MINDACORPNSEFebruary 24, 2023

Minda Corporation Limited

4,780words
96turns
13analyst exchanges
4executives
Management on call
Aakash Minda
EXECUTIVE DIRECTOR
Vinod Raheja
GROUP CFO
Anshul Saxena
GROUP HEAD STRATEGY AND M&A
Pushpa Mani
LEAD INVESTOR RELATIONS
Key numbers — 22 extracted
rs,
h on the instrument clusters business. As a part of the long-term strategy for instrument clusters, we had invested about INR 161 crores in Minda Instruments last year by acquiring 49% stake of our
INR 161 crore
ters business. As a part of the long-term strategy for instrument clusters, we had invested about INR 161 crores in Minda Instruments last year by acquiring 49% stake of our joint venture partner which is in
49%
rument clusters, we had invested about INR 161 crores in Minda Instruments last year by acquiring 49% stake of our joint venture partner which is in instrument cluster business. As you are aware th
15.7%
which is in instrument cluster business. As you are aware that Minda Corporation has purchased 15.7% equity for a cumulative amount of INR 400 crores through on-market transactions on February 17, 2
INR 400 crore
. As you are aware that Minda Corporation has purchased 15.7% equity for a cumulative amount of INR 400 crores through on-market transactions on February 17, 2022. The shares of Pricol purchased solely for t
INR 50 crore
n in terms of how you plan to fund this? I mean, in Q3 call, I think you mentioned you had around INR 50 crores net debt, and this is an INR 400 crores concentration. So what are your plans in terms of these
0.3%
positioned balance sheet. We have -- after this investment, we'll have a debt to equity at about 0.3%, and the debt-to-EBITDA will be around 1:1. So, we have enough strong generation of our own funds
15%
f Vipul Shah from Sumangal Investment. Vipul Shah: My question is, will we be content with this 15% odd stake or we have planned to increase it in a staggered manner? Aakash Minda: So Vipul, th
INR 36 crore
me. How do you think it will impact the ROEs of Minda Corp. because as I see, we generated around INR 36 crores of interest income in the last 12 months hasn't paid any dividend in this is one of them, then I
INR 400
y space. As is mentioned, there's going to be a lot of premiumization that will happen from about INR 400 - 500 cluster, it will go to about INR 4,000 to 5,000. We are well positioned to become the market
INR 4,000
be a lot of premiumization that will happen from about INR 400 - 500 cluster, it will go to about INR 4,000 to 5,000. We are well positioned to become the market leader in the this market. Mohit Khanna: I
INR 500
ngh: Sir, if you can clarify on the premiumization, as you did mention that it will be INR 400 to INR 500 will lead to INR 4,000 to INR 5,000, first question. And a second question, if you can -- as you a
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Guidance — 20 items
Aakash Minda
opening
“Minda Corporation is and will be generating enough free cash flows from operations to build and to fund our organic and inorganic growth.”
Aakash Minda
opening
“After this investment, debt-to-equity ratio will be about 0.3.”
Aakash Minda
opening
“We will be able to support all our organic growth initiatives in addition to staying on the lookout for new value-creating inorganic growth opportunities.”
Hiral Dadia
qa
“My question to you will be, does this -- though we don't have special rights right now in terms of the investment, but is there any future plan to increase stake in Pricol from here on?”
Jay Kale
qa
“My first question is regarding your capital allocation in terms of how you plan to fund this?”
Jay Kale
qa
“So what are your plans in terms of these kind of strategic investments or financial investments versus your organic growth target?”
Aakash Minda
qa
“We have -- after this investment, we'll have a debt to equity at about 0.3%, and the debt-to-EBITDA will be around 1:1.”
Jay Kale
qa
“But just to understand the way forward in terms of you want to maybe have a controlling stake, if at all, in the target company.”
Vaibhav Agrawal
qa
“So while I'm sure Pricol, you may have great prospects going forward.”
Aakash Minda
qa
“And of course, going forward, Minda Corporation has enough free cash flow generation plan as well as strategy in order to fund our organic growth and needs.”
Risks & concerns — 1 flagged
I kind of think it's kind of quite weak.
— Vaibhav Agrawal
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Q&A — 13 exchanges
Q
Thank you for taking us though the objective in terms of the investment that has been made in Pricol. My question to you will be, does this -- though we don't have special rights right now in terms of the investment, but is there any future plan to increase stake in Pricol from here on?
Aakash Minda
We will continue to explore all the opportunities of inorganic that will come for Minda Corporation, and we will present it to the Board to take the right call at right time. Okay. And my second question to this is in terms of synergies. We do see a lot of synergies in the instrument cluster business, right? So, how was it that in terms of timelines that we are looking at from a growth potential? So here, as I mentioned, this is solely a financial investment, the purchase of equity shares. So we are not talking about any synergies right now. Right. But doesn't this already get in terms of comp
Q
My first question is regarding your capital allocation in terms of how you plan to fund this? I mean, in Q3 call, I think you mentioned you had around INR 50 crores net debt, and this is an INR 400 crores concentration. So what are your plans in terms of these kind of strategic investments or financial investments versus your organic growth target? And what is the kind of debt to EBITDA or any metrics that you would be looking at that you would be comfortable with? Just to give a sense of how far you would want to go ahead with this financial investment?
Aakash Minda
Thanks, Jay. So as I mentioned now, our focus is on our organic growth. As I mentioned in my opening speech also, our objective is to consistently beat the market and perform better than them. We have never been more confident in our own business growth prospects and cash flow generation ability. Minda Corporation is and we'll be generating enough free cash flow from operations to fund our routine capex and organic growth. The company has well positioned balance sheet. We have -- after this investment, we'll have a debt to equity at about 0.3%, and the debt-to-EBITDA will be around 1:1. So, we
Q
So I just wanted to understand in terms of the management and Board's thought process towards capital allocation. So I'm sure, I mean, out of the cash that was on the balance sheet was also sort of QIP money that we raised a few years back. So while I'm sure Pricol, you may have great prospects going forward. But don't you think that it's kind of an aggressive step that your entire, I mean, a large chunk of the treasury is basically invested in one stock and the fortune of the stock will determine sort of how our treasury does, so it's basically sort of -- it's kind of an unprecedented move, I
Aakash Minda
As I mentioned to you that our balance sheet itself is in a comfortable and conservative place. We have this as the surplus funds that we have deployed in the opportunity that has come from the market. And of course, going forward, Minda Corporation has enough free cash flow generation plan as well as strategy in order to fund our organic growth and needs. So that's the strategy that is there in pace right now, yes. No, So from what I understand, I think at least as things stand today, we are a minority shareholder. So neither rather any operating synergies, neither do we have any sort of say
Q
My question is, will we be content with this 15% odd stake or we have planned to increase it in a staggered manner?
Aakash Minda
So Vipul, this is a financial investment as of now. And as and when any inorganic opportunity comes across various platforms in a structured way, we'll take it to the Board. Okay. And may I ask means, is there any possibility that we may initiate a hostile takeover at any future date? As I mentioned, this is a financial investment only as of now.
Q
I had two questions. Firstly, considering this is a minority shareholding that you would consider to have it for a longer period of time. How do you think it will impact the ROEs of Minda Corp. because as I see, we generated around INR 36 crores of interest income in the last 12 months hasn't paid any dividend in this is one of them, then I'll come back.
Aakash Minda
Mohit, so as I mentioned, again, this sector, which is starting to do well. And all the companies here should be looking at growth. Of course, we've invested in this company here has a significant amount. We will again look at how the growth takes place and then take those calls accordingly. Sure, sure. Now just flipping the coin side. Considering this would be, at some point in time, a strategic investment. What are the key technologies, products, which you consider acquiring rather than developing them in-house? And what are the key synergies that you would look for if you do go for increasi
Q
Question pertains to what will be the possible alternate you would have considered considering that this pace of instrument cluster/travel in commission system is seeing a substantial evolution not just in India, but globally. So would not it have been better off if you had invested in the future technology where you have got some technological capabilities and personal advantage?
Aakash Minda
So Jinesh, we are already currently investing in all our organic leads and also in technology, in our technical center for all the products. As you know, not only for cluster but all the product of Minda Corporation will be going to premiumization and having more of electronic software and other premium features. So we are investing continuously on technology internally as well. And we continue to look for partners who we can invest in or tie up for technology for an instrument clusters space, particularly. So, I understand that the organic approach we have been not doing. I'm saying from an i
Q
Sir, if you can clarify on the premiumization, as you did mention that it will be INR 400 to INR 500 will lead to INR 4,000 to INR 5,000, first question. And a second question, if you can -- as you already mentioned, this is the financial investment. So we will be going to see the impact on margin front, if you can guide us along with the top line growth.
Aakash Minda
Yes. On the premiumization front, all the Minda Corporation products are going to go through premiumization route like entry solutions, instrument clusters, wiring harnesses, light weighting products, electric vehicle mobility etc. Particularly coming to the instrument clusters, like you know, there have been analog clusters, and now they'll be moving to advanced DFT clusters and more personalization because individualization may happen. In that concept, all the or most of the products are now going into DFT and touch screen. So, this is the driver information system premiumization that may ha
Q
Considering if you utilize most of the treasury surplus, is there any plans for future fundraising?
Aakash Minda
So our balance sheet is strong enough to cater to all the organic needs. If there are any inorganic opportunities that do come, we have a conservative and strong balance sheet to look at all of these options that do come. Sir, what is the current debt as of today? The long term and short term? Can you please share the current long term and short term debt as of today? So long-term debt as of today about INR 150 crores. And short Term? Short-term is to the tune of about INR 350 crores. So that's total cumulative INR 500 crores of debt? Total Net Debt is about INR 400 crores with Net short-term
Q
Yes, sorry. Just one quick clarification. So, given that this is purely a financing investment opportunity, what are the parameters does that your Board considers for any investment to qualify from an investment perspective?
Aakash Minda
So, we have norms for our inorganic growth opportunities that we have clearly defined, and we would like to be in the Indian market and the products which are of synergies to Minda Corporation. These are the primary two factors. And of course, any products which are agnostic to electric vehicle mobility and gives us the technology image. These are the primary factors. And of course, we're looking at this as an assets that give us a higher return, we look at that and the Board give us direction to invest in those for the best utilization of the funds. Sir, but the technology edge wouldn't matte
Q
Just wanted a clarification. Before this transaction, did we approach the Pricol management for seeking any collaboration or investment maybe through the primary route or any such option before buying it to the secondary market?
Aakash Minda
No, we have not had any discussion with Pricol management. Okay. And second was what are the possible exit options that would be there? I'm sure you would have presented that to the Board as well while making this suggestion. So what are the possible option that could emerge over the next -- I'm not talking about a particular thing that you would end up doing. But what are the possible options that you could: emerge over the next couple of years that will allow you to unlock value through this transaction? So Jaspreet, of course, right now, we're not thinking about any exiting. We've just inve
Q
Sir, can you just put on the debt and cash numbers on the book?
Aakash Minda
Sorry, can you repeat the question, please? The debt and cash on the books post this Pricol transaction. Aakash Minda So I'll ask my CFO to answer the debt and cash position. But what I would like to share, as I mentioned in my opening speech as well, is that we are in well positioned in order to take care of all our free cash flow needs coming from operations to fund our capex for organic growth in the short term to mid-term. And if any inorganic opportunity comes, we'll take it to the Board and then evaluate options. On the long-term basis, on the long-term debt and the financial position, I
Q
I wanted to check since it's a financial transaction. So are we allowed to apportion this much percentage of Pricol PAT in a consolidated number going forward?
Aakash Minda
No, this is a financial investment as a minority. So we will not be looking at any of those. Okay. Secondly, lawfully, are we allowed to come out with any voluntary open offer for the minority shareholders of Pricol? Sorry, please? Sir, lawfully, are we allowed to come up with a voluntary open offer for the minority shareholders of Pricol Limited? I cannot comment on that. So we are just again simply invested in this company. So I really cannot comment on that.
Q
Sure. Thank you, everybody, for joining. As I would like to conclude by saying that we strongly believe in the automotive instrument clusters space, and this product is set to have big potential going forward. There's a lot of premiumization that we'll be having in the upcoming future. We believe that Minda Corporation should be in the leading position and we have our technology centre, which is already working on such products.. The investment is purely a financial investment that is done from the open market. We look forward to your support, and thank you all very much.
Management
Speaking time
Aakash Minda
39
Moderator
15
Kushal Kedia
6
Hiral Dadia
5
Jaspreet Arora
5
Mohit Khanna
3
Aniket Mhatre
3
Aditya Welekar
3
Shashank Kanodia
3
Jay Kale
2
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Opening remarks
Abhishek Jain
Thanks, Faizan. Good evening, everyone. On behalf of Dolat Capital, we welcome you all in the Business Update Conference Call of Minda Corporation. From the management side, we have with us Mr. Aakash Minda, Executive Director; Mr. Vinod Raheja, Group CFO; Mr. Anshul Saxena, Group Head, Strategy and Merger & Acquisition and Ms. Pushpa Mani, Lead Investor Relations of the company. We thank the management for providing us the opportunity to host the call. Now I hand the call to Mr. Aakash Minda for his opening remarks, followed by the question-and-answer session. Over to you, Mr. Minda
Aakash Minda
Thank you, Abhishek. Good evening, everyone. I would like to thank you all for joining us on this conference call here today, and hope you all are keeping safe and healthy. We truly believe that the automotive instrument as a product is set to grow and has big potential. It will go through lot of premiumization in the upcoming future. We believe an Indian company should lead this market space. Minda Corporation has an advanced technology center, which is working and developing future technologies in the space of instrument clusters and electric vehicle mobility. We are very strongly positioned in technology and our own capabilities to lead this industry. We understand this sector and the business space very well. We understand and are very bullish on the instrument clusters business. As a part of the long-term strategy for instrument clusters, we had invested about INR 161 crores in Minda Instruments last year by acquiring 49% stake of our joint venture partner which is in instrument c
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