Tenneco Clean Air India Limited (TENNIND) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Q1 FY27 Earnings Conference Call of Teneco Clean Air India Limited. As a reminder, all participant clients will be in the lesson-only mode and there will be an opportunity for you to ask questions after the business updates concludes. Should you need assistance during the conference call, please signal an operator by pressing star followed by zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Himanshu Sharma, Head Investor Relations of Ternico Clean Air India Limited. Thank you and over to you, Mr. Himanshu.

Thank you, Sanya. Good evening, ladies and gentlemen, and a warm welcome. Today we have with us Mr. Arvind Chandra, full-time director and CEO, and Mr. Mahindra Chhabra, Chief Financial Officer. A detailed presentation on the business and financial performance is available on the company's website and on the websites of the stock exchanges. We will begin with Mr. Chandra providing a business update, followed by Ms. Chabra covering the financial results. We expect the updates to take around 15 minutes. After this, we will open the floor for a Q&A session of about 45 minutes. Before we proceed, I would like to draw your attention to the disclaimers included in our presentation. With that, I now hand over to Arvids.

Thank you, Himanshu, and good evening, everyone, and thank you for joining us for Technical Clean Air India's Q1 FY2027 earnings call. We started FY2027 on a strong footing, driven by discipline execution, continued market share gains, and increasing adoption of our technology-led solutions across both our advanced ride technologies and clean air and power train businesses. Despite a quarter marked by significant commodity inflation, geopolitical disruptions, and the additional costs associated with operating as a newly listed public company, we delivered healthy growth while sustaining strong profitability. For the quarter, value-added revenue grew 18.4% year-on-year to INR $13,816 million, outperforming the growth of our served addressable market. Now, Pat grew similar to EBITDA growth. If you exclude a one-time benefit recorded in the corresponding quarter last year, where we sold our motorcare business and other one-off incomes. But if you exclude motorcare, our pad growth is similar to EBITDA growth. I want to be very clear on that. Beyond financial performance, I am particularly pleased with the continuous progress we're making in gaining market share across our core businesses. Our commercial vehicle clean air solutions business increased value market share from 57% to 58% in FI 2026, while our passenger vehicle shock absorbers and struts business expanded market share from 52% to 55% of the India market. In off-highway clean air solutions, we maintained our strong leadership position with a market share of 68%. These gains reflect our technology leadership, customer relationships, and relentless focus on execution. In advanced right technologies, the momentum behind our proprietary DCX DaVinci platform continues to strengthen like never before. During the quarter, we secured multiple new application wins across existing customers, while also adding four new customers to the conventional and DCX platforms. Since its introduction, DCS has continued to redefine right performance expectations in the Indian market while maintaining the affordability and robustness required for local operating conditions. Page 32. We're targeting small. And this type of local engineering and innovation will continue in the future. Within our clean air and powertrain business, we continue to strengthen customer partnerships through multiple strategic program nominations, spanning ignition systems. after-treatment solutions and other powertrain applications. One of the notable achievements during the quarter was securing a spar plug order from one of India's largest passenger vehicle OEM. A new white space office. I'm a leading domestic OEM. We are a leading domestic commercial vehicle manufacturer. These program awards continue to broaden our growth pipeline and reinforce our position as a trusted technology partner for our customers. We're also making encouraging progress in export markets. During the quarter, our advanced ride technologies business secured its maiden order from a leading European all-terrain vehicle manufacturer, opening a new customer segment and geography for us. Additionally, our power train business won a heat shield order from Teneco America, demonstrating the global competitiveness of our Indian operations. These export wins support our long-term ambition of expanding exports and deepening our participation in global supply chains. Another highlight of the quarter was the recognition we received from our customers and industry peers. We were honored with the Innovation and Performance Award from Mahindra, the Technology and Innovation Award from Daimler India Commercial Vehicles, and the Ride Performance of 2026 Award from the Economic Times. These recognitions validate the strength of our engineering capabilities, operational excellence, and customer-centric culture. As we look ahead, the underlying drivers of our growth remain intact. We continue to benefit from increasing content per vehicle, strong program execution, technology differentiation, market share expansion, and a growing customer base. Our investment in advanced right technologies, alternative fuel-enabling solutions, and next-generation mobility applications position us well for future opportunities while maintaining relevance across evolving powertrain technologies. While external market conditions remain dynamic, including commodity volatility and geopolitical uncertainty, we remain confident in our ability to navigate these challenges through the discipline application of our P3 operating model, commercial excellence, and operational rigor. Most importantly, we remain focused on creating sustainable long-term value for all our stakeholders through profitable growth, technology leadership, and strong governance. I will now hand you over to our Chief Financial Officer, Mahinder Chhabra, who will take you through the financial performance in greater detail. Thank you very much.

Thank you, Erwin, and good evening, everyone, once again. Let me take you through our financial performance for the first quarter of FY2027. As always, we use value-added revenue, or BAR, as our primary performance metric. We started the year with a strong growth performance despite a challenging external While VAR grew 18.4% to INR 13,816 million. This growth was driven by higher production volumes, new program launches, increasing content per vehicle, and continued market share gains. Our value growth continues to outpace the growth of our sub-addressable market, demonstrating both the strength of our customer relationships and the benefits of our diversified portfolio. Looking at our business segments, Clean Air and Power Train Solutions delivered BAR of 6,626 million, representing growth of 9.6% year-on-year. Advanced right technologies continued strong momentum and delivered BAR of 7,190 million, growing 27.9% year-on-year. The ART business remains a key growth driver, supported by increasing adoption of advanced suspension technologies, new customer additions, and expanding application of the DCX platform. From a profitability perspective, EBITDA increased 7.9% year-on-year to INR 2,469 million. EBITDA margins stood at 17.9% of BAR. While margins were impacted by significant commodity inflation, rupee depreciation, geopolitical supply chain disruptions, and incremental costs associated with operating as a listed public company, We were able to sustain strong profitability through disciplined execution, productivity initiatives, rigorous cost management, and commercial actions. Our customer recoveries and factory productivity amounted to 60 BPL, already reflected in the EBITDA margin. Our operating performance continues to be supported by Tenneco's global P3 framework, which remains deeply embedded across our operations. Through this operating system, we continue to drive continuous improvement across safety, quality, delivery, inventory management, and cost competitiveness. The ability of our teams to execute with consistency and discipline has enabled us to navigate a period of elevated external advance while maintaining healthy margins and operational stability. Profit after tax for the year stood at INR $1,652 million with a fat margin of 12% on VAR. It is important to note that That grew similar to EBITDA growth, excluding a one-time benefit recorded in the corresponding quarter last year, which was from selling our motor care business and other one-off incomes. From a return perspective, our annualized ROC continues to remain very strong, demonstrating our continued focus on capital efficiency and disciplined allocation of resources. At the same time, we remain committed to investing in future growth opportunities. Another important area of focus has been strengthening the governance and compliance framework expected of a publicly listed company. We continue to enhance processes, internal controls, risk management practices, statutory compliance systems. The initiatives are intended to build a robust governance platform that supports sustainable long-term growth while meeting the expectations. Market outperformance, resilient profitability, and. Our diversified business model, strong balance sheet, high capital efficiency, and focus on operational excellence position as we move to the remaining part of the year. With that, we will now open the floor for questions. Thank you.

Thank you, Mahindra. We request participants to finally limit questions to two at a time. If you have additional questions, please rejoin the queue. I now request Samir to comment the Q&A session.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. To remove yourself from the 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 Ravi Gupta from Ingrid Capital. Please go ahead.

Thank you for the opportunity and congrats on strong YOY top-line growth. So, my first question is on the value added EBITDA margin decline, which is around 170-gips YOY and 43-gips QOQ. So, which segment of your clean air or suspension witnessed the higher decline? I believe in clean air, the input cost is more of a pass-through. And so this was because of only suspension business or how the data is between both of these segments. Thanks.

Yeah. Hi, Ravi. Thanks for that question. But as a practice that we've agreed, we generally do not disclose the margins at a BU level. We look at the overall margins. And as far as the costs are concerned for components, the indexed components like steel and all, we have back-to-back arrangement with the customers. There could be a time like by a quarter or so. And for non-indexed, we have been kind of following up with the customers. We have been able to recover certain amounts, and for the remaining part, the discussions are in progress.

So year over year, you know, we were not a public company last year. So now we're a public company. And obviously, the cost of running with a public company, setting up a full leadership team, and all the things that are needed for good governance, right, that adds cost. So from a Q1 of last year to Q1 of this year, obviously, you will see additional cost. The other one is just the geopolitics of the Mideast War that has, to some extent, Impacted everybody in the supplier community because of crude oil, LPG. And some of these are not indexed. Steel is indexed back-to-back with our OEMs, but some of these are not indexed. And again, we've been able to partially recover some of these. I must say that our team has done a fantastic job, so our EBITDA percentages have been maintained. But that year-over-year delta that you see mainly comes to these two. It's moving from a private to a public company, and secondly, the commodity escalation that happened in the last quarter because of the midi score.

Got it. Secondly, on the order book, so since we have added four customers in suspension business and multiple wins in clean air, so what is the growth in terms of your order book? Like last time it was around 12,400. So what is the growth? I just want to understand. I know you don't share it on quarterly basis, but just to look at the directionally. So last time you had said for two years, it will be like mid-team kind of growth towards each other. So, is that improved, like, late teen or something? How to look at it? Thanks.

Yeah, thanks, Ravi. So, obviously, we cannot share, because that would be a forward-looking statement. But I think, let's put it simply, right? What we said the last time to where we are today, there's no change, right? Obviously, we are very excited about the fact that, you know, this DaVinci technology is... It's completely disrupting the market, right? And we are, in fact, for us, it's more about, you know, how do you execute when you win so many programs? One, the pilot program at our lead Indian OEM customer, but winning more programs, winning more applications within the same customer, as well as picking up four new, completely different customers, and all of them very prestigious and growing. So we're very excited about this. The rate at which we are acquiring new business with new technology, right? And obviously, with new technology, hopefully, our margin situation will also go in the right direction, right? So I'll give you a number. You know, order book, we decided that because, you know, the thing with order book is that there's no steady order book. Some quarters, it goes really high. Other quarters, it's a little bit closer to kind of even out the peaks and the drops. We decided that we would report order book every half year, right? So H1 at the end of the second quarter will report order book. And then again, at the end of the full year, we'll report second order book. So if you can just be patient for a few more months, we'll have the H1 number as well. But it's, you know, it's good. That's the best way I can say it without sounding too positive or too negative.

Perfect. Thank you.

Thank you, Ravi.

Thank you. The next question is from the line of Himanshu Singh from Baroda BNP Paripas Mutual Fund. Please go ahead.

Yeah. Hi, sir. Thank you for the opportunity. So, I just wanted to understand why is the growth in the clean air business at, let's say, 10% when the industry is growing at, like, mid to high teens for the quarter?

Very good question. Obviously, we knew that this question would come up. So first of all, remember that our clean air and power train solutions, they address the whole market, right? So we are in passenger vehicles, we're in commercial vehicles, off-highway, and so on. But we're not an EV, right? So an electric vehicle does not get an exhaust system, obviously, right? So from the served addressable market, you have to subtract... 15% market, service addressable market, you have to remove the EV part. And then also don't forget that we are not present in the passenger vehicle, one of the leading Japanese OEMs. We're not present at all. So that kind of removes us from participating in the growth that they were having. And in the recent quarter, quarter over quarter, because of GST, this particular customer... Leading Japanese OEM player, because we didn't participate, and they grew by a very, very strong double digit, we couldn't get the benefit of that, right? So, total strut market, minus EV, minus this particular... Then we're actually growing because we've had some gains with one of our German truck customers as well as... Passenger Vehicle OEM. So that's the best way I can describe it. Now, having said that, the good news is, and I've said that in prior quarters as well, we have with one entry into this passenger vehicle OEM that we did not have business for the longest of time, and we're entering through Cafe 3, and we're waiting for them to announce. When their engine will be launched, we are expecting that to be maybe 28, 29-ish, and based on that, you will start seeing our entry into that white space, and then once that happens, then our market share and the passenger vehicle side will also grow. You know that on the truck commercial vehicle side, we have very high markets rate, like 58%, and also on off-highway, we have like 60-plus percent, right? So we're very strong players in commercial vehicles in off-highway, and with this entry in the FY28-29 period, we will start also making an entry on the passenger vehicle side. Hope that answers your question.

Yeah, so could you just give us the growth for the industry after doing all the deductions which you suggested?

I think we have, I think our served addressable market is at about a 16% level, roughly, and from there, I think the EV part is about, again, I'm just, high-level numbers, don't quote me on that, but I'm just doing a basic math of. 16% minus about 3, 3.5% leading up to about 13%. And then when you take out the growth of the passenger vehicle OEM, the large OEM where we don't have business, we end up with somewhere between like 8% to 10%. And so relative to that, our 9.6% growth for clean air and bar train is better, right? So it's a value growth that is better than the apples-to-apples comparison of the market, if that makes sense, right? So market minus EV minus this particular leading OEM equals apples-to-apples with our growth. And our growth is slightly better, like I said, because we've had some gains with a few of our customers locally on the commercial vehicle side.

Consider on the spot.

I'm sorry, which one is it? I'm not sure. Wait, what's your question?

This is Park Plug Order.

We haven't released the value for that yet. We will do that at the right time. But I think the more significant thing is that, you know, getting entry into such a large vehicle volume base is very strategic for us, right? It's very hard to get in with what might be perceived as a commodity product, but we actually secure this through technology and also from a time-to-market perspective. We were able to leverage our relationship and other products to be able to get it. So leveraging relationships with new technology, something that's... It's exciting because now we can grow within this OEM in a very big way. When we have solidified the revenue value.

Sure, sure. Thank you. And just one last question on the, can you give breakup of domestic and export? That's it from my side.

This is for order book, Imanshu?

No, the revenues.

Yeah. So in terms of the current quarter, our exports are slightly over 7% of the overall revenue.

Okay. Thank you so much.

Thank you, Imanshu.

Thank you. The next question is from the line of Nishit Jalan from Axis Capital. Please go ahead.

Yeah, I thank you for the opportunity and conversation with the numbers. Two questions from my side. One, on the suspension business, TV suspension business. Just wanted to understand where are we in the process of shift towards more advanced suspension technology? What is the penetration of passive plus and similar premium technology in TVs? And where are we in the localization process of the same? Because if I remember correctly, our localization content was on the lower side in this part of the business compared to other suspension segments. And secondly, one more question on export aside. We had obviously plans to run for exports, meaningfully the percent of revenues. Where are we in that journey? Will it be more back and day or will it be, we will see good growth in exports in this year also? And if yes, what are the capital plans for FI27?

Thanks, Nishit. You were breaking up a little bit, but I think I got the gist of what you were asking. So, going back to your question one. Electronic suspension for the first time for an Indian OEM, and that we saw in some of the electric vehicles that got launched by this OEM very successfully. We were still in the process of fine-tuning the technology, and they want to actually keep improving it until it offers a very, very high level of comfort, right? And so, and localization is a chicken and egg situation, right? So once we have the required amount of volume, we're able to kind of localize gear with a critical mass and then rather than importing from overseas, right? In the case of DaVinci, the difference is, one is the semi-active suspension is more with electronics and software. On the other hand, it's more like frequency-dependent damping, right? So it's more like a FDD+, which is more about non-linear damping purely through mechanical means. See, that technology itself is so good that it has the ability to disrupt. And you're seeing evidence of that, the rate at which we're booking business on the Da Vinci's. Same thing on the localization side there. I think the localization will happen much faster because the volume uptake of Davenchy is going to be much faster. It's going to be applicable across definitely the entry level, you know, the mid, the BC segments of SUVs, and also with this new DCX 32 piston launch, we are also able to go down all the way up to the A segment. So, to answer your question, localization is just a matter of time. It will happen. We're waiting for the right critical mass and volumes to come in, and then we will localize. So... But... So we are the ones that are disrupting the market. That's very, very clear. To answer your second question on exports, like I said, there's no change in our story from last time. We're still booking exports. As you saw in this press release, we've talked about winning an ATV order. We're also winning business within our own Tenego group, competitively, obviously. That shows that our cost structure and the fact that we are technology-equalized allows us to have exports growth that is a little bit faster than the overall market. With exports, again, it is not a linear thing. Depending on the quarter, it can go up or it can go down. So we will, as part of our order book. At the end of Q2, we will report both the domestic and the export order book. So if you can just wait a few months, we will report that as well. But the good news is, you know, we've got exports coming in across our major product line, across clean air, powertrain, and suspension. Yes, tariffs is a problem. You know, the Trump administration levied additional tariffs on Section 232, Thank you. Some of the exhaust parts that get exported from here, that affects other suppliers as well. So it is a little bit of a downer, which makes the environment a bit tough for exports. But let's see, that's the situation we're dealing with. Also, there are some macroeconomic conditions in Europe and the Americas. Again, nothing to do with us. It's more to do with what's happening in those regions that could pose a challenge for exports. But having said that, our basic export story and our focus has not changed.

Just one left, a CAPTIC on 4527.

CapEx score?

For the current fiscal year, CapEx, what are you planning for FI27?

Okay, so Nishi, we are targeting to spend across 350 to 450 CR for FI27, which will support our double-digit top-line growth. Having said that, please be mindful that we are closely monitoring the economic environment across our key markets and may fully push out CapEx based on the actual demand requirement. Please note these numbers are kind of indicative and are not really a precise guidance for the grant fiscal year.

Okay, thank you so much.

The next question is from the line of Arvind Sharma from Citigroup. Please go ahead.

Thank you, sir, for taking my question. My first question would be that, again, if you get exposed a little more and you have kind of alluded to it, How would you say the difference would be between what we are selling to direct OEMs outside and to Teneco's global entities, like you highlighted the Teneco America heat shield order bin? So broadly, what would be the contours of these two segments?

Yeah, sure. Yeah, so look, again, you have to remember that our strategy to really focus on exports only happened like recently, right? Like three, four quarters ago. So we're only like about a year into this post, just a bit before the IPO and post-IPO. So right now, our export order book is coming in like 70-30. 70% is more like Tenneco to Tenneco, right? Tenneco India exporting to other Tenneco entities. And 30% is coming through third-party OEMs. So now, will this ratio of 70-30 continue over time? I can't tell, simply because there's a lot of opportunities also with third-party OEMs that our sister divisions in Europe and Americas don't want to participate in for whatever reason. Either it's not profitable enough for them, etc. But some of those that are not profitable for them are profitable for us, right? So we can go after those businesses. So those are things that we're still exploring across major regions. And also internally, right, Teneco with Teneco, we're also looking at where there's technology equalization, where there's opportunity for cost arbitrage, where we can provide the partnership in terms of either child parts or sub-assemblies or even finished goods for that matter. So a lot of these are opportunistic. Some of them could be strategic depending on new products that have been set up or new technologies that have been pursued by our other divisions. So, it's a little bit of a mixed bag. I think as we go through another year, the strategy will become a little bit more solid. Anybody who will give us a decent margin, which is obviously a greater to what we have, and plus, from a labor cost arbitrage, we are competitive, and we have the technology. So having the ability to be able to ship the latest technology from India anywhere else at the right cost structure gives us an advantage. Hope I answered your question, Arvind.

Yeah, thank you so much. Just two more data points. What was the royalty payment in the first quarter, and if you could share the capacity utilization in both the ART and the CAPT segment?

Yeah, so as far as royalty is concerned, royalty is 2.5% of the overall revenue reduced by inter-company sales. So that stays consistent in the previous year. Royalty.

Okay, capacity utilization.

Yeah, so as far as capacity utilization is concerned, for CAPT, it is upward of 80%. However, advanced rate technologies, we are really working more than 90% of the capacity currently. And that's one of the reasons we already announced one new plant for advanced rate technologies. That should be either western part of the country, within investment of INR 70 crores approximately.

Well, a lot of the run-up to the increase in capacity utilization is, you know, directly as a result of GST as well, right? GST has really benefited some of the smaller vehicles, A, B segment vehicles. And not just for us. I think many auto suppliers are also, you know, hand-to-mouth on trying to deliver parts. But this is a good problem to have, right? It's good news that our volumes are going up because of that. So it has really spurred demand, and all the suppliers are trying to all maximize from a capacity utilization perspective. And that's the reason why we're adding capacity in a frenzy to be able to.

That's all from my side. Thank you so much for taking my question. Thank you. Thank you, Arvind.

Thank you. The next question is from the line of Vipul Agarwal from HSBC. Please go ahead.

Thank you, sir. Thank you for taking my question, and congratulations on a good set of numbers. So my first question is on the margin, like margin, since the RM cost increase is a pass-through for you, and what we are saying is that OEMs are now kind of taking the actual price hike to pass through the RM cost inflation to the customers, and we would assume that there must have been some pressure for auto-engs also. So does your margin in first quarter reflect all the cost margin pressure or the pass-through, or there's still something pending at your end?

Yeah, first of all, hopefully you're doing well. Good to hear from you. It's a good question because, you know, this is, you know, we have commodities that are escalatable like steel, right, that are back-to-back covers, so we don't have an issue there. But it's the non-indexed commodities, right, like rubber, plastics, and crude oil, LPG, and CNG, and so on. We use that for various processes, for our furnaces, for example, for welding, we use argon gas, and so on. So, three things you have to bundle and then try to recover these from the customers. So what we are showing this quarter's performance, margin performance, It indicates a partial recovery of that. I must congratulate our purchasing team to have tried very hard to recover this. But having said that, it is a very difficult challenge to recover some of these from our customers. We're constantly hoping that we can recover all of it. But you know with the mathematical formula, if your commodity costs go up by 10 rupees, and if you are able to recover 10 rupees from... We're trying, our commercial sales teams are trying. It is a tough market out there, but we're Because of our P3 operating model, we're constantly focusing on factory-level productivity, making sure that we are doing everything we can to manage cost, including SG&A and so on. And, again, Mayinder can talk in more detail about it. But this is an ongoing battle. We don't know how long this Middle East war is going to continue. We're hoping that for whatever the cost increases are, we are able to offset that. It will be tough, but we are trying our best.

Yeah, I mean, just so I'd like, we really mean focus on the current cost environment, and we are very closely monitoring the current situation. And to mitigate the impact, we already strengthened oversight through various reviews and interventions that we have done within the organization. So, I mean, some of the examples are, for example, energy optimization through peak of usage, production consolidation, then we are having regular kind of sink over the SGA discipline. We have a very high kind of increased focus on the customer recoveries and all. So at an overall level, I mean, we have been taking all the actions to ensure that our cost, whatever there is an increment, we can kind of, if we can set it up to the extent possible.

Understood, sir. So, maybe if you can explain the seasonality of the margins in the standalone business, which is mostly your clean air business only, standalone. So, I would assume that like in what happens in from fourth quarter to first quarter, every year we'll see lower sales share of heavy commercial vehicles as compared to medium commercial vehicles, while it will kind of decline in first quarter. So, that's why the share of heavy commercial vehicles will decline in first quarter. And so, is there a seasonality which we will see every year in technical margins in stand-alone business, or was it like kind of one of this year? How we should read through the stand-alone business margins?

Yeah, so seasonality is typical, right, for the auto sector. So this covers passenger vehicles, commercial trucks, off-highway also. So you do see a little bit of a decline, and then certain quarters, like leading up to the festive season, we do see an increase. So we're not any different from any other auto supplier that is. In the Indian economy, right? So I don't think we can give you any flavor on how our margins will behave over time. All we'll say is that it'll be consistent with how prior years have gone. If you looked at the prior quarters, looking at sort of the pattern of how the margins have been in terms of down, again, it's again tied to the revenues, right? So, so far, the demand has been good. If you start with the demand in the last six months, so even... This quarter, even next quarter, at least the good news is where other regions in the world are struggling. India is still, Indian OEMs are still predicting very good demand. Now, if the Mideast war continues on and on, there will be some impact, I think. I don't think the demand will keep continuing. Thank you. And I'll take. But I think the pattern of margins will continue like prior.

Awesome. My next question is the smaller, the new DaVinci for the smaller cars you have introduced. So, for example, what is the incremental cost for an OEM to shift from traditional or passive suspension to the new suspension? Maybe, for example, if you can quote some example from, say, Balino-like vehicle or Balino-like vehicle, what can be the incremental cost for an OEM to shift from a traditional to the new DaVinci, the smaller DaVinci?

So, we haven't, because we cannot specify price in a public forum simply because it's, one is it's forward information because it hasn't started yet. At the same time, it would be proprietary information. But let's talk in general, right? As the customers convert from conventional to DaVinci or, let's say, semi-active, they will, we do hope to see an uptick in margins, right? And the margins will. I'll take at the max level when we have the volume, we are able to localize, and we're, of course, hopefully able to charge a premium for the superior technology, because these technologies, especially DaVinci, comes with a much better comfort level, and those of you who have driven the Mahindra 7XO can see that. It's highly publicized. It's all over YouTube and Instagram, so all I'm saying is... These technologies over time will come at a better margin. I can't give you a price delta because it's proprietary.

I was thinking, actually, I was thinking from other perspective, like, for example, if OEM wants to introduce, not from your margin perspective, like, how fast the acceptance of this model can happen from OEM levels. For example, if OEM has to take a price of just, let's say, 3,000 rupees, so the adaptation can be much faster, and if the price, maybe, say, 10,000 rupees, then the adaptation can be much slower. So I'm trying to understand that delta from OEM perspective, like, what can be there?

Good question, good question. So, yeah, very good question. All I say is the price delta is... It makes it very affordable for the OEMs, at least on DaVinci, for them to be able to scale up quickly. Now, it's a little bit different for the semi-active suspension because there's electronics and software and, you know, routing cables and wiring harnesses and so on. But for the DaVinci, it's very simple. You remove and you plug the new one in, right? It's a plug and play. And, of course, Delta is... It makes it very affordable. In fact, that was the purpose that DaVinci was designed as a way to kind of get you 90, 85, 90% of the way there on comfort, but with a cost delta of, you know, a few percentage points, right? So I think that's what makes it so compelling, and this is why you're seeing us win a lot of programs on DaVinci, as I mentioned earlier.

Understood. Just one last question. On the CAPEX, you highlighted that it can be 350 to 450 crore rupees. So can you give in some direction like where it will be? It will be towards ART or Clean Air, any new capacity you are bringing in. So if you can give some direction around it. That's my last question.

Yeah, so this capex will be towards both the business segments, clean air powertrain as well as ART. And just to clarify, this includes the investment towards the two plants that we have already announced, which is amounting to INR 140 crores. So, yes, this will be towards both the business units, both the business segments.

The next question is from the line of Radha from Mootywal Oswal. Please go ahead.

Yes, hi, team. Thank you for your opportunity. Sir, Bill, when DO6 norms happened, that time the content for vehicles of both PV and CV almost doubled for our female business. However, when BS7 is more about diagnostics and monitoring, so if we combine the upcoming norms like CA3 and BS7, does this mean that the content per vehicle increase will be limited to maybe 20% only? Is that the right word to think about it?

The market is the whole world, right? We have done a very successful group of concepts, Euro 7, with a leading European truck manufacturer, and that success... It means that we are not just technology ready in India, but we are for BS7 in India. We're also technology ready for Euro 7 and the U.S. version of that for 2030, right? So we look at the world as our... A6 was a much bigger jump, went from X going to 2X, and in some cases of commercial vehicle X going to like 4X. That won't be the case. I agree with you. 1.3 to 1.5x, something like that, I think, if you take the combination. But don't quote me on that because it's still not sure how the BS7 legislation will land. As you know, because of higher NOGs and particulate requirements, They will need to have some sort of dual dosing for the SCR and larger particulate filter. It's very likely. They can use some injection technologies to do some optimization. So each OEM will figure out some way of how to achieve the legislation on NOx and PM through injection, through... Better fluid flow, fluid mixing, dual dosing, and maybe more precious metals loading to achieve that legislation. Now, the CAPE-3 norms are more about the penetration of gas direct injection because it really offers a huge CO2 benefit, right? It's improved CO2 significantly, but the byproduct of that is... It produces more particulates, so that will need a gasoline particulate filter, right? So that also will take you from X to like 1.2 to 1.5X, depending on what application that is. But yeah, you're right. It will not be like a BS4 to BS6 jump. It will be BS6 incremental, and that's how we see it.

Thank you, sir. Exports for 7% of your revenue, as I have now, like you mentioned, to the previous participant. Can you expect big business to grow at double of the domestic business going forward considering the global partnerships that we have and how localization and considering India as the export have consumed these sectors?

So, Radha, can you repeat your question?

The voice is not very clear. Yeah, are you on a headphone? Can you remove your headphone? Because we cannot, it's very muffled, what you're saying.

Can you change the button? So, I was saying that exports are currently 7% of your revenue, and given the multiple factors of localization, considering India as the exporter and your global partnerships with Tenko, do you expect this business to grow at double of what India business can grow?

Okay. Good question. Yeah, look, we're starting from a low base, right? Thank you. Pre-IPO exports was only like 5% of total sales. Now it's about 7%. And I said that in my prior quarters that exports are coming in at a higher percentage of order book, right? So if you look at the total order book of, let's say, 100, then exports were coming in somewhere between 14% to 20% of that 100, right? So, we do think that exports will be a high percentage of the total. However, there's one important thing that has changed. Our domestic business has really taken off. We are booking business left, right, and center, and you've seen with ART, with DaVinci, and also with local clean air and power train customers, the rate at which we're booking local business is great. And this is music to our ears, right? So, exports will continue as a strategy for both third-party and also intercompany, but don't forget that the denominator is also growing, right? So, that ratio is less important for us because domestic is growing. Exports will continue as long as we have the same technology. As long as we are cost-competitive, we will continue to seek opportunities for exports, on both sides, by the way. This is for ride technologies as well as for clean air and powertrain.

Sir, generally, what is the delta of margins and exports versus domestic across your business verticals?

We generally do not disclose the margins for export and domestic separately. Having said that our export margins are either in line or better than the domestic margins.

Okay. And as there has been multiple order wins across both business divisions, Especially catering to new customers. I wanted to understand whether the margins of these orders are better than the current margins of the company?

We cannot disclose the customer level or program level margins, but like I said, for our exports business, the margins are better than the domestic business.

So thanks, and all the best to the team.

Thank you. Next question is from the line of Viraj Sangvi from Ambit Capital. Please go ahead.

Thank you for the opportunity, sir. I just wanted to understand the Da Vinci DCX suspension business a bit better. So, there, what I want to understand is that when you win a model for Da Vinci DCX suspension, does it mean that all the trims of that particular model would have Da Vinci DCX or would it be the case that it could be possible that lower trims still have passive suspension and the top trims which have Da Vinci? And secondly, over here, the four customers that we are mentioning, are those four new customers for DaVinci, D6, suspension specifically?

Okay, so I'll answer your first question. Thank you, Viraj. Our aspiration is to ensure that all of India improves its suspension. Over the last 70 odd years, India is still 90% of vehicles on Indian roads, passenger vehicles, sedans, SUVs, they're still operating with conventional suspension. Right? We've had all sorts of improvements on engine, on interiors, better seats, now glass mat screens, Bluetooth, ADAS, sunroof. But somehow suspension was always orphaned. Right? But that has changed. Da Vinci and because of semi-active suspension. We have proven that it doesn't take a massive, you know, it's not a big thing on your wallet to be able to aspire for higher suspension. So that's what Da Vinci has proven, that you can make it affordable and you can give better comfort. So our aim is to, with this new announcement that DCX32, that we are also going to be targeting the very, very low end. of the A7 markets. We think that DaVinci has the potential to disrupt all the way from the lowest, what is the cheapest? It will be Da Vinci. Maybe above 35 lakhs, we'll start getting into semi-access. We are proving to you. Very rapidly, not just one customer, but multiple programs. DaVinci, but also for conventional, right? So very often it happens that the customer says, okay, you can have these programs will have conventional, but these higher premium ones might have DaVinci, right, within the same customer. But the good news is these are customers where we've never had any business, even with conventionals. And with a 55% market share, that's today. Right? The fact that I'm telling you that we want four new customers beyond that, that should give you an idea of how strong we are in the market.

Got it, sir. And just to get some sense, for an OEM, how much cheaper would a DaVinci DCX suspension be compared to a semi-active or a similar model than they would be trying?

So we cannot, again, discuss price, deltas, etc. All we're saying is Da Vinci is affordable enough where it can become standard, just like a window regulator, right? It becomes standard in every automatic window regulator. We think that Da Vinci has the ability to satisfy the needs of a large portion of the Indian vehicle market. Now, when you start getting into electric vehicles and, let's say, premium vehicles, Electric vehicles, it's better to put some kind of electronic software-based suspension simply because it integrates better with braking, steering, engine performance, right? Because you can have a common ECU, you can have a master ECU to have a common functionality split by various ASIL functional safety aspects. So it's easier to integrate electronic suspension and EVs. But having said that, we still have interest from EV OEM saying that, hey, we want to put DaVinci on our vehicles because it's a lot cheaper, right? So I think DaVinci has the ability to kind of satisfy a long range of A, B, C, even D-segment vehicles if value and affordability become an issue.

Got it, sir. My second question is on CAPEX. So, out of this 350 to 400 ques of CAPEX, which is planned for FY27, how much would have we incurred in Q1 FY27? And secondly, there were some exports-oriented CAPEX also, which was going to be planned. So, would this 350 to 400 ques of CAPEX include some export-oriented specific CAPEX as well? Thank you.

We're publishing our balance sheet in September, so we would be disclosing the amount that we would have spent.

Thank you. Thank you for answering my questions.

Thank you. The next question is from the line of Nagraj, an individual investor. Please go ahead.

Good evening. Congratulations on a very good set of numbers. My first question is, do we have any plans to enter passenger EV segment with any new products other than ART? My second question is, when are we expected to start commercial production of Da Vinci suspensions for smaller passenger vehicles? And my last question is, since we are already a debt-free company with negative working capital, how are we planning to deploy cash flow from operations in future? Thank you.

In fact, electric vehicles need almost necessity that you have a much better suspension because the EV rides on a battery with a very low center of gravity, and if you don't have a more robust shock absorber or suspension, it will feel like you're riding a go-kart, right? So, by default, all the EB players... It's more of a, either a Da Vinci or electronic type suspension. So that automatically gives us more content for vehicle, right? Now, if you're saying other than ART, that's a good question. That's something that we are debating internally. We're not ready to disclose what we want to do, but that's something that we're discussing in the background in terms of how we can be more, not just EV, but more like agnostic, right? Which means pick a product, whether it's an ICE engine or a... Let's say electric vehicle, the product should not, it should be agnostic, right? It should work on both the type of segments or vehicles. On your second question on Da Vinci, the smaller bore announcement we've made, the announcement we've just developed that. So now we're looking for customers. The good news is that this already came in as a result of some customers asking for it. So, it's just a matter of time before we start merging the demand from the AB segment customers with the readiness. And the comprehensiveness of that, of this new technology, right? So it's the chicken and egg. OEMs want the same thing on the low segments, but we didn't have the technology ready, but now we do. So now we can start discussing with them how we would like to apply this. But like I said, my aspiration is that I want, if I had a wish, I would put the entire, all of India's A and B segments on Da Vinci as a minimum, right? So that's my aspiration. Your third question was something around... Cash, yeah, how to use the cash rate. Look, yes, we do generate a lot of cash. 50 to 60% of our EBITDA converts into cash. Our traditional business lines are big cash cows for us. So we will use that for funding our capex, that 350 to 450 crores. It's fully generated. The CapEx is fully generated through internal accruals. So we are not, even after spending that kind of cash, we still will be debt-free. So the obvious question is, what else are you going to do with your free cash, right? So there are a lot of options, including M&A inorganic option that we are pursuing. So it's in line with your first question. So wait for the right time.

Thank you, all the best.

The next follow-up question is from the line of Imanj Hussein from Baroda BNP Paribas Mutual Fund. Please go ahead.

Hi, sir. Thank you for the opportunity again. So, just wanted to understand, like, did we face any impact from Hyundai supply disruptions which we saw in 1Q? So, did we have any impact from there on the greener segment?

No, we didn't, because we don't have a strong position in that passenger vehicle company, so we didn't face that. So, that's a simple answer. Okay.

And just on the progress of new product launches, which you had highlighted earlier, like suspension business and two different segments, how is it coming? And when should we start seeing some movement in those segments?

You're seeing that in the continued growth of our business, right? So if the market grew by 16%, we've grown through content per vehicle and through new launches. In fact, this coming year, as we're sitting here today, going into next year, let's say through March 31st of 2027, We do plan to have a lot of new launches, especially from the Da Vinci win, semi-active, there's also on the clean air and power train side, a lot of the business wins will start bearing fruit. So, somewhere between, like, early calendar year, 27 through... So the next couple of years are going to be very heavy for new product launches across the board. So we're quite excited about that. And that will automatically give us a pretty nice growth to look forward to.

Sure. Sir, and just last question, what is the difference between the DCX32 and the DCX?

The normal VCS that we invented earlier was for the, let's call it the mid-to-premium SUV types, right? So the 3.2 refers to 32 millimeters, and the 3.5 refers to 35 millimeters. So the standard one was more like 35 millimeters for the luxury, mid-to-luxury vehicles. The 32 is basically the size of the piston. Which works for the A and B segment vehicles. So you just kind of think of it like you have a product and you're just shrinking it to form fit a vehicle that is much smaller. So the things that are the rod diameter, so for something like a 32, you would need like a 25 millimeter rod, and it will be encased in an outer tube of maybe 58 millimeters. I'm just giving you an example, right? Between the rod, the piston diameter, and the inner part of the outer tube, and by shrinking it, you are now able to compete on the lower end for A&E segments.

Sure. Thank you so much, Dr. Tramaisi. Thank you, Imanshu.

Thank you so much.

Thank you. Ladies and gentlemen, we take that as the last question. I now hand the conference over to Mr. Himanshu Sharma, Head of Investor Relations, for closing comments.

Thank you, Sanaya. Ladies and gentlemen, thank you all for your continued interest in our company. And look forward to speaking with you again next quarter. Thank you and have a good evening.

On behalf of Teneco Clean Air India Limited, we thank you for joining today's call. This concludes this conference and you may now disconnect your lines.