Minda Industries expects to maintain margin at 12%: Sunil Bohra
We have moved our margin profile from 7-8% to 12%, which is the top quartile in our industry.
You have been able to outperform your peers in the quarter gone by. Would you attribute it to the strong cost control measures that you undertook or would it be the growth in new products?
It is a mix of both. The company has been taking a series of actions to improve its kit value. In the last quarter, we have seen revenue addition from a couple of businesses which were added in the last 12 months. One of them was Minda Katolec and another one was in Germany. Plus, there has been some value adds from existing products that has withheld the sharp fall which we have seen across the industry.
On a half-year basis, our revenue is roughly 5% lower than the industry. The drop from two- wheelers, three-wheelers, four-wheelers and CVs is different -- from 15% to around 30%. Overall, in terms of revenue, we have been able to do relatively better but there is definitely room for growth in the coming months.
We are currently working to add a few more products to our kitty which should help sustain the momentum of the outperforming sector in the medium term in terms of top line. In terms of margin, we have been able to maintain our EBITDA margins quarter on quarter and even compared to last year, we are almost flattish despite the headwinds in terms of revenue growth. We have been taking strong actions in terms of cost optimisation and cost controls which have yielded results that are visible in terms of our margin. So yes, things have worked the way we have planned.
Could you tell us what has been the order inflow for the newly introduced products like alloy wheels, RPAs, LEDs, controllers etc?
The potential is big. We have been banking on these products which we call the sunrise products. In terms of new additions, a couple of new launches happened last month. We have got Maruti S-Presso and other orders. We continue to add products order book for whatever new launches are there.
But in terms of these products which is alloy wheel or controllers, we are continuously working to add the premiumisation factor in terms of LED. All the while, the lights are directly correlated to the industry volumes. We have again been able to do better, not only because of premiumisation but also because we have improved our share of business along with the sunrise businesses.
We have been taking strong actions in terms of cost optimisation and cost controls which have yielded results that are visible in terms of our margin.
As regards the controllers’ plant, which currently is under construction, there is not much revenue in this quarter from controllers and also from alloy wheel for two-wheelers. The plant is under construction and we should see some revenue addition from both these products in the first half of next calendar year.
The controller business should start somewhere in the next quarter and the alloy wheel for two-wheelers should start operations in the first quarter of the next fiscal. These two products will provide improvement and enhancement in kit value from the next calendar year onwards.
In addition to that, we are in the completing of acquisition of Harita and that should be over by the end of this fiscal. That also will start adding to our top line and bottom line.
Do you see higher margins as well? It will contribute to both the top line and bottom line. In terms of the order book for BS VI vehicles, are you still facing any challenges?
Industry-wise, the capacity utilisation is down. If the volumes are down, it directly correlates to our production capacity as well. Capacity utilisation is on the lower side. While in the existing or the old plants, capacity utilisation is somewhere around 70%, at the newer plants, which we have put up in last 12 to 18 months, the capacity utilisation is relatively low -- 50-55% -- because six plants have been put up in last 12 to 18 months.
Going forward, it is very difficult to say what kind of margins will be there for future but our current guidance is that we should be able to maintain the range of around 12%, which we have successfully achieved for last year. We have moved our margin profile from a single digit of 7-8% to 12% which in our industry is somewhere in the top quartile. We would like to consolidate in that margin range despite the fact that we are adding fewer products.
Wherever one adds new products, the margin is relatively lower in the initial years as you ramp up the margins. If are able to maintain the margin despite adding fewer products, that will be a good achievement. In terms of acquisition of Harita, the margins are in a single digit. So that may be a little bit margin dilutive but overall in terms of fixed asset turnover ratio, the Harita acquisition is very attractive and we are confident that in the medium term, it will be able to deliver the ROCE for our existing businesses. Overall, things look better from medium term perspective.
What is the increase in content per vehicle?
Yes, in terms of content per vehicle, normally we give our kit value on an annual basis. Last year, we have added kit value ranging from 7-8% to 13% depending on the category of the vehicle or two-wheeler versus four-wheelers We are on that journey and we are confident that this year and next, we will see a significant bump up in kit value.
We expect that in the next six to 12 months, it should be in the range of 5-6% to 10-12%, depending on whether it is a four-wheeler or a two-wheeler. Due to addition of two-wheeler alloy wheels, we expect big value enhancement in two-wheelers compared to four-wheelers. In four wheelers, we are adding products like sensors, controllers etc. There also we will see some improvement in kit value, but in the next 12 months, two-wheeler kit value will see better growth compared to four-wheelers.