RICOAUTONSENovember 16, 2022

Rico Auto Industries Limited

8,549words
120turns
8analyst exchanges
10executives
Management on call
Arvind Kapur
CHAIRMAN, CEO & MD
Kaushalendra Verma
EXECUTIVE DIRECTOR
R.K. Miglani
EXECUTIVE DIRECTOR
O.P. Aggarwal
CHIEF ADVISOR (FIN & A/CS)
Surendra Singh
CHIEF ADVISOR (HR & ADMIN)
Rakesh Sharma
CFO
Sandeep Rajpal
VICE PRESIDENT (MARKETING)
B.M. Jhamb
COMPANY SECRETARY
Vijay Gyanchandani
S-ANCIAL TECHNOLOGIES
Vijay Gyanchandani From S
Ancial
Key numbers — 40 extracted
rs,
to various people all over, the economy seems to be doing very well. And we do talk to the bankers, we talk to the market and everything is doing well. And there are very few things which are not --
25%
very well. And we are hoping that the two-wheeler industry would also carry because almost about 25% to 30% of what turnover does go to the two-wheeler industry, even though we are growing in the tw
30%
ell. And we are hoping that the two-wheeler industry would also carry because almost about 25% to 30% of what turnover does go to the two-wheeler industry, even though we are growing in the two-wheel
24%
your Company has -- we have grown since last year. Our revenues from last year was up by almost 24% and -- when you compare it quarter-to- quarter. And this quarter also, we seem to be -- there is a
22%
pick up further, even though we have done better than before. Our growth over last year was over 22%, and -- we are hoping that -- our growth -- our share of exports at the moment is 26%. The slight
26%
ar was over 22%, and -- we are hoping that -- our growth -- our share of exports at the moment is 26%. The slight practices taking place. This quarter, the exports were -- could have
40%
for the Toyota project. The demand, they have told us to ramp up the production by almost further 40% to whatever the maximum they had committed earlier. So that's a very good sign. So the acceptabil
INR 1,300 crore
on electric vehicles and electrification. And the total order book that we have is close to about INR 1,300 crores. That is the -- and the annualized value is about INR 200 crores a year, out of which almost 85%
INR 200 crore
that we have is close to about INR 1,300 crores. That is the -- and the annualized value is about INR 200 crores a year, out of which almost 85% is for the electrical vehicles. So that is the change that you s
85%
ores. That is the -- and the annualized value is about INR 200 crores a year, out of which almost 85% is for the electrical vehicles. So that is the change that you see. And we are negotiating furthe
0.5%
nents of electric vehicles are concerned. Our debt-to-equity ratio remains within 0.5% - 0.6%, and we will continue to retain it here. Our board will not let us cross this. The capex t
0.6%
f electric vehicles are concerned. Our debt-to-equity ratio remains within 0.5% - 0.6%, and we will continue to retain it here. Our board will not let us cross this. The capex that we
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Guidance — 20 items
Arvind Kapur
opening
“In fact, whatever investments we had done for the Toyota project.”
Arvind Kapur
opening
“And that will go into for -- we will give the sample by early next year, and the production would also start next year.”
Arvind Kapur
opening
“And we're hoping that by next year or the year after that, we are hoping to touch 40% as far as the components of electric vehicles are concerned.”
Arvind Kapur
opening
“The capex that we do is primarily the balance sheet component, we are doing, but I think we will be doing some capex for AISIN and also for this new project that has come for BMW, but that will be done next year and the year after that.”
Arvind Kapur
opening
“And as, even though the rains, which came later, they did destroy some crops, there will be some disadvantage there.”
Arvind Kapur
qa
“And not all the models, some of the models will be made by EClL and some of them are made BEL.”
Arvind Kapur
qa
“So, but in any case, if at all, there is some supplies that are required by the defense and the they, if they buy from these PSUs, we will be supplying most of the things in any case because we have the capacity to make those components.”
Aman Vij
qa
“And do you expect private payer to have maybe 30%, 40%, 50% market share combined in this.”
Arvind Kapur
qa
“So that would be an add-on to the total business that we will be doing.”
Aman Vij
qa
“What kind of margin should we expect like 20% plus or higher?”
Risks & concerns — 3 flagged
But by and large, the monsoon has been good, and I think we will see the impact of that in the rural side also.
— Arvind Kapur
And we have told them that one is fairness and number two is you cannot risk the lives of our soldiers.
— Arvind Kapur
Every quarter -- The other thing that was happening was there was a lag impact of the raw materials.
— Arvind Kapur
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Q&A — 8 exchanges
Q
My first question is on our defense portfolio. So in February, you had talked about we have submitted our products for trial and it will take two, three months for the same. So any progress on the same?
Arvind Kapur
No. On the defense side, there were trials which took place, and there has been a lot of chaos that happened in that. And the – in fact, even today, my people are sitting at the Ministry of Defense, and there are discussions going on because there were some – they were trying to bypass the private sector, and they were trying to pass on the orders only to the public sector undertaking. So there has been some chaos there. And it appears that they'll have to recall the tender, and I think everything starts for fresh again. So this is defense works and so that's -- we are fighting for it. And eve
Q
Congratulations on a great set of numbers. Very happy to see our performance as we are growing quarter-on-quarter. Sir, I would just like to talk about what do we see as a sustainable commute rate because we've been doing great numbers recently. So -- what could we see in the next year and maybe end of this year, what kind of revenue are we seeing?
Arvind Kapur
This year, our budgeted revenue is about INR 2,400 crores. That's what our budgeted revenue is for this year. And we are fairly confident that we will be around that plus /minus INR 50 crores. That's what where we are. Because we've already done 50% of whatever in the half year. And we are fairly confident we'll be touching that. And next year, we should be INR 3,000 crores+. That's what the lease that we would have, and we are still working out the numbers. Because this new order, which has come in the INR 100 crores order, that would add from '25 onwards, but we are getting similar orders fr
Q
Hello sir, this question is regarding the tax rates. As of now, as I see the tax rates are quite high and what could be the possible reason behind this? And until when do we look for or see this stabilizing?
Rakesh Sharma
See, in our case, the applicable tax rate comes to around 34%. So that is the rate you are seeing it here. But actual cash outflow is to the tune of around 18% because we are paying under MAT. So once we utilize whatever MAT credits are available to us, after that we are planning to adopt the new scheme, where the effective tax rate will come down to around 23%. So right now also there is nothing wrong about it. Actual cash outflow is at the rate of 18%, but we are utilizing those MAT credits. So once that is over, we will adopt the new scheme where it will be around 23%. So until when, approx
Q
Congratulations on a good set of numbers sir and thanks for the opportunity. I have some follow- up question on the fuses which Aman Vij had asked, and my first question is that the current issues that we have are they more technical in nature or are they like very similar issues to what we had 10 years back? So are we clear from a technical perspective?
Arvind Kapur
Technical perspective we are absolutely clear, but what is happening is that the fuses, when the selection of fuses was taking place, there were some preferences which were being, some of the private sector was being sidelined and preference was being given to the public sector. And when they did the testing of the public sector fuses, the failure was over 50%. And that made the fuses even worse because the public sector has been supplying the fuses for the last 15 years or 10 years. What happens to the fuses which are in stock? Are they 50% okay or 50% which are not okay? So it's become a maj
Q
Quickly on -- I think some time last year, you mentioned about the land sale in Noida and Gurgaon. Are you planning to sell that one because right now the...
Arvind Kapur
I couldn't hear you too well. Can you repeat your question, please? Yes, sorry. Actually, last year -- before last year, you mentioned that we had some land parcel in Noida/ Gurgaon, you are planning to sell it at the right time. As the interest rates are going up, are you planning to sell that particular land? This is a land where the factory is located in Gurgaon. And this is 27 acres -- also 26.5 acre land that we have here. And we are in the market to sell it because we've already made arrangements in all other plants. We have enough space and land bank available and buildings available wh
Q
My question is on the EV side of the portfolio. So is it safe to assume the margins there will be like much better than our current margins? Or are they similar?
Arvind Kapur
Then EV margins, depends on who you supply to. The EV margins on exports is definitely better. And the EV margins on some of the domestic companies is not as good as the export, but better than the other domestic items that we supply. So BMW EV, which I think we’ll be exporting will be the top end margin versus the other? Say, BMW EV we've been exporting for the last 5-6 years and by the way, and 6 years now. And we’ve been exporting to BMW. We've been exporting to PSA in France. And we were the first and single-source supplier for those components to these companies. So when they developed th
Q
So last two years, we have seen our top line moving substantially from INR 1,400 crores now to INR 2400 crores, let's say, last 3, 4 years back. Ideally there should have been some margin expansion? And what I see is your entire operating bearing eaten away by gross margin reduction. So, it would be helpful for us to understand, first of all, why is this happening? And when you say that margin will move from 8% to 12%, is it a function of gross margin or is it a function of leverage? So these are two tough questions within the overall thing if you could answer?
Management
See, for the last more than two years, you would be observing that commodity pricing were increasing like anything. It was skyrocketing during this period and like MD explained earlier also that this rising price has lag impact on us. Although our arrangements with customers are back-to-back arrangement is there and we get compensation, but that price increase is effective post facto. It means, for example, we have quarterly arrangement. So last quarter's average will get next quarter. So whenever the prices are rising, we lose on that lag impact part. Now the cycle is reversing. So now the pr
Q
Well, thank you so much, and if there any question by anybody, please write to us, and we will certainly like to -- even call us up and we would like to talk to you and share to you whatever happening in the company. Fortunately, the market is good, and we are all very excited about all the possibilities. Every quarter, you will see the profitability going up. And hopefully, we should be around 12% soon and we like to make further improvements. With the newer components coming and, of course, there would be further additions that will keep on coming. And INR 2,400 crores this year, that's what
Management
Speaking time
Arvind Kapur
53
Aman Vij
23
Moderator
10
Bhaskara
7
Aditya Sen
6
Anant Jain
6
Pritesh Chheda
6
Darshil Jhaveri
5
Rakesh Sharma
2
Vijay Gyanchandani
1
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Opening remarks
Vijay Gyanchandani
Thank you. Welcome to Rico Auto Industries Q2 FY '23 Earnings Conference Call. From the management, we have today Mr. Arvind Kapur, Chairman, CEO and MD; Mr. Kaushalendra Verma, Executive Director; Mr. R.K. Miglani, Executive Director; Mr. O. P. Aggarwal, Chief Advisor (Fin & A/cs); Mr. Surendra Singh, Chief Advisor (HR and Admin); Mr. Rakesh Sharma, CFO; Mr. Sandeep Rajpal, Vice President (Marketing); and Mr. B.M. Jhamb, Company Secretary. Now I request Mr. Arvind Kapur will take us through the key remarks after that, we can open the floor for the Q&A session. Thank you, and over to you, Sir.
Arvind Kapur
Good evening. This is Arvind Kapur, and welcome you all to the conference today. Sorry, we had to postpone with one day and hoping that we will all cheer for our Indian team yesterday, and we didn't want to disturb all our investors. But unfortunately, we did not fare well there. Very sorry for that. Having said that, the market has been good. As we've been talking to various people all over, the economy seems to be doing very well. And we do talk to the bankers, we talk to the market and everything is doing well. And there are very few things which are not -- unfortunately, we had the festive season also and the festive season automobile, in particular, did very well. And this is the first time after a long time that the two-wheelers also rebounded back, and they also did very well. And we are hoping that the two-wheeler industry would also carry because almost about 25% to 30% of what turnover does go to the two-wheeler industry, even though we are growing in the two-wheel industry.
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