Sona BLW Precision Forgings Limited (NSE:SONACOMS) Q4 FY23 Earnings Concall dated May. 03, 2023.
Corporate Participants:
Kapil Singh — Head of Consumer and Digital Commerce Research, India
Vivek Vikram Singh — Managing Director and Chief Executive Officer
Kiran Deshmukh — Chief Technology Officer
Rohit Nanda — Chief Financial Officer
Vikram Verma — Chief Executive Officer
Analysts:
Gunjan Prithyani — Bank of America — Analyst
Vimal Gohil — Alchemy Capital — Analyst
Nitij Mangal — Jefferies — Analyst
Sat Mohan Gupta — Sona Comstar — Analyst
Sonal Gupta — — Analyst
Hitesh — — Analyst
Presentation:
Operator
Okay, good afternoon, ladies and gentlemen, good day, and welcome to Sona Comstar Q4FY’22 Earnings Group Conference Call. [Operator Instructions].
Some of the statements by the management team in today’s conference call may be forward-looking in nature and we request you to refer to the disclaimer in the Earnings presentation for further details. The management will also not be taking any specific customer-related questions or confirm or deny any customer names or relationship due to confidentiality reasons. Please refrain from naming any customer in your question. I will now hand over the floor to Mr. Kapil Singh, Head of Consumer and Digital Commerce Research India and Lead Auto Analyst at Nomura. Kapil, you please go ahead.
Kapil Singh — Head of Consumer and Digital Commerce Research, India
Thank you, Deanna. Good day to everyone. To take us through Q4 FY23 result and to answer your questions. We have with us Mr. Vivek Vikram Singh, MD and Group CEO; Mr. Kiran Deshmukh, Group CTO; Mr. Sat Mohan Gupta, CEO, Motor Business; Mr. Vikram Varma, CEO, Driveline Business; Mr. Rohit Nanda, Group CFO; Mr. Amit Mishra, Head, Investor Relations; and Mr. Pratik Sachan, DGM, Corporate Strategy and Investor Relations.
I will now hand over the call to Vivek for his opening remarks and the presentation. Over to you, Vivek.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
Thank you. Kapil and Deanna. Welcome everyone to the Earnings call of what has once again been our best quarter ever. I think I’ve said it a few times, but I hope I never get tired of saying this. So best quarter ever and the best financial year ever in several aspects of our business. But first, as is our policy, when talking to the company’s owners, our shareholders, we will begin with the challenges. So although inflation seems to be cooling in general, there hasn’t been much change on the cost side on our largest purchased commodity which is alloy steel. It remains at elevated prices. So hopefully that too correct soon. Apart from that, as highlighted in the previous call, the EV two-wheeler industry. There was a requirement to get to vehicles homologated again due to the new battery standards. Also there is challenge around lack of clarity and uncertainty on FEM2 subsidy. And that too is a constraint to growth.
On the positive side, I guess there is a lot more of that this time. In financial terms, we achieved the highest revenue, EBITDA and net profit in the Q4 FY23. We closed the financial year with a stronger order book with the addition of several new programs, new customers and new products. This gives us the confidence to sustain growth momentum in FY24 and beyond over the medium-term. We’ve also made substantial progress with our technology roadmap by developing four new products in FY23 alone. We are also working on several exciting and innovative products for our customers across both motor and driveline businesses. We’re obviously excited to add sensors and software as the third pillar of growth and hope to close the NOVELIC transaction before the end of this quarter. On the ESG front, we’ve made some credible progress by developing and implementing an innovative solution in our forging plant at Gurgaon that helps us recycle and save around 12,000 liters of water per day. This of course is a great achievement, and we’ll talk about it at the end of our presentation. Before proceeding. I would like to add that we don’t consider ourselves macro experts at all, but to preempt your questions about the markets we serve, here are a few observations. The US market was positive on a year-on-year basis in Q4 and continues to look good. The Indian market did well across all three categories of PV, CV and off-highway and continues to be fairly strong. Europe also had a positive quarter on a year-on-year basis which is very gladdening to see, that is continuing to improve over the recent quarter. Asia which is our smallest market, remains volatile because of the uncertainties of the post COVID reopening in China. Let’s see, when that recovers. So coming to the numbers. We again had good sequential growth but more importantly and perhaps the only important metric for us. The year-on year basis, our revenue grew by 35%, while EBITDA and net profit increased by 49% and 54% respectively as we continue to improve on our margins.
Battery electric vehicle segment revenue grew by 37% and for the first time we have crossed the 200 crore mark from that segment. BEV revenue share also increased to 28%. For the full year like every year, we would like to report our performance scorecard as managers to you on our five KRAs that we consistently since our listing been talking about, our financials, our progress on electrification, our progress on business development, diversification and new product development.
Beginning with financials, we continued to do well on all three indicators, growth, margins and returns. Our revenue, EBITDA and PAT are up by 26%, 25% and 28% respectively. Another quarter of strong operating performance has increased our EBITDA and PAT margins to the middle of our usual range. I think we’ve always communicated a range of 25% to 27% for EBITDA and 14% to 16% of PAT and I think now we’ve come bang in the middle of that. Returns do have been and continue to be strong. As I think I said last year too while showing a similar slide, any company’s performance is meaningful only when seen in the context of the industry it operates in. The best benchmark for us is global light vehicle sales. And relative to that, we continue to rise against the tide. We more than doubled our revenue in a market that has declined by 7% during these three tough years. And having done this organically is a remarkable remarkable feat for our entire team.
Another aspect I want to mention or actually repeat is that while this chart shows a linear growth of over 25% each year, it doesn’t mean that each quarter had 25% growth. The real world is seldom linear and as ours is a company which grows mostly through new programs, growth comes in steps. As you may have noticed, in the eight quarters since our IPO, our growth has been less, 0% to 10% twice, between 10% and 20%, between 20% and 50% twice and over 50% twice as well. So if you look at the data scattered there is not much of a meaningful pattern on quarters. However, when you look at years, a meaningful pattern does emerge. And also please forgive me for perhaps reminding everyone of the obvious, but if you look at the last two years that we’ve been publicly-listed we’ve grown by an incredible 70% while maintaining our margins. And this is despite, I would say unprecedented headwinds, like COVID, semiconductor chip shortages, extreme inflation, and even a war in Europe. So apart from the tremendous team that I mentioned, our unrelenting focus on technology, innovation and the lens by which see how much value can be increased rather than just looking at your volume. I think these are the reasons for our resilient performance.
Coming to our second KRA which is on electrification. So our battery electric vehicle revenue has grown by 33% over last year in absolute terms and stands at INR670 crores which incidentally is close to our total revenue just four years back. We added 12 new EV programs during the year. And strengthen the EV order book further. In Q4, specifically, we added one new EV program from a new EV customer, which we’ll talk about in the next slide. And here I wanted to mention that we often asked all of you for specific and actionable feedback. And this is in actually response to one of those that we received from Gunjan and Anuja of BofA. We updated our EV program split because they kept saying that everything seems to be order book. So now–earlier we used to only show two categories, fully ramped-up production and in order book. What we’ve done this time and for the sake of more transparency is we’ve made it in three categories. So one is fully ramped-up mature programs, second started production, but in ramp-up phase and last, not yet in production. So if I were to do that for this at the end of FY23, we have a total of 20 programs in production, out of which 10 are mature and completely ramped up. Other 10 are in ramp-up phase. The remaining 22 are not yet in production and will start either during this year or the following this. I hope this brings more clarity and transparency and we hope to also continue to improve with more feedback from them.
Yes, we now talk about the new order win that we just have. This was from a North American new age OEM of commercial vehicle. And we are proud of it and are highlighting it for three reasons. First this order is for a bundled product offering which includes obviously our highest selling EV product, which is the final drive differential assembly and two completely new products, intermediate gears and input shafts. All these combined complete all the major moving parts in EV gearbox. Now this obviously has been a stated ambition of ours. But I’m glad that we’ve got that fairly early. Second, this would be our first commercial vehicle differential assembly ever. And this marks our entry into the EV gearbox parts for a new market segment, which is electric commercial vehicle. Specifically, this program for Class four and Class five trucks. Third reason, the increase in revenue potential in a vehicle. And again I wanted to mention that point that all research, we kind of read about the automotive industry. Every market segment and the focus seems to be on volume of vehicles sold. We prefer as a company to look at market segments from a value perspective. And I think it is due to the strategic lens that we’ve been able to move step-by-step in the last six-seven years from $15 to $20 differential gear set for an electric car. To a driveline system with %600 to $900 revenue realization per vehicle in terms of and electric class four truck.
Next, there’s not much to talk about in this slide, we keep it for the sake of continuity and because it’s a good visual representation of the geographic diversity of our electrification mission, the only change is the addition of a new program, as well as the new customer in North America. On to our third KRA which is business development, this year was our best year of business development. We’ve added INR80 billion worth of orders during the year. This came from 35 new programs and seven new customer. Primarily, our revenue growth this year came via the consumption of INR51 billion from this order book. As I explained earlier in an industry that is not actually growing the only source of your growth would be your ability to get orders and then consume them fast enough in order to maintain your growth and that’s what happened. Taking that out, the net addition to the net order book was INR29 billion which brings us neatly to our net orderbook which at the end of FY23 stands at INR21,500 or around $2.4 billion. As visible here, almost all our sequential growth in this quarter came from the consumption of the new orders, while the EV contribution and that’s the second takeaway from this slide, has increased to 77%, which is quite quite a big number. Fourth KRA is around diversification. Now, again, as every time the trend of increasing electrification and decreasing ICE dependence continues unabated as we keep developing new EV products and benefit from this EV may get better. Geographically, we have seen a shift in our revenue mix this year. North America has contributed 43% of our revenue in FY23. This shows an exceptionally strong growth backed by new programs mostly. Very heartening to see that after dropping to merely 11% revenue share in Q1, Europe market has also recovered and because of that, we have almost got back to the same percentage we used to be last year from Europe. And if you look at absolute revenue, because this is against a fairly high growth of 26%, we have seen a YOY growth in absolute revenue from Europe. Not much change in product mix or vehicle segment mix, to be honest, from the last quarter, except that on an annual basis the revenue share from traction motors for electric two and three-wheelers has grown significantly. This revenue share that stands at 4% today, used to be almost 0 two years ago and 1.5% just last year.
So with that I come to the end of my update. I turn to our Group CTO, Mr. Deshmukh to update us on technology. Over to you, sir.
Kiran Deshmukh — Chief Technology Officer
Good evening, ladies and gentlemen. I’m pleased to present our technology roadmap as we continue to break new ground in innovation. The development journey from ideation to commercialization is exciting. And we visually represent every time by transitioning a product from white area to blue on our technology roadmap. I’m delighted to report that we have successfully transitioned four groundbreaking products into the blues over the past year alone. In recent quarters, we have proudly commercialize the net-shaped spiral bevel gears and electronically controlled locking differential or EDL. Our spiral bevel gears testify to our pioneering efforts in precision forming in this product category. Meanwhile, our EDL represent the first ever complex differential specifically designed for electric vehicles. Both deeds are further solidifying our commitment to sustainable innovation. Building on this impressive momentum, we have added two more products, the input shafts and intermediate gears to the blues one this quarter. These advanced products, enhance our capabilities in precision forming and machining and bring us one step closer to developing a comprehensive EV gearbox. Consequently, we have reinforced our position as leaders in providing higher-value addition for electric vehicles. With that, I invite Rohit to provide you with an update on our financial performance.
Rohit Nanda — Chief Financial Officer
Thank you Mr. Deshmukh, a very good day to you all. It’s my pleasure to share our 4th-quarter and full-year results for FY23 with you. Like Vivek already mentioned Q4 was our best quarter on all three parameters of revenue, EBITDA and PAT being INR744 crores, INR201 crores and INR120 crores respectively. Our BEV revenue grew by 37% this quarter, whereas our non-BEV revenue also grew by a robust 35%, which is more than three times, the underlying growth in our key markets of North America, India and Europe combined. Our EBITDA grew by 49% as year-on-year margin improved by 2.5% to 27.1%. EBITDA margin improvement was primarily due to operating leverage and better product mix. Our adjusted PAT for the quarter was INR122 crores, which is higher by 57% compared to the adjusted PAT of INR78 crores in the comparable quarter last year. There was a better margin transmission from EBITDA, PAT due to lower net interest cost and depreciation combined as a percentage of revenue. This quarter our PAT has been adjusted for exceptional expenses pertaining to acquisition-related diligence work whereas PAT for the comparable quarter last year was adjusted for one-time tax related impacts. For the full financial year, our revenue grew by 26% to INR2,676 crores. Our BEV revenue grew by 33% to INR71 crores, and it was 26% of our total sale. Our non-GAAP revenue grew by 23%, while the underlined light vehicle market grew by only 2% in our three largest markets of North-America, India and Europe combined. For the full-year, our EBITDA grew by 25% to INR696 crores. We had a positive impact on our EBITDA margin from operating leverage and product mix. On the whole, however, our margin percentage was lower by about 20 basis-points because of increased direct prices, despite cost pass-through due to arithmetic effect. Our adjusted PAT for the full-year grew by 29% to INR398 crores compared to the adjusted PAT of INR309 crores last year. Lower net finance costs led to improved margin transmission between EBITDA and PAT for the full-year as well. As I already explained the PAT adjustment for FY23 pertains to diligence, expenses, related to acquisition while PAT adjustment for the last year–for the full-year pertains to one-time tax-related impact and reversal of expenses.
We now move to the cash flows during the full-year, the company generated INR535 crores as cash from operations and INR200 crores as free cash flows. We thus managed to fund our entire capex spending of INR335 crores from cash generated from operations. Besides this, we also distributed dividend of INR120 crores during the last financial year. Next one please. With this we come to the slide on our key ratios. The first one there is value addition to employee cost which has further improved from 5.7 times last year to 6.4 times this year which reflects continued improvement in our marginal value addition relative to change in the total employee cost. Our return ratios of ROCE and ROE, continue to be strong with ROCE above 30% and ROE above 26%. These are somewhat lower from the last two year levels, primarily due to ongoing capex expenditure. Besides, in case of return-on-equity, there is also an adverse base effect due to primary equity raised during the IPO. Our net debt to EBITDA continues to be below as net-debt number is continuing to be negative. Working capital turnover ratio has improved to 4.2 times. Our fixed asset turnover ratio has declined a bit to 3.9 times, which is mainly on account of the new capitalization that we did during the year.
With this, I’ll now hand it over to Vikram, who’ll be sharing an interesting ESG case study which showcases our efforts towards a better environment. Over to you, Vikram.
Vikram Verma — Chief Executive Officer
Thank you, Rohit. Good evening, everyone. As you know that driveline business is more concentrated with the forging as a process and the forging requires lot of power and water. So in the forging process a dye lubricant is used for both lubricating the dye and cooling of the dye. So in the process, the water evaporates and then condenses and extra water goes through into the pit, that is normally disposed off through a proper channel–authorized channel. This used to be the process earlier. Now, the team at the forging plant has done an exceptional job of putting a system through which we can recover water which is around 75% of the water is now recovered and put back into the system. So this is the cycle, which has been used, and this process is probably done first time and hence it should help many of the forging industry in the country. The whole idea of showing this and we will share this to the community that how each one can use this process for improving the uses of water. So that’s something which we are very proud of to share with the whole community, forging industry. I think that brings my end of this presentation. And I’ll now ask Nomura team to go ahead with the next session.
Questions and Answers:
Operator
Now, we are at the Q&A session of the presentation. We will now open the floor for Q&A. [Operator Instructions]. I’ll now go to the first caller. Gunjan, your line is unmuted, please go ahead with your question.
Gunjan Prithyani — Bank of America — Analyst
Hi, thanks team for taking my questions and thanks Vivek for incorporating the feedback, it’s pretty useful. I have two questions, firstly, a little bit generic one on the industry. Now, clearly the most topical thing has been the price aggression, or the price cuts that we’re seeing in the industry and in general, there is a fear that this eventually plays down to the suppliers as well in terms of looking at the cost structure or renegotiations. Has there been any renegotiations at your end or relook at the contract values or maybe if you can share some color around how should we be thinking about this change in competitive landscape that we’ve seen on the EVs.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
Thank you, Gunjan. I think we answered this question in different ways over the last three quarters. But again I’ll answer it with a Hindi phrase that I’ve used often that [Foreign Speech ]. The numbers will tell you the story. If there is significant discount, it will reflect in lower margin. If it is not, then it is not. Of course, there is pressure. When is not pressure there. I mean, if you are running a real business, there is always. How we deal with the pressure is our job as a management team, and there is almost always the renegotiation of contracts. But yes, the net result is visible. I don’t think there is much to be said about that. There is almost always something of the other going with one customer or the other. But if you look at the net result I don’t think there’s anything of concern there. Like I said I think three times in the last three quarters, we’ve answered this question. I’m very amused to see that whenever prices go up, nobody asked us this question that will you get extra money from it.
Gunjan Prithyani — Bank of America — Analyst
Okay, got it. Okay, maybe just another question that I have is on your slide 10 where you talk about the new customer. You put out, it is interesting how the rise–the content value has been rising with the addition of these new products with every passing quarter. I just wanted to understand the original differential assembly that we were giving to the customers was eventually, just the differential assembly, there was no intermediate gear, there was no final reduction gear, right. If you can just give some color. How does the value enhance by going from the basic, what you were supplying earlier to now adding this intermediate gear and what is it that is pending for us to supply the like it mentioned that we are one-step closer to supplying the final product, so what is it that is still missing in this portfolio for us to do that $600-$700 differential assembly or the integrated unit, maybe I’m just little confused.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
No issues, Gunjan. I mean for a non-technical person it is a good enough question. If you look at the parts, the bundle value, like I said, is already between $600-$900 bucks. However, the thing is, it’s not just the value of the project, it is also for what vehicle. So differential assembly also just the differential assembly, the second item from the bottom. That can range from $30 to $600 just that without the final gear also. If you go from small hatchback car to a large Class seven-Class eight truck. So the range is like, it’s not just the project, it is the product in what vehicle, which is what we’ve been trying to I think say. Even by the way, in the gears, the cheapest gear we’ve sold as a unit is INR45 and the most expensive INR4500. The range is very very wide. So it isn’t just what is the cost of this product or the price of this product, it is the price for that application for what kind of vehicle, what kind of load, what kind of torque. So that’s the thing. So it is two factors at play, are you going, which is why we made that slide and it will be in the appendix. What segments of the market are you addressing. And in that, how much. Second part of your question, which is far more interesting is what is remaining. So if you look at the whole EV drive unit at beginning. And I’ll let Vikram also add, of course, we are not putting it together even now. We are doing all the different parts of it and letting the OEM assemble it. I think the bearings we are not doing in this and we’re not doing the thermal management. So coolant whether it’d be liquid, whether it be oil-based, we are not doing that. So we’re still not quite up to that level of system integration of the whole gearbox. Vikram, you want to add to that.
Vikram Verma — Chief Executive Officer
No I think you answered. I mean if the question is, what next is the gearbox, in which all these parts have to go. will require bearings, require seals, the thermal management. There is a big housing. And a lot of sensors going into it. Beyond that is also a project that’s still have motor also, and inverter also. I mean. I think in the roadmap Mr. Deshmukh has shown that was our final goal. So this is still an intermediate before we reach there. So Gunjan, in short, we just keep moving forward and every time we move forward we transparently share it with our shareholders that we move one more step, the goal is still–there is still a lot more to do.
Gunjan Prithyani — Bank of America — Analyst
So final reduction we are doing, right. Now that’s not the gap in the portfolio anymore.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
No, that we’ve been doing, that is actually at third stage. Final reduction gear on the differential assembly, I think that we’ve been supplying since 2018-2019. So that’s been a while. The fourth one which you see, is for the trimotor architecture that’s the single reduction at the wheels the spool gear. EDL was what we showcased I think last quarter, this is the first time we are doing intermediate gears and shafts, we’ve never done these products before and this also requires actually for us to do a little bit of cold forging knowledge and capability, which is what we are building. I think we’ve been often asked that what else are we adding. Well this was always on the map. I don’t think people asked us about it, but this was always in obvious adjacencies within the gear box.
Gunjan Prithyani — Bank of America — Analyst
Okay, got it. Just last question and I’ll join back the queue. If you can just update us on where we are on the PLI if anything accrued in this year. And then just what is it that needs to be given to the government to get the incentive.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
Yes, I’ll let Rohit answer that. Just philosophically, I think for the last two years, maintain that. We will do our business without planning for any government intervention or subsidies, because that is I think the right way to do it. If they come, they come, if they don’t, they don’t. We have never accounted for it, we have never given much about it, but Rohit can answer that, he is far more on top of these things.
Rohit Nanda — Chief Financial Officer
So a PLI like all the other players, we’ve also moved our application and all for the product approval. Based on the current status and all, our understanding is that For FY23, actually there will be no PLI, the year gone by I am talking about. FY24 onwards, it should be there, but I mean, there are many things which are yet to become clear, in fact. The government has come out with a SOP towards end of April only so we are still studying that trying to sort of understand the process and all but currently. I think everyone has applied for the product approval and that is still everybody is in the queue for approvals.
Gunjan Prithyani — Bank of America — Analyst
Okay, got it. Thank you so much.
Operator
Thank you very much. We’ll now go to the next caller Vimal Gohil, your line is unmuted, please go ahead. You have two questions.
Vimal Gohil — Alchemy Capital — Analyst
Good numbers. So my question is, Rohit, we have seen our gross margins actually have touched 60% at one point of time. Obviously we’ve averaged around 57%, 58%, we’re currently at 54%, is some softening of raw material cost that we see at this point in time. So what’s the outlook there. And question two, Vikram. So your outlook on the start of motor business. It’s been a bit soft. So what would be [indecipherable].
Vivek Vikram Singh — Managing Director and Chief Executive Officer
Okay. I think you meant me Vivek, Vikram handles motor business. He will answer the starter question since he’s in-charge of the motor business, but first Rohit the question is to you.
Rohit Nanda — Chief Financial Officer
I think apart from alloy steel, I think we’ve seen softening of material prices over the last one year I would say. But if I were to look at alloy steel prices I think they are still higher than where we ended the last financial year. So I mean, it’s hard to predict. Generally, steel prices have come off but not the alloy steelthat we consume. In fact, in April we saw price increase, after that there have been two decreases in July and October. But they have been insufficient to even set off the increase that we gave in April. So in a way we are, actually for the full-year, like I mentioned in my part of the commentary also. I think alloy steel price price that we paid this year was still higher than the last year and that’s the largest commodity that we consume. In terms of outlook, it’s hard for us to really see anything because logically speaking even alloy steel prices should have come off given that general steel prices have come off significantly from their highest. No predictions as such.
Vikram Verma — Chief Executive Officer
Starter motors, I mean we did good job in the FY23 and our volumes were quite stable though I mean little bit lower than what we projected earlier due to the US and European market. Overall it is looking still good and effectively for and we will continue to do that.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
Yes, and I think beyond that I don’t think any of us know and like I think also mentioned we humbly state that. We are not expert in crores. We are not experts in predicting the future. And if anything, we have learned in the last four years, we all need to be perhaps more humbled. The world is far more dynamic and uncertain than we think it is. I think what we can do is, focus on our business and be always ready and agile and move fast. But predicting the future doesn’t seem to be something we are very good at and we’ll continue to not do that. We can see the bigger trend, we see how things move in, I’d say 10 to 15 years but one or two years is less to get final certainty.
Operator
We’ll go next to Kapil Singh. Kapil, please go ahead with your question.
Kapil Singh — Head of Consumer and Digital Commerce Research, India
Yeah, few questions. Firstly on order book, we have seen 28 billion of order book consumed this quarter. So any major product you can highlight which has gone into production. I’m sure it will not be fully ramped-up in the first-quarter itself.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
No. I think that will be too specific. Because, see, it is only one or two programs that do that but if I answer that that’s almost answering on behalf of another customer, no point. Yes, you know how the business is and I think it’s a very good sign. If you see this periodic up-and-down because that means that the order book is not just something which we were asked I think earlier that it’s something that is far in the future. These are things that–this is how growth comes. Specific. I mean, there is no new product, it’s all new customers only that is why I am not asking.
Kapil Singh — Head of Consumer and Digital Commerce Research, India
Ok, what I was trying to understand is whether this would not be fully ramped-up right now.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
No, shouldn’t be.
Kapil Singh — Head of Consumer and Digital Commerce Research, India
So I mean, the impact on order book is larger than the impact on revenue. That’s what I was trying to understand.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
It always is that way because what you’re trying to do is take out something and also one of the programs has hit maturity or full peak. So now any additional is zero. So how it works. Let’s say you were 10% of peak, but now this 10% goes up from the next 40 quarters. So there is a large-value, so you take 28 billion. You divide that by the number of quarters remaining, and you will get it. Actually the math is fairly simply and you will realize that almost all our growth is because of that. Nothing else is happening.
Kapil Singh — Head of Consumer and Digital Commerce Research, India
And, then you say some orders are fully ramped-up. What does this mean? If you could give, take example of I’m saying any general product in the market. So that we can understand.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
Let us take any standard biggest product with differential assembly and vehicle maker has projected and has planned to build 100,000 vehicles a year from that program. So how you already start initially in the initial phases will be 10,000, let’s say for the first year, because it would not be a full-year. Next year, it goes up to 60, 70; by third year usually it gets to 100 which is the peak. After that it’ll stay at 100 and then start to decline, that’s usually the curve any product cycle follows. So when we say fully ramped up, it means it has reached the peak volume set by the customer, of course, there can be plus-minus 10% in this every year if suddenly, lot of demand comes, but if peak stated at beginning assumption is reach, we take that out of order book.
Kapil Singh — Head of Consumer and Digital Commerce Research, India
Okay. Also on the order book do you assume any market growth or this is just the new products basically which is what is reflecting here.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
We never assume market growth for anything we do. Our budgets are based on 0 basis because you know this Kapil, three or four years ago I have never seen market growth.
Kapil Singh — Head of Consumer and Digital Commerce Research, India
Market declined actually.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
Yes. So we don’t assume all that. We assume 0 because again like I said, we’re not macro experts, so we don’t know any better. So we just say let’s assume everything will remain the same as it is today. And then plan around that. Order book has nothing to do with market in growth. It is customer projection and program ramp-up projection.
Kapil Singh — Head of Consumer and Digital Commerce Research, India
Okay, so. Let’s take a longer lead product like a tractor for example or a truck. In those basically you’re not going to assume any growth in those when you bill the order.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
So when growth does come, you will see growth, actually order book we will still not grow because you can’t solve for 10 years. So your base will certainly go. So even without consuming from the order book, your revenue can grow sequentially quite a lot. And we are hoping for that day to come, it hasn’t yet, internal growth.
Kapil Singh — Head of Consumer and Digital Commerce Research, India
This one last question on Slide 10, the new product that we have. The lead-time for this is quite small. Q4 start production. So is this can you throw some color because generally we have longer lead times are award cycles are longer, is this a new customer, and. While the lead-time is smaller than usual. And also, what does this mean for. Our future other segments for example, cars gearbox or other segment drugs. Just some color on that.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
Yes development, try to drive sharpening Petrofac. What does it mean is a lot more pressure on our engineering teams. This is something we really are concerned about that every customer seems to be in a far more hurried thing. which obviously is good from shareholder’s perspective that profits and revenues come faster than they use to but there is a lot of pressure and a lot of time pressure. I guess It will continue till this EV trend and the transformation stabilizes. I think we are in the midst of a large disruption in the industry. We are obviously beneficiaries of it, but yes, there is a lot of hard. What does it mean for other segment or other gearboxes. Kapil, we always say only what we mean, whatever we have said is all there is to it, they is not much more to read. We have made these new products and we have been able to secure the customer. We will always keep trying, keep striving to grow that business, keep trying to sell to more customers. And it will go up, the capability goes. Now, often we have been asked about other and we have always commented that we don’t talk about others, because our race is our race, our product roadmap is transparently shared with all of you, including with all our competitors and customers and everyone, this is what we intend to do. We are not hiding what we intend to do. milestones are there. If it is on our roadmap, we will do it. There is no question about that. I think in the last two years, we have demonstrated that many times. Required that we will be taking some things that other people have been doing, other people, other companies. So be it. We don’t define our by competition, we do not define ourselves by finite mindedness. It is completely transparent, whenever there is something more, let’s say, we sell it to another commercial. will share. If we take those parts, do it for a passenger vehicle will also share.
Kapil Singh — Head of Consumer and Digital Commerce Research, India
Okay, thank you very much.
Operator
Thank you. Kapil for your questions. We are now going to Nitij Mangal. Nitij, your line is unmuted, please go ahead with two questions.
Nitij Mangal — Jefferies — Analyst
[Indecipherable] and the uncertainties in electrical wheelers and also anything you can share on the development of magnet less motors.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
Nitij, I couldn’t quite hear you clearly. I think what I got was something around magnet less motors, but I didn’t get much more. Can you please repeat?
Nitij Mangal — Jefferies — Analyst
Yes, yes of course. So how are you thinking of the ramp up of the traction motor business in India. Given there is some uncertainty around the FAME, regulations etc. And then also anything incremental on the development of magnet less motors.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
Sure, so we are, obviously like everybody else, subject to the markets we operate. If the overall demand of our customer or the production plan of our customers lower so do we get it lowered. So we’re not thinking too much about it, we are ready with the products. We should still see growth, but what would happen is then that growth will come from incremental market share addition rather than growth in the industry. I would say I am aware to comment on what will happen of FAME2 or what will not. So I will leave that. I believe and this I think we’ve had this conversation that any industry or any business model that is dependent on government subsidies like PLI, like FAME. That will always be prone to far more risk than a business that exist without. We have always kept away from that. We did not plan our business at-home those subsidies even with while quoting to our customers. And that’s how we will continue, if the market comes, great if it doesn’t, we can’t control that, so uncontrollable also be. Again very humbly say we don’t really know what is going up on. So we can’t answer much. Second on the magnet less motors Sat, you or Mr. Deshmukh can give a update. although if any of you attended Auto Expo you would have been able to see one of those In action. Sat do you want to share data on the magnet less motors.
Sat Mohan Gupta — Sona Comstar — Analyst
Sure. On the magnet less motor. I mean, we are working with and we have also shown one of the motor with our partner in Auto expo. Right now in development and validation phase. And they will come back on the status, maybe in the next investor call with you guys with more firm information and data but right now it is in the validation phase and we are working on the some of the options.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
Just to add to what Sat just now said, we’re working on several technologies for magnet less and currently, in our technology roadmap, those products are in the white zone. Moment they are ready to be commercialized, they will move to the blue zone. We will share that in this forum. As any other R&D projects, these are all in the development-stage and depending upon the results and outcome of the validation test, we will be in a position to say which technology we will go for, etc..
Nitij Mangal — Jefferies — Analyst
Okay and one more question, Vivek when you see your order book flowing into revenues, let’s say over the next two or three years. I believe the share of EVs can probably get to like 45%. 50% or so. How do you see your customer concentration within EVs, let’s say, three years, five years down the line?
Vivek Vikram Singh — Managing Director and Chief Executive Officer
Even today, if you look at our overall customer concentration. It is no customer who is overpaying. Even at the scale of IPO that was the same thing. Three to five years later also, a similar type of thing should exist. In fact it is one of our priorities. Top two customers, how do we bring it to a manageable level, of course, our goal is that no customer should be higher than 15%, we are already at 20, I think we will maintain this good practice and three to five years that is. we’ll be happy to see there will be a lot more, however, dependence on which customer is not really the thing. it is which customer of ours does well in the market, which is the harder part to predict. Because who sells how many cars is not something we can control. We will do our best for every single customer. Then how they perform in the market, it’s not something which is a controllable factors that we have. Our job is to get as many customers and as many programs. We are already with 26 customers, we will keep adding to this list. How they perform. That’s up to them and to the end-customer, who is the king after all who decides which vehicle to buy. That person, he or she decides the fate of all of us.
Nitij Mangal — Jefferies — Analyst
All right, got it thank you and all the best.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
Thanks, Nitij.
Operator
We go to the next caller. Sonal [Phonetic] Gupta. Hi Sonal, your line is unmuted, please go-ahead.
Sonal Gupta — — Analyst
Hi can you hear me. Congrats, it’s been a great quarter and I think what’s more heartening to see is that every quarter you innovate and come up with new products for which you’re winning orders, so I think kudos to the team on that, it’s very impressive. Just a couple of questions from my side, one. I would just wanted to understand, what does the capex target that you’re looking at over the next couple of years and also I mean, we have been Inflation Reduction Act in the US. So will that sort of imply that you also look at some sort of a US facility, given that your largest market.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
Thanks Sonal. Second part, I’ll answer that we are always actively considering new facilities anywhere in the world but the inflation reduction act is actually more of an opportunity for us. Like the first one capex and the floating answer.
I think anything about INR900 crores of capex over three years. I think for the next three years, the number would be more around INR1000 crores to INR1100 crores. Some of the new models and all. That’s the 3-year capex.
Sonal Gupta — — Analyst
INR1000 crores to INR1100 crores. And just like. I mean, any thoughts around like I think Nitij asked that question like on the India traction motors, like because there’s has been a change in regulation and some customers have been impacted as well. So how do you see that part of the business sort of moving.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
At 4% right now. I hope it grows. But like I said, what will happen, that’s why we are adding forgiveness that we don’t know which way the America regulatory bill go. Hopefully we will keep trying to go in other direction in traction motors also.
Sonal Gupta — — Analyst
Got it and just a follow-up on with Rohit on like on the commodity cost side, have we seen all the benefit other than the alloy steel where we have not seen any benefit but for others like copper, etc. I mean, like. I mean, would we broadly say that all what needed to be passed on to us has been done.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
Commodity prices. [Indecipherable] They are usually linked to one or the other global index like LME, or [Indecipherable] index, so it’s very transparent. So if it happens, it comes through. There isn’t much I would say, things to worry about there. Copper has softened a little bit so that benefit must-have already come in but not that much, by the way.
Sonal Gupta — — Analyst
Got it, great, thanks a lot for taking my question. Thank you.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
Actually alloys sort of why it is different is because it’s a we buy alloy steel in India. Now there are geographical disparities. So steel made questionable things in different geography. It’s not very usual. Usually it’s lockstep and oil commodity move-in tandem, but this is a. slight difference,.
Sonal Gupta — — Analyst
Okay, great, thanks a lot.
Operator
Okay, we go to the next caller. Caller is Jyoti. I think Jyoti has dropped-off the line. We’ll take Hitesh. Your line is unmute. Please go ahead. Hitesh.
Hitesh — — Analyst
Congratulations on a very good set of results. Actually, my questions are basically. First is on this PLI incentive, which our firm is one of the biggest beneficiaries. So can you give us some sense, have you started getting in those incentives as yet or where are we on that right now.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
No, so. I don’t think the anybody has got it, still neither have we but Rohit can answer that better.
Rohit Nanda — Chief Financial Officer
Yes. Our understanding is that nobody is going to be getting them. I’m talking of only Auto PLI right now for FY23 because I believe it’s now been linked with the product approval and product approvals are in the pipeline. So our interim kick-in only after the products have the government has recently come out with the FOB. We still had been drafting, we are also going through it. But like I said, our understanding is for FY23, probably nobody is getting it. Going forward once the products are approved for each of the participants. That’s when you start to get it.
Hitesh — — Analyst
So we’ll get for the retrospective basis or only for say FY24 to be. My understanding is, FY24 onwards. But these things are still. I mean. I would say, early days, but broadly, my understanding is that it will be with a prospective effect not in retrospective effect.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
I think it’s just as we do in our company from the analyst perspective also take the most conservative view because I don’t think it’s area we want to be optimistic one. I think seldom I talk in the most optimistic question.
Hitesh — — Analyst
And my second question is just a housekeeping one. Also on this, these are other income which comes in the fourth-quarter, right. In standalone that’s why standalone PAT is higher than control, can you tell me what it is, Rohit, just so that.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
It would be intra-group dividends. which Sona is going to receive from subsidiaries.
Hitesh — — Analyst
Okay, okay that comes in the fourth-quarter. So they just skipped.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
It’s not necessary, but normally it come with the 4th-quarter, your observation is right.
Hitesh — — Analyst
Okay, okay, Okay, thank you and all the best.
Operator
Ladies and gentlemen, we are now at the end-of-the session and we would like to invite Vivek to do a quick closing remark.
Vivek Vikram Singh — Managing Director and Chief Executive Officer
Sure. I hope there is nobody whose hand is raised and we have not answered. I would love to take all questions. But if there isn’t, well, thank you. Thank you again for giving us your valuable time and attention. If you do have anything which is specific and actionable and can improve our performance or communication, please do send it to us and see you all in the next quarter.
Kapil Singh — Head of Consumer and Digital Commerce Research, India
Thank you. On behalf of Nomura. Thank you for joining this call and I thank the management of Sona Comstar for taking out time. Deanna, we can close the call now. Thank you very much.
Operator
[Operator Closing Remarks]
Vivek Vikram Singh — Managing Director and Chief Executive Officer
There are several questions. I just opened it, okay, we should have answered but it’s okay now, we have kind of logged off. Amit. I think you can respond to them individually. Okay, bye everyone. Mr. Deshmukh I will see you in evening.