Wheels India Limited (NSE: WHEELS) Q4 2025 Earnings Call dated May. 20, 2025
Corporate Participants:
Srivats Ram — Managing Director
P Ramesh Srinivas — Chief Financial Officer
Analysts:
Vivek Kumar — Analyst
Raja Kumar Vaidyanathan
Unidentified Participant
Manas — Analyst
Jay Unadkat — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Wheels India Q4FY25 earnings 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 touchtone phone. Please note that this conference is being recorded.
I now hand the conference over to Vivek Kumar. Thank you. And over to you sir.
Vivek Kumar — Analyst
Thank you Saisha. Good evening everyone. I would like to thank the management of Wheels Alia Limited for giving us the opportunity to host the call. We have with us the senior management represented by Mr. Srivathram, Managing Director and Mr. P. Ramesh, CFO of Wheels India Limited.
I’d like to hand over the call to the management for the initial remarks followed by Q and A. Over to you sir.
Srivats Ram — Managing Director
Good afternoon everyone and thank you. Vivek. Welcome to the Wheels India Q4 a press conference. The company has posted revenues of 1195 crores for Q4 which is 2.4% higher than the sales of 1167 crores in Q4 of March 24 and over the same period the profit registered is 36 crores against 36.8 crores in the current corresponding quarter of FY24.
So marginal increase in sales profit pretty much at the same level at the same time. If you look at it on FY25 full year basis, focus on cost control figures. Favorable product mix and lower commodity prices led to a fairly strong profit growth. We were able to cross 100 crores of net profit. Last year we did 105.9 crores as opposed to 67.9 crores in the previous year. This is a 56% increase in net profit. Whereas for the full year if you look at it, the revenues were less at 4425 crores against 4619 crores. This of course, this revenue de growth has been offset in the fourth quarter and we believe that this trend will continue going forward in the coming year as well where we do see some amount of growth. If you look at Q4 per se, we saw a marginal growth in top line in the domestic market driven by a stronger agriculture tractor market. We make wheels for tractors and also a strong demand for air suspension systems for buses that we service. On the export side, the growth was led by sale of windmill components which saw strong growth in the fourth quarter. This is as far as demand in Q4 is concerned. During the year FY25 we made capex of 250 crores out of which the largest single product investment was for a tractor wheel plant for larger wheels. And we expect that in the coming year as well the capex will be along similar lines. But the largest single investment in the coming year will probably be for components for the windmill segment. The company had a degrowth in exports last year, marginal about 8% degrowth from peak exports in FY24. And this is largely due to a drop in the second quarter of last year in exports. Subsequently things have are along expected lines and in the coming year we expect exports to also show some amount of growth. Going ahead. We are building a strong base which should probably lead to some amount of export growth over the next three years. That base is being built now on which we can actually, you know, develop products and also show increase in export sales in the coming years. Lastly, I’d like to mention that the board. Of directors is a company met in Chennai today to recommend a final dividend of Rupees 7.03 per share. This is over and above the dividend of 4.5 rupees per share which was interim dividend which was announced earlier during the year. That is it. From my side. I’m now open to questions from all of you. Look forward to your questions. Thank you very much.
Questions and Answers:
Operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may Press Star and 2. Participants are requested to use handsets while asking a question.
Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants are requested to press star and one to ask a question. Participants who wish to ask a question may press star in one at this time. The first question is from the line of Raja Kumar Vaidyanathan, an individual investor. Please go ahead.
Raja Kumar Vaidyanathan
Yeah, good afternoon, sir. Congratulations. A good set of numbers. Sir, just to start with, I just want to know what is the outlook for the exports? Because in the last call you said some of the export programs are getting right shifted. So just wanted to know, you know, what is the. If you could give some color.
Srivats Ram
Yeah, I think the, you know, barring all the talk of tariff demand remains reasonably strong. Although I do expect that probably towards the latter part of the year the full impact of tariffs will reduce demand at some point. But the company per se is expecting to show some growth in exports even in the coming year. Despite. Despite this, the outlook as I mentioned is. Is quite positive. It is in a number of areas. Exports are export of, you know, construction equipment, wheels, hydraulic cylinders, aluminum wheels and windmill components. I’ll try to.
Raja Kumar Vaidyanathan
Okay, sir. And sir, any outlook on the domestic auto, including the truck, I mean, sorry, the tractor segment. What is the outlook? You have it.
Srivats Ram
I think the tractor. Each of these industry bodies have made their claims in terms of what the growth will be. Look at the tractor segment. I expect fairly reasonable growth. At least about 5, 6% growth in the tractor segment. About 5% in the tractor segment. Commercial vehicle segment. Maybe about 3 to 4%. And maybe 3 to 4% in the passenger vehicle segment. This is what we expect.
Raja Kumar Vaidyanathan
Okay, sir, just a couple of housekeeping questions if you permit me to ask. The first one is, you know if you see the cash flow, the full year cash flow. I see items on account of obsolete about 6.13 crores and non moving and provision for bad debts for 3.25 crores. So that is what is shown in the current. Those are the two line items I want to highlight. Yes. And if I see your September cash flow there is an item in negative for 5.2 towards. You know, I think for the provision for bad debt line data.
Srivats Ram
Yeah. Yeah. Ramesh, would you like to comment on this?
P Ramesh Srinivas
Sure. Yeah, sure.
Raja Kumar Vaidyanathan
Which means you would have provided about roughly 15 crores in the second half. Is that my understanding? Correct, sir.
P Ramesh Srinivas
Good evening sir, this is Ramesh. Negative 5.25 crore. I think we also clarified in the last call. It’s a moment in the provision, sir. Okay. When. When provisions are made and provisions are reversed. That is the moment which. Which is coming in the previous period. In the current period. These provisions are relating to obsolescence of fixed assets and which has hit the P and L. And since it is a non cash charge, it has been added back. Sir.
Similarly on the provisions we have a provision. I mean we have a accounting rule for bad debts provision based on the truth provision is being made. And since it is a non cash charge, it’s again added back, sir, for the purpose of cash flow.
Raja Kumar Vaidyanathan
Okay. Okay. Got it, sir. Thank you so much.
Srivats Ram
And these are the basically provisions which are being reversed when you’re calculating cash flow. Because it’s not a real cash out.
P Ramesh Srinivas
Yeah, yeah. They are not non. They are non cash items. Yeah.
Raja Kumar Vaidyanathan
Sir, the next question is. I see your inventory has come down from 880 to 9770 crores. Is it due to the efficiency measures or is it due to poor the demand for the, you know, upcoming quarter?
Srivats Ram
No, no. We’ve. We’ve cut our inventory. No, no two ways about it.
Raja Kumar Vaidyanathan
Okay.
Srivats Ram
It’s not related to demand. I’m sorry, my. The answer is it’s not related to demand. Demand remains reasonable. Reasonable at the moment.
Raja Kumar Vaidyanathan
Okay. Okay, that’s nice to know. Okay, and the last one on the light. Want to know the reason for declaring 7.03 as a dividend by the decimal 03?
P Ramesh Srinivas
If I can ask, if I, if I can I answer that question?
Srivats Ram
Yeah.
P Ramesh Srinivas
Basically we went through an internal, I mean dividend policy and probably we could have come up with a number like seven and we put 25% of the profits for distribution and I mean that’s the reason there is no, any specific reason for that.
Raja Kumar Vaidyanathan
Okay.
P Ramesh Srinivas
No numerology at play.
Raja Kumar Vaidyanathan
Okay. That’s what I wanted to ask. Yeah, thanks a lot.
Srivats Ram
Yeah, thank you so much.
Operator
Thank you so much. The next question is from the line of Zaki Nasser, an individual investor. Please go ahead.
Unidentified Participant
Sir. Good afternoon sir.
Srivats Ram
Good afternoon.
Unidentified Participant
And congratulations on very nice bottom line which you have shown, which you said was a result of cost control, product mix and commodity pricing. Sir, do you think these margins will continue going on to the next year and what kind of absolute. I realize that the top line will depend on commodity prices and product pricing but could it be safe to assume that we will have a 10% growth over the absolute number from here on, sir, and the margins will be maintained at current levels?
Srivats Ram
Yeah, I think, to answer you, I think the margins will be maintained demand from what we see, we see positive growth but it will not be double digit margin. It’s very difficult for us to show a double digit margin when all our customers are talking much lower percentages of growth. If you look at the PV sector, SIAM’s reference is 1 to 2% growth.
If you look at commercial vehicles, people are talking about 3 to 4%. Look at tractor, they’re talking 5 to 6%. So given that the underlying industry segments are not growing that much, it would be difficult for us to expect a double digit growth. At the same time I will say healthy single digit growth should definitely be possible.
Unidentified Participant
I mean let me put it another way sir. Would it, would it be safe to assume that we can touch that 5000 crore mark this year, sir? I mean that would be 6, 7.
Srivats Ram
With commodity prices helping maybe, but I don’t. Yeah, margins I think we’ll maintain, I think the overall price. Profitability will, the overall profit will be maintained. But you know, honestly the it doesn’t look like commodity prices will increase too much this year given that everyone is talking of doom and gloom.
Unidentified Participant
Sir, coming on to the next question sir, is wheels India has in the past, I think since I’ve been tracking six quarters, four to six quarters has introduced windmill components. And do you, do you think that the face of the company can change from maybe as some people view a metal converter to an engineering company? Sir?
Srivats Ram
Yeah, that is the. See essentially we’ve been looked at as an auto component, you know, metal converter as you put it. But actually if you look at the company sales, if you look at automotive wheels per se, it is 55% of our sales and if I include the air suspension part of it, it is slightly over 60% of our sales. Then you have, you know, construction equipment wheels which is different.
You have hydraulic cylinders, you have the windmill components, you have some fabrication, all these which are not essentially your auto component type of category. So the company has been very different from a pure auto component player actually for quite some time. But it’s getting, it is enlarging because the opportunities here seem to be larger.
So we basically grow as our customers give us more opportunities. And it looks like globally if you look at it we are getting more opportunities. The non auto side.
Unidentified Participant
And if I may say what is, what would be the debt on, on books as of now, I mean at the end of March 26th with this 250 crores expansion and your whatever payback you do during the year.
Srivats Ram
Ramesh, can you comment?
P Ramesh Srinivas
Yes sir. Yes sir. See if you look at our debt, the debt on the book is about 704 crores. Okay. And if you look at our debt on 31st March 24th it was 708 crores. So our plan is to maintain the debt around the 700 crores and we will be using a build discounting of around 400 to 450 crores. So debt will remain at the present level while we continue to invest on the business at the rate of around 250 crores a year.
Srivats Ram
I’m sorry just to interrupt. One thing that I need to highlight here is that for example the capex that we do is very often not for the year in question but for the year after that. If you understand what I’m saying. So that that is actually one thing that you have to bear. Especially when you look at these large industrial componentry. The lead times are about 12 months for capital equipment. So I just wanted to highlight this for your understanding.
Unidentified Participant
Thank you sir, thanks so much and, and best wishes for the year, sir.
Srivats Ram
Thank you.
P Ramesh Srinivas
Thank you.
Operator
Thank you very much. Before we take the next question we would like to remind participants that you may press Star one to ask a question. The next question is from the line of Manas from JUS Enterprises. Please go ahead.
Manas
So I just wanted to understand if you can just give a quantitative number on the top line growth and margin for the next full year.
Srivats Ram
Yeah. As I said, you know, we are governed by what our customers will end up doing. As you know, our demand for our product is really very much a derived demand. Broadly speaking, commercial vehicle is talking 3 to 4%. PV is talking 1 to 2% and tractor industry is talking about 5 to 6%. So I will say a single digit growth probably, probably on the higher end of those numbers.
Manas
Okay. Okay. So second question. I just wanted to understand the export situation with regard to the tariff and everything. So is it like. I just want to understand like I think one of a competitor mentioned that rims don’t come under the tariffs. Is that right this thing or do we are still under the tariff?
Srivats Ram
No, no, we have see wheels. India has got so many HS codes. There are some HS codes which are under 232 clause. 232 is, is a tariff based on input material. 25% of input material. There are some tariffs which are on complete product grouping. So there are numerous tariffs which apply to two wheels in here. Let me put it this way. Lot of the products are actually fob. So the customer takes takes on the tariff.
Manas
So do we have a risk of margin coming down or they are bearing the cost. So what is our outlook ahead in this?
Srivats Ram
Yeah, per se, maybe marginally, but it does not. As I mentioned, we don’t expect. We expect to be able to maintain our profitability in the coming year as well. Yes, yes, we are confident we can do that.
Manas
Okay. And I just wanted to understand the hydraulic cylinder business. How is it doing? I mean you mentioned there are strong prospects on it. And so how do you think about. Next year?
P Ramesh Srinivas
Yeah, I think, I think we will probably need to wait till the second half of the year. So I’ll just tell you what the prospects are. One is we are looking at doing some contract manufacturing for cylinder works of a large oem. Still the discussions are not finalized. We are more in the sample submission stage.
Second prospect is actually tying up with a Korean cylinder manufacturer which we started negotiations but I think it will take another three, four months for it to happen.
Thirdly, we are working with one of our large customers who is looking at making us more competitive and also improving the quality system so that maybe a year down the road we he will look at exporting more from us.
Manas
Okay, so was there any prebank notice in this 90 day period like you had some export like where it’s not. It didn’t happen.
Srivats Ram
Nothing. We really didn’t see what you’re talking about. Whether people rush to order as much. We are not seeing it actually we didn’t see that. It was pretty much see they give us you know, three months notice, four months, it’s all as for what they’ve given earlier.
Manas
Okay, okay, got it. Thank you.
Srivats Ram
Thank you.
Operator
Thank you very much. Participants who wish to ask a question may press star in one at this time. The next question is from the line of Raja Kumar Vaidyanathan, an individual investor. Please go ahead.
Srivats Ram
Rajkumar. I’m sorry, are you there on the line?
Operator
Yes, they’re on the line and they’re unmuted.
Raja Kumar Vaidyanathan
Okay, can you hear me now?
Srivats Ram
Yes, yes. Yeah, I can hear you.
Raja Kumar Vaidyanathan
Yeah, yeah. Sir, thanks for the follow up. The question is on the margin for Q4 generally you. I think in the previous year, the Q4 call you mentioned there were some steel discounts and something, you know, because of which there was a bump up in margin. So do we also get similar such thing in this Q4?
Srivats Ram
Yeah, we did. But you know as Mr. Ramesh explained earlier, there were also some, you know, provisions which we made.
Raja Kumar Vaidyanathan
Okay, so in that case this margin of 8% that you’re think so that is kind of will be a steady state because even with that you are still done. Well, compared to December quarter the margin has moved I think about 30, 40 basis points. It has moved.
Srivats Ram
Yes, of course. I need to also highlight in this that in the event of any escalation in steel price it will put pressure on the margins as there’s normally some amount of lag effect that takes place when prices go.
Raja Kumar Vaidyanathan
Okay, that’s the timing difference that you are talking.
Srivats Ram
Yeah. Correct. Correct. Last year we were fortunate that there was no real increase in price. It was only reduction or no movement.
Raja Kumar Vaidyanathan
But do you anticipate any increase based on your current discussion?
Srivats Ram
Yeah, we believe there’ll be some marginal increase in the first quarter based on the fact that the government has put safeguard duties on steel. So there would be some increase in the first quarter which is coming up, but we don’t believe it will be substantial.
Raja Kumar Vaidyanathan
Okay. Okay. And any of the margin levels that you will be working for this financial year, you know, given that you already improved your margins this financial year. Q4 so what is the target?
Srivats Ram
So a couple of areas which will be which will play a key role is our ability to ramp up cast aluminum wheel production which unfortunately will happen probably more from December onwards because startup production of programs that we won business are only from that period. So from that period we should definitely see a ramp up of the cast aluminum wheel project.
Secondly, we believe that also the in the second quarter onwards we feel that the windmill business is normally down in the first quarter. Second quarter will be higher. So that should also help in higher margins thereafter. First quarter is the low quarter in this seasonal business of will lose.
Raja Kumar Vaidyanathan
So what you’re seeing essentially. So your margins will improve but it will improve in the second half of the year compared to current.
Srivats Ram
Yeah, probably. Let’s say from second quarter onwards it should. It should improve. The first quarter will be. First quarter is always a little bit strange. You know. March, April, April, May, June is not the same as January, February, March. So the first quarter will be slightly lower after that. It should improve from first quarter levels from the second quarter onwards.
Raja Kumar Vaidyanathan
Okay. And how much it will improve? Sir, like you have can put 100 bits.
Srivats Ram
It’s difficult for me to. You know, I really don’t even. I’m not even 100% sure of what will be customer offtake in this month. So it’s very difficult for me to determine exactly what will be the increase in profit. All I know is that the product mix change in the second quarter should help the profitability. Yay. Has a slightly unfavorable mix in the first quarter.
Raja Kumar Vaidyanathan
Yeah. The reason is you have got a very huge top line. So even a small improvement in margin will show a big change in your bottom line.
Srivats Ram
No, no, I appreciate the. I appreciate the. The idea behind it. Yes.
Raja Kumar Vaidyanathan
Okay. And. And so any color on your subsidy because last time you said the subsidies turned around and we can see.
Srivats Ram
The subsidies become. See the subsidy was had a. You know, made a loss for quite a few consecutive years and the subsidy has become profitable. Ramesh, I forget the net profit numbers. We have the net profit number of.
P Ramesh Srinivas
Yes sir. On the consolidation subsidiaries loss was 20 crores in FY24. Has become 6.65 crore in FY25, sir. Positive PBT. Positive PPBT. Yes. So that is reflected in the consolidation the consolidated financials.
Raja Kumar Vaidyanathan
Okay. And. And any reason we are not consolidating that subsidies because you will get the benefit of your carry forward loss.
Srivats Ram
No, no, no, no. We are. We are consolidating. Is there in the consolidated.
Raja Kumar Vaidyanathan
No, no. I’m talking about merging that entity because given that the entity has substantial losses.
Srivats Ram
No, they have a. There’s a joint venture partner. So that’s why we’re not.
Raja Kumar Vaidyanathan
Okay, okay. I’m sorry. Yeah. The last question. Understand many of the PV companies are kind of moving out of location. So just know is Wheels India considering, you know, moving out of this location and any chance of monetizing those lands.
Srivats Ram
No, we are not. We are not thinking of that at this moment.
Raja Kumar Vaidyanathan
Okay.
Srivats Ram
We are very much. I actually my office is in party so at least I have not been told that we’re moving out because I still go to the same place every time.
Raja Kumar Vaidyanathan
Okay. Thank you so much sir. All the best.
Operator
Thank you so much. The next question is from the line of J. Unathkat From Navneet Publication Ltd. Please go ahead.
Jay Unadkat
Good afternoon and thank you for the opportunity. So you highlighted on this incremental opportunity on cylinders that we are focusing on just now and you said that you’re working with some Korean company to be able to advance into this business. Would like to learn more about this in terms of what kind of cylinders are these the same ones that are required for storage or are these going to industrial and medical applications and partner. Sorry, sir. Go ahead, go ahead.
Srivats Ram
Yeah, yeah, yeah. So let me, let me answer your question. No, the Korean cylinder manufacturers actually making cylinders for construction and industrial equipment, more heavy duty type of cylinders. They are the leading manufacturer of cylinders in Korea and really they are looking at using us as a source for new businesses that they win so that they don’t need to ramp up in Korea.
They can use our capacity to produce in India for that, for the new business that they will. So this is the, this is a negotiation which is going on the question of royalty, how much royalty, what is the period? So the legal part of it is going through as and when it gets updated. We will also keep you informed.
Jay Unadkat
If I may and if it’s okay to share the name of the potential Korean partner, their current revenue and the kind of profitability we would make on outsourcing. Because cylinders, as I understand, is a slightly more difficult, complicated business depending on the industry that they cater to. So this will be a purely outsourcing only relationship or will this be a technology sharing where they will assist you to manufacture to their quality requirements?
Srivats Ram
No, no. So I’m sorry, I’m not able to share the name because the agreement is not yet signed, so I can’t share the name. But basically it is a technology type of agreement where we also get technology. It’s not just a outsourcing agreement.
Jay Unadkat
So with the technology, sir, if they are not procuring from you beyond their requirement, can you start manufacturing using that technology and know how for your requirements to sell in India or elsewhere in the world? Or will that be restricted to manufacture only for the Korean partner in specific?
Srivats Ram
Yeah, I think these are the details that will get fleshed out in the agreement. As the agreement is not yet signed, I’m not at liberty to speculate on what will be there.
Jay Unadkat
Okay, sir, so is it a fair assumption that these should materialize into something meaningful in the next financial year? Or could this be a much longer gestation kind of.
Srivats Ram
I think it’s reasonable to assume that it will start okay again by next financial year. Depends on when we come to an agreement with the Korean party. And. But I’m hopeful that, you know, sometime in this financial year we’ll be able to, you know, come to some understanding and following that, there should be some start of production. The impact may come more in the next financial year as opposed to this one.
Jay Unadkat
If I may extend this further, what size of an opportunity would this mean for the company? In terms of manufacturing for them as partners or for your own interest? And is this coming because of the China plus one realignment of supply chain or some capability or confidence that they have in the engineering and conversion skills of wheels India? How does one really look at this?
Srivats Ram
Yeah, see they’ve been, they’ve already started you know buying cylinders from us. So they have, they have bought cylinders from us and they have experienced our quality and based on the fact that they’ve had a good experience they are looking at some kind of agreement from there. They want to supply the supply agreement from our side. We want a technology agreement.
Jay Unadkat
Do we have an ideal capacity to be able to cater to them? Because as I’ve been following the company for a few years now and I see our utilization towards the higher of 80% mark on a continuous basis and all incremental capex like you also suggested of 200, 250 crores. We keep doing that in parts to be able to meet our own growth needs.
Srivats Ram
Yeah, we tend to not have too much of spare capacity but rest assured it will not result in any capex in the current financial year over and above that 250crores because again they will not start at full volume, they’ll slowly ramp up. So if it does materialize, you know, hopefully it will come into the capex for the next financial year.
Jay Unadkat
Okay, so but, but we, but we don’t have an arrangement where they will want to separately set up a unit with us which will also involve some kind of capex commitments coming from them or anything like that.
Srivats Ram
No, nothing like that.
Jay Unadkat
Okay. So whatever capacity expansion have to be undertaken to cater to the needs will be, will be borne by wheels India.
Srivats Ram
Yeah, will be born by Wheels India. And again as I said, you know this agreement is more on a discussion which is going on at the moment. It is not yet fructified into anything material.
Jay Unadkat
So last one from me, the 202 crore of apex which you indicated with the lead of the next 12 months and hopefully coming into play in FY27 is it fair to assume a similar asset turn? And if I may ask, what area of business is that getting dedicated to?
Srivats Ram
Yeah, so that actually is you know, significant part of that. So basically I said that the total investment is about 100 crores which is really in windmill components. So out of the hundred crores there’s at least 66 crores which is in a long lead time asset acquisition and that 66 crores will have more of an asset turn of one. But it is a very profitable business because it is a conversion business. It is not a material based business.
Jay Unadkat
Okay.
Srivats Ram
You understand? What I’m saying.
Jay Unadkat
Yeah, yeah, yeah, got it. So basically there will be some value add on the conversion and it’s more engineering towards engineering than just plain. Yeah, not a problem. So thank you very much. Very helpful. Thank you again.
Srivats Ram
Thank you.
Operator
Thank you very much. Participants who wish to ask a question may press star in one at this time. I repeat, participants who wish to ask a question may press star N1 at this time. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Srivats Ram
Ladies and gentlemen, thank you. Thank you so much for, for your queries and I hope I’ve been able to clarify all the points which have been raised. As I mentioned, you know the company. Despite the fairly murky economic environment, especially in the international markets, but also the subdued economy that we have in our country at the moment, the company is hopeful of positive impetus in terms of having a sales growth in the coming year. And we are also confident of maintaining our profitability. Thank you so much for all your support and look forward to interacting you in the near future. Thank you.
P Ramesh Srinivas
Thank you.
Operator
Thank you very much on behalf of ICICI securities limited that concludes this conference. Thank you for joining us and you may now disconnect your lines.
Vivek Kumar
Thank you.