Dhoot Transmission Limited (DHOOTTRANS) Q1 2027 Earnings Call Transcript

Ladies and gentlemen,

good day, and welcome to the Q1FI27 earnings conference call of Tooth Transmission 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 followed by zero on your touchstone phone. The management of Tooth Transmission Ltd. is represented by Mr. Rahul Dood, Managing Director, and Mr. Nitin Kalani, Group CFO. Please note, this conference is being recorded. At this time, I would like to hand over the conference to Mr. Rahul Dood. Thank you, and over to you, sir.

Welcome to all of you today, Founder and Managing Director for Tooth Transmission. After getting listed, this is our first earning call, and I would like to thank all of you for the immense trust that stood upon me and my team. The first quarter has been very good for the automotive industry and also for good transmission. For the two-wheeler industry, the last quarter was one of the best quarters with 22.8% growth. Comparing YOY performance, EV industry grew by 93% and ICE in excess of 20%.

In a nutshell, Now begin with the question and answer session. Anyone who wishes to ask a question may press star and then 1 on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and then 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. Again, to register for a question, you may press star and one now. Your first question comes from the line of Siddharth Pera with Nomura. Please go ahead.

Yeah, thanks for the opportunity, sir, and congrats for a great set of numbers. Sir, my first question is on the margin side, if you see, sequentially on the gross margin side, it's been stable, but in terms of cost pressure, it was much higher in quarter four, and like you correctly mentioned, in quarter one, the cost pressure is lower. So, how should When we think about the margin expansion from current levels, what is the under-recovery here, and where do you think they sort of normalize as you completely pass on the copper inflation?

Hi, Siddharth. So, most of the copper inflation is already passed on. Nitin Kalani, this slide. So, that has already happened. Actually, what What is happening is last four or five months, we are also seeing somewhat further increase in the corporate prices. So, some impact is obviously there on these numbers, basically, as we speak. But we would like to sort of continue to stick to our, I would say, indication, 15 to 16% kind of margin guidance for the full year.

Okay, got it. And second is on the multi-link acquisition, if you can guide us about how How to think about this business over the next few years? What is the sort of revenue, margin profile currently, and what are the areas you are sort of looking to push aggressively, and how big this business can become over the next few years?

So, Multilink full integration with us will take another 3-4 months to have a very proper integration in terms of overall products. But with this, we have added one customer, which is Hero, and also we have added two more products, which is the fuel level sensor and the relays, which obviously there is going to be a big market for cross-selling because Multilink doesn't supply to many of our existing customers. So, cross-selling opportunities would be there. I believe that there should be a decent 25-30% growth which we should be able to do on Multilink as well. And the margin should be in line with the root's margin.

Great, sir. So, last question is on the non-wiring harness EV component business. In terms of, I would say, specifically the EV two-wheeler battery pack assembly, where are we in terms of new customer addition? By when do we start seeing more pickup in terms of from more customers here?

So, as we had initially told you that we were already supplying to one customer, with one more customer down south, which is a big customer for us, and the supplies have already started.

Got it, sir. Thanks a lot, sir. I'll come back with that, please.

Yes. Thank you. Thank you. Your next question comes from the line of Rishi Vora with Kotak Securities. Please go ahead.

Thank you for the opportunity and congratulations on a good top-line print. Just a follow-up on, again, the non-wiring harness EV business. Today, we predominantly supply battery packs and incrementally, we may start supplying the other products as well. So, how should we think about this business over the next three to five years in terms of the contribution? Like, today, how much it is, I'm just asking for a rough number, but today, how much it is roughly contributing in three or five years down the line? You know, where do you expect the contribution of this particular segment would be, given that, you know, the pace of electrification continues to, you know, surprise positively, especially in the two-wheeler segment?

Yeah. So, hi, Rishi, Rahul Doot. Well, see, if you look at it, we are there present across the entire EV powertrain. It's not that we only do the battery pack assembly. So, whatever businesses come across, we try to optimize on all the areas of products which we have in the EV powertrain. If you're talking about the battery pack assemblies, we have been doing the battery packs for our top customer, and another top customer has now added on to it. So, the battery pack assembly business is also going to go up. Apart from this, we are also going to start the EV charging business. So, all those areas are going to add up. Now, when we talk of the growth in terms of electrification, it is going much beyond the expected numbers. And the present customers are very bullish on the growth. And fortunately, our top two customers don't look at India as a market. They look at world as a market.

And how should we think about the margin of this EV component business? Will it be similar, dilutive or accretive to our overall business?

So for us, margins are similar, whether it is ICE or EV, because at the end of the day, we work with customers, not product by product, But as a norm. And then it is all about superior execution. How much, you know, like we don't operate with too many management layers. We have a very hands-on operation and also a lot of good mix of workforce management and labor mix. So these are the areas that we focus on. And we try to have a superior execution. Otherwise, the margins remain the same for ICE or EV for us.

Understood. And any thoughts on three-wheeler battery pack business? Is that area which you will consider in the future or not?

So, three-wheeler battery pack, if you ask me as a manufacturer, we will always plan to create our own product and go up to the existing customers and try to reach out to them. But I believe we are at this point of time going to consolidate our position on the two-wheeler battery packs at least for the next one or two years.

Understood. And just one question for Nitin, like what would be our cash levels at the end of June and if you could share, I know, the SCF for the quarter?

Yeah, Rishi, thank you. See, the thing is the IPO money came in the month of August. So the Bain infusion, which happened in the month of March, plus the impact of multi-link acquisition, part impact, I would say, has led to debt level, which is at about 220 crore at the end of June quarter. We had fixed deposits created out of the Bain infusion. So that's the indicative number at this point in time. After the equity infusion has happened, the debt level would have turned again.

Okay, like around August?

Yeah, yeah, yeah.

Thank you so much for this. I'll get back in.

The question comes from the line of Vijay Kumar Pandey with Access Capital. Please go ahead.

Thank you for taking my questions and congratulations for an excellent set of comments. So, first of all, if you could help us understand the break-up of the non-wiring harness business in Q1, in terms of sensors and control, multi-link, you said 3%, and battery pack.

So, you want to understand the growth in the non-wiring harness business?

Yes, growth and the break-up of revenue break-up of the contribution.

Yeah, we, if you honestly ask me, the growth I can touch upon, but we are not allowed to give exact break-up on the battery side and all those things, basically, because of the customer concentration, being with only one single customer. So, the non-wiring hardness business grew almost 67.7%. Of that, I would say about 10-12% was contributed by the Multilink acquisition. Overall basis, it was about 3%. Battery packs, which is a major portion of this.

So, regarding the Ride Vision JV, it is all about the EDAs for the two-wheeler setup, which the Israeli The company has already done well. We have been giving presentations to all the important two-wheeler customers, and there's a pretty good interest which we have got out of it. It's a futuristic thing, and it will be lots to do with the regulations coming on board from the Government of India. We'll be prepared for all those areas to explore before they come. So, Adas as a product is not dependent on the segment of the whole thing. So, it can be two-wheelers, four-wheelers. We are going to first focus on the two-wheeler side for it.

If you can tell me, because as I have seen two villas, we have not seen much in the industry. If you could help us understand the types of product or anything on that basis.

So basically what happens is there are not only the front collisions, there are also back collisions, and sometimes there is a blind spot on left and right side, which is a company right vision. They have already done a lot of study on the Indian market, and looking at the concentration of the Indian market, they have created this product, and they are already in advanced discussion. So, it's regarding the blind spots which come across on both these sites, and that is how this is going to help us out.

Okay, okay. And lastly, in terms of multilink and non-variant harness, what will be our EBITDA margin and generally what is our expectation in mid-term?

So, I believe that the full integration with multilink should happen in four months' time, And I believe that as the way we work, the EBITDA margin should be in line with Doot's EBITDA margin.

Are we looking for any acquisition with IPO money with the cash we have now?

So that is always going to be a continuous thing, like with Bain associated and helping us out on the M&A side, there's a long funnel which goes through every month. But we are very slow on that because the money which has come in, the first option would be the JVs, DCs, organic, and then M&Es. And in that also, our first option would be Indian acquisitions and taking businesses abroad in the West, if at all it is related to strategy in terms of technology.

Do you think for any acquisition in passenger vehicle space or anything of that sort?

No, not as of right now. We are in an advanced stage related to a joint venture for the passenger vehicle harnesses for the HV side, but we will be able to, you know, give correct information of this in our second call, second earnings call.

Thank you, Vaan. All the best.

Before we take the next question, a reminder to all the participants, you may press star and then want to ask the question. Your next question comes from the line of Ajax Frederick with Sundaram Mutual Fund. Please go ahead.

Hi, sir. Congrats on a good set of numbers. Sir, just two questions. One is on the split between the wiring harness and the non-wiring harness, the absolute value this quarter and, let's say, last year's first quarter. If you can give me that data.

One second. We'll give you the absolute value. Yeah.

So the wiring harness revenue in this quarter was about 1,090 crore. Non-wiring harness business.

And how much was this last year, sir? 1Q.

Yes, 753 crore. Non-wiring harness business was 230 crore.

Sure, sir. And secondly, on margins, usually it comes with a quarterly lag, the repricing, etc. So, do we still have a probability of inching the gross profits up? Is there further scope?

In the first quarter, there was a slight elevation of the key raw materials, which are further basically by about 3-4%, July and even August, which will be materialized in the second quarter itself. The answer would be probably no, not immediately in Q2. But in Q3, we'll get these things if the prices are stable.

At that point of time, the recovery will start for us. It's a period of time. It will take its own, like, when it's a hard cycle for us, we have to, you know, kind of lose that money, and when the soft cycle starts, because there's, at some point of time, there's a peak which it hits, and then it comes down. So that's the time wherein the recovery starts.

Perfect, sir. Great, sir. That's it for me. Thank you. Thank you.

Question comes from the line of Preet Bittani with Ingrid Asset Management Company.

Thank you for the opportunity, sir, and congratulations on the good set of numbers. My first question is on the line of wage hike impact. So if you could just quantify what would be the wage hike impact we have around one employee cost, what would be led by wage hike and what would be the...

The wage hike impact is not on our thing. I mean, whenever, whichever state we are present, whatever is the minimum wages contract which comes through that, we have to adhere to that. And then only in terms, we have to discuss with the customer. So, I believe that the impact which is there has been taken and we are yearly discussed with them on the wage hike cost and that's where it comes to us back.

Sure, sir. I got it.

Preach, sir, you have any further questions?

No, no, my other question has already been answered.

Thank you. Your next question comes from the line of Ayush Vedh with Leo Asset and Wealth Management. Please go ahead.

Am I audible? So, first of all, congratulations, Raoul and Nitin, for a good set of numbers. So, my question is on the accounting side. So, when the acquisition of Multilink happened, the consideration is shown as 435 crores, if I am not wrong, in the RHP. So, what would be the goodwill impact for it?

See, we are in the process of assessing the attribution of those values, basically. Some tentative numbers have been arrived on that part. So, the value will be distributed across 3-4, I would say, major heads. And one of those would be customer relations, basically. Obviously, the assets acquired would be recorded at fair value, both on the fixed asset side and working capital side. In addition to that, there will be intangibles which will be identified. One of those large intangibles would be the customer relations, where we are getting a customer which was not with us earlier. And also, another customer where we have increased the revenue contribution from that particular customer. So, customer relationship would have a major, I would say, part of the purchase consideration breakup. In addition to that, there will be goodwill and, as you rightly said, the intangibles of trademarks and patents and other things, basically. My sense is that roughly it would be about 20 or 25% of the acquisition price when it comes to goodwill.

Okay, got it.

Thank you so much. This question comes from the line of Nishant with Nippon Life. Please go ahead.

If you can be a little loud, please.

Taking my question. So, first question would be on the wiring harness side, what would be the percentage of localization or the backward integration that we would probably have in that business versus the bought-out components, maybe in terms of cables, terminals? So, any sense on that you could provide us?

So we have a very good auto component division wherein we backward integrate into cables and connection systems. And localization is a continuous drive. You have to keep doing that every month and then go on progressing with it. It's not that there is a benchmark because at the end of the day, the business also grows and the number of components which keep on coming for localization are there. But I can tell you that we have a very good localization drive, and about 30% of the component, 35% of the component, which were 20-25% now. So about 20-25% is what we import, and remaining...

Those are all bought-out components?

We manufacture it ourselves. We have Dooth Auto Company. It's a subsidiary of Dooth Transmission, wherein about 1,200 crores of business is done for the group companies, which doesn't reflect into the overall sales, because at the end of the day, it's all self-consumption.

So, secondly, I just wanted to understand copper. So, what would be copper as a percentage of our bomb cost?

About 20 to 23 percent.

Okay, so 22-23% is our dependency on the copper as a material, right?

Yeah, 20-23%, approximately that fall apart.

And lastly, just a sense on your battery pack business, what would be our value addition in this particular product?

Battery pack, basically the cells are imported, which customer gives this to us. The tap cells, the bus bars, the wiring harnesses, the pressure sensors, the overall component level working which is there, connector systems and all that, all that we do in-house. We manufacture it in the auto-pump company.

Bound by an understanding with the customer. Actually, we really can't disclose more details there, because we have a single customer, and it will be tantamounting to reaching that agreement with the customer.

No problem, sir. Thank you.

To ask a question, you may press star and then one now. Your next question comes from the line of Viraj Sanghi with Ambit.

Thank you for taking my question, sir. Just one clarification first. The supplies to the second customer for battery pack assembly, were they started for the full quarter of Q1?

Just one month of the last quarter.

Secondly, sir, the automotive switches and EV concept utilization levels have kind of remained low for the last three years. So, what is the kind of hindrance which is there in that particular piece of the business and your utilization levels picking up over there, and how can that...

Sorry. So, the point is, in the automotive switches business, we do the off-highway business, the off-highway and the tractor business, which is... And we have been growing as per the market rate at what this industry has been growing. The call set business is doing very well. In fact, the new business of EV call sets which are coming for next year, we almost have a 40-45% share of business for the Indian market.

What we see on the wiring harness business on the passenger vehicle side is generally there are two separate suppliers for low voltage and high voltage wiring harness. So how predominant would that kind of scenario be in the two-wheeler, three-wheeler space or that is absolutely not the case in electric two-wheeler?

See, in any electric vehicle, there will be two voltage systems. So, LV and HP remain a part of the two-wheeler business also, but we are a part of both the products.

Okay, so usually when you are present on an electric two-wheeler, you are supplying both low voltage and high voltage. That would be predominantly the case. 9% of the case is that only.

Excellent, I would say, growth for the EV sector per se, where the volumes almost doubled the quarter of last year. Only with this small, this one particular, I would say, action, our share of revenues from EVs have increased from 24% to 27% of our revenue, in spite of all other segments growing very strongly. So, it all depends, meaning if the penetration increases for EVs, our revenue from EVs should also grow substantially. What we believe is that maybe in another two-three years' time frame, we should be definitely having a revenue from EVs of more than 32%.

Thank you. That's helpful. And my second question is that the ICE volume has been 33%. So, it It means that we are losing market share in the ice segment. Is my understanding right?

No, we have not lost any market share. We'll work on the numbers again, basically, with you separately, but we believe whatever is disclosed is correct.

Okay, means if we have the markets are intact, then we should grow in line with the industry. So, if industry grew by 20 and 33 percent, and we are growing by 17 percent, so means it's a basic assumption. There might be some volatility, so it will be better if it is clear.

No, so our revenues on our side grew 63 percent in the quarter.

Okay. It's mentioned in your presentation. Let me say the page number exactly. It's on stage number 6.

It's not specifically mentioned. Our revenues on the EV side grew 79%, and on the EV side grew 79%, and on the IE side grew 52.6%.

That's helpful. Thank you. And my last question, we are already in the testing phase for the ADAS systems. I think the testing has been done by the daily company. But do we have customer ready to adopt it? And if you can name it, who is willing to adopt it?

So we can't name the customers, but the point is that we already have a relationship with all...

...regulation means it doesn't come and customer, sorry, the OEMs want to sell it as a premium feature. That could be

a possibility, but as much as we understand, looking at the concentration of two wheelers which is happening and the road accidents which are happening, the regulations for EDA should be coming on very soon, and we want to be ahead of the curve in case it comes and be ready.

What is the means? I am not trying to reveal you, your number, but say an entry-level segment bike or a scooter, how much the cost will increase if they adopt the SCADA?

That depends on what all features. So, it's a very, you know, relative question. It depends on how many features it is required. So, we can't comment on this right now, but if you send us a separate email, we will...

This is all. Thank you for giving the opportunity.

A reminder to all the participants, if you wish to register for a question, please press star and then 1 now. Your next question comes from the line of Preet Jain with Niveshai.

Thank you so much, sir, for the opportunity. My first question is on the margin profile. If you compare YOY Q1 FY26 to Q1 FY27, is it the proportion of battery and other products increasing? That is why we are seeing an impact on the gross margin?

No, no, it's not because of that. As we explained it to you, it's about the hard cycle and the soft cycle of the commodity. So at that point of time, it was a soft cycle of the commodity going on. Right now, we are through a hard cycle of the commodity.

Okay, so like gradually we should see that margin profile going on, right?

Yes, whenever the raw material starts coming down, we should be, you know, doing better on the margin side.

Okay, okay. So, we do pass on our prices, but with a lag, you're saying?

It's a lag of three months, and that's how customers do it, and we have been doing it for years like this.

Got it. And, sir, in terms of, you know, where we, in the EV side, when I speak specifically, we have a good market share of around 70%. Let's say in terms of the content per vehicle with our, you know, set of products that we have currently, wire harnessing, battery sensors, controllers, so how much do you think that we have, you know, let's say, with our current product profile, we can offer X amount, and what percentage are we currently, you know, supplying to this OEMs?

So, if you look at it, there are various OEMs to which we are supplying various products. And, you know, there are products like the cot sets, there are products like the charging gun, products like RCDs, products like chargers, DC-DC converters, wiring harnesses, HVLV, and then the battery pack assembly. So, everyone has a content. Depending on model to model, it goes up and down. So, it's a variable thing. And it's an information which is customer to customer. So, we would not like to talk more about this in this term.

Kalani, if you want to add? But if you are honestly asking about the content between ICE versus EV, then the content is substantially higher. If you only look at the wiring harness piece, the content goes up by 1.5 to the content industry.

In terms of capacity expansion, like with this IPO proceeds also, we have not, you know, set aside anything for this wire harnessing segment. So, do you think 75-80% utilization, we still have a headroom to increase it or will, you know, soon be coming up with a capex here?

No, we have in the IPO proceeds which have come in, in that there is expansion going on in two plants. One is in Chhachar and one is in Hosur, which is going to add about 15-20% to our capacity this year. We cannot increase anything in the 75% range because all our customers operate at 100% efficiency when it comes to the 5-6 months of season time during Diwali. So for that, we have to maintain a capacity of 75% year-round so that during the peak cycle, we are able to support our customers.

Okay. Got it, sir. Thank you so much.

Thank you.

Ladies and gentlemen, we take that as our last question for today. I now hand the conference over to Mr. Rahul Duth from Duth Transmission Limited for closing comments. Over to you, sir.

All of you for attending the call today and looking forward for sharing our next earnings call next quarter. And thank you for the trust which has been bestowed upon me and my team.

Thank you, ladies and gentlemen. On behalf of Dooth Transmission Limited, that concludes this conference. Thank you, everyone, for joining us, and you now disconnect your lives.