Varroc Engineering Ltd (NSE: VARROC) Q4 2025 Earnings Call dated May. 29, 2025
Corporate Participants:
Unidentified Speaker
Vivek Kumar — Investor Relations
Tarang Jain — Chairman and Managing Director
Arjun Jain — Whole-Time Director and CEO of Business Unit 1
Dhruv Jain — Director and CEO of Business Unit 2
Mahendra Kumar — Chief Financial Officer
Bikash Dugar — Head IR and Finance Controller of Business Unit 2
Vishal Raval — Group Finance Controller for Business Unit 1
Analysts:
Unidentified Participant
Arvind Sharma — Analyst
Vishal — Analyst
Sakshat — Analyst
Rahul Kumar — Analyst
Mihir Vora — Analyst
Jyoti Singh — Analyst
Aksh — Analyst
Nishant Chauhan — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the Varrock Engineering Q4NFY 25 post result conference call hosted by ICICI Securities 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. Should you need assistance during the conference call, please signal an operator by pressing Star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Vivek Kumar from ICICI Securities. Thank you. And over to you sir.
Vivek Kumar — Investor Relations
Thank you, Shruti. Good evening everyone and welcome to the call from the management side. We have with us Mr. Taran Jain, Chairman and Managing Director. Mr. Arjun Jain, Full Time Director and CEO of Business Unit 1, Mr. Dhruv Jain, Director and CEO of Business Unit 2, Mr. Mahindra Kumar Group CFO Mr. Bikash Dugar, Head IR and Finance Controller of Business Unit 2 and Vishal Rawal Group Finance Controller for Business Unit 1. We’ll start the call. Brief opening remarks from the management followed by. I would now like to invite Mr. Tarangjian for the opening remarks. Thank you.
And over to you sir.
Tarang Jain — Chairman and Managing Director
Thank you Vivek and team ICICI securities for hosting the call and good evening to everyone. Tarang Jain here. As you all know, India has now become the fourth largest economy and the GDP had a steady growth of 6.2% in quarter three of FY25. Softening of inflation in the last few quarters and the interest rates reduction globally encouraged our central bank to reduce repo rate by 50 basis points in their last two Monetary Policy Committee reviews. Weak growth in consumption on top of global and regional conflicts and an uncertain tariff regime may impact discretionary spending which can have an impact on the automotive industry.
However, we remain confident about the medium to long term growth prospects of the Automotive industry. During Q4 of FY25, all the segments registered a moderate growth on a year. On year basis, two wheelers grew by 5.8%, passenger vehicles grew by 5.2%, commercial vehicles grew by 3.1% and three wheelers grew by 9.5% on a quarter. On quarter basis also, almost all segments other than the two wheelers reported strong growth. As normally Q4 is a strong quarter for India automotive industry. Every year the two wheelers degrew by 1.2%. Three wheelers grew by 3%, passenger vehicles grew by 20.4% and CVs grew by 20.9%.
Now before discussing the operational performance of the company, I would like to highlight a few other aspects which will help the Company to become a more sustainable and enable value enhancement for the stakeholders. In FY25 we filed 25 patents and were granted more than 10 plus patents. Thus, the total filings made now add up to more than 120 for the company which will further strengthen the intellectual property of the Company and help in developing technologically advanced products at an affordable cost. Secondly, we also completed the sale of our stake in the China JV and realized the net proceeds of RMB Chinese RMB290 million during May 2025.
Thirdly, our sourcing of electricity from renewable energy has been increasing throughout FY25 and was around 31% for FY25 as against 13% the previous year. For the month of March 25 it reached around 45%. We are also working on commencement of phase two of renewable energy project which will further improve this to greater than 50% in the coming year. These initiatives will boost our ESG credentials as well besides giving us savings in our electricity cost. Now coming to the operational performance. During Q4 of FY25 the company registered a consolidated revenue of Rupees 21 billion with a growth of 11% year on year on like to like basis with Indian operations growing at 13%.
Our EBITDA for the quarter was around 10.2%. On the back of improvement in the gross margin and and benefits of operating leverage, our PBT before exceptional items and JV profits was over Rupees 1 billion or 4.9% of revenue in Q4 of FY25. As you all know, we have been working on structural changes like merger of Varrock Engine limited and Varrock Polymer Limited and exiting from the China gv. We had to recognize certain one time exceptional items primarily relating to those to these initiatives which will simplify our operations and also improve our financial performance going forward.
We continue to strengthen our balance sheet and return ratios. The net debt of the company in FY25 reduced by rupees 2,348 million and as a result the net debt to equity reduced to below 0.5 times at the end of FY25 from 0.64 times at the end of FY24. The absolute net debt figure was at rupees 7480 million ROCE before tax for FY25 was at 20.8% and the free cash flow generation was also healthy at 3116 billion or 3.8% of revenue before growth capex in land Looking at the free cash flow generation and lowering of debt.
The Board of directors have recommended 100% of the face value as dividend for FY25. In FY25 we also achieved net new business win with annualized peak revenues of rupees 11,734 million with EV models constituting more than 55% of this. It is more heartening to see business wins in our overseas operations also which will improve profitability from financial year 27 onwards. Our continuing focus on revenue growth, improvement in gross margin, control on our fixed costs and optimization of capex and working capital will enable us to generate a healthy free cash flows in the future Also with this I will now ask mk, our group CFO to walk you through the presentation and give more insights into the financial performance.
We have uploaded the investor presentation to the stock exchanges as well as well as on the website.
Mahendra Kumar — Chief Financial Officer
Thank you. Good afternoon everyone. Let me take you through the highlights for Q4 of FY25. Now before I start I just want to highlight one point that there were certain special items during this quarter and this year because of the structural changes which we discussed earlier also in the investor calls. So for that reason the numbers are not directly comparable with the previous periods. So I would like to explain the reasons also. So first of all this year we carried out a couple of important changes to the group structure. One is exiting the China JV recognizing the impact as an exceptional item.
The second one is also the merger of Varrock Polymers with Varroc Engineering which again has certain one time cost impact. So these things have been recognized. One more important point to be noted here is Last year during Q4 we also had a significant amount of government incentives in the base, so which was actually pertaining to two financial years which we received in one quarter. So if you adjust for these differences in the base and excluding these exceptional items, if you look at the financials, the Q4 revenue at 21 billion had a growth of 11% year over year with India operations registering a strong growth of 13%.
Now this needs to be seen in the context of a moderate growth in the industry also which was which was a moderate single digit growth during Q4 for the industry. Similarly for the full year if you really see at 81.7 billion it amounts to a growth of 8.5% year over year with India operations registering 11% coming to profitability, Q4 PBT was at 4.9% versus 5% in FY24. Again the 5% in FY24 had the incentive impact. EBITDA was at 10.2% versus 11.1% last year. Same time net debt reduced by 2.3 billion. Now it stands at 7.5 billion as of March.
Subsequently we got the inflow from China divestment. So that is not taken into account here. So that inflow was. That inflow was received only in the month of May. So considering the performance, the board of directors recommended a dividend of rupee 1 per share for the year FY25. In terms of the order wins, the new lifetime order wins were 60.5 billion with annual peak revenue potential of 11.7 billion. Revenue from supplying to EV customers continues to be strong. It crossed 10% last quarter. So at 10.3% during Q4 and if you take full year it is getting close to 10%.
Then as we explained and announced in the past arbitration verdict, the investment in China JV was categorized asset held for sale and the exceptional loss of 8.1 billion was recognized for the year 03-31-2025. The sale of stake in JV has now been completed like how I explained and the amount of 340 crores which is the net proceeds after deduction of withholding tax was received. One more highlight of this year is the free cash flow generation. We had a strong free cash flow generation of 312 crores. This is of course without considering the growth cap itself land.
So it amounts to 3.8% of sales which is pretty close to our PBT percentage. Also and return on capital employed also strong at 20.8% before tax. Another important highlight is like how our CMD just explained the renewable energy sourcing for the full year was at 31% against 13% last year. By end of March we even touched 45% and it will go beyond 50% once we implement the phase two. Also in terms of patents, we filed for more than 20 patents in FY25. Now coming to the automotive production, if you see the industry trends during Q4, two wheelers had only a moderate growth of 5.8%.
Three wheelers of course had a strong growth of 9.5%. Passenger vehicles had 5.2% growth. And if you see sequentially two wheelers had a degrowth. Maybe also because of the festival advantage impact. In Q3, three wheelers grew by 3% but passenger vehicle registered a strong 20% growth. And EV two wheeler volumes grew by 5 and a half percent sequentially. And if you take full year, two wheeler grew by double digits 11.3%. Three wheeler by 5.4 and passenger vehicle had a moderate growth of 3.3%. Now coming to the consolidated financials for Q4, so EBITDA was a 10.2% which translates to almost close to 5.5% PBT for the quarter.
And again like how we explained if you adjust for the 866 million or 87 crores of additional government incentive in the base revenue of last year, the growth was actually 11% this year compared to Q4 of last year. And within this India business grew strongly at 13% despite a moderate market growth. Now on top of the volume growth, the cost reductions and forex gains also enabled improved profitability versus what we saw in the previous quarter. Now I will explain in detail some of these exceptional items in the subsequent slides. And then coming to the full year numbers, the reported PBT before exceptional items and before JV was pre 3.8%.
Again if you eliminate the base impact because of government incentives, the growth was about 8.5% with India business growing by 11.2%. The depreciation and interest burden came down significantly compared to last year which also enabled improvement in the year over year profitability. So coming to the exceptional items, basically there are three categories here. The first one is relating to sale of investment in China JV operations. We updated the investors in the past that the arbitration verdict required us to sell our stake to the JV partner. Finally after significant delay because we could not see any progress, also we had to enforce the arbitration verdict in Novrit was in Highland courts which ruled in our favor.
So with that we could actually sell our stake to the JV partner. And after deduction of withholding tax we realized about 340 crores out of this nearly about 181 crores. We brought into India and repaid loans in India as well as abroad. The balance amount is parked in foreign currency which we will be using in the coming months or weeks. In relation to the arbitration cost there is about 44 crores of cost which was awarded by the tribunal which we need to pay. This amounts to about close to 56% of the total cost which seems to have been incurred by the JV partner.
We are still studying the claims and the details and we are also checking the legal options regarding how we can contest the cost if you are not convinced. The second category relates to the major expenses of Varroc Engineering and Varroc Polymers. We took some impact in the previous quarter also, but we provided for something more because the stamp duties and other related costs are difficult to predict. Most probably in the next two, three months this will come to finality and if there is any excess provision we will never sit at the time. But for the time being we are being conservative.
So we provided for totally about 19.6 crores for the full year. Another development was relating to ktm. There was a court admitted insolvency proceeding which. Which which required us to go for a haircut. So the cost of that haircut was close to 3.1 crores. So being an exceptional item we provided for that also as an exceptional item in the overall financials. So that adds up to close to 147crores which is an exceptional item. Now out of this if you really see about 75 crores which is related to the impairment adjustment which we took in Q3, not actually a cash impact, it’s more like a book adjustment which we need to recognize in the value of the investment out of the remaining amount.
Also some of these are provisions or not exactly cash outflows. But as we progress we can update and let you know the status on what was the actual, what will be the actual cash outflow. With all of this. Coming to the overall net debt levels, we’re happy to inform you that we brought down the net debt level further down to 748 crores as of March 31st. This is without considering the inflow from China stake sale which came in subsequently. So with an equity of 1594 crores the net debt equity is pretty strong already at 0.5 which can improve further after the debt reduction using the China profits. Net debt to EBITDA also even at March levels stands below 1. The subsequent slides. Of course these are the same slides which we similar slides which we explained earlier.
Also this gives the business composition and in terms of the lifetime order wins it was about 60.5 billion for the the year FY25 with annual peak revenue potential of 11.7 billion. Now in terms of the mix also you can see that the share of four wheeler and others is increasing compared to the revenue mix of 25% that we have. Similarly the share of Bajaj in the overall pie of order wins also significantly less than the business mix that we see in revenue. And similarly EV as a percentage of total also is significantly high at 55%.
So with this let me stop here. We are happy to take your questions. Thank you.
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask questions a question may press Star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press Star and two Participants are requested to use handsets while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. The first question is from the line of Arvind Sharma from Citigroup. Please proceed.
Arvind Sharma — Analyst
Yeah. Hello. Good evening Sin. Thank you for taking my question. Two questions from my side, sir. First of all on the employee expenses there has been a reduction. What are reasons for that?
Mahendra Kumar — Chief Financial Officer
Yeah, so a couple of reasons. One, of course this is the year end. So we take a realistic assessment of the variable pay levels and other things. On top of that we also did restructuring exercise last quarter. The benefit of that for part of the quarter was realized in Q4 itself.
Arvind Sharma — Analyst
Got it sir. So this should be the ongoing run rate from here on.
Mahendra Kumar — Chief Financial Officer
Yeah, of course there will be a salary increment impact also from April so it will be slightly up. But yes, from this base we will have to build on.
Arvind Sharma — Analyst
The second question would be on the sale of stake in China. JV the 3.4 billion rupees. That would be an inflow which you’ve highlighted. That would be an exceptional gain in 1 QFI 25. Is understanding correct?
Mahendra Kumar — Chief Financial Officer
Yeah. So it is more like a cash inflow. So this is like sale of investment. So it’s not actually a P and L benefit but it is more like a cash inflow for sale of investment.
Arvind Sharma — Analyst
Okay. So it will not be reflected in FY26 or 1QFY26P&L that has already been accounted for.
Mahendra Kumar — Chief Financial Officer
The benefit of that will come in for instance using this money if I repay the loans, when I repay the loans the interest benefit on that will obviously come into P and L.
Arvind Sharma — Analyst
Got it. So it’s not an exceptional gain, it’s more a cash in.
Mahendra Kumar — Chief Financial Officer
Yeah. Correct.
Arvind Sharma — Analyst
And so if you could just share the capex guidance for FY26 and 27. If possible
Mahendra Kumar — Chief Financial Officer
we’ll be in the range of maybe 225 to 275 crores including some of the spending that we do for spending capacities. Plus we may also go for some land purchase also in and around Pune. So that may be maybe another 100 plus kind of crores.
Arvind Sharma — Analyst
This is FY26.
Mahendra Kumar — Chief Financial Officer
Correct.
Tarang Jain — Chairman and Managing Director
This year, before the next seven to eight years we bang a big parcel of land in Pune. So. So this will be kind of a one time capex, you know, for us. Other than that I think we’re maintaining, you know what Mahindra said between 225 to 275 crores will be a capex year on year.
Arvind Sharma — Analyst
Got it sir. Thank you. So Much for answering the questions. That’s all from my side. Thank you again.
operator
Thank you. Participants wish to ask a question May press star and one at this time. The next question is from the line of Vishal from Swan. Please proceed.
Vishal — Analyst
Thank you for taking my question sir. And congrats on decent setup numbers in such a challenging business environment. Sir, just wanted to know. There has been elevation in inventory and trade receivable. Is this some kind of change in the policy we have adopted or there is some one off there. Can you throw some light on that please?
Mahendra Kumar — Chief Financial Officer
Yeah. So inventory of course broadly it is because of the increased scale of operations also. But yeah there are. There are certain actions to be taken to bring it down which we’ll be working on. As far as the receivables are concerned there are a combination of factors here. For instance last year that is in FY24 we actually discounted and pulled ahead some of these receivables collections into the previous year just to reduce the overall interest cost. So because of that the opening balance of receivables was small. So that increase is reflecting here. Plus on top of that there is a general increase in the overall scale of business.
Also like what I mentioned there is a 13% increase in India revenue. So that also has an impact on the overall receivables. Plus there is also a change in billing methodology in one of our subsidiaries overseas IMs Italy. So earlier we used to build only for the conversion cost. Now we are billing for the total cost including total value, including material also. So to that extent the. The. The receivable content also will be more so. So it’s a combination of factors. Nothing to worry about.
Vishal — Analyst
Okay. Sir. Sir, regarding the proceeds of 340 crores which will be accounting in the current quarter. So is there any adjustment there which has to be made in terms of cost or something like that or will the 340 crores fully will be realized?
Mahendra Kumar — Chief Financial Officer
Yeah, no, the 340 crores is already realized. We received the money as I explained in the first week of May. As far as the P and L impact is concerned that that was already taken in Q4. Sorry, Q3. A little more towards these arbitration related cost is what we recognized in Q4. So that way the P and L impact is already taken.
Vishal — Analyst
Okay. Okay. Sir, by third question is regarding there is a fundraising. You know you have noted in the BSE a non convertible debentures of approximately around I think 500 crores.
Mahendra Kumar — Chief Financial Officer
Yeah, it’s more of an enabling resolution. We’re not going to Go for an immediate borrowings.
Vishal — Analyst
Okay. Okay. Great. Sir, that’s. That’s all from my answer. In case I have any additional question, I’ll fall back in with you. Thank you.
Mahendra Kumar — Chief Financial Officer
Sure.
operator
Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Sakshat from iPro. Please proceed.
Sakshat — Analyst
Thanks for the opportunity. So I just have one question. Do we indulge in receivable factoring because our finance cost looks very high for the net debt which we have. Explained. Sorry, go ahead. And if you can give a breakup, how much is factoring cost and how much is.
Mahendra Kumar — Chief Financial Officer
Yeah, I think we explained it in the previous calls also we typically discount about 700 to 725 crores worth of receivables at any point in time. And that is at a cheaper cost compared to the borrowings that we have. So that’s the reason we continue it in future once we repay all the debt. And that is the last one to be attacked. So at that time we will reduce it. But for now, yes, this level of discounting will be there.
Sakshat — Analyst
Okay. So right now let’s say for a net debt of around 70, 750 crores the finance cost rate would be around 10%. So out of 160 crores.
Mahendra Kumar — Chief Financial Officer
Yeah, it turned off to 9%. But what you need to do is you need to take gross debt, not the net debt. So we have about 200 crores of cash also. So gross debt as of last year end when Q4 end was 900 and about 950 crores. And of course that will come down with the China inflow and all gradually. But yeah, for your competitive purpose you need to take the gross debt.
Sakshat — Analyst
Okay. So we can expect at least 80 crores worth of relaxation eventually going forward from the finance cost. As finance cost goes down.
Mahendra Kumar — Chief Financial Officer
Yeah, I mean I won’t. I want to give a guidance here. See last year we ended with 170 crores. So somewhere around. I’ll put it around 120 crores kind of a number. We will of course try to reduce it further.
Sakshat — Analyst
Got it. Please. Thank you so much.
operator
Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Rahul Kumar from Vikarya. Please proceed.
Rahul Kumar — Analyst
Yeah, hi. What is the share of revenues from EV and how much of that is from Bajaj?
Mahendra Kumar — Chief Financial Officer
No, so share of EV revenue like how we explained was 10.3% during Q4 and full year it was 9.8%. Most of it is from Bajaj only.
Rahul Kumar — Analyst
Okay, okay. And what is the target on the debt that by FY26.
Mahendra Kumar — Chief Financial Officer
No again so like how I explained last year we generated free cash flow of more than 300 crores more or less. That’s the kind of direction we’ll continue to take in the coming year also. But there will be some land purchases of more than 100 crore plus like our CMD explained and there is a chain inflow of already there’s a 180 crore reduction of debt which we did in the last couple of weeks. So broadly maybe around 500 to 400 to 500 crores is what we should safely assume.
Rahul Kumar — Analyst
Okay, thank you.
operator
Thank you. The next question is from the line of Mihir Vhora from Aquarius. Please proceed.
Mihir Vora — Analyst
Yeah, thank you for taking my question. So my question was that now with the China. So based on that how do we work ahead on the technology front? Like there will be some type, you’ll be working with the jv. So now going ahead what would be our technology roadmap in the lighting space and how are we looking at gaining market share now with the lighting getting more advanced. So I mean your some color on the lighting.
Tarang Jain — Chairman and Managing Director
So I think from a technology perspective of course China definitely brought a lot of technology to the table. However I think for really the requirements of India we have always been self sufficient. I think further in terms of having the right partnerships in place to develop or to drive further advanced engineering. I think this is a practice that, this is a practice that we again we’ve had in place for the last three years and we expect that to continue. So to summarize I don’t see any major impact in India as a result of, you know as a result of the China JV dilution.
Mihir Vora — Analyst
And sir, currently in terms of lighting in India what would be your mix as such? 2 Wheeler would be how much of it and 4 Wheeler would be how much.
Tarang Jain — Chairman and Managing Director
So of the total lighting revenue I would expect two wheeler is probably around 60ish percent and passenger car is 40%.
Mihir Vora — Analyst
And are we seeing some traction on the passenger side as well now or we continue to be more going towards two wheeler.
Tarang Jain — Chairman and Managing Director
I think the focus is in both and I think we continue to win businesses also in both. So I mean I wouldn’t say the focus is one way or the other. We believe we have product, you know based on what our customer needs are. We believe we have product that services those needs And I think against those needs, we win further business as well also.
Mihir Vora — Analyst
Okay. And so my second question is just on aftermarket, basically the quarter seems to be weak as such. It looks, based on my number of what I’m seeing, it seems to get around 7% of your revenue, which used to be around 8 to 9, like 9 to 10%. So any call out here and what is the aftermarket strategy?
Tarang Jain — Chairman and Managing Director
No, so there’s no specific weakening or anything. So the overall base is also increasing. So obviously the aftermarket business generally grows in high single digits. The overall base grew in double digits. So because of that, there was some dilution.
Mihir Vora — Analyst
All right. Okay. Thank you. That’s all.
operator
Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Jyoti Singh from Aryan Capital Markets Ltd. Please proceed.
Jyoti Singh — Analyst
Yeah, thank you for the opportunity. So I just wanted to understand largely on the macro side, so like India. And you, what’s your outlook on that? And also if you talk about on the European margin and plus, what is the outlook for 26 during this uncertainty time period and apart from this, like any other new product that we are targeting in the coming years and what will lead to growth in the upcoming years. Thank you.
Tarang Jain — Chairman and Managing Director
So I think from a macro standpoint, I can probably talk about India and I think really I would say some of the macro trends that we focus on is an increasing desire and need for localization which we look to take advantage of, given that we are already for our core processes. We are already localized. And also from a design perspective, we are already localized. The further trend that we. The further trend that we look to leverage is the movement and greater penetration of EV as well. So I think both these trends together, I think create enough opportunities for us to be able to drive, to be able to drive content growth in the vehicle.
Mahendra Kumar — Chief Financial Officer
What was your second question?
Jyoti Singh — Analyst
Second question, sir. On the European margin outlook and plus FY26 outlook?
Mahendra Kumar — Chief Financial Officer
No. So this. We explained the previous calls also. So what we are currently focusing on is building the order book. We already had some good order wins in the previous quarter, which we announced and talked about also. So that journey continues. We will continue to build the order book, but there will be some gap between the order booking and the sale. So that will take anywhere between 18 to 24 months. So most probably we’ll see a good recovery. We should see a good recovery in FY27. For now, we will continue to have good, tight cost control and manage the business.
Jyoti Singh — Analyst
Okay, thank you sir. And sir, just wanted to know your overall outlook on the recent development that is done by Bajaj Auto on the KTM support. So basically it will help them in a longer term to unlocking globally. So how we will going to benefit if you can talk about it.
Tarang Jain — Chairman and Managing Director
Especially from a two wheeler perspective, I think KTM vehicles is where we generally deploy the highest levels of technology we have. So you know, KTM doing better is only an extremely positive, is only an extremely positive signal for us. Right. One of course from a sales standpoint but also like I said, really from a technology deployment standpoint.
Arjun Jain — Whole-Time Director and CEO of Business Unit 1
So just to add, you know, see now that Bajaj has taken control over KTM and related brands of ktm as varna etc. We see a much greater opportunity for sales growth with KTM in Europe. And we see also opportunity not only in products we do today like lighting, but also on some of the other products where I think probably we will try to drive more sales and Bajaj also being in control may be more open to Indian suppliers, you know, having a greater, you know, contribution, you know, in the KTM motorcycles being made in Europe, you know, and that will also help probably, you know, the overall bomb costs, you know, also for Bajaj.
So we are going to anyway be trying to discuss with Bajaj in this regard that whether there can be, you know, greater opportunities of the products we supply in India or otherwise, you know, also for KTM in Europe. So that’s the big opportunity we see with this development.
Jyoti Singh — Analyst
Okay, thank you so much sir.
operator
Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Vishad from school. Please proceed.
Vishal — Analyst
Thank you for taking my question again. Sir. Sir, regarding the strategy in exports, so post the exit from Visteon and even in China jv we have actually struggled in export. So any, any strategy, you know, change in the team or you know, scale up in the product line or you know, offerings. If you can discuss, you know, share some thoughts on that, how we are proceeding and to scale up this business.
Tarang Jain — Chairman and Managing Director
So just to see, today our Exports is around 4% of our revenue which we of course definitely are not very excited about. And we definitely want to first reach a double digit, you know, percentage of overall revenues being exported. Also for the reason that exports we are able to realize slightly better margins also. So our efforts are on. We have also a focus group focusing on a lot of our metallic products which are going. We want to Penetrate more there some of our also electronics. So this whole effort is in process and probably the next two to three years we would definitely like at least 10% of our revenues coming from export.
So this effort is on and we are extremely focused in trying to realize this particular objective of us.
Vishal — Analyst
Great. Sir, sir, my second question is regarding, you know, this quarter there has been improvement in the margins and notably so in, you know, there has been strict cost control. You have done in other expenses as well as employee costs. So from here, you know, should we see or do you target some kind of meaningful improvement as well or you know, you are satisfied with this kind of. Do you see some scope from here on as the scale improves, big S improves.
Tarang Jain — Chairman and Managing Director
See the main focus of ours is sales growth, you know, and like we said that, you know, we want to grow 6 to 8% more than the market. And that’s always going to be our objective, you know, going forward. India now at the moment almost 90% of our revenues is coming from India. And here definitely, you know, we would like to have, you know, a high double digit growth, you know, in FY26. That’s what we’re aiming for. And I think the profitability and other things also is based on us realizing the revenues. And today I think we have a good order book.
And I do feel that if the market really in a way is growing, April was not a very good month as you know, overall for automotive. I mean other than four wheelers which grew at about 5%, I think all other vehicles degrew. So we are just hoping that the markets at least are at the same level as last year, you know, and then I think we can expect a good growth and then if the growth is good, we can definitely expect a good margin abroad. Like what our CFO said, Mahindra said that this coming year we have one lot of good business abroad also.
But that, but all those businesses will start getting realized from, you know, the second quarter of FY27, you know, till then of course abroad, in abroad businesses we’ll have to, you know, kind of see, I mean, keep focusing on cost controls till that time, you know. But yes, FY27 onwards, second quarter onward, we will start seeing that there is a growth in sales and of course then the return of profitability, you know, that’s for the abroad business, which is about today 10% of our revenues. But of course there we see also a good level of business wins in this year, in this year, which will help us also going forward in overall sales growth.
Vishal — Analyst
Perfect, sir. Thanks for answering my question and all the best for the next financial year. Thank you sir.
operator
Thank you. Before we take the next question we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Aksh from Praj Financial. Please proceed.
Aksh — Analyst
Yeah, I just wanted to. I have. A question on electrical, electronics and lighting components and that we have seen over a 26% decline in electrical overseas revenue. What is the reason for that?
Tarang Jain — Chairman and Managing Director
Overseas? Yeah, you’re talking about the business too. I think there. I think as you know the generally the conditions, you know in Europe are quite weak and even in Vietnam we have not had the expected sales because the major customer there continues to be Piaggio and Piaggio globally. Actually unfortunately the volumes have dropped and that’s the reason that there has been no growth. But having said that we have won some good businesses from some two wheeler players in Europe and also we are actually also driving hard to win some businesses with some Japanese OEMs. Big OEMs.
And I think that going forward I think we do expect from FY27 a good level of revenue growth coming in from two wheeler lighting. Also we expect that the electronics capacity which today is running at quite a low level of about 20% there also we see like I said that from next, the second quarter of FY27 we will start seeing, you know, the return to, you know, higher revenues and profitability as we have already won the businesses. We’ve already won the businesses and we continue to win also more business for electronics, tubular lighting. And also going forward even we are, we will focus on four wheeler lighting.
Aksh — Analyst
Okay so because if we see, even if we had a, there was a big degrowth in that particular segment. So it was my concern about that. What’s your outlook on metallic division? Because even there we have seen some muted growth of under 5%.
Tarang Jain — Chairman and Managing Director
Yeah. So I think when it comes to metallic we are quite choosy like I said because it’s a very high capex and low, a little bit lower roc business compared to our other products. So we are picking and choosing the kind of businesses we want to enter. And we are also focusing on a full capacity utilization because we still have some capacity underutilized. So we try to see how we can also fill up those capacities. So yes, compared to electrical, electronics, lighting or our plastics business we are obviously a little bit more conservative when it comes to growth in the metallic business.
Not to say that we will not grow but it will not be the level of growth we see in Our other products where our focus is obviously more because they’re not also as much capex high capex businesses like in metallic.
Aksh — Analyst
Okay. Okay, thanks. And about the land parcel, what is it related that we are you know investing like you said it would be there for like next seven, eight years. We are investing in some land parcels. So any glimpse you want to share? Sir,
Tarang Jain — Chairman and Managing Director
so here see in the Pune region, you know we are running out of we have about seven factories and you know, largely more in the Chakan area in Pune. And here we are running out of space. You know, of course it’s not that immediately we’re running out of space but I think it’s not easy, you know, to get a land parcel and we are looking at a bigger land parcel this time so that we don’t have to worry, you know, too much. You know it’s not that easy to get land parcels as you know.
So therefore we want to be now focusing on, we are in discussions and we are trying to get a big land parcel which will be in excess of 100 crores for sure. Seeing the land cost today and I think once we are and we’re looking at it in the next probably couple of months to kind of close that transaction. So once we have it then I think that the kind of land parcel we’re looking at I think we should be okay for next seven to eight years in the Pune region which is a region which is also growing very fast for us.
Aksh — Analyst
Lastly, what would be our utilization rate?
Tarang Jain — Chairman and Managing Director
I think now I think utilization rate. Would be how much
Mahendra Kumar — Chief Financial Officer
average? Maybe 70 to 75%. It varies from business to business. Electronics may be on the higher side. Side.
Tarang Jain — Chairman and Managing Director
Yeah, yeah. So I think I think 70 to 75% is fair and I think, I think we’ve been disciplined in terms of increasing capacity. But yes, there are places like, like NK said like electronics where we have to drive capacity increases now.
Aksh — Analyst
And sir, sorry for one more question. What would be our approximately margins compared to in ev compared to the traditional ICE or the Delta if you can share.
Mahendra Kumar — Chief Financial Officer
We don’t give that product level margin data.
Tarang Jain — Chairman and Managing Director
Yeah but it’s competitive. It’s not that you know, the margins are as a percentage so much higher or something because nowadays, I mean even a lot of the technology products and everything thing, you know, I mean it’s competitive, you know, it’s as competitive as the ICE engine. It’s only that you know, you because of the content, you know you have a very good revenue growth coming out of you know, such EV products. So that’s the good part, but the margins are competitive. I mean, I don’t think it would be something higher or something like that.
One odd product may be higher, but generally is similar.
Aksh — Analyst
Okay, okay, got it. Thanks a lot. Thanks for that.
operator
Thank you. Participants who wish to ask a question may press star and one at this time. The next question is from the line of Nishant Chauhan from JIOJIT BNP Paribas, please proceed.
Nishant Chauhan — Analyst
Hi, am I audible?
Mahendra Kumar — Chief Financial Officer
Yes.
Nishant Chauhan — Analyst
So just one question question pertains to our overseas subsidiaries, I.e. the Romania, Vietnam and the lighting plants over there. So could you just provide, I mean, how was the year for them? What kind of revenue did we do there and compared to the last year?
Mahendra Kumar — Chief Financial Officer
So yeah, so in terms of the overall percentage, it’s around 4% of the total revenue which is coming from these overseas markets. So what was your question outlook?
Nishant Chauhan — Analyst
Just the revenue number, if you can provide, or the yoy growth degrowth that we would have done in, you know, our lighting subsidiaries across Vietnam, Romania, Italy and also the Romanian economics.
Tarang Jain — Chairman and Managing Director
So basically, see, you know, we have got, you know, tubular lighting plants, you know, in Vietnam, Romania and in Italy, and we also have an electronics plant in Romania. So compared to the previous year, there was a degrowth where it came to the sales, which was in a very challenging atmosphere. And the two reasons I said was that one of the challenging environment in Europe and when it comes to Southeast Asia in a Vietnam plant, a larger customer is Piaget there also. And Piaget, if you see the last couple of years, there’s been a degrowth in their volume.
But having said that, I mean, we have been winning businesses with other customers, you know, you know, in Vietnam, whether it’s European or Japanese. But that’s something, you know, which will start getting realized only from FY27 onwards. So till then, I think we’re going to be challenged when it comes to the sales. You know, like if you talk about FY26 and let’s say even the first quarter of FY27, we are not going to see any kind of sales growth from current levels. You know, it could be probably similar or little lower, only, you know, I’m talking about the.
The plants abroad.
Nishant Chauhan — Analyst
Right, got it, got it.
Tarang Jain — Chairman and Managing Director
Just one second, Just one second.
Nishant Chauhan — Analyst
Yeah,
Arjun Jain — Whole-Time Director and CEO of Business Unit 1
maybe just to add a little. Bit to that, I’ll just try to also summarize from. From my side. So, yes, last year versus this year. There has been, I believe, a sales. Decrease of between 25 to 30%. The reason of course is one is the macroeconomic Trends in Europe not being the best and also this customer dependency that we’ve had for the Romania locations. As well as the Italy and Vietnam locations. But what we also announced in the last call is that we’ve had some significant business wins that will bear fruit in terms of sale in FY27. So yes, you know, so there is. This decrease in revenue, but there is. A light at the end of the tunnel from our perspective. So we can expect a good level of growth from FY27 second quarter as we have already won businesses for these plants abroad.
Nishant Chauhan — Analyst
Got it, got it. So secondly, on the domestic electric two wheeler side, I think what we’ve seen is the pace of growth has been slowing down. I mean this year we probably the volumes grew by around 20% whereas last year we saw like a 30% growth in volumes. And coupled with that we also seen a lot of OEMs going towards a lower priced or more value kind of value price models. So in that scenario probably the value growth is even lesser for electric two wheeler industry as a whole. So I mean, how do you see this play out going ahead and how excited are we in this, you know, electric two wheeler segment as a whole as a component supplier?
Tarang Jain — Chairman and Managing Director
So I would say, right, I mean really, I think for a electrical electronic component supplier like us, it is really the ultimate opportunity. From a content growth perspective. The amount of content we would put into a comparable EV scooter versus the comparable ice engine scooter, I think the content growth is almost 5.6x now further to that, fortunately the content growth is not necessarily driven by the bells and whistles on the vehicle but is really driven by the core vehicle powertrain. So of course, you know, the price point pressure at an OEM level, even at a component supplier level of course exists.
But you know, the content that we have is not possible to do away with, right? I mean you need an E powertrain, you need a BMS if the vehicle has to be ev. So we continue to be extremely, we continue to be extremely bullish around it from the perspective of our growth. And yes, maybe the growth rate has, maybe the growth rate is moderate, moderated a little bit, but I don’t think that we see, it is not a trend that we see going away anytime soon.
Arjun Jain — Whole-Time Director and CEO of Business Unit 1
So basically to add, you know, see, we are very excited about, you know, the penetration of EV in two wheelers today. We see the penetration more happening in scooters and will continue for sure. And I think there’s optimization of, of the cost in this various model necessary for a Higher adoption, you know, so that’s, you know, in the right direction and maybe, I mean there could be some little bit ups and downs maybe in a quarter or something like that, but the direction is very clear on the EV transition. I’m not saying it’s going to be 100% of all scooters, but definitely there’s going to be a good level of growth, you know, in the scooter segment even, I think going forward.
I think we can see also EV adoption in the motorcycle segment. That’s also something which I think probably will happen going forward and I think we are very well placed. Also recently also we have increased the product portfolio that we added the BMS also a few months back in our portfolio. Plus we are also adding more customers today. Let’s say we have Bajaj. We also in discussions with other customers, we already won some businesses with other customers. So we are pretty much excited about. So whatever the level of growth may be, it’s going to grow and I think that we are definitely as well, we are definitely going to benefit with our strong presence already as an early starter in the EV game, especially on the powertrain side.
And so I think you can see a good level of sales as a percentage of, you know, increasing for baroque in the years going forward.
Nishant Chauhan — Analyst
Great. Thank you. Thank you for your answer.
operator
Thank you. The next question is from the line of Rahul Kumar from Barakya. Please proceed.
Rahul Kumar — Analyst
Yeah, hi. So sir, can you give us some guidance on the operating margin or EBITDA margin for, you know, next year or something like that?
Mahendra Kumar — Chief Financial Officer
No, we don’t give any guidance like that. Broadly say we’ll try to improve it from now on. Like how our CMD explained, growth will be the major focus for us. On top of that we are also working on cost reductions and margin improvements. So all this should translate into improvement from the current levels. But it also has a seasonality factor to it. Not all the four quarters are equal for auto components industry as you know. So there may be some ups and downs but yeah, the journey continues to improve it further.
Rahul Kumar — Analyst
Okay. And the quantum of the improvement which we have seen this quarter versus let’s say last year, that quantum would obviously reduce.
Mahendra Kumar — Chief Financial Officer
I mean that’s what we can’t predict or we don’t want to give any such guidance. But yeah, we’ll try to improve from here.
Rahul Kumar — Analyst
Okay, thank you.
operator
Thank you. Participants who wish to ask a question may press star and one at this time. As there are no further questions, I would now like to hand the conference over to the management for the closing comments. Thank you. And over to you, sir.
Tarang Jain — Chairman and Managing Director
I just want to thank everyone for joining the call and for all of you for your continued support to the Varrock Group. Thank you.
Mahendra Kumar — Chief Financial Officer
Thank you.
operator
Thank you. On behalf of ICICI securities limited. That concludes this conference. Thank you for joining us. And you may now disconnect your lines.