Subros Limited (SUBROS) Q2 FY23 Earnings Concall Transcript

Subros Limited (NSE:SUBROS) Q2 FY23 Earnings Concall dated Nov. 11, 2022

Corporate participants:

Annamalai Jayaraj — Representative

Parmod Kumar Duggal — Chief Executive Officer

Analysts:

Aashin Modi — Equirus Capital — Analyst

Abishek Jain — Dolat Capital — Analyst

Mitul Shah — Reliance Securities — Analyst

Unidentified Participant — — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Subros Limited Q2 FY ’23 Earnings Conference Call hosted by Batlivala and Karani Securities India Private Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note this conference is being recorded.

I now hand the conference over to Mr. Annamalai Jayaraj from Batlivala Karani Securities. Thank you. And, over to you sir.

Annamalai Jayaraj — Representative

Thanks, Neerav. Good evening, everyone. On behalf of B&K Securities, welcome to Q2 FY23 Earnings Conference Call of Subros Limited. I also take this opportunity to welcome the senior management team of Subros Limited. We have with us today Mr. Parmod Kumar Duggal, Chief Executive Officer; and Mr. Hemant Kumar Agarwal, Chief Financial Officer and Vice President, Finance. I would now invite Mr. Duggal for the opening remarks to be followed by the question-and-answer session.

Also, may I remind you of the Safe Harbor, the company may be making some forward-looking statements that are to be understood in conjunction with the uncertainty and the risks that the company faces. Forward to you, sir.

Parmod Kumar Duggal — Chief Executive Officer

Thank you, Jayaraj. Good evening, ladies and gentlemen. My name is PK Duggal. A warm welcome to all of you on Subros investor call for quarters two for FY ’23. The automobile industry started the year ’22, ’23 on a very promising notes and our cost trend second quarters are very good from a growth perspective. The market is showing a sharp recovery and the order booking is high. Passenger vehicle industry has grown by 38% on production basis in quarter two of FY23. And commercial vehicle industry truck has registered a growth of 32% during the quarter. I think there are much more positive sentiment for the growth of auto industry in India now.

While on the one hand we see a revival of weakened demand on the other hand high commodity prices and inconsistent semiconductor availability as aggravated the problem for auto manufacturers, which is causing a major concern for the industry phosphate. The increasing price of commodities in India has resulted a record-high price of new and used vehicle in the countries. The results of quarter two for FY23 has been shared with the stock exchange and also posted on the website. Let me elaborate the summary of the results one-by-one.

First I’ll update about the industry relevant to our business. In this quarter, passenger vehicle industry has grown by 38%, as I mentioned before, in comparison with the corresponding quarter of the last year. Whereas, Subros PV Segments Thermal product growth in quarter two is 34% on sales business in comparison to the corresponding quarter of the last year. So our performance is more or less in line with industry performance, subject to some difference in some model make.

Commercial vehicle bus is also improving. Tourism sector, school bus business is also revising now. But but AC fitment ratio is yet to be improved in the bus fitted from the OE side. The company has registered a growth of 2% in the comparison of corresponding period in this particular segment. But then on the Commercial Vehicle Truck segment for N-2, N-3 category, which is relevant for the AC or a blower business for us, industry has shown upside trend after two years. The industry has grown by 62% in first half of FY23 as compared to the corresponding first half of last year. Subros growth in this segment is 88% during the same period. Growth is mainly because more AC fitment ratio we observed in this particular market. Consumer preference is shifting towards AC truck as compared to normal truck.

This year the big impact of environment change has been seen in various part of the country impacting our home AC sales. This sector is showing a promising growth now, in this half, home Aircon sale has grown by 83% as compared to the previous year. Revenue from operations finally has recorded at INR695 crore in this quarter, corresponding quarter was IND529 crore. Overall there is a growth of 31% in the revenue over corresponding quarter of last year. In this quarter car and non-car segment has contributed 94% and 6% respectively. Maruti and Suzuki Gujrat has contributed 85% of the total sales of our company. In this half, industry has contributed INR77 crore, which is almost 5% of the total revenue contribution. Our share of business in passenger vehicle air-conditioning market is 40% and share of business in Truck segment is 49% and BUS AC, it is 20%.

Now I’ll talk about the operational performance. As I mentioned before, there is lot of challenges in supply-chain, which has never been experienced by anyone in the industry. Commodity price fluctuations, logistic cost escalation, US dollar at the highest-ever level has impacted the margins in a big way. Significant increase in the lead time of import shipment and subsequent fluctuation of schedules by the OEM due to the semiconductor shortage, the availability of [Indecipherable] at vendor end has affected our inventory levels by almost 10% to 15%.

Commodity price fluctuation during last six months as a substantial impact on materials sales ratio. Though there are trends now for easing out these fluctuations, but it will take another quarter or so to normalize the impact on the financials. Although we had a compensation formula with our key OEMs but this is on a periodical led business. So it will have impacts in subsequent quarters. The company has realized EBITDA of INR44 crore to INR44.05 crore in the quarter two of FY23 as against EBITDA of 37 crores in the corresponding quarter. So if we compare EBITDA from the corresponding quarter of last year, it has improved by 19%.

Profit before tax in quarter two is INR14.72 crores, which is 2.12% of the net sales. And if we compare this with the corresponding quarter of the last year, it has improved by 92%. Profit-after-tax is INR9.82 crores, which is 1.41% net sales and it has also improved by 92% as compared to the corresponding quarter.

So finally the summary of financial results is revenue of INR695 crores in quarter two with a growth of 31%. EBITDA of IND44 crores with a growth of 19% with the corresponding quarter. EBITDA of IND14.72 crores with the growth of 92% and PAT of IND9.82 crores with a growth of 92%.

Now let me update on the business side on the various aspects. Business owners for quarter two is better than the corresponding quarter of last year. Semiconductor availability has now become again a challenge and now it will have impact in quarter three and quarter four but not significant, it would be in mild impact. Container costs started easing out now, this will ease-out on our logistic costs as well. Growth is coming months is expected to be increasing trend as comparison to the last year and we’ll watch the situation and keep ourselves adjusting to the situation. This time we are also expecting the double-digit growth in this year as we planned at the start of year.

As I mentioned in my previous update, the mobility landscape and the fundamental shift will happen in next eight to 10 years with the AI trend, autonomous driving, connected car, electrifying and shared mobility amplified their, in fact enabling Subros to everywhere, aggressively manage this transformation. We are in discussion with our collaborator, DENSO Corporation, Japan for necessary technologies required for this transformation.

Today, only 2% to 3% of new vehicles sold globally are electrified. This opportunity ahead is much larger and Indian players can become home of innovation both for domestic as well as for International market. This is a significant success we have received in new business acquisition from our OEMs. And business up to 2025 has already been tied-up which will ensure that sustainable growth and positive share. The company is also focusing in ramping new opportunities in the business of EV, Hybrid and CNG space. There is the focus of the market is to move for non-high speed technologies and alternative-fuel technologies. Our focus is on ramping such business in a very high way.

So far, almost INR125 crores worth business in this particular segment is already secured and as the long-term direction we set a target of 10% of our total turnover should be contributed by EV, hybrid or CNG technology. Business expansion in rail coach is also improving. And we are now getting businesses into coach Aircons as an initial order and we will [Indecipherable] as we enter into this market with a full [Indecipherable]. Development activities for the new programs and also along with the customer engagement is in progress and all the projects are within the milestone as set by the customer. As we reported in past calls, we secured business from Maruti-Toyota Alliance project, which is assembly in Toyota plant in Bengaluru, our Chennai plant has already started supply for this plant and we already secured two-month of sales in this project. So this is for Grand Vitara, which has started in August ’22 both for a mild hybrid and also for the strong hybrid cars.

And also for the future programs of Maruti Suzuki, our alignment is there and we already secured businesses in this. So thank you very much from my side and and now I’m ready to take questions.

Questions and Answers:

 

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] Ladies and, gentlemen, we will wait for a moment while the question queue assembles. [Operator Instructions] The first question is from the line of Aashin Modi from Equirus Securities, please go ahead.

Aashin Modi — Equirus Capital — Analyst

So, sir firstly we — my first question is regarding the revenue growth. So we have highlighted that this quarter we have had a 34% year-on year revenue growth. Could you please tell us what would be the ASP growth and what could be the growth in terms of volumes?

Parmod Kumar Duggal — Chief Executive Officer

So you’re referring to the growth in volume versus revenue?

Aashin Modi — Equirus Capital — Analyst

Yeah. PV estimated that grew by 34% year-on year.

Parmod Kumar Duggal — Chief Executive Officer

Okay..So PV, out-of-the total, turnover of INR694 crore has contributed INR553 crore. That is on a PV space and on the ECM, it is around INR98 crores. So put together, it would be around INR651 crores.

Aashin Modi — Equirus Capital — Analyst

Okay. Sir, [Indecipherable] that we have grown in passenger vehicle AC by 34% year-on year. So could you give us a guidance on — could you just — what would be the volume growth in it and what would be the pricing growth in it.

Parmod Kumar Duggal — Chief Executive Officer

Okay, so volume growth would be in the range of around 30% and 4% is the price differential, which has because of the fluctuation, which is compensated by personal.

Aashin Modi — Equirus Capital — Analyst

Sir, on a year-on year basis what would be the raw-material fluctuation will be there. I mean, if our have increased by 4%, so there’s still a lot of pace of recovery from the OEMs that is there.

Parmod Kumar Duggal — Chief Executive Officer

So the net impact on us is roughly 7% to 8% out of that 3% to 4% is compensated so far from the customer side and balance is quarter lag impact. If they don’t — maybe another 2.5 person will be compensated but there will be a quarter lag on that.

Aashin Modi — Equirus Capital — Analyst

Okay, sir. And to continuing on the margins front what would be the other levers driving margins commodity or Logistics cost and when can we expect this margin revival to start?

Parmod Kumar Duggal — Chief Executive Officer

So margins stress is because of majorly, I’ll say, four elements have contributed to that. First is of course, logistic cost is extraordinary high and the impact of the logistic cost is roughly 2%, 2.5% of the total revenues so far, that is on a periodical basis. Although it started easing out now, but it will take another three to four months to come back to maybe not the same level as before COVID but it would be substantially lower than that. Second is about commodity, which are mainly from aluminum, copper, steel and the last is about PPE, that is poly plastic. So, these are three commodities which has contributed high trends in last six months time. Although PPE has started normalizing now. And the third impact is because of the various economic factors in various parts of the geography the fabrication cost has also gone up. So the cost of manufacturing of raw material converting into our usable product has also increased.

So we are expecting it will take another six to eight months time to see a revival, fully revival into that, but our effort is now to offset this impact with either customer claim or to expedite cost on projects internally at some of those.

Aashin Modi — Equirus Capital — Analyst

Okay. Thanks for the detailed answer. Ans, sir, my last question is that our share of business in PV has stated 40%. So how are we growing in Maruti and second-base clients M&M. Our share of business in Maruti and M&M, where do you see that going forward?

Parmod Kumar Duggal — Chief Executive Officer

So share of business within 40% in Maruti, we have grown by almost 2% to 3% so far in last one year and going forward it would be another maybe 3% more by maybe ’24 or so, based on the business engagement we already tied-up. In Mahindra, we started two years back roughly 17%, now we have reached to 25% of share of business in Mahindra. And it’ll further grow at maybe 8% to 10% going by the current engagement we have in next two to three years time.

Aashin Modi — Equirus Capital — Analyst

Okay. Thank you, Duggal. That’s all from my side.

Operator

Thank you. [Operator Instructions] The. Next question is from the line of Abhishek Jain from Dolat Capital Markets, please go ahead.

Abishek Jain — Dolat Capital — Analyst

Thanks for opportunity. Sir, what is the reason for the lower gross margin from last many quarters? From last 10 to 12 quarters we have lost our own 1,000 gross — other cost has increased from 57% to 77%. So is there any impact of the constant for the pricing actions with the OEMs on. It is only the impact of the logistic cost. Logistic cost is also passed on, on quarter-on-quarter basis but we have not seen any improvement in from last many quarters, even from last two years.

Parmod Kumar Duggal — Chief Executive Officer

So, Abhishek, last, maybe six quarters this impact is there, then the COVID started, and maybe slightly after the COVID got mature in November or so, the impact as I in the previous question tried to reply, the four elements, not only the logistic costs but the commodity cost and the fabrication costs and also coupled with the new businesses which we started are definitely with the lower price than the past models, which got replaced. So this is a cumulative impact of that. But, as you mentioned, Commodities are back-to-back compensated by customers but it will not be in the same-period. It has to have either six-month or one quarter lag.

Container cost was not as part of the pricing formula to be compensated by customers. We made a special requests from customer last year to get partial compensation and this year again we are approaching back to the customer for compensation. Still under negotiation, final amounts will be considered based on that. So this is a dynamic market situation where customers are also the contracts are not fully means, hedge for all the fluctuations but we are learning from the environment and negotiating with the customer time to time basis. It will take another maybe two quarters to ease out the situation but we are working towards that.

Abishek Jain — Dolat Capital — Analyst

As the fabrication cost is now — you are talking that permanent in nature from the last many quarters. So what is the client feedback right now to take a price action in this regard?

Parmod Kumar Duggal — Chief Executive Officer

So far this was not part of compensation formula, because normally if it is linked to the LME but now since syndication has become a major cost escalation. So negotiation started, so they are positive to compensate but not yet concluded with a set formula. So once we decide for fabrication costs reimbursement, it has to be based on the formula agreed between us. When the decline will happen, they will feed back the benefit but right now we are seeking for escalation compensation.

Abishek Jain — Dolat Capital — Analyst

And what is the impact of the currency depreciation in the gross margin?

Parmod Kumar Duggal — Chief Executive Officer

So currency depreciation since it is a quarter lag basis may be 0.5% to 0.75% will be the impact because dollar has gone up, but yen has come down, so cumulatively with all occupancies it would be roughly 0.5% to 0.75%.

Abishek Jain — Dolat Capital — Analyst

And that will be a negative impact?

Parmod Kumar Duggal — Chief Executive Officer

As of now it is negative.

Abishek Jain — Dolat Capital — Analyst

So as you are talking about that, this largely costing the easing of that, credit rate has gone down significantly from last three months. And metal prices is also going down and these cost was not passed on earlier. So you will get a direct benefit into your EBITDA from the next quarter onwards?

Parmod Kumar Duggal — Chief Executive Officer

So it may because if we get this compensation then we have to revert back but where we are not getting compensation then this will directly contribute to the bottom-line. But considering the total cycle of import, which is almost four 90 days, including one month of inventory, so impact will come after four months.

Abishek Jain — Dolat Capital — Analyst

But impact on the gross margin is from last many quarters and it has not been compensated from last many quarters, 800 to 900 bps of context and the gross margin. So, will it not be reversed in the coming days?

Parmod Kumar Duggal — Chief Executive Officer

It will come. It will come. That’s why I’m saying it will contribute to the bottom-line directly but there may be a time gap on that. Definitely it will come back to that.

Abishek Jain — Dolat Capital — Analyst

So, can you give some guidelines for this second-half margin especially for the gross margin side?

Parmod Kumar Duggal — Chief Executive Officer

So I will not be exclusive by the numbers but, yes, there would be a better recovery now in fourth quarter, third quarter is almost mid of — we are in to mid of third quarter but fourth quarter onwards we will see some recovery, but definitely quarter on — from that fourth quarter onwards, there would be a recovery coming in gross margin as well as on the EBITDA margin.

Abishek Jain — Dolat Capital — Analyst

And sir other operating cost and also we are seeing the continuous, it is going up. Is it because of increase in power cost, power and fuel cost?

Parmod Kumar Duggal — Chief Executive Officer

But I believe that operating costs has come down, because if you see overall EBITDA differential between corresponding quarter and now, it’s just 0.5% whereas material cost is increased by 3%. So we have offset this impact of 3% by improving on the operational efficiency. So that’s why it is compensated.

Abishek Jain — Dolat Capital — Analyst

But other operating costs is around 8.6% of the sales versus the last year of — last quarter of 8.3%.

Parmod Kumar Duggal — Chief Executive Officer

Which data you are referring to?

Abishek Jain — Dolat Capital — Analyst

I’m talking about the quarter-on-quarter, it has gone up.

Parmod Kumar Duggal — Chief Executive Officer

So 8.37% was last year and 8.62% is the current year, that’s what you are referring?

Abishek Jain — Dolat Capital — Analyst

Yes. Current quarter 8.6% versus the last quarter 8.3%. Last quarter, I mean, first quarter FY23.

Parmod Kumar Duggal — Chief Executive Officer

So that may be a small impact of some inflationary cost in consumable and power, but it is not substantial.

Abishek Jain — Dolat Capital — Analyst

Okay.

Parmod Kumar Duggal — Chief Executive Officer

Yes. There will be a small impact of these inflationary factors.

Abishek Jain — Dolat Capital — Analyst

Okay. And sir yes, in this quarter, passenger vehicles segment growth was very strong on a quarter-on-quarter basis, despite that the company has not reported growth in the revenue. Even you have own the business of the actually INR700 crore, which is high selling model. So what is the reason for the the sort of underperforming?

Parmod Kumar Duggal — Chief Executive Officer

So, if you take-out — you’re comparing with last quarter versus this current quarter, that’s it?

Abishek Jain — Dolat Capital — Analyst

Yes.

Parmod Kumar Duggal — Chief Executive Officer

So INR706 crore was revenue of last quarter and if you separate out [Indecipherable] 70 crores from there. So it was around INR630 crores. And again INR630 crores for this quarter the revenues is INR693 crore.

Abishek Jain — Dolat Capital — Analyst

Yeah.

Parmod Kumar Duggal — Chief Executive Officer

Whereas the [Indecipherable] is just INR7 crore. So from that comparison, there is a growth in particularly PV segment per sale.

Abishek Jain — Dolat Capital — Analyst

But, you own also business on the this Suzuki and Toyota alliance and you’ve got some incremental revenue from there. So just wanted to know what is the number from these alliance and why the underperformance is there.

Parmod Kumar Duggal — Chief Executive Officer

So let me correct the first figures which I mentioned. Out of INR707 crores, the PV segment business including is INR600 crore in the corresponding quarter and in the previous quarter, quarter one at this time it is INR651 crore. So the roughly there is a INR51 crore growth in this particular segment. And now addressing your second question, which you asked about is the quantum of business which we got from Toyota alliance and that’s what was the question.

Abishek Jain — Dolat Capital — Analyst

Yes, yes, sir.

Parmod Kumar Duggal — Chief Executive Officer

So this business is roughly 190,000 of units as per the RFP volume and this would be roughly INR200 crores, INR220 crores of incremental business. And it has started in August ’22, so it is just a month before the end-of-quarter.

Abishek Jain — Dolat Capital — Analyst

And, how much incremental revenue we can generate from that in FY23.

Parmod Kumar Duggal — Chief Executive Officer

FY 23 maybe roughly INR110 crores or so.

Abishek Jain — Dolat Capital — Analyst

INR110 crores. And sir, you were talking about that there is some production constrained in the Q3 and Q4, so most probably that second-half value would be see some deep. I mean the third quarter, fourth quarter number will be lower than the second quarter.

Parmod Kumar Duggal — Chief Executive Officer

No, we are not expecting that because what we have planned for although our quarter first half is almost from our plan it has covered substantially but, quarter three, maybe slightly different quarter four is looking very promising.

Abishek Jain — Dolat Capital — Analyst

And my last question is, is there any impact of the old inventory in this quarter because the last quarter you had a very high inventory lag in your plant.

Parmod Kumar Duggal — Chief Executive Officer

So there is no absorptions per se if the aging of the inventory is filling from one quarter to another quarter, this is a kind of safety for business continuity, which is required because these days import lead times is uncertain. Earlier with the full efficiency, it was between 21 days to 28 days when the container was reaching India but nowadays it is 40 to 45 days. So to just to offset this risk we increased the inventory levels in our plants so it is not obsolesce but it is 50 stocks, which we can.

Abishek Jain — Dolat Capital — Analyst

Is it also impacting the gross margin because that — earlier that inventory [Indecipherable] with higher prices but now the cost of raw materials has gone down, you need to take…

Parmod Kumar Duggal — Chief Executive Officer

Yes, it would be. There would be a marginal impact of that also.

Abishek Jain — Dolat Capital — Analyst

Okay. Thanks. And that’s all from my side.

Operator

Thank you. [Operator Instructions] The next question is from the line of Mitul Shah from Reliance Securities, please go ahead.

Mitul Shah — Reliance Securities — Analyst

Thank you, sir for giving opportunity. Sir, I have two, three questions. First one again on the currency as you highlighted, 75 business impact, can you give broader details as of Q2 in terms of how much is the percentage exposure in Yen terms and how much in USD term.

Parmod Kumar Duggal — Chief Executive Officer

So $2 million is the monthly exposure. And JPY300 million.

Mitul Shah — Reliance Securities — Analyst

Okay. And this is more or less similar brand over last year or it has suddenly sharply changed in last one or two quarters?

Parmod Kumar Duggal — Chief Executive Officer

Fir last year the dollar exposure has gone up by $0.5 million and yen exposure has come down by JPY50 million.

Mitul Shah — Reliance Securities — Analyst

Any hedging do we do or still it is almost open?

Parmod Kumar Duggal — Chief Executive Officer

No, we have a hedging policy so we do both the currencies as per our hedging policy.

Abishek Jain — Dolat Capital — Analyst

So what would it be approximate average hedging rate for the next six months for both the currencies?

Parmod Kumar Duggal — Chief Executive Officer

For next six months, if you talk about dollar, average rate will be around $81. And for yen it will be around JPY57.

Mitul Shah — Reliance Securities — Analyst

Second question on in terms of various commodities as you were metals than plastic has a different long-term contracts and lag effect of commodity cost. So how these contracts now shaping up as fluctuation is very-high within a month or so compared to earlier three months, six months contract. So what is the change in terms of your procurement for metal segment as well as on the plastic side?

Parmod Kumar Duggal — Chief Executive Officer

So there is no change as far as commodity contracts are concerned. So like aluminum, we have a defined timeline with our vendor with a quarter lag, same as with the customer. Copper is always at a spot whenever you are placing the order with the 15 days plus, minus, you can take LME rates. So there is no change as far process for commodity procurement is concerned. It is all linked with the LME at the time of placing your order.

Mitul Shah — Reliance Securities — Analyst

So based on this aluminum three months contract, so whatever sharp commodity correction happened in last three months, that sizable benefits should come in Q3 and Q4, is it right?

Parmod Kumar Duggal — Chief Executive Officer

Yes, that will majorly will come in Q4. Because quarter three contractors are already released in quarter two, that will get consumed in quarter three. Then quarter three ordering will impact in quarter four. So partially quarter three, fully in quarter four.

Mitul Shah — Reliance Securities — Analyst

And the same is the case with plastics also?

Parmod Kumar Duggal — Chief Executive Officer

Yes, plastic prices also corrected sharply in last three quarters.

Mitul Shah — Reliance Securities — Analyst

And lastly sir in terms of price reset with OEM as all those things are again pass-through with a lag effect, how the contracts there, that is also quarterly or a monthly reset or how it works there?

Parmod Kumar Duggal — Chief Executive Officer

No, customer pricing contracts with the different customers is in the different price lag. So few customers it is on a quarter lag, few customers it is on a half yearly basis. And international customer, where we are exporting through IPO is on annual basis. So, those contracts are different from different OEMs.

Mitul Shah — Reliance Securities — Analyst

Again the last thing on this. If we assume the prices remain at around current level of October-November, considering the lag effect on both the side with the your vendor, so roughly quarterly as well as on the customer contracts of three months, six months, what should be the net impact in Q4 or Q4 onwards and in which we assume that prices remained at this level now. Would it be positive more than 100 basis or?

Parmod Kumar Duggal — Chief Executive Officer

No I will not quantify this specifically but yes there would be a positive impact on the bottom.

Mitul Shah — Reliance Securities — Analyst

Q4 onwards right?

Parmod Kumar Duggal — Chief Executive Officer

Yes.

Mitul Shah — Reliance Securities — Analyst

Thank you sir and all the best.

Parmod Kumar Duggal — Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Abhishek Jain from Dolat Capital, please go ahead.

Abishek Jain — Dolat Capital — Analyst

What is your CapEx plan for FY ’23 and FY ’24? And how much capacity you have already incurred in the first half of second?

Parmod Kumar Duggal — Chief Executive Officer

So, Abhishek, we are keeping CapEx is in the range of INR70 crores to INR90 crores net of customer recovery every year. And now since ’23, ’24, we are seeing certain capacity ramp-up planned by the customer including Maruti setting up new lines. In the new location Kharkhoda. So we will be in our planning our CapEx is in the range of INR100 crores, INR120 crores in next FY ’23, ’24, but, of course, the guidelines are very clear that we need to manage within the internal accruals to spent for our new capacity. So that’s how we are trying to keep the financial prudence positive.

Abishek Jain — Dolat Capital — Analyst

But in the first half, FY ’23 presentation showing that you have done a CapEx of around INR96 crores. So full year guidance…

Parmod Kumar Duggal — Chief Executive Officer

These are the payments incurred for the CapEx which has already been done, carried over from the last year, a few advances which have been paid for at the movement of equipments.

Abishek Jain — Dolat Capital — Analyst

Okay.

Parmod Kumar Duggal — Chief Executive Officer

[Speech Overlap] And including there was a land purchase, which was a contract done is on currently our plant and machinery, as the plants and land and building is on rental basis which we converted to the ownership, which will offset certain lease rent payment and moving to [Indecipherable]

Abishek Jain — Dolat Capital — Analyst

So for the new plant — how much CapEx is required.

Parmod Kumar Duggal — Chief Executive Officer

It’s not a new plant. It is the existing plant of our die-casting, which was on lease before, now we have converted this leads in our mail, earlier we were sub-lessee, now will become the main-lessee. That’s the change for that we have paid an amount to the [Indecipherable] INR26 crore approximately. So it’s only change of [Indecipherable]

Abishek Jain — Dolat Capital — Analyst

And sir, in the railway segment, what is the outlook AA does have? In the railway segment Government is spending has gone up significantly in the last couple of quarters, what kind of the opportunity you are seeing there?

Parmod Kumar Duggal — Chief Executive Officer

So railway has changed complete business model now and now Tier-1 given the [Technical Issues] to take care of the complete wagon. So we are aligned to the big players in railway and we see a huge potential coming in next two to three years time. I think from the current level of Railways sale which is roughly maybe INR10 crore to INR12 crore, we see 5x or 6x growth coming in from this segment.

Abishek Jain — Dolat Capital — Analyst

So what is your target for FY ’24, ’25 in our railway segment?

Parmod Kumar Duggal — Chief Executive Officer

So that’s what, I said, 5x to 2x, that means it would be roughly INR70 crores around.

Abishek Jain — Dolat Capital — Analyst

And what sort of the margin you make in this segment?

Parmod Kumar Duggal — Chief Executive Officer

In railway side?

Abishek Jain — Dolat Capital — Analyst

Yes.

Parmod Kumar Duggal — Chief Executive Officer

So these margins are better than the PV segment.

Abishek Jain — Dolat Capital — Analyst

Okay. And in Home AC segment, as you mentioned that there is a INR77 crores revenue in the first half. So what is the full-year target and are you looking further CapEx in this particular segment, it’s basically in the backward integration sort of betting?

Parmod Kumar Duggal — Chief Executive Officer

So right now we are going slow on this home AC segment because the fluctuation of commodity has a direct impact on this segment. And the margins are shrinking because customers are not compensating in a very structured manner as Mobility OEMs are doing. So here the contracts are on month-on month basis which is highly putting pressure on us. So we have not been very aggressive in second half in Home AC segment till the time market is stabilized. And so far we are muting all the investments in this particular segment. We will first utilize our existing capacities, only then will go with the new OEMs.

Abishek Jain — Dolat Capital — Analyst

Okay. And sir. Just if you can give the numbers again for this EBIT non-PV revenue from the PVs, railways in the first half.

Parmod Kumar Duggal — Chief Executive Officer

For first half?

Abishek Jain — Dolat Capital — Analyst

Yes, sir.

Parmod Kumar Duggal — Chief Executive Officer

So, roughly INR1,200 crores out of INR1,400 crores has some PV. And balance INR200 crores is from non-PV which is substantially contributed out of INR200 crores, around INR75 crore from Home Aircon, INR77 crores [Indecipherable] and INR123 crore from other than that that will contribute Bus Aircon, truck Aircons, rail and other aftermarket expenses.

Abishek Jain — Dolat Capital — Analyst

And what is the contribution of the bus and bus Aircon and truck Aircon?

Parmod Kumar Duggal — Chief Executive Officer

So bus Aircon would be roughly INR20 crores and truck would be roughly INR40 crores.

Abishek Jain — Dolat Capital — Analyst

And in INR1,200 crores, what is the contribution from the ECM segment, sir?

Parmod Kumar Duggal — Chief Executive Officer

ECM is hopefully, INR180 crore, INR185 crores in first half.

Abishek Jain — Dolat Capital — Analyst

INR185 crores. And you are supplying only to Maruti or you have started supply to some tractor gears also?

Parmod Kumar Duggal — Chief Executive Officer

Tractor supply for this new Mitsubishi project will start from January, so we have already doubles our product and it will be rolled-out now.

Abishek Jain — Dolat Capital — Analyst

And then you will also supply to Toyota new plant, ECM?

Parmod Kumar Duggal — Chief Executive Officer

Yes, ECM is getting supplies to Toyota-Maruti Alliance Project also, including hybrid.

Abishek Jain — Dolat Capital — Analyst

Okay. Thanks, that’s all from my side.

Parmod Kumar Duggal — Chief Executive Officer

Okay.

Operator

Thank you. [Operator Instructions] Your next question from the line of Harish Kumawat, please go ahead.

Unidentified Participant — — Analyst

Yes. Hi, sir. Good evening. Sir, my question was more on the non-PV side. So our mix for non-PV was only 6% currently. So are we looking at any potential order book visibility in the PV or the rail segment, like in the short-term, say, one to two years?

Parmod Kumar Duggal — Chief Executive Officer

So as, I mentioned before that this contribution currently which is around 6% is — our target is to take it to 12%, so we are looking at huge expansion in bus side, railway side and truck side will be the result of the regulation which is on hold as of now, which is AC mandatory for N-2, N-3 category. So if that is revived, then it would be extraordinary high, then it would be roughly 15% contribution from non-PV side.

Unidentified Participant — — Analyst

Okay. Understood. So. Just on the truck side, as you mentioned, so what is the current mix of AC and blower in the truck segment and where do you expect it to see in the next two to three years.

Parmod Kumar Duggal — Chief Executive Officer

So in N-2, N-3 category, currently the AC fitment ratio is roughly in the range of 15%. It is between 15% to 17%, roughly it is 15, so 85% is blower. So if that is [Indecipherable] 85% in to the AC part, the pricing gap between blower and AC is almost 7x. So it will have a multiplier in that.

Unidentified Participant — — Analyst

Okay. Understood sir. On the EV side so we started supplying to Grand Vitara hybrid model, so is there a potential content increase in those vehicles?

Parmod Kumar Duggal — Chief Executive Officer

Yes, it is having — for strong hybrid, it is almost a 10% to 15% size differential which is on a higher side.

Unidentified Participant — — Analyst

Okay. And for the mild hybrid it is at similar levels. I’m assuming that.

Parmod Kumar Duggal — Chief Executive Officer

Yes, it is. Because there is no product chain change requirements.

Unidentified Participant — — Analyst

Okay, I understood. Sir, overall so we got the INR125 crore of orders in the EV and hybrid segment, so this is this is more towards the Grand Vitara only, right? Or is there some other…

Parmod Kumar Duggal — Chief Executive Officer

So Grand Vitara is already done. INR125 crores is the future order which we received other than Grand Vitara, so if we had Grand Vitara hybrid, it would be roughly INR200 crore. So the digital business which we receive is the future model of Maruti EV, it will be a purely EV segment and also from Mahindra side. So that’s how it would be in ’24, ’25 start-off production with that.

Unidentified Participant — — Analyst

Okay, perfect. That’s very helpful. Another one that, I think you mentioned the SUV for Maruti and Mahindra. I think I missed them, so if you could just repeat them, sir, please.

Parmod Kumar Duggal — Chief Executive Officer

You need to repeat your question please.

Unidentified Participant — — Analyst

So you had mentioned a share of business from Maruti and Mahindra earlier. I think I missed it because of some bad connection. So if you could just repeat yourself please?

Parmod Kumar Duggal — Chief Executive Officer

So share of business in Maruti, I mentioned about the roughly 74%. Mahindra was 17%, it is now moved to 25%. Overall share of business in the market for PV is 40% in the CV it is, Truck segment is 49% and in the bus it is 20%.

Unidentified Participant — — Analyst

Thank you so much, sir. That is very helpful. And sir, one last question I would like to ask. It is on the import content side. So what what is our current level of import content? Percentage of import content, sir.

Parmod Kumar Duggal — Chief Executive Officer

Current import content is roughly — 17% of the revenue is our current imports. So it has substantially reduced from 26% that was there in maybe 2018. And now we are targeting to reduce it by another 6% to 7% by another two years or so.

Unidentified Participant — — Analyst

Okay. Perfect, sir. That was very helpful, sir. That’s all from my side. Thank you for your time.

Parmod Kumar Duggal — Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] As there are no further questions I now hand the conference over to the management for closing comments.

Parmod Kumar Duggal — Chief Executive Officer

So we have discussed enough on this subject, so right now our priority is Management and from a Company side is will improve the margins and improve the bottom-line because on the top-line we see a lot of excitement, double-digit growth, so far 30% plus growth and finally by the end-of-the year we’ll be in a better position in terms of revenue. So finally the bottom-line has to reflect the whole effort going-forward. So we see that in next financial year first-half would be much more promising, so our efforts are on, that is the first priority and the second priority is to align ourselves with this EV mobility transformation, so we are in discussion with all customers now, mapping our product with their product lineup or the vehicle lineup. So that is the world’s second major where this non-IC engine base product alignment we have to expedite. So, these are that focus. Thank you very much to all of you for participating in this investor call. Good luck.

Operator

Thank you very much. On behalf of Batlivala and Karani Securities that concludes this conference. Thank you for joining us. You may now disconnect your lines.