Sharda Motor Industries Limited (SHARDAMOTR) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Sharda Motor Industries Ltd. Q1-FI27 Earnings Conference Call, hosted by Equirius Securities. As a reminder, all participant lines will win the lesson only more, 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 10-0 on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Mihir Pura from Equator Securities. Thank you, and over to you, sir.

Yeah, thank you, Balak. Hi, everyone, and welcome to the Q1 FY25 post-results conference call of Sharda Motors. Without any further ado, I'll now hand over to the management for the opening remarks. Over to you, GD, sir.

Thank you very much, Meek. Thanks a lot. Good day, everyone. My name is GD Tucker, and I would like to thank all of you for joining today's call. I extend a warm welcome to all the participants. I am joined today by our group CEO, Mr. Ashim Relan. Deputy Managing Director, Mr. Ashwali Maheshwari, and Chief Manufacturing Officer, Mr. K.K. Sharma. I trust you have had the opportunity to review our Quarter 1 FY27 results and investor presentation, which are available on the stock exchanges as well as on our website. Before we discuss the company's financial performance, I would like to briefly touch upon the performance of the Indian automobile industry during Quarter 1. The industry began at FY27 on a very strong note with healthy momentum visible across all vehicle categories, supported by steady consumer demand, improving rural sentiment, infrastructure-led activity, and continued traction in exports. Overall, industry performance during the quarter reflected broad-based momentum, with domestic automobile production increasing over 22% year-on-year to 93.6 lakh units, underscoring strong OEM activity and healthy demand visible across automobile value chain. During Q1 FY27, the automobile industry witnessed healthy production growth. Across key segments, passenger vehicle production grew by 16.8% year-on-year to 14.53 lakh units, with the growth primarily led by utility vehicles, which increased 21.2% year-on-year, reflecting continued consumer preference for SUVs, and feature-rich models. LCV segment also witnessed healthy momentum, with production rising 20.8% year-on-year to 1.91 lakh units, supported by sustained demand across last-mile transportation and goods movement applications. To sum up, the demand continues to remain healthy across all vehicle categories relevant to Sharda Motors' business. Passenger vehicles, particularly utility vehicles, continue to drive momentum, and commercial vehicles are benefiting from infrastructure activity, freight movement, and logistics demand. Three-wheelers are also witnessing steady traction supported by urban mobility and last-mile delivery requirements. Coming to now our financial performance for quarter 1 FY27, as previously, we have remained focused on disciplined execution, cost control, operating efficiency, prudent capital allocation, cash generation, and maintaining balance sheet strength. As we move ahead, the operating environment remains supportive, although we remain mindful of certain risks arising out of evolving geopolitical conditions. However, we believe the structural drivers for the automobile industry remain intact, rising mobility needs, replacement demand, infrastructure spending, Formalization of logistics, premiumization, and export opportunities should continue to support the industry over medium to long term. Let me now walk you through the operational and financial performance for the quarter ended 30th June 2026. For this quarter, on a consolidated basis, the company reported revenues of Rs. 1,011.1 crores, representing year-on-year growth of 34%. Gross profit for this quarter stood at Rs 203.9 crores, reflecting year-on-year growth of 8%. As you know, gross profit remains a better indicator of the company's underlying operating performance. As against 8% to 10% growth of the addressable market, which we can serve, our gross profit growth was 8% as above due to production impact arising out of a supplier fire at one of our key customers, and one-time impact due to premium RM procurement on account of geopolitical situation. Ebitda for quarter one. came in at Rs 103.2 crores reflecting year-on-year growth of 5% with EBITDA margins standing at 10.2% for the quarter. Profit before tax, before exceptional items stood at rupees. 115 crores for the quarter after factoring in our share of profit from joint venture and associates. In the corresponding quarter last year, PBT stood at 107.7 crores after excluding exceptional gain of Rs. 22.4 crores. Profit after tax for this quarter stood at Rs. 86.5 crores. With this, I now hand over to Mr. Ashwani Maheshwari, Deputy Managing Director of the company, to take you through the key business update. Thank you.

Over to you. Thanks a lot, Jiri, for the updates. This is Ashwani Maheshwari. I extend a very warm welcome to everyone on the call. It's a pleasure to connect and share our key business and strategic updates for the quarter. As you all know, the global business environment continues to remain uncertain with geopolitical developments, evolving trade dynamics, and macroeconomic volatility influencing markets across regions. Against this backdrop, the Indian automotive industry has demonstrated remarkable resilience and continues to offer an attractive long-term growth opportunity. While the global industry continues to debate the pace and direction of electrification, the reality emerging in India is diverse. We are seeing simultaneous growth of conventional ICE vehicles, CNG, hybrids, flex-fuel technologies, and electric vehicles. This is being supported by rising domestic demand, new model launches, Improving affordability and India's growing relevance as a global manufacturing and supplying base. This strong underlying demand is supported by a broader manufacturing opportunity. The auto component industry is becoming an increasingly important part of India's economic and manufacturing story. ACMA states that the sector contributes approximately 2.3% to India's GDP. 25% to manufacturing GDP, and directly employs about 1.5 million people. In FY26, the industry reached approximately US $85.9 billion, with exports of about US $24 billion. The sector has grown at a 5-year CAGR of around 14%, demonstrating both domestic scale and increasing global relevance. For Sharda. This environment is particularly favorable. The future is unlikely to be defined by one winning powertrain. It will be shaped by a combination of technologies with audience choosing the most appropriate solution by vehicle segment, usage pattern, cost, and regulatory environment. Our strategy is therefore not dependent on any single powertrain technology. Instead, it is to build capabilities that enable us to participate across this multi powertrain landscape while simultaneously creating a powertrain agnostic product portfolio. Now, against this industry backdrop, let me now explain what this transition means for Sharda and how our strategy is progressing. Over the last few years, we have been systematically diversifying Sharda along three dimensions, products, powertrains, and geography. Our objective has been to reduce dependence on any one of the technology or market and build multiple independent engines of growth. During our Q4FY26 investor call, we had highlighted light-weighting exports. Emission adjacencies, regulatory readiness, and technology partnership as our key growth priorities. I am pleased to say that during the quarter, we made progress across these priorities. We continued to ramp up our temperature-controlled tube business, expanded our emission order book in multiple powertrains, booked additional orders with export customers, accelerated production ramp-up in control arms, and made further progress on subframe and torrent beams. These developments demonstrate that the priorities communicated earlier are moving progressively from strategy and customer engagement towards orders, SOPs, and revenue contribution. Moving on to lightweighting, lightweighting remains a key pillar of our power train agnostic strategy. During the quarter, previously announced control arm and link programs continue to ramp up, while the order pipeline provides further visibility across FY27 and FY28. Customer engagement and RSQ activity remains encouraging, with growth linked to customer production and program ramp-up schedules. Our current control arm and link business has been built on Sharda's organic manufacturing, local R&D and customer capabilities. We are strengthening this platform further through technology partnership and by extending the portfolio into more engineering-intensive structural products. Our technology licensing agreement with Dongi expands our light-breaking portfolio beyond control arms into subframe and torsion beams. Building on the ongoing engineering collaboration with Dongi, we jointly showcased cutting-edge products and technologies to key OEM customers during the quarter. This has further strengthened ongoing technical discussions and generated RFP of multiple product platforms. While it is still early to comment on commercial timelines, we are encouraged by the progress being made. Overall, our objective is to build a leadership position across the broader relevant lightweighting portfolio by expanding beyond control arms and links into high value structural products. Let me now move to exports and global business. The momentum in our global business continues to remain encouraging despite the evolving geopolitical and trade environment. Our previously announced three orders from a North American engine and genset manufacturers with a combined annual value of approximately U.S. $10.7 million and a lifetime value of approximately U.S. $58.5 million remain aligned to revise customer schedules. SOPs are expected across Q3FI27 and Q4FI27. Execution activities including sampling, validation, and SOP readiness are progressing in line with customer requirement. In addition, we are working on execution for various SOPs of previously announced businesses and have a good RFQ pipeline across our focus area of CV, agri and large genset emission components, temperature control tubes, small tractor, and genset exhaust systems. Let me now share the key developments in our emission business and adjacencies across new segments, fuel technologies, and products. In the emission business and adjacencies, our strategy is to grow by early preparedness for regulations including BS7, cross-sell newly developed temperature control tubes across all segments, increased participation in domestic emission market for premium two-wheelers, Commercial vehicles, construction equipment, and genset market and export key emission components. We are making good progress across these areas through customer development, program execution, and technology readiness. During Q1, we have secured multiple WLTP replacement business orders from leading passenger vehicle audience. These wins reflect our proactive preparation for evolving regulatory requirements and our ability to convert regulatory changes into business opportunities. The SOP of the previously announced temperature control tube order for a leading off-highway equipment manufacturer has commenced and is ramping up as planned. Moving on to infrastructure and capacity, our investments remain modular and closely linked to confirmed programs and customer requirements. Our Chakan 3 light-weighting facility has commenced SOP and is ramping up in line with customer schedules. The facility has been designed with modular capacity, allowing investment to remain linked to confirmed programs and future customer demand. As the announced control arm and link orders ramp up, utilization is expected to increase progressively. Our new Uttarakhand facility is progressing in line with the customer implementation plan. The project involves an investment of approximately Rs 20 crores and has been planned closer to customer's manufacturing location to improve logistics, responsiveness, and JIT alignment. In the first phase, it will support the relocation and co-location of existing business as the customer shifts production. Over time, the location can support additional share of business and create opportunities with other customers in North India across emission and lightweighting products. Moving on to technology and R&D, we continue to strengthen the capabilities required for both our current portfolio and future growth areas. During Q1FI-27, we filed two additional patents. This takes the total number of patents filing to 24 with 4 patents awarded. Our R&D team are also supporting WNTP, Euro 7 benchmarking, hybrid solutions, flex fuel readiness, temperature control tubes, and the localization of light weighting technology. Let me now provide an update on the evolving regulatory environment and the opportunities it creates. The revised CAFE-3 draft, issued on 16th July 2026 and proposed to be implemented from 1st April 27 for M1 passenger vehicle, retains its multi-technology approach while introducing certain refinement. The revised framework sets modified targets for lighter and average weight vehicles while reducing the compliance advantage previously available to heavier fleets. It also moderates the supercredit benefit for strong hybrids and flex fuel vehicles. While retaining the existing incentive for electric and range-extended electric vehicles. The likely OEM response will therefore involve a combination of EVs, hybrid, CNG, flex fuel and improvement in vehicle efficiency, rather than one uniform technology solution. Except for pure EVs, all these powertrains continue to require engineered emission systems. This makes carefully relevant to both our emission and lightweighting portfolio. BF 6.3 or BF 6 with WLTP will be effective from 1st April 27 for M1 passenger vehicles. While WLTP may not require a complete exhaust system redesign in every case, it increases the focus on catalyst efficiency, calibration, thermal management, and durability. Our new WLTP related orders demonstrate that we are participating in this transition. BS7 has not yet been officially notified. Directionally, if India adopts requirements aligned to Euro 7, content is expected to increase mainly in the hotend and after-treatment systems through high catalyst requirements, gasoline particulate filter, and additional catalytic applications. This would of course depend on vehicle category and OEM architecture. Our R&D work with an existing customer on Euro 7-related solutions provides early technology exposure and preparedness. Another area receiving increasing industry attention is the transition towards higher ethanol blends. Up to E20, changes to the emission system are relatively limited. The final content opportunity will depend on notified fuel specifications, regulatory requirement, and OEM platform design. We continue to work closely with the OEMs and remain well positioned to support this transition as the market evolves. Let me now update you on our technology alliances and joint ventures, which are another important pillar of our growth strategy. Our ETPL joint venture continues to have stable performance and remains to be profitable during the quarter. China and Korea continue to be an important market for technology scouting. Both have developed significant capabilities in lightweighting, hybrid systems, E-E platforms, chassis technology, and advanced manufacturing. We continue to engage with potential partners where there is a clear technology advantage, customer relevance, localization potential, and long-term commercial viability. We will remain selective and will communicate developments once they reach a mature stage. Moving on to acquisitions, over the last few years, we have consciously invested in organizational capabilities required to evaluate, execute, and integrate acquisitions successfully. We have strengthened our strategy, M&A, business development, and integration capabilities in established a discipline framework for assessing opportunities. Having established these capabilities, we believe we are now ready to be more assertive in pursuing strategic acquisitions. However, this does not mean compromising on discipline. Any transaction must continue to meet our filters of strategic fit, customer and technology relevance, valuation, integration, feasibility, and ROC. Our strong balance sheet provides us with capacity to pursue suitable opportunities, but capital deployment will remain balanced between organic growth, technology partnership, acquisitions, and shareholder returns. Finally, let me briefly summarize our outlook. The key contributors to FI27 growth include the full year benefits of previously announced lightweighting order, ramp up of additional lightweighting programs, the temperature controlled tube adjacencies, SOPs of North American export orders, and the supportive outlook for domestic OEM volumes. The exact quarterly trajectory will remain linked to customer production schedule, SOPs and the program ramp up. Overall, the quarter reflects steady progress in converting our strategic priorities into execution. Our focus now is on timely SOPs, successful ramp-ups, conversion of customer pipeline, and disciplined capital allocation. We remain very confident in the long-term opportunity and will continue to balance growth ambition with disciplined execution and return expectations. Thank you so much. With this, we can open the floor for Q&A.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question, may please press star and 1 on their 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 is from the line of Preet from Incred AMC.

Please proceed with your question.

Thank you so much for the opportunity, sir. My first question would be on the line of our export or the order book which we mentioned in the PPT and on the suspension side. On export side, I can see that from the PPT, the order which is going to flow, which has already started the SOP for which you have mentioned as a quarter three or quarter four of FY26 was around $23.7 million. And there are two orders which are going to start from quarter 3 or quarter 4 F527, which is around another $11.85 million. If I add this both and multiply with the current dollar rate, it... It comes around 300, 350 growth out of that. How much can we expect in F527 and F528? If you could just give some brief on the same.

So, we have eliminated the order sheet, as you had said, at various point of time, the SOP happening. The SOPs are happening as per schedule, and one of the SOPs, as I announced earlier, it's starting in Q3, FY26, one is starting in Q4, FY26, and subsequently, it will ramp up. Now, our SOPs will completely remain aligned to the customer requirement and schedules. So, you will progressively see this impacting or getting accredited into our top line. Now, classifying into how much would happen in various months would completely depend upon the customer schedules. Suffice to say that the SOPs and the plan are as per the dates which we have mentioned.

Sir, will it be safe to assume that out of all these orders, we could do around 100 crores of top line in this year and around 200 crores of top line in FY28?

So again, as I said, giving a number is going to be a little difficult because this will depend upon these customer schedules. Now, our SOP and ramp-up will remain completely aligned to the customer schedules. As on date, we... We do not see any changes in the SOP dates.

Great. So, just to follow up on this, how do we see ramp-up to happen? So, like, if our annual value is $2.3 million, and the order is of around 5 years, lifetime value, which comes around 5 years, so do we see full ramp-up to be happening in 2nd year, 3rd year, 4th year? Any ballpark number?

So, I mean, I can, we can take this. Question, as with an experience, normally the ramp-ups are linked to the pickup of the vehicle. Now, if it's a new platform, there's a pickup schedule which the OEM would formulate. Our experience says that it would take a year or a couple of years to get to the peak volumes.

Got it. And other on the suspension side, last year, as of year, we had a market share of around 14%. Is there any improvement in the current quarter? Or if you could just bifurcate the growth into suspension or exhaust or if you could give any quantitative number? And other thing on gross profit growth, we have done around 8% growth. If you could just type, like we understand there is a Catholic converter portion substrates due to which our raw material prices fluctuate, but this quarter apart from that aluminum and steel prices have also risen a lot. So if you could just tell us how much gross profit we might have lost because of that aluminum and steel cost increased, which we would be getting in next quarter.

Right. Sorry, I couldn't get your name. Can you? Preet. Preet, there are three questions, if I correctly understand. Your first question is around the suspension or the control arm and links, the lightweighting market share. Right? That's our first question. So, we have given the market share of 14% in the last financial year. We do market share analysis every year. We don't do it every quarter. So, it was 14% at the end of the financial year. With the SOPs and the visibility we have, which we see now happening even in the third quarter, this market share will certainly go up. How much will it go up is something which we calculate at the end of this financial year. So, we'll be able to give you a number only at this end of the financial year, but suffice to say that this will go up with the visibility of orders which we have in hand. Your second question was related to the gross profit. Correct, Pete?

Yes, sir.

Yeah, so I will just request GD to take that question. Yeah, hi, Preet. So as far as gross profit is concerned, you rightly said gross profit is the right indicator of our performance. So this quarter, as we mentioned, our growth was 34% because of, you know, the catalyst, which is one of the pass-through element of our sales. And then product mix of the items which are with catalyst. So that all impacts the overall revenues and therefore gross profit is the right indicator of the growth. Now, in this quarter, it was 8%, and in terms of impact of steel or aluminum, etc., while aluminum has no relevance for us, so most of the direct materials are on pass-through basis, and there was small impact of premium RM procurement, which is built into the gross profit growth of 8% because of the geopolitical situation. Some impact was there which is already built into this. And the pass-through happens gradually. So it happens on different timescales with different customers. So it's a regular activity. So you won't see anything specifically missing in any particular quarter which will get covered in next quarter because this is a regular feature of every quarter or half year. So there won't be any impact arising out of that lag. Hope that gives you the answer.

Sir, just to get it more clear, so do we mean to say that all the raw material price increase apart from substrates we get on a live basis and not with a quarter lag like other auto antiquity companies? Is my understanding correct?

So, in terms of timelines, it differs from customer to customer, and our situation is also exactly as other ancillaries have in the sector. However, the only point I mentioned, for example, assuming for a particular quarter, for a particular customer, I get it on quarterly basis. So, I will be getting for the previous quarter, for this quarter, I will get next quarter. So, there will be a lag, but that lag doesn't create any vacuum for a particular quarter because you get for the previous quarter. So, therefore, you won't see any vacuum because of this reason in the numbers.

No sir, for the substrates, we get it on a live basis, right? Sorry?

For substrates?

For substrates, the raw material which is very volatile, we get it on a live basis, right? Like this quarter, if there is a price increase of the substrates, but for this.

Yeah, so let me just clarify, Preet, on this substrate prices. So that is customer-directed item and prices are determined by the customer only. So there is no sort of lag on that particular part.

Yes, exactly. So if there was no steel or copper steel prices increment in this quarter, what would have been our gross profit growth? It would have been higher than 8%, right?

So, in terms of, you know, one is the substrate impact which we have already mentioned. Now, steel is back to back. So, therefore, there won't be any impact of the movement in the steel prices at gross profit level because gross profit is net of raw material cost. So, there won't be any impact. And therefore, you know, gross profit growth will be same irrespective of this.

So sorry for taking a lot of time. I just do not understand yet. For example, if still prices have moved up by 20%, this 20% delta we would be getting in the next quarter because we get it with a quarter lag, right? So if still has moved from 100 to 120, the 20 rupees delta we would be getting in the next quarter. So there would be an impact of gross margin comparison in this quarter of 20 rupees, correct? Or am I getting it wrong?

So, you are getting it right. So, let me explain you the entire commodity thing passed on. Now, for direct bypass, like catalyst, it's a complete pass-through. That is clear. The direct materials are also indexed. Now, in this particular quarter, there is also one-time premium freight or premium price RM procurement, which has been absorbed by us to ensure smooth supply chain. There are lots of one-time costs which are paid on account of labor, the dynamic situation because of geopolitical disruption. Now, all this will not be coming quarter, if that's your question. Now, these one-time costs, which are incurred, will normalize over the coming quarter. As far as the indexing is concerned, it is difficult for us to put a number to that indexing, because what we are talking about is a lag. Now, I do not know what will the RM prices be this quarter. Now, if the Rn price of this quarter Whatever delta changes will be the impact with the respective OEMs, whether it is 3 months or 6 months accordingly. So, it is not possible to predict whether the RM prices are taken into account or not taken into account. Is that clear?

Yes, sir. Got it. Lastly, on...

Sorry to interrupt, Preet, sir. May we request that you return to the question queue for follow-up? Thank you, sir. Ladies and gentlemen, to ask a question, please press star and one now. Participants who wish to ask questions, may please press star and one at this time. The next question is from the line of Sonal Gupta from HSBC Asset Management. Please proceed with your question. So, Anil, your line has been unmuted. Please proceed with your question.

Hi, thanks for taking my question. I hope I'm clear. Sorry, just carrying on with the previous question, right? I think there's some confusion around steel price impact. So, is the steel price accounted for with a quarter lag? Or I think you mentioned that it is back-to-back, so then in which case there's no lag on steel prices, right?

Absolutely, Sonal. There is no lag in steel prices, you rightly said. So, therefore, there is no impact. Yeah.

So, then, given that catalyst and steel are largely covered back-to-back for us, there is no major real under-recovery for us, right?

No, absolutely not. This is what I said. The only limited impact was the premium. Freak on RM procurement to ensure smooth supplies because of the geopolitical situation. So that is already into the numbers.

Got it. Got it. And you also mentioned there were some other one-time factors. So would you be able to quantify the impact of these one-time factors?

So, Sonal, very difficult to quantify, but two things we can say. One is that these are already factored in. These were because of the geopolitical situation in April and May. In July, these have already stabilized. We are hoping for the best for the future as well. And whatever limited impact we had, we have already captured into the numbers. And number was not very significant, just to say something on that.

Got it. Got it. Thanks. And just, I think, again, the questions have been around, right? Like, if you look at our gross profit growth, while the industry is growing very well, I understand the challenges of one of the OEMs this quarter, but our growth has been sort of relatively weaker. So, and we've been underperforming the industry growth. So, I'm just trying to understand, right, like at what point do you think, I mean, will we be able to address those issues and sort of. So, given our order book and other things, when do we see that we at least start growing in line within the industry?

So, I will divide the question in two parts, and the later part, Ashwini will take over. So, in terms of our growth versus the industry, overall growth was higher at 16-17% for the industry, and as you know, we are not present in Japanese OEM. So, we adjust the growth, and then again, one of our key customers, one supplier had a, you know, fire which had production impact. So, if I... Net of all of this, the growth of the industry, which we can serve, was close to 8 to 10 percent. And our growth is at 8 percent, which is net of these premium freight adjustments also. So we are broadly growing in line with the industry. I will let now Ashwini address the other point in terms of how we can grow further.

So, one point there is that we do not provide guidance. But having said that, there are three factors of growth, which I also mentioned in my opening remark. The first factor of growth is the existing orders, the lightweighting orders and the export orders, which are already announced. The SOPs of those orders and the ramp-up will happen. So that is one factor. There will be conversion of the existing RSQs into orders will be the second area of growth. And the third area of growth will be the organic growth of the industry itself, which will happen. So we are extremely hopeful of the time going forward.

And just last question, if I may, just on the Dongil TLA, I mean, have we been able to sign up some customers for these products? I mean, anything that you can share in that regard?

Yeah, sure. So, just to give a context on the TLA, as we had said last time, that this is, it's a long-term technology collaboration. Now, in this collaboration, what we are doing is, we are focusing on capability building, technology transfer, and localization, including strengthening our control arm and link business in design and development. Now, during this quarter, Building on our ongoing engineering collaborations, what we did is we jointly showcased physical cutting-edge Korean products to key OM customers. Now, this has strengthened our discussions and generated RFQ opportunities across multiple product platforms. Strategically, Our aspiration is to build a leadership position across the entire broader, lightweighting portfolio which you want to address. Our internal assessment on this portfolio is around five years now. It can be between 8,000 to 9,000 crores. And we firmly believe that we can actually build a mid-team to high-team percentage share in that portfolio.

Okay, got it. Great. Thank you so much.

Thank you, sir. The next question is from the line of Viraj Kacharya from SIMPL. Please proceed with your question.

Yeah, thanks for the opportunity. Just two questions. One is, you know, you talked about emission changes.

Sorry to interrupt, Viraj, sir. Your voice is breaking.

Am I audible now?

Yeah, please proceed.

Yeah, first question is, you know, we talked about small emission changes, 6G, capital.

Sorry to interrupt. Your voice is breaking, sir. Can you re-join the queue after this? Can you speak something? Yes, sir. Can you speak something?

I can hear you guys. What happened now? Yeah, go ahead. Yeah, sir. I was asking, you know, what kind of a content change you see from BS 6.3, cafe, you know, tilde, big emission standards like BS 7 come into play.

Right, so we spoke about the upcoming three standards. One we said, which is called typically BS 6.3 and WLTP. Now, WLTP essentially is a measurement norm, wherein the measurement is around real-life driving conditions. Now, there essentially the increase in the content Might not be very high because it doesn't require a complete exhaust system redesign in all the cases. However, it focuses essentially the way it is delivered is through catalyst efficiency, calibration and thermal management. Now, so that's first norm change. The second norm change is the BS7. Now, BS7 is not officially notified, but if we If we follow what Euro 7 is happening, and in Euro 7, we are in an advanced stage of developing the engine with one of our customers for export requirements, which gives us a very decent understanding of what the norm can be. The exact norm would depend upon how much do we adopt from Euro 7, but suffice to say that there is a content increase which will come up. Why will that come up? Essentially, it will come in the hotend, after treatment system, there will be a catalytic high requirement, there will be a GPF requirement which will happen. That's on the BS7 content. The third point which you mentioned was on Cafe3. Now, Cafe3, the latest notification has come in, I think, on 16th of July. Now, that notification, It moderates a little bit on the lighter and the heavier vehicles, but the essence remains the same. Essence is that it is promoting all technology in powertrain transmission. So it's talking about CNG, it is talking about hybrid, it is talking about flex fuel, and overall corporate average efficiency norms it is talking about. So which means? Besides EV, all the others would require engineered emission systems. Lightweighting portfolio also gets a boost because lightweighting is going to be one of the key criteria also which we are going to pursue. Now, translating to content increase, that would depend on the design, but translating to our addressable market size increase and a portfolio diversification, that would certainly happen.

Okay, second question is C. If you look at the global market for exports, sorry, you're saying something?

Yeah, yeah, please go ahead.

So if you look at the global market for exports for emission, you know, between now and 2030, there are different markets will be seeing the next level of emission upgrade, right? Which means that at least two, three years in advance, OEs would have been almost finalized. Or in the process of shortlisting the vendor for next-generation emission upgrade. So in that backdrop, how should we understand pipeline for us, you know, playing out for emission subsystems, you know, for export market?

Now, our export market strategy essentially is focusing around CV emission components, temperature control tubes, genset emission components, and small agri genset exhaust systems. Now, all these areas around the question is how have we selected these areas? This is essentially on our core strength and diversification. Now, there will be various components orders, there will be various orders which will be dependent upon various strategies which the OEMs in this area will follow. There can be an organic growth which can happen. So let's say the genset market is really, really booming in India other than the US because of various requirements. So, organic growth will lead to opportunities. The transition from one... Regulatory norm to the other will lead to growth opportunities and a China plus one strategy will also lead to growth opportunities. So it will not be only one opportunity which is around the regulatory norm which we would be banking upon or which we are banking upon. We are talking about working in a very specific product set and a very specific segment. The requirement will come from various inputs or various triggers.

No, no, sir, I understand. What I was trying to understand is how should we understand pipeline shaping up for us when it comes to exports of components and subsystems in emission. So any color you can give another pipeline because if you look at the order book, while we have seen some wins in emission, I think the larger... Momentum or the traction is what you're seeing on the controls and light arms. So in that backdrop, just trying to understand in terms of pipelines, especially on export for emission components, how should we understand that shaping up? Any color you can give in numbers or inquiries.

So, I don't know, where have you picked up the data saying that we are essentially doing emission systems only? If you look at our export data, in the export, the orders we have announced are in various areas. There are emission adjacencies in which we have announced orders, and that orders are for, if you look at our order book, that's for a large heavy industry emission company which we announced. They have announced orders in emission components. They have announced orders, again, in agri-components, which are essentially on either adjacencies or tubes. So, there are various areas which we have been announcing the orders on.

Okay. No, actually, I was asking you more in terms of the pipeline for, you know, customers.

Sorry to interrupt, Virat, sir. May we request that you return to questions for follow-up. Yeah. Thank you, sir. The next question is from the line of Manpreet Arora from Arora Wealth Advisors. Please proceed with your question.

Yeah, thank you. Ashkeniji, just a clarification before I ask my question. In the opening remarks, did I hear it correctly that we are also exploring opportunities in premium two-wheelers in the emission system? Did I hear it correctly?

Yes, Manpreet, you heard it absolutely correctly.

Oh, interesting. And so, when you say premium two-wheelers, should I understand mostly, you know, these high-end motorbikes? Would that be a...

Yeah, it would be above a particular CC.

Oh, interesting. And so, is this space also meaningful in terms of, you know, the capabilities that are required and content and the patent knowledge? that we have built over, you know, the last so many years. I mean, is that a differentiated phase?

Yes, yeah, absolutely, Manpeet. I mean, that's what I said in the opening remark, that we are looking for areas where our capability differentiated set, which is into engineered emission systems, are applicable, and we can add value. During that analysis, a premium two-wheeler segment is something which we analyzed and found that there is a capability set which is directly applicable. Now, one might ask between premium two-wheelers and the lower CC systems. One is what are the kind of difference and why do you want to play in a particular segment and that's what the strategic call which we have taken dependent upon. Our capabilities, the customer requirement and the long-term visibility of future which we see. And that's how we have decided to also explore premium two-wheeler market.

Great. So, is this only for domestic or international? Because, you know, some of our two-wheeler players out of India have now acquired companies in Europe and all that. So, does this, are you looking at?

As of now, as of now, we are looking at domestic. Now, if, as we do for tractors, if the domestic production is being exported, That's the OEM's choice. But as of now, we are looking at supply in domestic market.

Okay, great. Thanks for the clarification. Now, my question... No, sorry. Hello.

There's a follow-up. Go ahead.

Yeah, I mean, I was just clarifying on your opening remarks. My first question is actually on the PORM JV.

Now, a few calls...

So, before, you know, you had mentioned that we have won a program, new program in the PureMGV, so just wanted to understand if that, what is the SOP for that program, when does it start? And also, just a follow-up to that is, you know, when do we really start seeing an inflection in the PureMGV? Only when new standards now come in, like BS7 would probably be a time when... We start probably having discussions with customers and working on their engines and then maybe get a foothold into some of the newer programs. Is that the right way to think about the JV?

So, Manpreet, as far as that program, which we mentioned last time, that program is concerned. It started in Q4 last year, and it will gradually ramp up during the course of FY27. So, that's very much on track. In terms of, you know, JV as such, as you would be knowing, this JV is for a CV segment above 4 liters, where we are not. Present directly. But since we are a partner, we get access to advanced technologies and global landscape, which helps us in many ways to strengthen our position as well as our offerings. As such, I think this also we have mentioned previously as well. We get very little from the joint venture because we are not in management control, only 50% of PAT, which is left after many deductions. So that is what we get. But this industry is very, very lucrative. Unit economics is also very good. Are evaluating a lot of options to participate more deeply. Now, when will that happen? Obviously, we will definitely update all of you in due course as things progress in this regard. But this sector, this industry, this part of the industry is very lucrative, and we would definitely like to explore more and do more in near future, and we will update all of you as we progress.

So, would BS7 be a point in time when, you know, we will see some of these discussions happening, or it is a continuous process?

It's a continuous process. It's a continuous process, and as and when something, you know, develops, we will update.

One small question, if I can ask, that is on the integrated muffler side. Shwaniji, you mentioned that, you know, that is something that will happen because of the trend changes that have been announced. Now, have any discussion started on the integrated muffler side with potential customers? And also, if you can give a range of what would be the content per vehicle for such an integrated muffler. I don't want an exact figure. You can, you know, 1K to 3K, 3K to 5K kind of a number is good enough. So if you can, you know, help there.

So, Manpeet, as I mentioned last time, and I must compliment your memory is pretty sharp on that, we did talk about the only opportunity arising out of 10.3 is integrated mufflers, but it's a very small market. The total market size in our estimate would be between 60 to 100 crores. That's about it. So, this is like a normal course of business development for us, rather than tracking individually as to opportunity arising out of 10, 3.

Okay. Okay. Thank you very much.

Thank you. Thank you, sir. Ladies and gentlemen, in the interest of time, that was the last question for today. I would now like to hand the conference over to management for closing comments.

Thank you. Thank you very much, everyone, for your participation. Hope you were able to get answers to your queries. Still, if you have any further query, you can reach out to our investor advisors, Ernst and Young, and thank you again and wish you a pleasant evening. Thank you very much.

Thank you, sir. On behalf of Equal Securities, that concludes this conference call. Thank you for joining us and you may now disconnect your lines. Thank you.