Automotive Axles Limited (AUTOAXLES) Q4 2026 Earnings Call Transcript

Good morning, ladies and gentlemen, and welcome to the Automotive Access Limited Q4FY26 Earnings Conference Call, hosted by 361 Capital Market 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. Should you need assistance during this conference call, please signal an operator by pressing star then zero on a touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sailesh Raja from 361 Capital Market, Private Limited. Thank you and over to you, sir.

Yeah, thanks, Sopnalli. Good morning, and thanks to everyone who have logged in to Automotive Access OQFA 26 Ennings conference call. From the management side, we have with us Mr. Nagaraja, who is President and Whole-Time Director, Automotive Access Limited. Mr. Raman K., he is Interim CFO, Automotive Access Limited. And Mr. Krishan Kumar, Whole-Time Director, Meritor HVS, India. So now I'll ask Mr. Nagaraja for an opening remark, post which will open for Q&A. Over to you, sir.

Good morning, ladies and gentlemen. I'm Nagaraja Gargashwari, President and Whole-Time Director of Automotive Access Limited. As Shailesh mentioned, along with me are Kishan Kumar Urpi and Mr. Raman K. First of all, thanks to the strong market. As you're all aware, we were able to close FY26 on a very high note. We were able to convert the demand and improve both the top and bottom lines. So what we will do is, first, Kishan will take us through the market and how we are looking at it, and followed by Raman sharing the results of Q4 and also the full year FY26, and then we will open up for the question and answer. Over to you, Kishan.

Yeah, thanks, Nagaraja. Good morning to everyone. Like all of us know, and I think I've been repeating this in the previous calls as well, the industry, especially in the commercial vehicle, about seven and a half ton, it's been on a tremendous ride for the last three, four years. We have been seeing consistently 400-plus market since FI23, and that continued and ended in even a better... It's a place now for the FY26 full year with the market closing at around 480,000 vehicles, which is 16% above FY25. And the special note here is the Q4, which is a phenomenal number for the industry, each OEM crossing their own individual records. And so did we with our delivery and production during this quarter. Thank you. So what we can probably make out of the last year was probably the GST cuts that happened later part of the year. And then the fleets, you know, the large and small fleets trying to get the benefit out of it. The replacement cycle also kicked in a little bit earlier than the earlier predictions. So the fleets actually went ahead replacing the vehicle. So very positive sentiment overall, and that, you know, showed up all the way to the last date of March in terms of production and sale. And one more positive note here is, which probably there will be questions later, we also converted a good amount of the new products that we launched during the years, and the ramp-up was pretty good done, and we were able to convert that as well, you know, at a very high success rate, I would say. So with that, probably I will hand this over to Raman for a financial summary.

Good morning to all the participants in the call. So, and take this opportunity to present the results for Q4 as well as the full financial year, FY26. So, from a top-line perspective, we ended the quarter four with revenue of $6,643 million, which is, you know, comparing to sequential quarter, we were up by about 18%. And year over year also, I think we had a similar growth of about 18.5%, 18.7%. The other income is about 55 million. That is kind of lower when compared to last quarter, given the geopolitical situations and the interest rate cuts that happened in the market. So our investment income was slightly lower in the quarter. But nonetheless, I think most of the investment income are in the recovery stage of this point, as we speak. And moving down, so when compared to the material cost, I think we had a total material cost of about 4,518 crores. Sorry, million, which is at about 68%, which is just likely improved year-to-year. And this is, you know, in line with the new business model as well. The employee benefit expenses stood at $473 million at 7% on revenue, which is kind of mostly flat when compared to sequential quarter. The finance cost and depreciation are more or less in line. The depreciation is slightly up because we've had some of the investments that kind of got capitalized in the last quarter. So there is a slight increase in the depreciation when you come back to the sequential quarter. The other expenses stood at 880 million. So I think that is again slightly up. Obviously there is a variable portion in that other expenses as well. So that is the reason it has moved up. Otherwise, you know, all other Fixed expenses remain quite stable. So that leaves us with a total EBITDA of $825 million, which is about 12.4% on the revenue for the quarter and the Q4. And there were no exceptional items. We had reported some exceptional items in the last quarter. For this quarter, we don't have any exceptional items. And that leaves us with a PBT of about 700. PBT is at $723 million at about 10.8%. Thank you. PAH stood at 539 million at 8%, sorry, at 8%, that was 8%. So, when you compare this over the last Q4, like Q4 of last financial year, I think we ended up with a similar path of about 8%. So, I think in terms of profitability, you know, we have sustained the same level of profitability, though we had, you know, the cost structure from last year to this year significantly varied due to the, you know, reasons that we experienced in the last quarter. And coming to full year, the revenue overall for the financial year 26 was 21,777 million. And the total income, including the other income, which is the investment income, is 22,099 million. There is a 5% overall growth in the revenue year over year. And when comparing, when coming to the cost structure, I think our metal cost for the current year stood at about 67.5%, close to 68%. I think we are fairly stable and we have been improving year over year on the metal cost front. Employee cost is $1,592 million at about 7.3%. So we had a lot of expenses this year. We had the workman settlement that happened in the last quarter As we explained in the last investor call. So that's had an impact. So that is a one-time settlement for the next four years. So that's had an impact. So from last year, when compared to previous year, it has kind of gone up from 6.7% to 7.3%. And our total other expenses, which is the next significant item, is about $3,106 million at about 14.26% on revenue. So, as I said, there is a variable portion in the new business model. So, I think it is in line with the revenue that we had over the year. Overall, our EBITDA for the full year is at 2,692 million at 12.4%. And then we have the exceptional item, the annualized impact, what we discussed last time of about 120 million. Netting of that, our EBITDA stood at 10.6%. For the year, when you compare to previous year, we had 10.1%. So we are about 40 to 50 basis points above there. And the PBT for the full year stood at 2,198 million at 10%. And PAT for the full financial year was 1,643 million at 7%. So, and when coming to the cash flow, I think the major significant highlight that they want to give an update is on the topics. So when compared to last year, sorry, and the last financial year, we spent more than 70 crores of topics. So whatever investments that was committed, you know, most of about 60 to 70% was spent in the last year. And instead of all that, we were able to generate a net of investments, 30 crores of cash that we had generated in the last financial year. So, yeah, that's the financial update. I'm happy to take any questions.

I'll hand it back to NG and Kishan for any other comments.

Thank you. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star then 1 on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants, you are requested to use handtips while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.

A reminder to all, you may press star and 1 to ask a question. A reminder to all the participants, you may press star and 1 to ask a question. We will take the first question from the

line of Samarth, from Janak Merchant Securities. Please go ahead.

Hello, sir. Am I available? Yes, yes, sir. Yes. Sir, so we have changed the sales agreement. So as per the new sales agreement, we pay technical fees to merit your HVS. So, can you share how much percentage of the sales we are paying to them now? Because you had mentioned that you will come out with this number somewhere around Q2, but we are yet to disclose the number.

Ramon, would you take that?

Yeah, I'm just giving that.

So, overall, see the technical fee is anywhere in the range between 4% to 4.5%, and depending on the mix of revenue that we have. So, I think that's the broad percentage in which the technical fee operates. I hope that answers your question.

Okay. Sir, in the last year in Q4 FY25 call, we had mentioned aspirational target of 4,500 to 5,000 crore top line over the next 4 to 5 years. And you had mentioned that exports would be a key lever for this strategy. So, can you talk more about exports and now considering that U.S. Class 4, Class 8 is also recovering and European markets are also stable. So, do you expect that we see a significant growth in exports going forward?

I can take it. This is Kishan. Thanks for the question, Samad. Yes, in the long run, if you ignore the current, the temporary situation that we have seen in the U.S. with the Tariq, I think in the long run, the visibility is still to accumulate good export orders, and this is also part of our global supply chain strategy. The investments that we are doing in AAL, whether it is for the capacity or to bring more robust process, that is all in line with the demand that we have in the export and domestic market. So overall, as you rightly mentioned, the forecast with the domestic market growth, export, and all other initiatives that we are taking up, the top line should grow in the rough order of 4,000 to 5,000 growth, with export being better than the current contribution what we have today.

Sir, and will this be limited to sub-systems or we will go for completely assembled axles only in XMODs?

I think we have answered this in the past. So the product line as such in Europe and North America don't allow us to supply the fully dressed axles because the products are different. So it is largely going to be limited to these assemblies, sub-assemblies and probably child parts. And also, in all those regions, there is a requirement to customize the end product to meet those regions' OEM requirements, just like how we have a customization. So, that also limits the, you know, the export content to, or scope of export to the, you know, the extent to the drive-in, what we call the sub-assembly, and maybe some child parts.

Got it, sir. Sir, and like earlier we had mentioned, in the existing production facility that we have, we can do somewhere around 2700 crores sales. And now we are, since we are doing the capex, so is this capex enough to reach your aspirational target or we need to spend more?

I'll take that, Nagaraja here. So, again, it all depends on the type of product mix that we are looking at. Currently, what we are looking at, you know, trying to understand or forecast the peak market demand and then putting up enough capacity to that. And there will be one more set of investment is going to come in next 6 to 18 months' time. With that, we will be having enough capacity to meet our aspirational top line.

Sir, can you, like, how much will we spend in this new capacity, or the new capacity creation?

Yeah, again, I think at this point of time, you know, it will be a little bit of a challenge for us to, you know, forecast what it is because we are, like Kishan mentioned, we are looking at the needs of both the domestic customer and export opportunities. Based on that, you know, we may have to come out with a overall plan. That is what we are kind of working on in next, you know, like six to 12 months. And then once we, you know, finalize on our next set of CapEx, you know, we'll be sharing with all of you.

Sir, last question from my side. We were having another three products like the slipper suspension, the off-highway, the off-highway axle, which were also where we also had good growth plans earlier and even the ICV axles. So what is the status on this?

Let me take that question.

This is Kishan again. So coming to Off-Highway, we do have sustained a business over the past several years with this customer. And apart from that, we are closely monitoring the Off-Highway industry. And the products we have in the global portfolio. They are very unique to those regions. So, India is very unique. So, for that matter, it is still a very close watch and plan your long-term strategy. Right now, the current product portfolio, what we have is what we are supplying. And coming to the slipper suspension, we are still supplying that to our largest customer with a different arrangement where we have handed over the supply chain under an agreement so that it is easier for them to manage because it has to be closely, you know, associated with the chassis of the assembly line. So both the businesses we continue to pursue. And the last question was ICV. ICV is typically not a very stronghold for us globally as well. We do have products which we continue to improve and supply to the same customers. And for us, the core is the heavy-duty market, which is where our largest portfolio and the product... You know, the launch that we have done in the recent past. So that remains our focus.

Got it, sir. Sir, is there any situation where we are not able to supply enough demand means because of a capacity constraint in the domestic markets?

So, I'll take that, you know, like we have mentioned, we foresaw that, you know, the kind of product mix is going to probably limit our ability to sell the market, and that's the reason we initiated it about 12 months ago. At this point of time, unless the market really goes beyond the volumes what we have seen in the last Q4, I don't think we have any capacity constraints at this point of time.

Got it, sir. That's all from my head.

Thank you.

Thank you. Before we take the next question, a reminder to all, you may press star and one to ask a question. We will take the next question from the line of N. Modi, an individual investor. Please go ahead.

Yes, good morning. My question is regarding capacity utilization. At what percentage of capacity we are running out of land at the moment?

Sir, the last quarter, when I looked at it, it was over 90%.

And presently, sir?

The last quarter, we almost crossed 90% of our capacity. We are really doing that, you know, peak of our capacity.

Last quarter, we are talking, sir. At the moment, sir, in the month of April, May, what we are doing? Pardon me?

Could you repeat?

In the month of April and May, what we are doing, sir?

So April and May, again, the market has softened a little bit. We generally operate somewhere between 70% to 80% of the capacity. So that's what we'll be looking at. But again, it will be very difficult to look at one particular month. We should be looking at a broader horizon because the capacity on a particular day, week, or a month, it will be completely misleading.

Okay. Okay, sir. Sir, by what time our capacity is expected to be completed, this capacity announcement?

So, as we committed, you know, to use the phase one and, I would say, phase one and 1A, that's what we call is that capacity will be completed by end of December 26. And then that's what we were telling to earlier question that in next to six to nine months, we'll be coming and forming up our next phase of CapEx investment based on both the domestic and the export market outlook.

Look at, look at that. Thank you.

Thank you. We will take the next question from the line of Lakshmi Narayan from Tunga Investments. Please go ahead.

My first question is that in terms of the current supply directly to the OE,

Sorry to interrupt in between Mr. Lakshmi Rara and you were not audible. Could you please use your handset mode and speak?

My question is that currently, after the technical fee agreement, now we would directly supply to the OE or the clear ones, right? Yes, your understanding is correct. Yeah, both in export as well as in domestic. Correct? Yeah. So, yeah, the second question is that, see, I've been told that, I may be wrong, please correct me. So, I've been told that there is a transition towards tractor-trailers, and if that happens, there is, you know, the axle, there is the usage of axles will also come, I mean, multi-axle trucks would actually come down because of the tractor-trailers. If that is the case, how does it positively or negatively impact us?

So let me take that. This is Kishan here. Thanks for the question. You are right. There is a very clear trend for the last couple of years where we see. The proportion of tractor-trailers, specifically 4x2, that is on the increase, and in fact, we were expecting this, anticipating this, even before the trend started happening, because this is a very typical trend we have seen in the global markets, and we had always the product ready. So the product that we launched, the 185, a couple of years ago, and which we are now ramping up significantly, that is to cater to this heavy-duty tractor-trailer market. What it means to us is... Where there were rigid or the rigid multi-axles, that proportionately will reduce, but then the tractor-tailer will increase. So it will be a cannibalization of some of the products that we have in the rigid axle, multi-axle, rigid axle, rigid vehicle platform, getting into the 4x2 tractor-tailer. And this product, what we have launched, With one customer, like three, four years ago, now we have launched with all our major customers. And that is probably the highest, you know, axle number in terms of capacity also that we are creating, expecting that this trend will continue for some time. But on the other side, there is enough headroom in the industry where even the multi-axle rigid vehicle will also grow. So if you have seen any of the forecasts. We are expecting the overall TIV by 29, 2030 to be 500,000 plus, which means there is enough headroom for each of those platforms also to grow, which is a positive news for us because we have every segment covered with our portfolio. I hope that answers the question.

And so, which means that it is not deflationary for you. As, you know, for example, the last concluded year or the year forward, it has not been deflationary for you in terms of the components that actually goes into these, you know, vehicles. Am I right?

You are right in a way, because we have a product available and it's not a loss of business for us. But if you take a pure number of axles that we produce, because the configuration changes from a multi-axle to a single axle, that will bring the number of axles down, but not at the cost of loss of business. It's a continuation of business because we have the products available.

And the other thing which I have thought is that at least in the last one month or the last two months, there have been an increase in steel prices and all the metal prices in general. So that is actually impacting us.

I will take that. Probably, Raman, you can add to that. We always have a back-to-back agreement with most of the customers when it comes to commodity changes, and this is a standard industrial practice. There may be a little bit of lag or lagging in that adjustment, but definitely the business is always protected, and it is a standard industrial practice.

Just to add to that, our financial results are already chewed up to the last increase. So, I think we always take the provisions. The settlement may happen later, but the financials are completely protected for any market increase.

Okay, so does it mean that since our fixed costs are there, this inflationary thing will be more contributing to our bottom line, right? Is that how it is, if there is an inflationary particular for the next 6 to 9, 6 to 12 months?

Maybe I will just take it, Raman, again, probably. See, if you really look at our operation efficiency, there is always a focus on improving the productivity, and then at the same time also growing our top line, and thereby we protect our bottom line, and even in cases, as you can see in the Q4, we also improve it. So while there is always an inflation, if you look at the last several years of our results, we have been able to always bring in the efficiency and then productivity improvements, both in internal operation and from our supply chain. So we always have to, you know, work on that, and that is one of our strengths. We've been doing a good job, and we are very confident going forward also. So we'll be able to, you know, take care of that, any potential inflation, and then also offset it by our productivity improvements. And one of the reasons for the CapEx improvement is not only to, you know, add in additional capacity, But also to bring in the latest technology and efficient, you know, equipment so that, you know, we are always improving the focus on improving our bottom line.

All right. So just one more question, if I can squeeze in. You mentioned that as an industry, we are talking more than 400K per year. And so two questions. So is this right being so cyclical as it was? Because this is something which I heard from one of your OEs also, saying that they think industry is not very cyclical in the last three, four years. And second, as we look ahead in current year, the demand continues to be strong. That's what I could hear from your first few statements. Can you just help me understand or delve deeper into these two observations?

Okay, let me share that question. This is Kishan. What you have heard about the cyclicality being more, I would say, narrowed in terms of the peaks and valleys, that is true. And the numbers are in front of us. So the year we came out of COVID, FI23, we had a 37% growth. And we crossed 400,000 for the first time after COVID. And then from there onwards, it's always the variation is within the 5%. Until last year. So last year, we saw a significant growth of 16%. And this is expected to continue because there is consumption. There is rural consumption. There are very clear indicators, whether it is GDP, IIP. So it is going to continue. And whoever the OEM partner, it is not just one. I think most of the OEMs are expecting this year, FI27. Should also be a good year. So, when I say good year, it is 400 plus, but whether it is 420, 450, 480, that is probably too early to say, because if you look at FI26, nobody forecasted 480. It was around 450, 450. So, there is always a room to cross, I would say, the average of last four years.

Got it. Got it. Thank you, sir. I will come back in.

Thank you.

Thank you. We will take the next question from the line of Radha from Motika Loswal Financial Services Limited. Please proceed.

Hello, sir.

Thank you for the opportunity and my audience. For it to interrupt, Ms. Radha, I would request you to please use your handset mode and speak. Yes, sir.

Yeah. So, sir, my first question is, I understand that while our focus has always been in MHCV, but since the company had entered into LCV, ICV segment a few years back, so can you give us some sense from the next three to five year perspective on your thoughts on expanding the addressable market available for the company by launching products, more products, either in LCV, ICV, and if possible in ICV also in the future?

Thank you for the question. This is Kishan. So what we have been doing consistently in the past several years in terms of our product strategy, that is aligned with how the industry is moving and where our core strength lies. And globally, it is in the US, if you have to talk about the US market, it is class 8. And Europe, it is heavy duty axle and heavy duty vehicles. And even in India, we are in the same forte. And this is what differentiates us from the competition. So we will continue to do that. All of our product launches are focusing more on the medium and heavy duty and more so in the recent part on the heavy duty. Having said that, we already have enough products in the ICV-LCV where we strategically want to play, and we necessarily don't want to go beyond a certain GVW or GAW level because that requires a lot of investment in the plant, and the return on that investment may not be as good as in our core business. So for that purpose, product strategy and our supply chain and cafe, that's always been focused more towards the heavier side of the industry.

So, what percentage of your revenue is coming from LCV-ICV currently?

Raman, you want to give an answer to that?

Yes, Krishan. So, see LCV-ICV, there is a very small portion of the revenue that we have. Maybe I would say somewhere in the single digits at this point, maybe low, less than 5%.

So, secondly, you know, since India is a cost-effective production and a lot of water entry companies are keeping India as a production hub to export to their group companies, and the margins are, in fact, better in the export market. So, considering that we have Meritor as a partner, so currently, what percentage of overall sales is exposed to Meritor Global, and do you see this as a big opportunity going forward?

Sir, did you interrupt in between, sir, if you're speaking and autonomic?

Yeah, I can take the second part of it. Yeah, I think we answered that partially in one of the earlier questions. Export is a growth area for us. And it is part of the global supply chain strategy as well to make sure that all the investment that we are doing is utilized to the best of its capacity. And even, you know, the answer to what extent we can grow in the export is basically the product portfolio that are common today. And there are also opportunities depending on how the domestic market behaves in the future. Right now, even though we are talking about 500,000 plus, if there is a downside, we always have the ability to do the global products. So that is already plugged in our manufacturing strategy.

So, lastly, I understand that you already have e-axels as a product already ready with you for many years now. So, can you give us some sense on how the content per vehicle increases on an average if you compare it with the conventional ICE axels?

Let me answer this question again. There are the technology or the architecture that we have in the EXL that is an add-on to the traditional mechanical action. That means what we are currently manufacturing in terms of the mechanical parts, gears, and other things, plus the electric motor and other electronics, power electronics. So it's always an add-on. Now, coming to India more specifically for e-axle ready, I think the industry is not ready yet. We are still in the traditional central drive plus mechanical axle world, which we have anyway protected with our current product portfolio.

Yes, sir, I understand that, but I just wanted to understand how the content for vehicle will improve this and when it happens.

That's, you know, like I said, 100% of what we are doing today, plus the power electronics. And it all depends on the pricing strategy. For India, it is too early to comment on that.

Okay, sir. Thanks and all the best to you.

Thank you.

Thank you. We will take the next question from the line of Sakeet Kapoor from Kapoor. Please go ahead.

Hello.

Thank you for the opportunity. Sir, if you could just give us some color on the 10-ish part. I think so you alluded to some number of peak revenue as we are prepared for a 5 lakh 10-ish. So currently for this quarter and for the year as a whole, what have been our 10-ish?

Namaskar, Saketji.

I am not sure if I understood your question well. The way I am reading the question is, you are talking about the gross carnage of the industry. Is that right?

Sir, both, sir. Firstly, about you, you talk about that we are prepared when the industry requirement for 5 lakh reaches, and since you mentioned about we are operating at 1995%, what was our number for the quarter? And the second question, or just a continuation to the theme, was that last quarter you did spoke about some specification changes in the buses segment with respect to some state government making some changes with the floor ice, and that will lead to the product, excellent product that we have developed. So what is the update on the theme, and when will that product be introduced?

Okay, I'm still not clear on the first part, but let me take a, you know. So, based on that, how I am, I'm going to answer that. So, in terms of tonnage, there are two things. One is our axle, what we supply to what vehicle it goes in terms of tonnage carrying capacity. And today, if you see the heavy duty, when we talk about it, it is 50 ton and above. And our product portfolio today with the single axle, 185, largest axle in the industry, and the tandem and HR axle, we are already there. We are going up to 70, 80 tons range. In terms of the industry tonnage for the full year, we were at 9.4 million tonnage. That is the total tonnage carrying capacity of the industry. And just to give you a, you know, comparison of this versus the previous peak, which was FY19, where we also did the similar vehicle production of 476,000, it was 8.7. So 8.7 to 9.4 with the same industry level, that addition is coming from that heavy duty or higher sun age vehicles, which is more and more increasing in the past few years and it is going to continue. The second part of the question is related to the bus code, the low floor. Yes, there is more clarity on that, and it looks like the current product portfolio, what we have, can meet most of the requirements, but then there are also, some OEMs have a different strategy, and that is yet to evolve. So, it is still something that is currently evolving, but the products that we have for that space, those are protected for that particular regulation that came in.

Right, sir. And sir, I think we did capex closer to 70 crore last year, sir. It's 73 crore, rather. So what are we emphasizing for the current year in terms of CapEx? And then, as you were answering to my question, if you could come up with an investor presentation, wherein we speak about our product profiles, the industry scenario, where are we placed in, and some colors so that my questions are more aligned and I get, we people get more aligned to what the industry is. And that will suffice a lot of understanding to the sales.

Hi, Raman here, so I'll take the question. So on the capex part, first piece of the thing, I think last year to now, I think last year we spent about 30 crores. This year we spent 70 crores. The coming year also we are expecting because the major spend as we're going to complete the phases that we had already spoken about. So we'll be at most similar range of capex spend will be there in the upcoming year as well. And to the second question on the investor presentation, I think, yeah, we will, you know, we will look at that possibility of having a presentation run. Yeah. And at least once a year or something, the product portfolio.

Right. And last point is on the employee benefits expenses part. Is it proportionate to what the utilization levels were for the quarter? I think so. We hit a number of 47, 48 crore for the quarter. That is on the higher side itself. So, how should that be aligned? And just to get more sense, you mentioned that we will be doing a similar amount of CAPES that we did for the last year. So in terms of the capacity augmentation, what should we end the year in terms of the incremental capacity that we will be operational by the end of this system?

So, the second question, I will take probably first question, Raman is going to come back and talk to you. See, again, like we mentioned, the capacity what we are putting in here, you know, there is an augmentation, like I mentioned, with all these projects going on. We should be able to really meet any of the near-time demand that is coming in the domestic market and also potential opportunity from the export market. So, as Kishan mentioned, we are expecting a domestic peak. Something should happen at 580 levels. We don't know what the product mix is, but, you know, we are putting enough capacity to meet those peak demands. And again, the CapEx, I want everyone to be on the same page that it is not just the capacity, but also, like I mentioned, how do we bring in the new technologies and productivity so that we can always, you know, offset the inflationary pressure that might be there on our fixed cost. Raman, would you like to take the earlier question? Sure.

Yeah. Just on the employee benefit expenses, yeah, we had about 47 crores for the quarter. So that had a bit of one-offs this time. So we had some leave-and-cashment settlement and all that happened. So about 8% of it was a one-off. So, but on the like-to-like, you know, it should be lower by around 8%.

Okay, thank you for all the answers. Only to just to make a small sense of that, since we will be working also on the efficiency part, so what should be the EBITDA margin range going ahead? Where are we currently and with the type of efficiency and the operational program that we took, I think, so on a five-year basis, where should our EBITDA margin shaping them? And does the current set of business environments provide us into a different paradigm altogether with the type of changes and the capex that we have done?

And while we don't want to, you know, do our forward-looking statements at this point of time, like we have been always sharing, and you can look back at our, you know, the past records, one is we have been continuously focusing on, you know, improving our top line, but at the same time protecting the bottom line. All the efficiency what we are bringing in, we can assure you that it will not only offset any potential inflationary pressures or a potential adverse product mix, but at the same time, we have been always working towards and we have demonstrated that our bottom line is always, you know, going to improve. So definitely the product mix and top line will kind of help us to get a much better fixed cost absorption, but the rest is assured. I would say that, you know, you can look forward to the improved, you know, our markets.

Thank you. We will take the next question from the line of Shikha Mehta, some time and tight advisors. Please go ahead.

Hello, sir. Am I audible?

Yes, yes, yes, please.

Yes. So, taking off from the previous participant, since our new capacity is expected to come live maybe by December this year, and, you know, we're currently as on Q4 already at 90% utilization, is it, you know, a fair assumption to make that going forward, whatever improvement we see in our top plan for the next two or three quarters will be mainly based on new products, which might get us better pricing? and better margins.

Vishen, you want to take it up?

Yes, I can answer the second part of that more specifically on the new products that we are launching. Yes, these new products are aligned with the change that we are seeing in terms of the OEM strategies. And like I mentioned earlier, some of them will partially cannibalize our current product line. But whenever we launch a new product, we try to capture the value pricing from that in terms of what features and what benefits that gives to the end customer. So, yes, marginally, it will be better in terms of profitability compared to the legacy products. And we capture the value in terms of placing the right pricing strategy, knowing that there will be a migration to a certain extent from the traditional to the new product that we launch. And this has been a policy for a long time. This is not something new, and we continue to do the same.

And, sir, I think on a previous con call, you had mentioned that from a tandem axle, I think your realization goes up almost 2 to 3x. Is that correct? Is that the right way to see it?

Um, it's not to that extent. It depends again on the product family and specifically the tonnage or the GVW of the vehicle. It is probably not to two to three times extent. It's, you know, I don't know if we can put a number there. It is probably around 10 to 25% as a broad range, not more than that.

Okay, okay, sir. Understood. All right. And so, lastly, on our market share, I think, you know, we have around 50% plus market share with Ashok Leland. Is that maintained this quarter? Do we have any comment to make on that?

On an average, the whole year we have maintained as per our agreement with Ashok Nala. Like Nagaraja mentioned earlier, it is very difficult to pick. One particular day or a week or a month because the product mix changes so much. So we always try to keep the healthy average where our top line and the profitability, both are well balanced.

All right. And as on date, are we supplying products other than breaks to Tata?

No, our primary supplies to Tata is only breaks right now, but there are cases when there are products which they need for the export market or, for example, buses. There are certain business that we do with them. Time to time, not a regular business.

All right. And is this something that, you know, is part of our strategy to increase as a wallet share or are we happy with where we are currently?

So, in terms of breaks, I think we are pretty well-placed where we want to be, and I think the focus in breaks is always to have a healthy share so that we also cater, considering the capacity that we have, we always have multi-OEM strategies. It's not just single OEM.

No, sir, I was asking on the Axel side, is there a strategy to increase our wallet share in CA Tata models or not really? We're happy with that.

There are continuous discussions, but right now I'm not in a position to confirm. There are different discussions at different levels.

All right, sir. All right. Thank you so much, and again, congratulations.

Thank you.

We will take the next question from the line of Abdur Jushi from Trivante's Capital. Please go ahead.

Hi, I am an audible.

Yes, sir, you are audible. Please proceed.

Good morning. Thank you for the opportunity, and congratulations on this good set of numbers. Just on the demand side, we already asked about it, but looking at the sales price increase that we have seen, And the availability of diesel, do we see anything changes in the schedules as kind of a thing from the OEMs happening in the near future? Or have we seen already that the schedules are revised? Any kind of sense on that and the overall demand considering the diesel price?

Thank you for the question. So let me restate what I mentioned earlier. The industry as such is in a very stable 400 plus scenario every year. And the next year as well, we are expecting it to be 400 plus. So, the other dynamics, external dynamics, like the diesel cost, that's too ugly to comment right now, because there is demand. And specifically, talking about Q1, Q2 of this financial year, that's a typical softer market. Historically, it's been like that. And we think it will continue that. And then, how we come out of monsoon and how we end Q4, that will probably define whether it is a 400 plus 20% plus 5%. So that's something wait and watch. But on a demand level, there is a consistent demand, what we have been seeing for the Q1 and Q2, that is continuing. Whether it changes significantly or not, time only can say that.

So, as of now, there is no change.

Very typical Q1, Q2 that we see historically, and that's the level of demand we are seeing.

Thank you.

We will take the next follow-up question from the line of Lakshmi Narayan, Samtunga Investments. Please go ahead.

Yeah, thank you. A few questions. Just as you, you know, step into the coming years, what are the three priorities, certain priorities for the company? Is it qualitative or quantitative? The second question is that there is an operating margin which you actually reported just now. Is this taking into consideration the technology fee or, you know, how does it work, you know, whenever the technology fee kicks in? And the third question is that as regulatory or safety norms go through changes, how do you benefit or if our business is neutral when it comes to regulatory or safety norms for the commercial basis? So, three questions.

Okay. So I'll take the first part of the question. Probably Kishan can talk about the safety norms and what is happening in the industry. So our three focus area, we have been always telling that one is, you know, we wanted to make sure that we are completing all this CapEx investment, you know, on time and then bringing in all the benefits associated with that. And so that is our focus. Again, by December, we should have those things in place. And we are also kind of potentially looking at the technology. We were talking about, you know, the gears required for buses and coaches and then product associated with that, which is under development and testing, which, again, we're going to kind of look at it. And that's where we want to kind of look at it, the opportunities and probably realize. The additional, you know, the share of business in the segments where we are still present but may not be very strong in that area. So that is our second area of focus. The third area, obviously, that is, you know, I would say it has become more like a routine. And always be sensitive to the market demand changes and then continuously focus on protecting and growing our bottom line. And then, you know, continue to be ready for any potential opportunities available in the export market. So those are all the three areas, you know, we would like to continue to focus, and especially, you know, this year.

What are the other about the other two questions? This is Raman here.

On the margins, I'll take it. So, especially on the technical field. So, the operating margin that we have declared now is after considering the technical fee. So, it is being approved on a monthly basis, depending on, based on the revenue, as I said, the mix and all that.

So, the quarter is completely after taking into that particular number?

Yeah, no, it is all the quarters. So, all the quarter results are after considering the technical fee only.

Sorry, and this is applicable on both exports and domestic or only domestic? Both exports and domestic, right?

It is based on the agreement what we are having. I think, you know, we probably will not be able to disclose all those details.

No, sir, my question is that as an external participant, what is the number one has to assume? On a blended basis for an entire year, it's got the exports and domestic keeps changing. Now, you know, there is a margin that is being reported. So, I just want to understand that.

Like Rahul mentioned earlier, it is in the range of somewhere between 4 to 5 percent, you know, that's a thing you can look at. On the total revenues.

Yeah, on the total revenue, on the total revenue, there is a broad range, depending on the mix of customers, we can exploit it, we'll keep it.

Yeah, and the last question, sorry, yeah, the last question was related to the regulations. So, there are, in the next three to five years, couple of regulations that will come in the safety space. And when we look at our product line, mainly the foundation break in this case, there is not much that's going to change. Unless there is a very stringent norm on the stopping distance, which we are not seeing in today's discussions in the regulation space, it is more on bringing EBS and supporting systems. Where our conventional foundation breaks are qualified, it can be used. There is no change that we are expecting. Now, the big industry move that has happened in the Western world is moving from drum to disc brake. With the current regulation landscape, what we have, we think it will continue to be in a very niche market like buses and maybe hazardous goods. And that means our current capacity and the demand, what we see for the drum brake, that will continue.

And in the actual space, we

are not seeing any major changes in the regulation. There was one where the overload has been to some extent regularized, but that's a typical overload that we see on Indian roads all the time. So it has not changed anything in our product portfolio.

And as electronic braking system or ADAS, all of things, you know, come to mainstream, right, whether there are trends such as smart axles or smart braking systems, which means that there is some amount of digitalization happening there, is it a car-fetched idea or it will actually get absorbed and you are actually... Capable of handling either the signals are processed from the braking system or the axle to the electronic braking or the ADAS or whatever that's right. I just want to understand your views of it.

Yeah, sure. And you're right. The ADAS and the electronic braking system, that's going to happen, but that doesn't have any influence on the mechanical axles or the brakes that we have. You're talking about smart axle, yes. We have a couple of axles that we qualify as smart axle in the global portfolio, but they are not applicable for Indian market as of now. So if it moves in that direction, the products are available. It's more of licensing them and industrializing them. And there is a wide range of different features that Axels can provide, but that value has to be perceived by the end customer, which is where India has always been different.

And by how far are we? Is it like two years behind or three years behind some smart actors of the country here?

Absolutely anybody's guess because the Indian market behaves very differently from the Western world. It's, you know, all I can say is, all I can say is when it happens, we will be there.

But is smart actually penetration is 100% in developed countries, or is it even there it is?

No, it's even there it is very limited, very limited. I'm sorry. So, you know, the definition of smart itself is very unique for each region. So, unless we know that, it's difficult to say when what will happen.

Okay. Thank you. Thank you.

Thank you very much. Ladies and gentlemen, we will take that as the last question, and with that concludes the question and answer session. I now hand the conference back to the management for the closing comments.

Thank you. Once again, I really appreciate all of you who have called into this conference, and then thanks for all those questions. Like we mentioned, we are in the midst of going through the CAPEX cycle, the phase one we have already completed, and then we'll be able to complete the next phase by the end of December. We have been really focusing on bringing in the new products, and as you can see, those results both in the top line and our bottom line. Rest is assured we'll continue to strive hard and make sure that we meet all our customers' demands and continue to explore growing opportunities that potentially might be coming in our export market. Thanks once again, and have a great day.

Thank you, members of the management. On behalf of 361 Capital Market Private Limited, we conclude this conference. Thank you all for joining us, and we may not disconnect your lines. Thank you.

Thank you.