Sona BLW Precision Forgings Limited (NSE:SONACOMS) Q3 FY23 Earnings Concall dated Jan. 24, 2023.
Corporate Participants:
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
Kiran Manohar Deshmukh — Group Chief Technology Officer
Rohit Nanda — Group Chief Financial Officer
Vikram Verma — Chief Executive Officer, Driveline Business
Analysts:
Gunjan — — Analyst
Chirag Jain — Catamaran — Analyst
Chirag — — Analyst
Hitesh Goyal — CLSA — Analyst
Amyn Pirani — — Analyst
Jinesh Gandhi — Motilal Oswal — Analyst
Kapil Singh — Nomura — Analyst
Presentation:
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
[Starts Abruptly]
In fact, we did an internal analysis based on the J.P. Morgan report and found that in the next three years 98 new EV car models are going to be launched in US, Europe and India. And our driveline products will be present in 21 of them.
Now coming to our proudest and perhaps the single most significant achievement this quarter. We have won a new order for electronically locking differential assemblies or EDS, which is the single largest new order win in the history of our company. This is for an existing EV customer and is our most advanced and highest-value driveline product. If you happen to visit us at Auto Expo, you may have seen this on display. This win has come after a lot of effort, a lot joint hard work between our customers and our own engineering teams. In addition, we’ve also won another differential assembly program for electric cars for the US market from a different existing customer. And what is is remarkable in both, is that both programs must start in less than 12 months. We chose two things. One, the urgency of people to launch EV models and also how much our customers rely on our agility in going from design to production quickly. Like we are showing agility in product development, we’re trying to also show agility in dynamically changing our strategic approach. So we had shown this about a year and a half ago when we did our first call. We have changed this a little to cover both passenger and commercial vehicle applications. Now in driveline, which is on your left-hand side, you can see that we already cover most segment on both sides. And this is a point I want to make because oftentimes we get asked on things like content per vehicle and how much is the differential assembly. But the thing is it depends on the application and the torque. So differential assembly value alone per vehicle can range from $30 at the bottom to almost $300 at the top of the passenger vehicle side. And on the commercial vehicle side, it can range from just about $20 to almost $900, going to the top of range.
So our strategy is to cover the whole spectrum, for sure. But focus more on maximizing our penetration in the top three segments of both PV and CV. PV, we are already fairly significant. I think CV also we intend to increase our penetration, while also being present in and benefiting from the higher volumes of the lower power segment.
In motors, on the other hand, we cover only the lower-end of the power range today, which is high-volume but medium margin. I mean, we produced 120,000 traction motors in 2022. And given that only around 630,000 e-2-Wheelers were sold in India in that time, that should comfortably puts us among the top players, if not the single largest player in India. But that’s not the end goal for us, it never was. That is only the beginning and we intend to cover all sales. The focus in the next three years at least will be on light passenger, light commercial vehicles and electric buses, that’s going to be our focus. And in time, we hope to advance to larger passenger vehicles and commercial vehicle, but not in this current phase. So that’s the strategy on electrification.
With that, we come to our net order book, which has increased on the back of these four new EV programs and five new non-EV programs. Those are mostly in the driveline products for commercial vehicles. This increases by 35% year-on year and our order book increases 60% over just last quarter. And we reached finally INR238 billion at the end of Q3. Now the large size of the EV programs have also increased the proportion of EV in this order book and now it’s 73%.
We’ve also updated our customer reach metrics at the end of 2022, and are exceptionally honored that today we serve seven of the world’s top 10 passenger vehicle OEMs. These are three of the top 10 truck makers and seven of the top 10 tractor makers of the world. We are also privileged to supply to four of the top 15 electric two-wheeler makers in India. And five of the top 15 electric car makers in the world. This reach ensures that we are well-diversified and a part of a structural growth trend as electrification increases and not just dependent on one or two customers. With this, we neatly come to diversification. The weakness in Europe the first nine months means that the revenue share from hybrid and micro hybrid has been low as compared to previous years. On a longer-term track, the increasing share of BEV and decreasing proportion from ICE seems to be continued.
Geographically, things have been far more interesting. As you can see, Europe and Asia, which used to constitute around 40% of our revenue last year were reduced to only 25% for the first nine months. Now despite that, our exceptionally strong growth in the US, backed by new programs and new order wins and the strengthening of the Indian market have more than made up by increasing to 45% and 29%, respectively.
Now, relative market shares can be tricky, like I said, I think last time also, especially in the times of big growth. So when analyzing these numbers, also look at the absolute numbers. Like how are Europe revenue has in fact increased on a Y-o-Y basis in Q3. There is little — little change in product mix or vehicle segment mix from the last quarter. So not too much to add here.
So with this, I turn to our Group CTO, Mr. Deshmukh, to update us on technology. Over to you, sir.
Kiran Manohar Deshmukh — Group Chief Technology Officer
Thank you, Vivek. Good evening, ladies and gentlemen. Like in the past, I’m sharing our technology road map with you. Every time a new product — product under development is commercialized, we move it from the white area to the blue zone. Last quarter, for example, our breakthrough next [Indecipherable] we have set move to the blue semi-circle, reflecting its commercial launch.
This quarter, our newly developed electronically locking differential assembly, or the EDL, debuts for the high-end electric SUV for North American market. The EDL is an advanced technology used in the high-performance and off-road vehicles to enhance stability, traction and safety. An EDL is a type of differential that uses electronic actuators to lock the wheels on the left and right sides of the vehicle together. This allows the wheels to rotate at the same speed, providing maximum traction and stability. The differential is controlled by a computer that receives input from various sensors, such as the vehicle speed, steering angle and yaw rate. The computer then uses this information to determine when the differential should be locked or when it should be unlocked based on the driving conditions and the drivers inputs. The technology enables better performance in off-road and inclement weather conditions.
The EDL, as you would have seen from what I’ve said before, is a critical component of the car and must integrate seamlessly with the rest of the vehicle systems. So this development required a significant amount of engineering and testing to ensure that the EDL performance effectively, while minimizing the impact on the vehicles energy efficiency and meeting regulatory requirements. In this particular case, the customers launch schedule was highly aggressive and our engineers work closely with the customers team to make this happen. This demonstrates our engineers’ abilities to work collaboratively and quickly developing a highly-engineered product and the customers’ trust in their capabilities to do so. On that note, I hand it over to Rohit to cover financial update.
Rohit Nanda — Group Chief Financial Officer
Thank you, Mr. Deshmukh. A very good day to you all. It’s my pleasure to share our third quarter and nine months results for financial year ’23 with you. Q3 was our best quarter in all three parameters of revenue, EBITDA and PAT at INR685 crores in revenue, INR186 crores in EBITDA and INR107 crores PAT.
Our BEV revenue grew by 29% this quarter, whereas our non-BEV revenue grew by a robust 42%, which is more than 2 times of the underlying market growth of 18%. Our EBITDA margin has improved to back about 27% and it was 80 basis points better than comparable quarter last year, primarily due to better product mix. Absolute EBITDA has grown by 43% compared to a revenue growth of 39%. On a sequential basis, EBITDA margin is up by 200 basis-points mainly due to better product mix. Profit after tax at INR107 crores is higher by 45% compared to adjusted PAT reported for the third quarter during last year.
During the nine months of the year, our revenue grew by 22% to INR1,932 crores, our BEV revenue grew by 31% to INR467 crores and constituted 25% of our total sales. Our non-BEV revenue grew by 20%, while light vehicle market in our three largest markets of North America, India and Europe grew by only 1% over the same period. For the nine months, our EBITDA grew by 17% to INR494 crores, EBITDA margin percentage was lower by 120 basis points, largely due to arithmetic effect from increase in RM prices in-spite of the cost pass-through. The PAT for the first nine months grew by 18% to INR276 crores compared to adjusted PAT of INR234 crores for the same-period last year. Margin transmission between EBITDA to PAT is better due to lower finance cost as compared to the previous year. This brings me to the slide on the key ratios. Our value addition to employee cost ratio continues to improve further and it is now 6.4 times, showing that the rate of marginal growth in the value addition is higher than the growth in employee cost of the company.
Our return ratios of ROCE and ROE continue to be strong above 25%, though these are a bit lower from the past two year levels, primarily due to higher working capital and ongoing capital expenditure for revenue to be generated in future. Return on equity also had a base effect due to primary equity raised in the IPO during the last financial year. Out net debt continues to be negative reflecting the balance sheet strength to raise debt in order to support future growth. Working capital turnover ratio has improved to 4.1 times, whereas fixed asset turnover ratio has come down a little bit to 3.9 times mainly on account of new capitalization done during the year.
Last but not the least, we are glad to share that our first sustainability report has been published in December. This can be accessed on our website. For now I’ll just briefly touch upon the key ESG goals that we have set for ourselves. Our environmental goals include providing solutions for low-carbon mobility by increasing revenue from products meant for electric vehicles to 45% of our revenue by 2026. Besides this, improving resource efficiency in our operations through a reduction of specific energy consumption by 4% by year 2025 and 8% by year 2030. Besides this, we have also taken targets for reduction in Scope 1 and Scope 2 emissions.
Apart from environmental goals, we have also said other ESG goals like social and governance goal, which include maintaining highest levels of quality and health and safety environment for the employees, be an equal opportunity employer, create a meaningful impact through our CSR programs and ensure highest level of corporate governance through zero tolerance for corruption and non-compliance. I will encourage you all to access our sustainability report on our website.
And with this, we have now come to the end of Q3 earnings presentation, and I’ll now hand the proceedings back to the Nomura team for Q&A.
Questions and Answers:
Operator
Thank you so much. We will now open the floor for the Q&A session. [Operator Instructions] We will take — the first question is from Gunjan. Gunjan, your line is unmuted now, kindly go ahead.
Gunjan — — Analyst
Sure. Good evening, sir. Thanks team for taking my questions. Two questions from my side. Firstly, on the — on the order backlog. Clearly, this is an impressive, but you know we’re adding new programs, we’re adding new customers. What I’m just trying to get more color on is, Slide 9 where you give your programs which are under serial production. Now, though that number has been sort of at 10 for last couple of quarters. I you can give us some color on when do we see some of the new commissioning — the new wins that you spoke about today, you mentioned that is towards the [Technical Issues] something, which flows through in the next couple of quarters and what segments would that be? So some color on how we should see the order book translating into revenues over the next three, four quarters? That will be the first question.
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
So Gunjan. First of all, hello. Second, you know our business is long-term in nature. It’s a long-term game we’re playing with long-term players. Three quarters, two quarters is not the way to look at programs. Even if a program, and you covered auto for a while. So 10 means, this 10 is not just in serial production, it is at its maximum. So it is at the fully ramped up thing. No program can go from start to fully ramped up in just three quarters. So it doesn’t happen. So it will be hard for me to comment on that. We will keep looking at it every quarter and we should see. But in the next four, five quarters we should see a lot of program becoming active even if they are not fully ramped up. I mean, if you look in our BEV revenue, right? That should give you some — some indication that they are obviously ramping up, which is why numbers keep going up.
Gunjan — — Analyst
Okay. But you do expect like, few of these which are — which are in the order book start commission or start contributing. I understand that ramp up will take time, but is there visibility from the next three four quarters perspective?
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
Even in this quarter there are four or five that have started, but they have not come to a stage where it is fully ramped up. And that how much time it takes, that’s — one, that’s not in our hands, right? That’s in the customers hands. And that can take a while. But yeah, lot of them are starting. Actually this quarter a lot of them are starting.
Gunjan — — Analyst
Okay, got it. And Vivek, the second question is on this whole — the EV competitive landscape that’s been changing globally, right? I mean, we all saw the way the EV makers are looking at price cuts and aggressively pricing the models, and in that context when you’re looking at your opportunity, any — how do — how are we approaching this now because does this mean there is more cost pressures as a supplier given the pricing from the OEMs are getting more aggressive? And I don’t want to name the customers or OEMs here, but I mean clearly there has been very aggressive pricing. And does this aggressive pricing mean that the market shift could accelerate? So how are you guys approaching this change in the narrative on the EVs?
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
So there is a lot of noise out there not in our segment. With most of our customers we worked and I know who you are talking about, but we have worked with most of them for decades. Behavior between customer and supplier that you have long-term relationship doesn’t shift overnight. Market news shifts overnight. Yes, capital markets react overnight but relationship don’t change that much, like business models don’t change that. We have — we do not see any any significant impact on that front, to be honest at all. Acceleration in electrification, yeah, look if people cut prices, of course, it can be accelerated. However, the biggest shift will come when battery prices actually go to the level they should be, which is much lower than today. Actually, last couple of years is when the battery prices have plateaued. That’s what has kind of made electrification penetration slower in the last couple of quarters that it was. That is the big one that I will ask you to look at.
I mean, I can understand in your role you come up across news every day and you have to see that changing. We, let’s say we win any order, right? We’ve been working on this for the last two years on the pricing and on the product development. It doesn’t suddenly change overnight just because the news item comes. So, nothing — I mean, you know our numbers for the last 22 years. We get asked this question a lot. But do you think auto would ever a market — its customers were like, no, no increase your margins a lot, we don’t care about cost. I mean, when will auto not cost competitive. It isn’t got to do with the EV world. It was always this, which is perhaps why we are there in making the kind of margins we do.
Gunjan — — Analyst
Okay, got it. Just last clarification and then I’ll join back the queue. The CDL product that we’ve showcases at Auto Component Expo, and if you can give some color on how the cost of this product is different from the different from the Differential Assembly that we’ve been doing so far? I mean, just broad approximate numbers would help.
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
Cost or price…
Gunjan — — Analyst
I mean, content value. Let me let me put it very simply for you because we obsess over content value, so how would it be different from the conventional Differential Assembly that you were doing?
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
It is at the highest end of the range I indicated to you. In my commentary I had indicated that Differential Assemblies can go from 30 per vehicle to 300 in passenger vehicle side. So it is towards the highest end of that range.
Gunjan — — Analyst
Okay, got it. All right. Thank you. I’ll join back the queue.
Operator
We have next question from Chirag.
Chirag Jain — Catamaran — Analyst
Yeah, just following up on the EDL thing, one second. Vivek, can you just talk about the — how many, like what is your competition in this EDL and how much time does it take to make this product? So what are the additional components that go into making this compared to a standard differential assembly that you do? And in terms of future expansion of this product as well, where all can they be applicable in future.
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
So, I’ll let Vikram answer this because to be honest it is his achievement not mine. And second, again, we should not look at each product and say how much can be multiplied by. The thing is, at any range we can do, and the higher-end is what we will try to service. We wont even stop at EDL, right? We are going to do the whole transmission eventually. So everything that you see to try to predict how our future will look in a year or two, it will not work because if you did the same exercise two years ago you would have taken a $3 differential and multiplied by a large number. If you had taken it four years before that, you would have taken $18, $20 per gear set and tried to multiply by that number. Every three years who we are as a business and what we can do in capability terms itself will change. By the way, Vikaram?
Vikram Verma — Chief Executive Officer, Driveline Business
Yeah, I understood. I understand your questions.
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
Yeah.
Vikram Verma — Chief Executive Officer, Driveline Business
Well, I think the present differential which can have six to seven main parts can go up to 15 plus parts to make an EDL. So the content within the differential actually goes up twice. That’s one. And of course, the complexity of making is quite different than the normal differentials which we are making or EV vehicle for pass car, a low-end pass car application to a very-high end pass car which use a CDL, offloading application it is required. So, as I said, it will be twice in numbers or parts going-in. That I think was your question?
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
So competition, Vikram, and what is unique about our EDL, I think you should speak on the design.
Vikram Verma — Chief Executive Officer, Driveline Business
From a design perspective, I think the EDL which we have made is quite different than what competitors have been making for ICE. And so from that angle, it is very different. I can’t explain you in terms of how it functions. The end function is same, but the construction is very much different. So that’s the uniqueness of what we have made in collaboration with customer.
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
Yeah, and this was done jointly with the customer because EDL existed in the ICE world, but they didn’t really in the EV world. So to make it with the customer was a challenge there. We’ve done that. The traditional competitors were GK and Dana. I think these were the two who were known for EDLs in the past. But this is different because it’s made only for — like they say born electric. This is a born born electric EDL. So in a way it’s a different product. And again, we’re trying to be one step ahead of global competition. I mean, if we have to become a globally we have to always be doing different things. So that’s the goal of this.
Chirag Jain — Catamaran — Analyst
And how much time did it take us to make this?
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
From beginning to now?
Chirag Jain — Catamaran — Analyst
Yes.
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
Yeah, Vikram?
Vikram Verma — Chief Executive Officer, Driveline Business
I think we have been working for last two years.
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
Yeah.
Chirag Jain — Catamaran — Analyst
Okay. Got it. And we also have another order for deferential assembly for electric cars. So, could you talk about it as well that, is this a product and also the question that I was asking on EDL was also the same that not so much from numbers prediction but just to understand the applicability of EDLs. Will it be — will the future high-end electric cars also be using EDLs according to you? Is that a requirement.
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
Big UVs and pickup trucks.
Chirag Jain — Catamaran — Analyst
Okay. So most of the electric SUVs and pickups will using it. Alright.
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
Its a better way than doing what — I wont name the company who is trying to do with the quad motor configuration. This is a better way to achieve the same end result.
Chirag Jain — Catamaran — Analyst
Okay. And does it have any software components as well?
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
No. I mean, software is at the OEM end. We just have the electronic actuator. I think I showed you at the Auto Expo what that has, but not software.
Chirag Jain — Catamaran — Analyst
And this will be over what period this order is — the order book that we have assumed is over what period?
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
So the order books end is 10 years, as you know. I mean, we only give for 10 years. So obviously it is less than 10 years because it begins in — yeah, but this is an open order, so as long as the vehicle.
Chirag Jain — Catamaran — Analyst
And by when can we hit the peak revenues here?
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
That’s a good question.
Vikram Verma — Chief Executive Officer, Driveline Business
And I think it kicks off from the end of this year and should grow over next two years, 2026 probably it will be.
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
Yeah, calendar ’20, calendar ’25 or ’26 calendar should be peak.
Chirag Jain — Catamaran — Analyst
Yeah, okay. Thanks, Juliet. You can continue with the queue.
Operator
Okay, thank you. Next question is from Chirag. Your line is unmuted now. Please go ahead.
Chirag — — Analyst
Yeah, thanks for the opportunity. I had a question. Hi, Vikram, and hi everyone. I had a question on a follow-up actually, you answered some of my question on EDL. See, my basic question was how and why an OEM would adopt EDL over a differential assembly. One, the pass car or be it commercial vehicle. That is a broad question. And second, it there a regulatory push required for you to achieve the penetration of EDL?
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
Okay. So, I’ll let [Technical Issues] But EDL is a differential assembly. What — the name is electronically locking differential assembly.
Chirag — — Analyst
The reason I’m asking was the price — the cost difference or the value difference as you indicated, from $30 to $300 at the top of the spectrum. Means, it involves good amount of value content jump from a OEM perspective also. OEM is spending $30, may not be willing to spend $300. So what will drive then — you partly answered SUVs and pickups, but why and how could they transition to even lower vehicles on a car or commercial and [Indecipherable] is required for this to other cost of penetration?
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
Okay, so I’ll answer that. I think you trying to ask that this is the new product that will go in everything. No, it won’t. So EDL is required, if you want me to have a four-wheeler drive as a beginning, right. Why $30 versus $300 is also how many driven access, right?
Chirag — — Analyst
Yeah.
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
So, two. The first thing you have to say it’s actually 30 to 150, in that sense.
Chirag — — Analyst
Yes.
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
In that case, it is the class of vehicles. So if you don’t have an off-roading four-wheel drive requirement, you don’t need any, like you don’t need an EDL for a city car.
Chirag — — Analyst
Yeah. Fair point.
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
Which is why I said, SUV and pickup truck is the target segment, which is why [Technical Issues] In that if you look at the highest segment, you will see the [Technical Issues] also says that.
Chirag — — Analyst
And I presume regulatory push is required for an option, right, which is natural progression the way it happens in ICE.
Kiran Manohar Deshmukh — Group Chief Technology Officer
Not really. This is more a OEMs desire to give you better handling of the vehicle. [Technical Issues]
Chirag — — Analyst
Yeah.
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
It is almost all, I’d say [Technical Issues] globally SUVs and I’m taking global definition of SUV, not the [Technical Issues] their crossover is also coming. Almost all of them, if they are SUV, they will be four wheel drive, and they’ll have even now. So it’s a nice product also.
Chirag — — Analyst
Yeah. And with last extension. Are you looking to enter the ICE market also given that you have EDL now and there will be requirement in ICE market, or you are not looking at ICE market at all?
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
Not at all because look, I mean we started making differentials in 2016 for EV. There is no reason to go supply to a market that will start shrinking. So, I think the opportunity just doesn’t make strategic sense.
Chirag — — Analyst
Yeah. My second question was on this market share data that you shared, you know for differential and autos. Is it possible to indicate what is the global denominator in that? because it will be helpful to us for us to understand what according to [Indecipherable] was the global scene given that there have been so many appearance last year. If you can share that number according to the — what was the industry volume that they’ve calculated?
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
Sorry, Chirag, your voice actually is slightly — I’ve got, like you said market share numbers.
Chirag — — Analyst
Am I audible now? so what I am saying is, if you can share the industry data that — or the industry volumes to calculate the market share for the full-year?
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
So, that’s widely available. I mean 80 million vehicles sold last year, CY ’22 and I think [Technical Issues] That should be okay. We’ll send it to you, but I think that’s [Technical Issues]
Chirag — — Analyst
[Technical Issues] ‘ll take it offline, I’ll take it offline. Thank you.
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
[Technical Issues]
Chirag — — Analyst
Okay, okay, great.
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
Data source eventually [Indecipherable]
Chirag — — Analyst
Yeah. Yes. Thank you. Thank you very much for the opportunity. I will come back for more questions.
Operator
We have next question from Hitesh Goyal. Hitesh, your line is unmuted now. Please go ahead.
Hitesh Goyal — CLSA — Analyst
Yeah. Hi, Vivek. Hi team. Good afternoon. So my question is more on the PLI scheme. So can you give us some sense on what’s happening on the PLI view, already applying to the government on the — attention that you are getting. But as per I understand it is not coming into the P&L as of now, right. So when do we expect that, how is it getting calculated because somewhere I read the government is looking at value-add to really compute that rather than revenue, which was the first we saw PLI scheme. And whether you will be passing on to the OEMs, because that will be a competitive advantage, especially for Indian automakers, suppliers, right? So whether some part of that will passed on or you have sufficient pricing power to hold on to that gains?
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
So I’ll let Rohit answer it. Our accounting treatment policy etc., is clear. Till we get it we are not accounting for it. So we haven’t made any provision or any adjustment for PLI. But Rohit?
Rohit Nanda — Group Chief Financial Officer
Yeah. So Hitesh, to the best of our understanding, the scheme continues to be linked to the revenue. So value addition criteria is basically the qualifying criteria, the domestic value addition. So to the best of our understanding, so far we have not — we were called by the Ministry also recently to have a meeting and all, but we have not heard about any changes from them. And like Vivek already clarified, we don’t intend to start taking the credit in our books till the time we actually get it, which will be in the next financial year. So when the next financial year is also something that we don’t know as of now. We’ll probably keep everybody informed as and when we get more information from the government, but this is where we are.
Hitesh Goyal — CLSA — Analyst
And just to be clear, what is the average incentive on revenue which you are looking at? I mean, on your portfolio?
Rohit Nanda — Group Chief Financial Officer
So, there are two factors there. One is that it will be limited to the products which qualify under the scheme, that I’m sure you understand. The percentage also is graded depending upon the turnover we achieve. I think my sense is that at the peak, over the years, because; one, there is an EV sort of top-up that we are likely to get. Overall, over five years I think the peak rate that we will hit will be I think around 15%. We may start at around I think 11% or so.
Hitesh Goyal — CLSA — Analyst
And is there a necessity to pass on this to OEMs or you have, because you’re a [Speech Overlap]
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
Because you know who our customers are. There is no customer if — I mean there is only one customer who is above 5%. Most of the customers in India are left in 2% of our revenues. So, bargaining power is not the same as it is everywhere. Second, most of our Indian customers, we are not getting any incentive [Speech Overlap] two wheeler alone, not much there.
Hitesh Goyal — CLSA — Analyst
Yeah, got it, got it. Thank you. Thank you, Rohit and Vikram. Thanks.
Operator
We have next question from Amyn Pirani. Your line is unmuted now. Please go ahead.
Amyn Pirani — — Analyst
Yes, hi. Can you hear me?
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
Hi, Amyn.
Amyn Pirani — — Analyst
Hi. Thanks for the opportunity and congratulations on the order win on the EDL. Some clarification on that. So; a, this order, so basically is this for an entirely new product or are you like replacing someone or are you giving a better product to something that you are already supplying? So some color there would be helpful.
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
So new product for this customer. Obviously, the product exists in ICE vehicles of different carmakers but not for them. For them, this is the first EDL.
Amyn Pirani — — Analyst
Okay, okay. And the other order that you — that you declared today. Obviously, the amount is significantly lower. Is it because is it for a significantly lower tenure or is it just because it is relatively lower-value add product compared to the EDL? So just wanted to understand that.
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
So, Amyn correct. So it is lower value, lower-volume and lower tenure. All three.
Amyn Pirani — — Analyst
Okay, okay
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
So small cars, I mean, so in a ordinary quarter that would have been a highlight win, but small cars — and that’s the point I’ve been trying to make to a lot of people that you win a big SUV with a big value, in money terms you get way more than you get in volume terms. Here even the volume is decent. The values were little at one axle driven. So it’s just not a big car. So you don’t get.
Amyn Pirani — — Analyst
Great. Most of my other questions are answered. So thanks a lot. I’ll come in the queue.
Operator
We have next question from Jinesh Gandhi. Jinesh, your line is unmuted now. Kindly go ahead.
Jinesh Gandhi — Motilal Oswal — Analyst
Yeah, am I audible?
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
Yes, Jinesh very much you are.
Operator
Yes, yes. Thank you.
Jinesh Gandhi — Motilal Oswal — Analyst
Congrats on the EDL order. Sir, can you indicate what is the share of business? Would it be 100%? Are we single source supplier for that product for that particular model or it’s a share of business?
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
No, Yes. So yeah, single source.
Jinesh Gandhi — Motilal Oswal — Analyst
Okay. That’s great. Secondly, when you look at our Asia-Pacific ex-India revenue, that market has been under tremendous pressure, if I have to put so in terms of — share has been falling partly because other markets are doing well, but on an absolute basis also the geography seems to be coming down. So what is happening there? Why are we seeing decline in that geography, particularly I mean presume that’s China.
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
Correct. So China plus South East Asia. But the decline mainly on the ICE sectors, we are starter motors as a percentage of vehicles sold is getting lower. So that will — if you have only one product and that is what the plant in China does right? That’s a starter motor plant. So yeah there’s a time where we’ll have to figure that out that what is point of continuing in a particular market that’s electrifying fast. So that was bound to happen.
Jinesh Gandhi — Motilal Oswal — Analyst
Okay, okay, and..
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
China is electrifying far faster than India. So India, your starter motor business or even in US can continue for 15 years. But in China maybe five years, six years, it may be all electric.
Jinesh Gandhi — Motilal Oswal — Analyst
Okay, okay. And are we seeing increased penetration of our driveline products in China or that is difficult?.
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
I think we’ve mentioned this even right from the IPO time that our strategy is North America, Europe and India to retain because we already have very-very high market share, and grow in US and Europe. Now, this why our market increases, we grew quite a lot in North America. Europe is still very under penetrated. I would say, low-single digits is what would be our differential amount itself. Asia, especially China the biggest problem is there is a duty delay. So if I export, there is a duty. And if I want to go setup there, we don’t see that as a better choice. And right now if you have a lot of room to grow in North America and like Europe, like lot.
Jinesh Gandhi — Motilal Oswal — Analyst
Right.
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
It is also multi-market parameter.
Jinesh Gandhi — Motilal Oswal — Analyst
Right, right. Got it, and lastly on the P&I part, I mean given that only few of our products would be qualifying for that. Can you talk about what percentage of our current revenues would be eligible for PLI scheme in the sense, in terms of the portfolio mix would be eligible for PLI scheme. And similarly if you can do it at the order book level that will give us some indication of how we stand in terms of our qualification for PLI.
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
So. I do think that a true assumption that only a few of our products are qualified, will be qualifying is not the thing because the list is out. So all EV differential assemblies, all EV traction motors. And Rohit, IMCM will also qualify, right?
Rohit Nanda — Group Chief Financial Officer
We are getting clarification. But right now our EV revenue largely would be a good indicator as of now.
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
Yeah. Actually that’s, Jinesh that’s a very good one. EV revenue, so whatever is EV is pretty much automatically qualified.
Jinesh Gandhi — Motilal Oswal — Analyst
Got it. That’s very helpful. Thank you. Thanks and all the best.
Kapil Singh — Nomura — Analyst
We have a couple of questions in the Q&A box as well. So one of them is from Pragya Shah. You have added a lot of new products in the last year. Have you seen any new customers or existing customers ordering these new product apart from first initial customer for whom you have initially built these products? The reason is to understand ROCE on these products.
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
Yeah, Rohit, you can take this.
Rohit Nanda — Group Chief Financial Officer
So I think the number of customers and the products, actually we disclose every quarter. So if you’ll see the number of customers and number of orders they been going up. So there are repeat. I shouldn’t say repeat, but there are different customers buying same or similar products. And what was the second part of the question?
Kapil Singh — Nomura — Analyst
So basically if there are — the question here implies that if there are more people ordering the same new product, then maybe the ROCE on the product, will be better. So, is that how it works? how do the ROCE on the new products work?
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
[Indecipherable] to that philosophy, number one. I think if your product doesn’t make in the first batch itself, it doesn’t start making good money and return, you shouldn’t do it. So we don’t follow or subscribe to that philosophy. If we have a single order also it will be ROCE positive and it will be in the range that we have been doing business. That is the discipline with which we do anything anywhere. We don’t price — I think its a — as you guys would have also found it in other companies is, let’s first introduce a low price and then when volumes increase we will get higher price does not work in auto. Whatever is the price you set, it can only go down from there, it can never go up from there. And economies of scale. Yes, they come in, but not that much.
However, if you just add — look at the latest order that we — I mean traction motors is the new product category, right? We went from no customers to seven, eight customers in almost two years. If you take any of the ones, but you have to go at least two, three years because for a product to go from when we announce it to SOP is one year. From SOP to other customers seeing it and inquiring and then trying to build that would be another year minimum. So two to three years is how much time it takes. But anyway, I mean economic value wise it should start working out from product one.
Jinesh Gandhi — Motilal Oswal — Analyst
Yeah. And then the last question from my side. Rohit, you talked about the fact, or Vivek you also that we should be able to hold on to the margins around these levels. So if you could just talk us through in the context of EV revenue mix will be going up. And what do you — what are you seeing on the raw material cost and also the motor business mix will also be going up. So when you put these three variables together, what are you seeing?
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
Just there. There are more. So there are many more but I wont confuse you, which is why I had said very simply. At least for the next four, five quarters we see 27 and 15 as sustainable levels. If nothing changes drastically in — alloy steel does not go up further or aluminum can go up further. However, I think that is also potential for good deals, which is equal, which is alloy steel can come downwards. Which it should. Geographic mix and product mix, we kind of have a idea of what the next four quarters are. It looks like it should hold at this level. There are other variables also by the way, but I’m not confusing the matter. I’m just trying to give a straight and simple answer, then it should be continuing. Nothing else. I mean, interest etc., doesn’t really affect us that much. So I don’t think there are the variables that play.
Kapil Singh — Nomura — Analyst
Okay. Great. Juliet, I’ll hand you back for the closing remarks.
Operator
Thank you very much. We will now conclude this call. If you have any follow-up questions, please feel free to email your Nomura sales representative or corporate access. Thank you everyone for your time. Over to the management for the closing remarks.
Vivek Vikram Singh — Managing Director and Group Chief Executive Officer
Well. Thank you, Juliet. Thank you, Kapil. And thank you everyone for attending. I’m sure you have other places to be, so I won’t take long. Thank you.
Kapil Singh — Nomura — Analyst
On behalf of Nomura [Technical Issues] management as well as all the investors for joining us. Thank you very much and we can close it now. Thanks Juliet.
Operator
Thank you.