Divgi Torqtransfer Systems Limited (DIVGIITTS) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Divki Talk Transfer Systems Limited Q2 FY27 Earnings Conference Call, hosted by Equiris Securities Limited. As a reminder, all participant clients 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 now being recorded. I now hand the conference over to Mr. Ronak Chen from Equius Securities Ltd. Thank you, and over to you, sir.

Good afternoon, everyone. On behalf of Aquarius Securities, I welcome you all to Q2 and H1 FY27 post-results call of Divghi Top Transfer Systems Limited. From the management side, we have Mr. Chitendra Divghi, Managing Director, Mr. Hirendra Divghi, Full-Time Director, Mr. Sudhir, Mr. CF, Mr. Sadvinder Singh Sabrawal, Chief Growth Officer, and Mr. Deepakwani, COO. I will now hand over the call to Jitendra, sir, for his opening remarks. Over to you, sir.

So, good afternoon, ladies and gentlemen. On behalf of Divki Top Transfer Systems, I welcome everybody that has taken the time and the interest to come here today, our shareholders, investors, analysts, for this earnings call of the second quarter and first half of financial year 27. I trust you've had the opportunity to review the results we've posted. Before starting, I'd just like to take a moment to extend my best wishes to all of you and your families for the Diwali festive season. Just a point for the record that this discussion may include forward-looking. You know, kind of projections, and actual outcomes may differ because of market, customer, execution, and other risks described in our presentation. So I'd like to open by touching upon the significance of this quarter that has just gone by. As you would all appreciate, this was an important milestone for all of us at Divki. We delivered a total revenue of almost 150 crores, 148.7 to be precise, which was an increase of 68% over the corresponding quarter for last year. EBITDA reached almost 44 crore rupees, growing 99%, while profit after tax reached 26 crores, growing approximately 146%. The EBITDA margin was 29.5%. These are meaningful outcomes, but I would encourage all of us to look beyond the headline numbers. This performance reflects several years of investment in products, technology, customer engagement, manufacturing capability, and disciplined execution. They also reflect the strength of a business model in which operating leverage Can become increasingly visible as volumes and scale build up. One aspect of this quarter deserves emphasis. Our performance, I think, is not dependent on a single short-term event. It is the result of multiple operational programs moving forward in concert. Our established transfer case platforms are contributing greater scale. The EV transmission business is showing improved activity, and components and exports are broadening our earnings base. For investors, the strategic significance lies in this combination. A company with several relevant drivetrain capabilities can engage customers at more points in their product planning cycle, and it can reduce reliance on the timing of any one program. This diversification... We are still a work in process, but the first-half performance provides evidence that the model is beginning to take shape. Equally, we recognize that the automotive industry is cyclical. OEM production schedules, model launches, export demands, supply chain conditions, and changes in technology can all affect performance. We therefore evaluate progress not only by revenue growth, but also by quality of delivery, Thank you. Let me now shift gears and make a few introductory remarks on the half-year gone by. So for the first six months of FI27, Thank you. More diversified drivetrain systems company while retaining engineering depth, operating discipline, I made progress in the first half, while recognizing that each business has its own demand cycles and execution requirements. So, what drove this progress? To me, three themes stand out. First, of course, is the transfer case business, which has continued to benefit from strong demand, platform refreshes, and the Indonesia program. Second, our EV transmission business saw a marked improvement in the second quarter after a softer first quarter, reflecting improving customer schedules and broader EV adoption, especially against the backdrop of uncertain geopolitics. Components and exports continue to provide an expanding source of revenue, supported by global customer relationships, and successful execution of awarded programs. This matters because our growth is no longer dependent on a single application or a single geography. It is developing across multiple product families and end markets. A word about Indonesia, and I would be remus if I did not address... The Indonesia 4x4 program is a useful illustration of the direction of our business. It demonstrates our ability to support an Indian automotive customer or customers as their regular platforms address international markets and India overall becomes more relevant to the global automotive industry. It also demonstrates our manufacturing and program management agility. The ramp-up was completed in a relatively short period. We see globalization of Indian OEM platforms as an important long-term opportunity for our drivetrain systems. The recognition we received from Tara Motors for execution excellence and Business agility in supporting their Indonesia expansion is especially meaningful to us because international programs test the supplier on several dimensions simultaneously. Engineering must align with vehicle application, manufacturing capacity must be made available at the right time, and quality and logistics must remain reliable as the customer ramps up. Our teams have worked across these requirements. with a common focus on the customer. And I want to take a moment to specially commend our operations team across our plans who have done such a stellar job. We regard the recognition not as an endpoint, but rather as a benchmark for how we should execute as we go into the future. There is also a broader strategic implication. Indian vehicle manufacturers are increasingly evaluating opportunities beyond the domestic market. When an established Indian supplier... I want to shift and quickly I will make a few remarks about our overall approach in the United States market. As you are aware, we have established a wholly-owned subsidiary in Greenville, South Carolina, in the state of South Carolina, to build closer customer relationships and support our development pipeline in North America. The immediate objective is engagement, better engagement with customers, understanding customer requirements, Progressing RFQs and identifying the right sourcing and manufacturing solutions. We are also evaluating potential manufacturing opportunities. I want to be clear about our capital allocation approach, though. Establishing a presence does not mean committing immediately to a large manufacturing investment. Any future investment will be assessed against customer commitments, program economics, operating risk and the long-term strategic value it can create. We intend to preserve the flexibility that our balance sheet currently provides us. Our U.S. presence is intended to bring us closer to customers and to the decisions that shape future sourcing programs. Local engagement helps us understand technical requirements better, respond to requests more effectively, and coordinate Thank you. The establishment of the subsidiary and our office at the Clemson University International Center for Automotive Research in Greenville, South Carolina, provide a practical base for this work. Initial team onboarding is an important first step, but building a credible customer-facing operation requires consistent follow-through on each inquiry. The first approach is that we will be thoughtful about the sequence of investment. We can begin by serving opportunities through our existing Indian manufacturing base where that is commercially viable. If customer commitments and program economics support additional local value addition, we will evaluate those options in a structured manner. The existence of a market opportunity alone is not a sufficient reason for major capital expenditure. We will weigh overall strategic factors, including tariff exposure, logistics, customer requirements, technology content, expected volumes, and returns, before deciding on the next phase of investment. In conclusion, looking ahead to the remainder of FY27, We are focused on sustaining execution in transfer cases, supporting the ramp-up of EV programs, deepening export relationships, and moving our emerging transmission opportunities through their technical and commercial milestones. The presentation we have uploaded sets out an FI27 revenue target of well over 500 crores and long-term revenue aspirations. In the region of 1,000 crores by 30 and going towards 2,000 crores beyond FI 30 to 33. These are targets and aspirations, not assured outcomes. Their achievement, as you would appreciate, depends on customer programs, market demand, validation, sourcing decisions, and of course our own execution. Our strategy is to build a globally relevant Indian drivetrain company through technology-led innovation. Customer and geographic diversification, manufacturing excellence, and financial discipline. With that perspective, I will hand over to our Chief Growth Officer, Satrinder Singh Sabarwal, to discuss the businesses and growth pipeline in greater detail. And, of course, at the end, we will be more than happy to take questions and points that we may have overlooked. So, Satrinder, over to you.

Yes. Thank you, Jitin, sir. And I will dedicate this quarter mainly to our operations and sourcing team because all the strategic investments in deciding to pursue strategic programs at the customers, investments in the product portfolio, manufacturing, and all, we have already put multiple quarters before. But now when the demand comes, it is this operations and the purchase teams which have stood up and demonstrated. And we have executed this demand for the organization. With that, let me focus on what has changed in the market, how the business has performed, and what are the milestones we are pursuing going forward. Our growth strategy is into two connected parts. The first one is basically to scale up in the areas where we have established customer relationships, established industrial capabilities, and programs. Mainly, I am referring to transfer gates, EV transmissions, and precision components. The second connected part is to develop existing products and geographies. What I mean by that is the new products, mainly the all-wheel drives, the PPU systems, investments in manual transmissions, And strategic growth areas of automatic transmission. We'd like also to expand ourselves into Egyptian geographies, mainly the U.S. Both to increase our breadth of our offerings, as well as to increase the content of supply per vehicle. With that, I'll go into each of our product verticals to give you a glimpse of how we perform and what are our further growth revenues in each of them. First, we start with transfer case. Our revenues in Q2 this year was about 80.4 crore rupees. Compared to 42.7 crore rupees the previous year. This is 88% of revenue jump year on year. When we look at H1, for the same transfer case, our revenue was 156.4 crores versus 82 crore per year back, which is again a jump of 91% year over year. The business is clearly benefiting. 1. The ramp-up of the Indonesia pick-up program. 2. Stronger demand in the domestic market for 4x4 system adoptions and 3. Upgrade vehicle launches being made by our OEMs with our product portfolio. These distinct drivers are very important because they provide multiple revenues of volume growth for us in our transfer case product portfolio. What are the next growth avenues for transfer cases? Our strategy is actually to take our established strength and co-by-co systems beyond the domestic passenger vehicle market. As Indian OEMs continue to expand in the global markets, we aim to support their vehicles in the export markets. This includes pickup programs as well as light vehicle applications. We are also broadening our product portfolio in the 4x4 systems beyond the transfer case. We are already working with another Indian OEM on the all-wheel drive systems as well as the power take-off unit, the KITU systems. Our partnership with Toyota Sushok also gives us a route to engage with customers in the Japanese ecosystems and other Asian markets. The international opportunity is much wider for us in the transfer case in the 4 by 4 systems. Pick-up drugs and utility vehicles are used in varied conditions, much tough conditions than the urban roads that we see here. This gives us an opportunity to get into robust drivetrain performance and reliable supply chain. is pursuing opportunities where its experience in 4x4 systems can be relevant through established relationships and prospective programs involving global customers. This is the same product vertical, which is the EV transmission. If you look at our quarter-two revenues for EV transmission, it is 11.4 crore rupees versus 6.2 crore rupees in the previous year quarter-two. This is a sharp growth, and it was supported by improved demand from the end market, higher adoption of EV penetration in the end market. And excellent market share gain by the OEM where we are engaged. Half yearly perspective, our revenue is 17.2 crores, compared to previous year, 13.2 crores. We view this growth as an increasing evidence that the strategic investments that we have made in the manufacturing and product capabilities in the previous years are now reaping the benefits. Nevertheless, the TV demands Program schedules can fluctuate, but we remain focused on executing rather than contemplating future quarter revenues. This is a popular important development program for us. We have already received the customer approval for production supplies and the presentation already mentions that we are already prepared for the series production to happen in H2. This is an important progression from the prototype and the validation activities that we have already done on the Sigma program. Now, our EV transmission capability. It covers applications across a broad power range, right from the smallest 10 kilowatt to the high-kilowatt, 150 kilowatt, as explained in our presentation. We would also like to inform from another growth opportunity is already on the cards, where we have already secured a prototype order for a CV transmission from an Indian-China CV company here in India. Broadlevel is a very important technical engagement wherein a customer recognizes our product capabilities, but it should not be interpreted at this stage as a production award. We all know we will have to go through the next steps of technical validation, the commercial alignment, and the customer sourcing decision. Broadlevel, our initiative continues to build a diversified TV customer and application portfolio. Rather than relying on one customer, one program. At the same time, our efforts on additional GP applications are designed to reduce the concentration risk. A broader set of vehicle platforms and customers helps us to create more revenue for growth, but it also requires us to be selective in terms of our resource allocation. Together we will work, we will prioritize the program. That fits our technical strengths and offers credible rules to commercial and sustainable production. I move to the third product vertical, the components, wherein I will also cover a subset of that, which is the exports. First, at a broad level, on the overall components. Then we look at our water number. In Q2, we hit 35.9 crores. Versus the previous year at 29.1 crore. That's again a very significant jump in our overall component revenue business. Within this, if you look at the exports, we have hit another quarterly milestone of greater than 23 crores in our export revenues. These are important proof points of our manufacturing capabilities and how our global customers acknowledge our capabilities. The program has now progressed to stable production, reinforcing the customer's confidence on the quality and delivery performance of the DPB. This is the manual transmissions, including the synchronizers. As we have already outlined in our presentation, we are pursuing opportunities in manual transmissions and synchronizer systems. We have already submitted our proposal for a 5-speed manual transmission for a commercial truck application and also submitted proposal for synchronizer systems. For an off-highway challenging application. These opportunities broaden the market we can address, particularly beyond the passenger vehicle, towards the light commercial vehicle, off-highway equipment, and in fact, specialized driving systems. Our work includes both the front-wheel transmission as well as rear-wheel drive solutions. We also look forward to working with this Indian OEMs here, and we have gone ahead and submitted commercial quotations to our customers. Right now, we are at a stage of meaningful and deeper engagement with the OEMs to map out their next phase of customer vehicle programs, the associated powertrain programs, and where precisely we can marry our customers. Our automatic transmission offerings get to the customer roadmap of next-generation vehicles. Our intention is to build the engineering, industrialization, and partner capabilities needed to support automatic localization at scale. With this, I would now want to give you a glimpse of our growth avenues with our strategic partners and geographic diversification. Technology partnerships are very central to our growth strategy. You are aware about our strategic customers. Mahindra provides us a long-standing relationship in 4x4 systems and now a route towards the international vehicle platforms. Similarly, Tata has been another very important strategic customer to us for our TV transmission capabilities. and also providing us another avenue towards the international market. Postmotors creates opportunities for diversification into specialized vehicles and new drivetrain applications. Our global customers of GovWarner and MadMap, they provide us global technology and sourcing relationship. Our partner turned us to show, offers us... Our aim is to build the credibility. At the same time, India provides us the industrial base from which we can serve both the domestic as well as international requirements. To summarize the growth agenda, we are prioritizing ourselves in five practical milestones. One, continued execution of the Indonesia and the domestic 4x4 programs. Two, customer wrap-up and series production readiness for the Sigma EV transmission. Three, conversion of export RSQs into recurring programs. Four, progress through the automatic transmission. Proof of concept and the localization status. Advancements in the manual transmissions, all-wheel drive systems, and synchronizer opportunities. We will measure the progress through approvals, program awards, production schedules, revenue conversions, and the return on the investments. Our objective... I will now invite our finance leader, our CFO, Sudhir Mirzankar, to take you through the detailed financial results, profitability, cash flow, balance sheets. Over to you, Sudhir.

Thank you, Mr. Pindar. Good afternoon to everyone on the call. Before presenting the financial numbers of Q2 and H1 of Equal 27, I would... The transfer case business continued to deliver strong growth supported by sustained demand across existing OEM programs and increasing volumes. This drive business recovered during the quarter by components... We are also progressing with new customer programs and opportunities across adjacent transmission technologies. So, due to FY27 financial performance, coming to the financial performance... In Q2 of FY27, total income stood at Rs. 148.7 crores, reducing 68% year-on-year growth from 88.3 crores in Q2 of FY26 and 5% sequential growth from Rs. 141.9 crores in Q1 of FY27. Revenue from operation increased 73% to Rs. 143.1 crores. On the revenue mix, the transfer case segment delivered revenue of Rs. 80.4 callers compared with Rs. 42.7 callers in Q2 of F526, representing a growth of 88%. Sequentially, revenue increased 6% from Rs. 76 callers in Q1 of F526. Demand continued to be strong across existing customer programs. The EGA drive segment reported revenue of Rs. 11.4% compared to 6.1% in Q2 of F26, reflecting growth of a return person. The business also recorded a strong sequential recovery from Q1, supported by improving demand and program activity. The component segment recorded revenue of 34.6 crores, up 25% from Rs.27.7 crores in Q2 of 8.26. Growth remained steady despite global uncertainty. Supported by precision components and export business. We have continued to gain traction with the export company business crossing the quarterly revenue run rate of 20 plus crores. We have also received production approvals for export farms, providing further opportunities as programs. So moving to H1 of FY27, financial performance. For H1 of FY27, total income stood at 295 crores compared with 165 for 1 crore in H1 of FY26, which registered load of 76%. Revenue for operation increased 81% to this 2814. Transfer case revenue increased 91% to $1.66, while EGA Drive revenue grew 30% to $70.2. Components revenue increased 45% to $60.6, reflecting the continued expansion of the business. Ebitda for H1 required medical student 85.53, up 108% year-on-year, with EBITDA margin improving to 29.4%. Thank you. So overall, H1 reflects strong growth across our established businesses, supported by customer demand, exports, and increasing scale. We remain focused on exhibition, operational efficiency, and converting our growing pipeline into sustained businesses. So, going to balance sheet and financial position, coming to our balance sheet position, we continue to maintain a strong and virtually debt-free balance sheet with negligible borrowings. Our cash and cash sheet balance should add 41.6 crores, supported by bank balances of Rs. 255.7 crores, providing adequate financial flexibility to support our ongoing operations and growth initiatives. On the working capital front, trade distributors stood at 110.5K, while inventory was Rs.74.5K as of September 26th. We continue to focus on efficient working capital management while supporting the expansion of our business. Overall, our strong liquidity position and negligible debt provide us with the financial flexibility to invest in future programs and growth opportunities. So that's it from my side. Now I would like to open the floor for questions and answers.

Thank you very much. We will now begin the question and answer session. Anyone who wish to ask a question may press star and 1 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. The first question comes from the line of Mantan Javeri from Nexus Equity. Please go ahead.

Hello.

Yes, I'm Oliver. Yes, I just wanted to confirm on the Indonesian order. So, like, in the presentation, we are highlighting that this year will be closing around 500 crores of revenue. And in the first half, we have already done more than 280 to 90 crores of revenue. So, and the pickup will be more in H2. So, the math doesn't confirm, like, obviously, we'll be crossing 500 by a significant margin. So, that was the first part of the question. And for the second part, so automatic transmission, like, can we expect some significant breakthrough in the FY29, like in terms of commercialization of our business?

Yeah. So, these are the two parts of your question, right?

Yes. Yes, sir.

Yeah.

So, you're absolutely right. I think the forward guidance, you're absolutely right, 290. I think what we meant to say was it will be well, not 500 close, well over 500 close. So, you're absolutely right. And the second half will be kind of a mirror image. Of the first half, let me just say that to... To the first part of the question, the second, yeah, we are working, actually, we have made qualitative progress, because one of the things we've been able to accomplish now is isolate Thank you. I was commenting on the prospects for automatic transmission, and what I was beginning to say was we have isolated two clear, let me say, nuclei of opportunities. One is for small cars, which, you know, where the solution seems, you know, a competitive solution continues to elude our OEMs. And that's where we sincerely believe that a strong Indian Tier 1 is needed to find a solution for the Indian automotive industry. As far as we know, attempts made so far have not been particularly successful, either in terms of performance or economics. So this is one opportunity we are working on. The second opportunity is... High-torque, that is 2-liter and above engines in SUV applications, rear-wheel drive, that sort of complements our offering on transfer cases. So, you know, there are a lot of moving parts in this, but we expect... There is one particularly attractive opportunity that is arising, and if we execute that successfully, we may end up actually moving up the launch of an automatic late 28 or very early 29 in small numbers and then gradually picking up. We, so there are, as I said, there are multiple customers and methodologies that we are working with. Hopefully, we should have an announcement later in December or the early part of next year.

Okay, sir. Announcement regarding the commercialization of automatic transmission. Is that correct?

Yeah, yeah, yeah.

Okay, and that would be, I think we would start with Indian OEM only, or it will be anyone.

Well, there is also the possibility of servicing some overseas requirement.

Okay. And, sir, our long-term vision of going to 1,000 crores and then eventually to 2,000 crores and the roadmap that we have published, this year, let's assume that we will be around 550 to 600 crores on a conservative side. And, sir, you previously highlighted that next year, due to this such a high jump revenue due to Indonesian history, next year that there won't be growth won't be possible due to this large order. So, does that status continue or are we seeing that where we can sneak in even a 10 to 15% of growth next year in FI 28, I mean? And then again, FI 29, we will have this tailwind of automatic transmission.

Yeah, see, we prefer being a little conservative and preparing our cost structure for a more conservative scenario. And then if there is a boom, Then, obviously, the performance ends up becoming better. So, I'll tell you what, generally, the strategy and approach we are taking is that the baseline trajectory of growth, we're trying to maintain at 15% to 20%. Now, Indonesia was like a surge on top of that, okay? And side by side, we are trying to achieve a breakthrough. In one or more of the four categories that we work with, and those four categories are manual transmissions, four-wheel drive, EV, and automatics. If you look at our presentation that we have posted, slide number 27 kind of takes a crack at projecting where this market could go. By 2030 and beyond. So a lot depends on, you know, how opportunities come through. What this reflects is our take on how the markets are going to evolve and crystallize going forward. Those of you who pay attention to the evolution of the global economics and within the context of that, the global automotive industry would recognize that India is becoming increasingly relevant. We are certainly seeing that, not just in terms of manufacturing contracts, but there are clear, visible signs. That India is being co-opted, Indian companies, both OEMs and Tier 1s, in future platform development across the world. So, we are working on at least three such programs which are in their embryonic state. And because of confidentiality agreements, I'm not at liberty. But they include two Europeans and one Japanese, or potentially two Japanese. Uh, because we are clearly seeing that India has a decisive advantage, uh, in terms of cost, of course, but also capability in, in certain respects. Uh, so, uh, you know, and therefore this on slide number 27, whatever, uh, projection we have put is at this instant, instance, our sort of crack at our, our estimate of how that situation would look. And as you have seen, suddenly Indonesia emerged. And there will be more such interesting things that happen as we go along. Suffice it to say that we need to be in a state of strategic preparedness, right, to be able to take advantage of opportunities of this type.

And just one last small question. On the margins front, due to all the cost pressures currently going on, we have been steadily maintained our margins in effect improve in this H1 also. So do we expect that margins will held about 25%? Like obviously 27% is the high point of what we have guided in the past. So 25% is safe to assume in F28 also once the Indonesian order goes down.

Yeah, if you go back to our earlier calls, since our IPO, we have said that as we grow and handle, you know, this buka uncertain market, we will try and maintain EBITDAs above 20%. We process all our quotations to try and achieve this threshold. Also, ROI of return on invested capital of at least 15% to 18%. When we do our quotations. So, that promise holds. And we are certain, and as you've seen, since our IPO, I think we have, if we have slipped a little bit on ROIC, and that's because, you know, we've been investing continuously for modernization and capacity development. But broadly, if you look at our financial results, we've kept our EBITDAs above that 20% threshold, even in the downturn years. So, yes, that is certainly, we are committed to maintaining that. And I'll tell you what's happening. As the scale builds up, While there are challenges in the current environment we live in on operating variable costs, you know, cost of power, cost of commodities going up, but the scale will bring better utilization of our assets, so the impact of depreciation and impact of fixed costs can be better managed. And you certainly saw the impact of that when the scale surged thanks to Indonesia. Now, imagine, you know, if you're working on an automatic transmission program that has, that whose top line can go anywhere from 300 to 700 crores, you can see what effect it will have on depreciation and fixed cost.

Absolutely, absolutely. So, basically, sir, automatic transmission would be higher margins than current, for instance. At least 25%.

Let's just say that, let me, you know, product development has a process of maturation, and it can start with slightly lower margins, and then over the, you know, three years or so, with cost reduction and productivity, the margin then improves. So, to open up the market, So, against the big boys of the global industry, who, of course, are battling their higher costs and import tariffs coming into India, we have some advantage. But our experience is that this takes time. If you go back into our history, you see that, you know, the kind of profitability we have today, we did not have that 20 years ago. So, it takes time. But with the capability we have on the ground now, the time certainly will be compressed to 3 to 5 years and not 20 years.

That's it. That's it from my heart.

All the best for the future, sir.

Thank you very much.

Thank you. The next question comes from the line of Avinash Nahata from Param Financial Services. Please go ahead.

Hi, sir. Am I audible? Yes, loud and clear. Congratulations on the good set of numbers. My first question pertains to EV transmission. So first is, as part of the leading OE, which all programs we are part of? So if I study their numbers, they are doing almost 15,000 a month. So for the quarter gone by, they have done 45,000 units. And if I see our numbers, I mean, we would have done not more than 3,500 to 4,000 per month kind of numbers. So we are part of which all programs and something which we have been part of some programs lately into this quarter. If you can spend two minutes on this.

Yeah, yeah. No, that's a good question. So, we were originally earmarked to be on... All programs from Little Tiago all the way up to Curve. But developments now are that in between there was a little bit of an interregnum. So the situation now is that with the advent of the Sigma program, we will cover all the vehicles except... The punch. And on the punch, we have a separate contract for component development that is going on for the new Chinese tier one that is going to be supplying Tala Motors. So through that component base, we will come back on the punch. And therefore, our presence with the launch of the Sigma will actually cover then the entire range of vehicles from Tata. I might add that we are also on some small commercial trucks at Mahindra, where we are seeing a significant increase in numbers. So, let me just preempt the follow-on question. To this set of remarks, which is that why aren't we seeing the sigma numbers? And the reason for that is the vehicle testing is backlogged at Tata Motors. And, you know, it's been kind of superseded by new product development that is going on there. This is localization that we are doing against Chinese imports, and given the limited... Thank you. Which means that Tata Motors has mandated TACO to buy from us and supply. So TACO itself has given us the PPAP approval for our production. And we had actually even mobilized some of the inventory to launch this vehicle. So we hope that the testing will conclude now after Diwali by the middle of December or so. And we are looking forward to the introduction of the Sigma. So the Sigma then will be introduced on the Nexon and Curve and also the front axle of the Harrier and the four-wheel drive version of the Harrier and Safari, also the Sierra. And through the component state business, we are developing that for... Another, it's a joint venture between a big Indian group and InnoVans of China. We'll be supplying components for that, specifically for the Tata Punch program. So I hope this answer very specifically, point by point, addresses the question and the concern underlying that question.

Okay, just a small follow-up, so which means essentially based on whatever visibility we have for the testing, etc. So starting Q4, which is 1st of January, since we are part of the entire family of Tata vehicles except the punch on the Sigma program, So, are we the sole supplier in the Q4? We would be the sole supplier?

Yeah, on the gearbox, we are.

Okay, so we can see substantially higher numbers into Q4, I mean, based on the current expectations.

Yeah, yeah.

And is my assumption right that we are doing not more than 3,000, 3,500 monthly?

Yeah, yeah.

And how that progression would be into Q3?

It will be driven by the schedules on Nexon and Curve. Schedule of? Nexon and Curve. And beyond that, from April onwards, on the punch as well. So this broadening electrification is actually bolstering the forecast for FY28. Yes, got it.

Okay, my second question is just an extension of the previous participant's question, which is, like you said, 15 to 20% growth on baseline business. So essentially, before this Indonesian program, we were doing closer to 40-odd crores on the four-wheel drive. So assuming a 20% growth, is it a fair assumption that from the first quarter, 27-28, from 1st of April, our numbers are going to be 50 crores a quarter for the four-wheel drive business? Without taking into any other programs right now.

Yeah, see, I wouldn't want to hazard, yeah, you can infer based on these numbers, but what is happening is there are indications, because Mahindra, for example, is launching this new pickup truck globally. And today, it is very difficult to put a number on what that number will be. Our experience is that since 2020, that Mahindras, when they go into the launch, the numbers tend to exceed their initial forecast. So, there are a lot of moving parts, and the situation is highly dynamic. And to make, you know, a particular set of forecasts, I think is a little hazardous, I would say. But we know that directionally, it is going in that direction. And it's not in SI-28, but in SI-29, if they end up hitting the right buttons, we could see Indonesia-type volumes globally. That means India plus. The markets that they operate in. And it's quite a broad spectrum because they operate in North Africa, they operate in South Africa, Australia, New Zealand. South America is a big market, right? I should also point out that maybe there's one thing we missed in the opening remarks when we talked about Tata, which is that Tata Motors is now, as you have been following, finished the acquisition of Iveco. And Iveco has a very significant line of LCVs that are four-wheel drive. And we have the products already designed to go on those transmissions. So, you know, so these are the opportunities that I see. Broadly, I would say is that the acquisition of Iveco by Tata is actually the big. The big breaking news for us, both in the area of manual transmissions for these vehicles, automatic transmissions, and transfer cases. So, with all this happening, we need to process that, and hopefully we will have some kind of a coherent picture in the next couple of months.

Okay, and if I could squeeze one more, on the component side, so right now we are at a run rate of 35 crores a quarter, which is 20 crores of exports and 15 crores domestic. So is it, what kind of growth, I mean, is it possible to do closer to 180, 190 crores in FY28? We are already at a run rate of 140 crores on the quarter gone by.

Yeah, that is not inconceivable.

Thanks a lot, and all the very best to the DP team. Thank you.

Much appreciated. Thank you very much. Thank you for the good questions.

Thank you. The next question comes from the line of Sanskar Sahooji from MK Global Institutional Equities. Please go ahead.

Thank you for giving the opportunity, and congratulations on the strong quarter, sir. Majorly my question is on the age-speed automatic transmission program. Could you update us where are we in the terms of customer nomination and what will be the watch out or maybe what milestones are remaining for and business award, something on this.

Yeah, so we have quoted on these programs, and... Because of the complexity and the strategic nature of these awards, it is taking a little bit of time. Also, there is a sort of incumbency that we are up against at our customers, and that is what is. But we know that both in terms of cost reduction and strategic... Thank you. And as far as we know, there isn't anybody else in terms of a local entity that has a solution that has been tabled with, you know, the rear-wheel drive automatic also has a strong connection to the light commercial truck segment and its speciality application. Which could be forestry, mining, defense, and so on and so forth. Where, again, Indian OEMs are at the mercy of the kind of unpredictable, let me say, vicissitudes of the global automotive industry that itself is going through a lot of churn. And therefore, for stability and security in the supply chain, a strong supplier is needed. The question is, you know, Indian OEMs are not going to agree to the kind of cost benchmarks which are out there in the world. They need something even more competitive. So that is the effort that is going on right now. We have and we hope that in the next. At least by December, we will have one of these two things sorted out. As I said, one is in a low torque, very small, you could say it's the world's most compact dual-flatch transmission. This is one idea that we are pursuing. And the other one is a more conventional rear-wheel drive, a six- or eight-speed, one of the two, automatic transmission.

Yes, got it, got it, sir. Thank you so much for clarifying. Thank you.

Thank you. The next question comes from the line of Karan Gupta from ACMIL. Please go ahead.

Yeah, hi.

So, my question on the volume side of the segment, segmental volume, if you can share, and by FY28, from FY28, how it will be, you know, the proof of guidance.

Let me make sure I've understood your question. You want to understand segment-wise volumes?

Yeah.

Yeah. You know, as I said, these kinds of questions are a little hazardous to give, you know, a more prudent way of addressing them is to give sort of the potential, the direction in which we are going. So, as I said, if you look at historically, we've been, if you look at three to five-year periods, we tend to register a CAGR of 15 to 20%. Okay, there may be little ups and downs along the way. We are quite confident that that is what we will maintain, and it is our clear view. that in parallel, there will be significant breakthroughs. The breakthroughs will be of two types. One, which is very large in number, you know, like an automatic transmission or a global transfer case contract, which can therefore completely change the color and character of the business. The other one is A surprise award from, of a very, very high prestige. So, you know, one of the big German OEMs, for example, awarding on one of its signature iconic vehicles, awarding the development to a company like us. And we think that is likely to happen because Many European suppliers are facing bankruptcy or just steep cost increases. And in low to medium volumes, they are unable to effectively service their traditional OEM customers. So one of the trends that we are seeing is the India international purchasing offices of these large multinationals becoming very active. Uh, uh, in terms of trying to figure out whether they can have contingency plans out of India. So this is now becoming a matter of survival and, and sick and bringing security to their supply chains. Uh, because of, again, confidentiality, I cannot, uh, you know, name these companies, but I think I've given you enough hints to, uh, let you know what's, What's happening? Let me just say that The reason we have gone to the U.S. also is we believe that the price realization in overseas markets can be much better than what we are getting in India. Our benchmarking and intelligence we have clearly shows that. So that is another factor that I would urge you to keep in mind, and this is especially so on our EV platforms. So, if the intent behind your question is to sort of understand through numbers what's happening, you also need to bear in mind these factors. So, we are currently talking to two Japanese OEMs and two sort of European OEMs, one directly and one indirectly. So, and... In both cases, both on the Japanese side and on the European side, we have prototypes that have been, so I'm not, you know, talking of a sort of fluffy, flimsy idea sometime in the future, but here and now, what is going on? Now, and... One of those programs is going into production in low volume on a new platform, maybe in the second half of next year, and one of the Japanese programs beyond that. But the numbers right now are a little modest, but what we know from experience is that developments like this can snowball quickly into confidence building and generally then lead to some scaling up. So, please bear this in mind. But broadly, I would say 15% to 20% increase is what we are, and that will come through numbers right now. Because in these contracts, the price is not going to change. But our U.S. office is hard at work, and as a matter of fact, since yesterday, we are at one of the premium... We have a lot of equipment exhibitions in the US, where for the first time we are exhibiting our entire range and portfolio of products, and we expect something interesting to come out of that. We have also quoted on some business that cannot be done out of India. It has to be done out of the US. The end application is Ford and Chrysler and Toyota for a tier one there. And we will know very quickly, in the next one to one and a half months, whether that contract is coming our way. If that goes forward, then we have to move very fast in the U.S. to set up. You know, a manufacturing facility and we have a clear plan. We are waiting for the building blocks to come together. So, I know this is a kind of a roundabout way of answering your question, but I think I've addressed the main intent behind it.

Yeah, fair enough, fair enough. Just wanted to try, you know, to quantify the truth prospect. Because there are multiple new programs in coming, right? And the new customers you are acquiring too. Fair enough.

Yeah, what I would do is, I think the answer to your question is actually also its work in process. I would ask you to go to the presentation and look at slide number 27. That one slide captures You know, a framework which is guiding us, and that tells you the efforts that are going on, and I think we will be using this template

to report our progress. Okay, fair enough, fair enough.

In the EV transmission side, we are more focusing on the domestic players, except data, how many new customers we are going to acquire in the next, let's say this is 527 and 28, any work-in-progress conversation going on with the multiple clients? Thank you.

I've already told you there are a couple of new Japanese applications we're looking at. We're looking at two European applications. There is in the U.S.

There is also EV transmission and transfer case.

Yeah, this is in the area of EV transmission. This is actually all, let me see, it's all four-wheel drive.

Across package, you know.

Yeah, so one is front-wheel drive based all-wheel drive, the other one is rear-wheel drive. Okay.

Yeah, sure. Thank you.

Thank you. The next question comes from the line of Ronak Jain from Equited Securities, Private Limited. Please go ahead.

Yeah. Hi, thank you, sir, for the opportunity. So, I had just one question on the Indonesia order. So, basically, I just wanted to understand how much of that order has already been completed, and whether this whole order is going to be executed in FI27 itself, or will some part of it also get spilled over in FI28, early part of FI28?

Yeah, excellent question. I think the Mahindra part of the order will get executed by around February. But certainly, yeah, before end of the year, the Tata part of the order will spill over and go up to June. Okay.

And till now, how much of the order has been executed, like combined Tata and Mahindra, percentage-wise?

See, in terms of vehicle shipments, Uh, it's, uh, maybe MindRise is at 50% and Trata is at, uh, below 50%. Um, but on the transfer cases, the units that we have supplied, I think we, uh, as I said, at the rate of, uh, two, about three, on average, 3,000 a month, we are likely to finish this by February. So we're looking at the last... Five months now. So about in excess of 20,000 units at Mainra. You have the numbers?

We also supplied from our side in the Q4 of the last financial year. Put together between that Q4 and this financial year, Q1 and Q2, for Mahindra's, we have supplied approximately 24,000 units.

And for Tata's, we have supplied about 13,000 units.

Okay, got it, sir.

The next question comes from the line of Bhavesh, an individual investor. Please go ahead.

Good afternoon, sir. Thank you for the opportunity. Firstly, congratulations on delivering a strong set of results. I have just one question regarding your capital allocation strategy. The company currently holds a strong cash position of approximately 2.7 crores. So, could you please share your plans for deploying this capital? Are you planning any upcoming capex and ultimately giving the company strong performance? Is there management?

I'm still doing rewarding shareholders through a special level, thank you.

Yeah. Now, if you have to reach this target of 1,000 crores and there onwards to the next 1,000, it will require deployment of this purpose.

And So that is where it is

intended for that purpose, this particular corpus that we have. If you look at our IPO prospectors, you know, whatever we have said there, we are going in that direction. And the integrity of the plan has not been compromised. It has taken a little more time, but that's what we are doing. The amount will be used for both product development.

As well as capital investment. Andy, rewarding the long-term shareholder, any plans for a special dividend? No, nothing of that type.

Okay, sir, that's it from us. Thank you and all the rest for the future questions. Appreciate it.

Thank you. Ladies and gentlemen, we will take this as the last question for today. I now hand over to the management for closing comments. Over to you, sir.

Yeah, so... I don't want to add, I think there has been a substantial discussion among three members of the management team and some really comprehensive, penetrating questions asked from the audience. So I would just like to conclude by thanking our investors, analysts who took the time and effort to participate in this session. I've always said that we enjoy these sessions because we learn a lot. Hopefully, we are able to pass on some better insights into the business, a better idea of the future where we are headed. And through this, we make it productive and constructive for all of us. So, in conclusion, thank you very much. And we look forward to another such session. Happy Diwali to everybody.