others.
Abhishek Jain
And going ahead which could be the main growth of the company. Now the 88% comes from the emission. So in FY26 there won’t be any change in the content per vehicle because of the no knocks change will take place. But in FY27 because of the CH change in the many change in the lots of the many segment. How do you see the growth going ahead in this particular segment?
Aashim Relan
Yeah, so Already guided for FY26 I think one very important thing is not to just look at our growth based on norms anymore. Right. And for FY26 already just mentioned the lightweighting programs, new suspension plants, temperature control pipes, the export business starting and so on from FY27 onwards or a longer term outlook that definitely our lightweighting vertical will scale up. And that’s with a combination of market share gain within the existing control arm business plus some customer wins as well. As we are working hard organically with R and D as well as through JVTA to add content that we can offer between in this segment as that’s a very large segment.
Then of course the exports growth. Currently Exports is roughly 2% of our sales and that is definitely going to go up. And then the emission domestic market as we mentioned, that is TREM5 as well as temperature control pipes as well as BS7 coming in. And that would increase the addressable market that we have within emission. And then we are also actively participating in the localization efforts to look at M and A and where we can have some powertrain agnostic components coming in as well as entry into some exponential growth synergistic markets.
Abhishek Jain
Okay. And my last question on the inorganic opportunity. Are you looking for any inorganic opportunity to medium term to scale your business?
Aashim Relan
Yes, we are looking at it. Right. And we have a significant cash surplus. Though when we look at inorganic, I would just like to break it into three things which is technical agreements, joint ventures and acquisitions. We have a separate team who’s working on that. And for an acquisition per se we would have a high bar. But for the other two definitely is something that we could do sooner. And we are looking at powertrain agnostic components as well as anything that would give us an entry into some of the exponential growth synergistic markets that we might identify.
Abhishek Jain
Okay, thanks. That’s all from my take.
Aashim Relan
Thank you. Thank you so much.
operator
Thank you. Participants, you may press Star and one to ask a question. Next question is from the land of Ankur Poddar from Swan Investments llc. Please go ahead.
Ankur Poddar
Thank you for taking my question sir. And congratulations for decent set of numbers. Sir, my first question is regarding the follow up of the last candidate question, sir. You know when you say that we should look on the basis of gross profit growth. So the new business which you are giving guidance about, you know, right. Weighting business plus new suspension, plant, temperature control components or exports that will drive our growth for the next financial year. So if I am in the next financial year, what kind of growth should I look? Should I look applying growth or should I look gross profit growth?
Aashim Relan
Sure. So I would advise for the time being to look at the gross profit indicator like we’ve been sharing. However, we are working out on an alternative reporting mechanism so that there is more clarity given now that the mix will also include components coming in from lightweighting exports, adjacencies and so on. So we are working on that. And maybe over the next quarters we will also share a further accurate mechanism of looking at it. Okay. So yeah.
Ankur Poddar
Does the new business will also have a similar or a better gross profit? If you can throw some light on that, give some indication, sure.
Aashim Relan
So I could not talk about gross profit for the new business in terms of just comparing it. So maybe you know, better way to look at it is would it have a similar or similar or would it have a similar ebitda? Right. And it is too early to tell right now. And because there are three, four distinct businesses that are coming in, I think each will have a different profile. So as these businesses start maturing and contributing more to the revenues, we’ll keep sharing indicative profiles for them. We are of course very, very conscious of capital allocation and we are striving to have businesses on high.
Ross. And that is definitely one parameter. But as they mature, we’ll keep sharing because within these businesses also there are different profiles.
Ankur Poddar
Okay, my second question is regarding the export. We got USD 7 million on an annual basis which we will start from next year I suppose and lifetime order in USD 40 million. So sir, any incremental order wins you are seeing in your near term vision that would be a significant which you can share. And what kind of opportunity for the same product line you are seeing going forward in the near term. What is our strategy? How do we plan to scale the export vertical?
Aashim Relan
Sure. So of course in terms of near term wins, we have a good pipeline and we’ll keep sharing as we make the wins. So we will keep the disclosure more on when we get the business in hand rather than talking about projections. But we do have a good pipeline. Now in terms of our strategy, if you look at it, we have a separate vertical that is focused on growing the export business. We see a very big opportunity on it. Just the component business that we have won, the CV emission component business. It’s a starting point.
It’s a very large market. In fact, we estimate our addressable market in Europe and US is about 1.1 billion just for these kind of components. It’s a very, very large market. What we have received is, is let’s say a starting point and we are very hopeful to scale up with it. Our strategy for growing this is one to have a dedicated team who works on it, who is engaged separately with a different profile of customers and to focus on parts where we have a lot of strength within our domestic business or there are a lot of synergies.
So we are focusing only on areas where we have a strong competitive advantage. That’s why we have segregated it just to focus on CV emission components, Tractor emission and muffler systems, genset emission and muffler systems, heat shields and temperature control pipes when it comes to exports. And we have a very good R and D available for similar products. And we are backward integrated as on now also on our domestic business. So we are playing on our strength of backward integration, a very core understanding of these products because most of them we do domestically and we are very hopeful that all this put together would work out very well for the export sector.
Ankur Poddar
Okay sir. In terms of our, you know, competitive intensity. So when we got this new business of seven million dollar canvas run rate. So are we replacing, you know, Chinese supplier or on supplier from you know, emerging economies or are. Are we replacing the traditional suppliers?
Aashim Relan
Yeah. So this business in particular is a new generation of engines and a new generation of emission norms. And as a strategic move by lot of US as well as European companies, but especially US companies is to diversify out of China. Right. And to at least have two options available other than China. And that for products which I mission linked generally only happens when there are new engines or emission norms changing. So luckily there is a lot of change going on in emission norms globally and there’s a lot of change that will come from 2026 to 2030.
So a lot of new sourcing opportunities are out and we are utilizing this trend which is called as China plus one. And this existed way before, you know, the 4th of April. It’s just something that has come more to light after all these tariff news that are there and as well as, as well as these emission norms changing and replacing a lot of the supply chain which is concentrated mostly in China. But there would be other parts also where this supply chain is exist.
Ankur Poddar
Okay, one more in the last call you have guided that or you share some thought that there is some CD5 norms which are expected from this quarter. 2 so where are we sir, in terms of, you know, can you throw some light in this a delay in implementation of these norms as well?
Aashim Relan
These norms have come in and it’s just that the inventory is there in Q1, Q2 with the construction equipment companies and they will clear that off. So and that’s why we have said that the real production will really start from Q3. So if you refer to the new presentation slide 18, the CV adjacency business which is coming in which are the temperature control pipes that is coming linked to these norms only. Now our strategy for this has couple of parts to it. One, that we are utilizing adjacencies, specifically temperature control pipes to establish business relations with customers.
These are new customers to us. And generally if you look at this industry there are only, you know, mostly global players only were there in India also. So they have a different supplier base. Most of them are in fact planning to import these products. So they Were not interested in full systems. But we utilize the first phase of the implementation of the CV norms to get into temperature control pipes. So that’s one to get into the adjacency domestically. Second, by establishing this relationship it substantially increases our odds to participate with them in the localization effort of the complete systems.
And we are very hopeful that they’ll begin that also once these norms settle in this year and they’ll begin the development cycle of that. So we are hopeful to get some of that business. And then third, these customers in fact are huge globally and they’re huge buyers just of temperature control pipes, heat shields and so on. These guys buy it in very large quantities. So with these new customer relationships they that are established as well as getting entry into the domestic site, we are very hopeful that this would open up the wallets and business opportunities for them globally as well.
operator
Thank you. Sorry to interrupt you Ankur. I’ll request you to come back for a follow up question. A kind request to all the participants. Please restrict to two questions per participant so the management can address all the questions. Next question is from the Mir Vora from Ecoda Securities. Please go ahead.
Ankur Poddar
Yeah, hi.
Unidentified Participant
So my question was on ERW tubes which you have mentioned in the PPT as well that we have backward integrated. So just wanted to understand whether how much would this be as a percentage of our product cost and like would it be completely backward integrated right now or we are outsourcing it also?
Aashim Relan
Yeah, so. So regarding the pipes that we make, I don’t have offhand what percentage of our product for the pipes be as of now we use it completely for captive consumption. We do have capacity to sell this outside. However this is also one of our competitive advantages. So we do not want to sell this or at least in the similar profile outside. And that’s not a focus area to sell pipes outside side when it comes to the backward integrated stainless and AC Ms. Pipes that we make. So it’s completely for captive consumption but definitely with some value add.
We are looking at them for the export market and temperature control pipes. The base of that is these pipes as well. Okay.
Unidentified Participant
And sir, in terms of like cost savings, what would be like, can you quantify how much cost saving would it be like when we are backward integrated versus if we procure it from outside?
Aashim Relan
Yeah, I would not want to quantify it as a number because one it’s not a steady number and second it would not be right to disclose such a.
Unidentified Participant
Okay. You mentioned that because of the competitiveness of the industry we won’t be looking at out, you know, selling it to the outside players. But like with this value add you mentioned in terms of temperature control pipes are there any other product lines also where with certain value add we can you know supply or use our extra capacities in as such?
Aashim Relan
Yeah. So these are very specific pipes. Right. And there are other applications and that is always under consideration. It’s not a core focus area right now. However, there are possibilities in the future to look at such applications. But the core application does come into temperature control pipes as well as general exhaust system pipes and temperature control pipes alone is a big market and it also has very few players globally that successfully to.
Unidentified Participant
Okay, so that’s all from my side.
Aashim Relan
Thank you.
operator
Thank you. Next question is from the line of Ravi Naridi from Naridi Investments. Please go ahead.
Ravi Naridi
Thank you very much sir.
Aashim Relan
Very good commentary. You are telling in this con call. What is our CAPEX plan for next.
Ravi Naridi
Two, two to three years and whatever joint venture we are doing what great growth we expect in from company in next few years.
Aashim Relan
Sure. Thank you. So first in terms of capex we’ll be in the range of about 75 crore for the next two years. In terms of capex, in terms of joint venture we have one major joint venture which is with Purumaka which is focused on heavy commercial vehicles. Right now it is a very small contributor and in fact it was loss making for many years. We have turned it around together with their team and now it has stabilized. We are expecting some growth in that segment. However, it is not going to be a major contributor so far to overall consolidated pack.
Once we do have some significant development that we will share. But there’s some good news that they are also looking at localizing or rather moving some international model to India. And if that happens and that could happen soon it would add to some revenues within that joint venture as early as this year. But it is not yet firmed up. So once it’s firmed up I would than formerly definitely sir. One more thing. One side you max buyback, another side you are issuing liberal bonus. So do not understand this logic of management. Sure. I think all.
All the let’s say actions are to benefit overall shareholders. And so buyback was last and this year we are doing a bonus and giving a healthy dividend as well. Okay, thank you.
operator
Thank you. Next question is from line of list chain from Astute Investments. Please go ahead.
Unidentified Participant
Hi, thank you for the opportunity. You know firstly I wanted to understand on your PV side on the exhaust system wherein obviously we’ve not Been reporting on the value added sales. Can you help me understand on the Catalyst side, what exactly are we procuring for the OEMs and how big is that part of our overall, you know, procurement?
Aashim Relan
Sure. So the Catalyst goes into mainly all the products. Right. And there are different models with different customers and now within customers, even within the programs that different models. So the Catalyst is nothing but the precious metals and how it is put in a honeycomb. And there are probably a couple of suppliers for that in India, but all are international companies. So for some customers we utilize the free of cost model where it comes to us, it goes into a part, but it is given free of cost. So it’s neither in our revenues, neither is it in our cost.
And for some customers and within the customers also now some models, they request us to buy it and but they do not pay any profit or anything on it. It’s simply inventory carrying costs. So it doesn’t really add any value apart from inflating the cost as well as inflating the sales. Now as a policy, probably one, two years now ago, we wanted to minimize the model where we have to buy the Catalyst because there’s not much that it adds to our value and then it, you know, causes these issues of not being able to look at sales as a growth indicator.
So we did go on that journey in the RD norms that came in 2023. We didn’t take any business. Maybe there was one business that we took with this model of buying Catalyst and over time this would become a smaller and smaller part of our revenues. However, if a customer really requests that they would like to follow this for the ease of doing business or whatever other reason, then we would not say no to them because it is basically a neutral to us this morning.
Unidentified Participant
Okay, thank you. Second question is obviously BS7 is going to implement in some time, but what do you see the scope there? And you know, obviously we would have been developing product. So what is the increase in cost, you know, we can expect from the BS 6.2, you know, after the RD norms which we had introduced.
Aashim Relan
Sure. So your question is around what is the likely content increase in BS7?
Unidentified Participant
BS7, yes.
Aashim Relan
Yeah. Okay, so it’s still too early to say exactly how it will go because it also depends on the decision that customers make on their engine side and engine maturity side as well. And different customers generally have different strategies. However, in Europe now we are seeing and we have, you know, looked at various models of Euro 7 now which are coming in and there definitely there is a content Increase. How substantial the content increase will depend on how the Indian OEMs eventually adapt to it. So maybe right now would not be the correct time to give a guidance on the content increase.
Apart from that, it will increase. Right now the quantum will depend really on how it is adapted within India. And once we get more clarity on that, I’ll share. On the order 7 side, however, preparedness is very well ahead in BS7 Euro 7 because now that our focus is also on the export site, we get some earlier access to how the technology is evolving than we did before. So it is an exciting opportunity. But for India, we’ll wait for clarity before we share some guidance.
Unidentified Participant
Okay, Third question is on the export side, you know, we’ve been trying looking at the export markets and increase exposure since last two, three years. And you mentioned initially because we did not have a full fledged team. So how do you see, you know, from three years now to till now the changes which we have brought and how do you see the turnaround time? Right now you mentioned the lead time is higher, but obviously three years we would have put in, you know, bid for many hours team. So how do you see the turnaround and how do you see this going? Because currently based on the orders we have, it would be it contributes around 6% of our revenues.
How do you see this growing and scaling?
Aashim Relan
Sure. So yeah, definitely one of the lessons that was learned is to have a full dedicated team and also to have people in the ground in the key markets, which we have done. And there is a lot of focus as well as investment in team like the headcount that works now on global business or exports is much higher. So we are very hopeful to get many more business orders. Right. And as we get them, I keep updating like we did for the previous one. And the previous order itself is very significant. Right. And with the successful implementation of this order alone, we could get a good business coming in to exports.
So I think couple of things are working to our advantage now when we look forward. One is definitely an augmented team that focuses on it. Second, the gestation period also brings us forward into the business development cycle. So whether it’s two years, three years, whatever you want to put. Third, we do have a substantial win now, right. Which is like the chicken and the egg. So we do have something that is coming in. Right. And four, very, very importantly, which cannot be underestimated is the changing emission norms globally. Right. It is the biggest window for a company like us.
If you see a company like us even on the domestic site, when Emission norms change, domestic tea. We did really well. Right now we are seeing a global window open up. If you map out from 2026 to 2030 for various changes coming globally and that is an opening that is coming in terms of export opportunities because that is the time when OEMs look to resource. It is very, very difficult to get into an existing program because it’s so sticky and the emission business because it’s compliance driven and it has a huge test cycle. But when that opens, and that opens with a general principle globally, especially US Customers which are doing to diversify out of China, at least to have a Plan B for China both put together, definitely excite us.
But we have to be humble and we have to show some more good business. So I’m hopeful for that in the next couple of years as well.
operator
Thank you. Nilesh. I request to come back for a follow up question, a kind request to all the participants. Please restrict to two questions per participant and join the queue again for a follow up question. Next question is from the line of Sonal Gupta from HSBC Asset Management. Please go ahead.
Unidentified Participant
Yeah, hi, good evening and thanks for taking my question. So Ashim, just on the trem5 norms because a lot of the, I mean like whoever we’ve spoken to on the tractor OEM side seems to suggest that it’s unlikely that it’s, I mean, happening in its current shape and form. And obviously the OEMs have been trying to, have been negotiating with the government to try and get it postponed. So my question here was that if, even if, I mean like currently our share of business in the tractor is almost zero. So even if the norms are not implemented, let’s say in the worst case scenario, do we still get an incremental share of business and it’s still a growth driver for us.
Aashim Relan
Yeah, so thanks for the question. So as you’re discussing with the factor OEMs, right, and they are the best judge and the government is the best judge. So it remains to be ambiguous because there’s no clarity and you know, every couple of months, you know, there is some conversation either left or right. Right. That’s why it’s very hard to really see where and how it settles right now. Coming to tractors itself, it’s a very small part of our revenues. But whether or not the norms get implemented in April 26, we do have complete access to this technology.
Right. And we have had access to it for the last one year because with a lot of these OEMs, we are also supporting them on the export programs. And their export programs require similar emission norms. So utilizing again our experience in this, all the technology that is built up the global market is open as well. And that will definitely be in contributor to our sales from the global side.
Unidentified Participant
But I mean like currently are we supplying for, I mean like so is, is it. It’s a low single digit number, right? Like tractors?
Aashim Relan
Yeah, it’s a very small percentage of our revenues currently which is the export business that we are doing via the OEMs. Right. So the OEMs export the tractors for the markets which require these regulations. They utilize our products.
Unidentified Participant
Right. But I mean like what I was trying to understand is that, I mean incrementally, even if these norms don’t come through, I mean on the existing products, can you supply something? I mean can you win a share of business which might be with other suppliers currently?
Aashim Relan
Yeah, so we could always do that. Right. When you’re looking at that, could we do something from a localization perspective? Definitely we could do that. More importantly, lot of these same products are required globally also. So could we cross sell that there’s an opportunity there to cross sell it. Taking business away from a competitor is not definitely our focus. Our focus is more on to gaining new opportunities and new businesses. But could we gain some market share vis a vis that these OEMs export more to these markets? Definitely. So when we look at the macro trend of will more tractors be exported out of India? I think that’s a definitive.
And as more tractors get exported out of India, there would be the requirement of these products. And these products are anyways also required in the end markets by some manufacturers who are not making them in India. And we are approaching them as well as we have full access to the technology as well as we have the products which we already sell to the domestic guys for the exports.
Unidentified Participant
Got it. And just on I mean like some numbers. So I mean there’s a increase in depreciation this quarter and I mean like on a full year basis it’s up 20%, I mean for Q4, so just. And then also you’ve seen, I mean uptick in other expenses. So I don’t know, I mean how to read this because I mean obviously it seems that there’s certain amount of margin contraction in this quarter even though gross profits have grown at 4% but EBITDA is growing at 1% and I mean that Pat is obviously impacted by other things, but depreciation has also gone up.
So if you could just talk about some of these things.
Aashim Relan
Sure, sure. So I’ll Just take it into two things. I guess your question. One is depreciation and second is other expenses, right? So depreciation is nothing but our new plant coming in, right. For lightweighting and that’s, you know, adding to the depreciation and the capex cycle and that is on the depreciation front, other expenses. Now other expenses includes cost of consultants. It includes even higher labor charges. It’s a mix of various things. But for us, where the main drivers have been that there are consultants now that we have in us specifically who are supporting us on the global business side.
We are participating a lot on the M and A front, right. Which we were not doing before. And the major driver of this has been also minimum wages which get baked in some of them into the other expenses because other expenses includes the higher labor charges as well. Now looking at margins, I would say to avoid looking at margins on a Q1Q basis or a quarterly basis and look at the longer term trends and definitely on the longer terms the margins have been good. If we look at it on the annualized basis, FY25 versus FY20.
Unidentified Participant
But sorry, just on this, would there be some startup cost related to these new plants? And that’s why we’re seeing slightly higher and this will sort of normalize next year. I mean what we’re seeing in this.
Aashim Relan
Quarter there definitely is startup costs also with new plants and there are a lot of new avenues that we are getting into. So there would be. So if you look at the new avenues that we are getting into, whether it is global business, whether it’s strengthening M and A, whether it is investing into light weighting, these are of course temperature control pipes. These are of course going to have some degree of startup cost as well. That would come in.
Unidentified Participant
Got it. Great. Thank you so much.
operator
Thank you. Next question is from the line of Karthik from CIASH Advisors. Please go ahead.
Unidentified Participant
Yeah, good evening Ashim, thanks for the opportunity. A couple of things. I’ll read out the questions and you can answer in order. One is in terms of your export orders, would you know the exact destination? And I’m asking this in the context of all the tariff mess that’s currently floating around. So any clarity on that, whether this would be the customer paid duty basis or how exactly would that be? That’s one second would be. You said pure M is looking to shift one particular model to India. Would this be for the Indian market or for exports? Some clarity on that.
Last question on control arms, is there visibility for you to improve your market share here from the current 1 1/2% in India. These are three questions. Thanks.
Aashim Relan
Sure, sure. So just if you can repeat the first question.
Unidentified Participant
About the export destination, you know, before the.
Aashim Relan
Okay, sure. So the destination is us. There is some commonality we understand from the customer between the Europe and US production, but this destination is to the US which form it will be done in? I think it’s starting in Q4 and it’s very early to tell or comment on that. Even I don’t have clarity on that. Whether due to your question was on duty or something like that. Right? Yes. So I don’t. Yeah, yeah. I think that is something which is not a conversation also right now with the customer. The customer is also mature and taking a much, you know, longer term view to first look at where this will stabilize.
Right. It’s anyone’s guess in where, what tariffs, etc. Will be. So they have committed no change to us. Right. As of now and they don’t expect any change also. So let’s see. I think we don’t know this duty structure and so on part, but the customer doesn’t anticipate any change and they have said let’s settle all this, let’s settle down the global thing. Every day there’s some new news. Right. And then that discussion would begin. Your second question was around Abhijavi. So the localization. Yeah. So in an international customer is wanting to develop an engine from India and export it worldwide.
Right. So currently our partners do it for them at some part of the world. So they’re exploring the potential to make it in India and then to have a localized supply chain because it gets attached to the engine. Still too early to say but as we get some more clarity we’ll share. But we’re very hopeful for some conclusion.
Unidentified Participant
If I may interject, would this be housed in the joint venture, the opportunity or would that.
Aashim Relan
Yeah, yeah. Everything would be. That would be in the joint venture. Yeah. So if it happens it would be joint venture. Yeah. And then the control arms. Right. So the light weighting. So definitely we do see to increase further market share in control arms. You know, we are just getting going in lightweighting the way I would like to put it. Right. We are also like we have established for global business, we are establishing a vertical for lightweighting and our strategy there is one definitely to increase market share in control. However, the larger opportunity is to look to add content.
Lightweighting is a very, very, very large segment. Right. It’s honestly one of the largest segments right now out there and it is Going through dramatic change. It is going through dramatic change. Change that these parts have never gone through before. I think this is, you know, first time so many changes are happening to all the parts when it comes to what we put under lightweighting. So a lot of our focus is to now add content. How can we offer more than control arms? And there are a lot of new age technologies that have come about, right? There are plenty now to even talk about.
So we are utilizing some organic R and D efforts, plus looking at augmentation through joint ventures TAs on how we can strengthen the technical side of it and add content as a result. And that could be even larger revenue driver than just simply getting market share within control arms. But market share within control arms is definitely also something that we are focusing on.
Unidentified Participant
And if I may just add this addition of other opportunities through partnership route that you spoke about. Would this be a next 12 months kind of initiative or would it be like say a 36 month kind of a thing that we should bacon from a thinking.
Aashim Relan
It’s very, so very from a thinking perspective. You know, it’s a noun, right? We are, you know, we have a separate team that works on MNA now. We never had that. It’s the last 12 months only where we have a separate team and we are very actively engaged with various partners now. How it, you know, comes about, it’s very hard to guide. It can be 12 months, it can be five months, it can be 24 months. Because when it clicks, it also has to be in the right terms and conditions. However, our eagerness and want is definitely to do this and we see a very large opportunity and lot of players who are not in India for it and very few players who have these new age technologies right now present in India.
So we are excited about this opportunity, how it comes. That’s something we just have to see, you know, when it takes. Great, great.
Unidentified Participant
Thanks very much and very best wishes.
Aashim Relan
Thank you. Thank you.
operator
Thank you very much, ladies and gentlemen. We’ll take that as a last question. And now hand the conference over to the management for closing comments.
Aashim Relan
Thank you very much. We appreciate your participation in our earnings call today. We trust that we have addressed all your queries. Should you have any further questions, please feel free to reach out to our investor relations advisors, Ernst and Young. Thank you and have a pleasant evening. Thank you very much.
operator
Thank you very much. On behalf of Equodus securities limited. That concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.