GREAVESCOTNSEQ3 FY2023February 09, 2023

Greaves Cotton Limited

8,134words
97turns
12analyst exchanges
4executives
Management on call
Arup Basu
Managing Director, GCL
Nagesh Basavanhalli
Executive
Dalpat Jain
Group CFO, Dr. Arup Basu - Managing Director,
Sanjay Behl
CEO and Executive Director, GEMPL. As a reminder, all
Key numbers — 40 extracted
Rs. 514 crore
ey highlights. If you look at the consolidated revenue of the group, we reported total revenue of Rs. 514 crores, which is 6% higher than the same quarter of previous year but lower than the sequential the Q2
6%
k at the consolidated revenue of the group, we reported total revenue of Rs. 514 crores, which is 6% higher than the same quarter of previous year but lower than the sequential the Q2 FY23 and main
Rs. 365 crore
he subsequent quarters. So, if you look at the breakup of consolidated revenue of Rs. 514 crores, Rs. 365 crores came from standalone business and Rs. 142 crores were the consolidated revenue of Electric Mob
Rs. 142 crore
eakup of consolidated revenue of Rs. 514 crores, Rs. 365 crores came from standalone business and Rs. 142 crores were the consolidated revenue of Electric Mobility. The good news is as I was mentioning with th
70%
with the overall prices coming down. The raw material cost for standalone business was less than 70% and EBITDA margins have moved back to double digit. We happy to report 10.7% EBITDA margin at sta
10.7%
business was less than 70% and EBITDA margins have moved back to double digit. We happy to report 10.7% EBITDA margin at standalone level during the quarter. In Greaves electric mobility business, beca
Rs. 8 crore
her volume and business, we had a loss at PBT level. The expenses also included a onetime cost of Rs. 8 crores for a particular share-based payment and during the quarter. So overall at electric mobility lev
Rs. 10 crore
vel, we had a negative PBT of Rs. (28) crores. At a consolidated level, positive EBITDA of around Rs. 10 crores on recurring basis and standalone EBITDA was Rs. 39 crores, which is 10.7%. Company’s Balance
Rs. 39 crore
ted level, positive EBITDA of around Rs. 10 crores on recurring basis and standalone EBITDA was Rs. 39 crores, which is 10.7%. Company’s Balance sheet continues to remain strong. We had a total cash and cas
Rs. 1,171 crore
Company’s Balance sheet continues to remain strong. We had a total cash and cash equivalents of Rs. 1,171 crores at the consolidated level and with the binding term sheet that has got signed for acquisition of
100%
at the consolidated level and with the binding term sheet that has got signed for acquisition of 100% stake in Excel Controlling case in 4 tranches. We will be using some part of our internal accrual
28%
tive thing is the target company is highly profitable with normalized EBITDA margins of more than 28% and with the significant scope for growth in the push pull cable segments where they operate. Wit
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Guidance — 20 items
Dalpat Jain
opening
“Which will be made-up as we go in the subsequent quarters.”
Dalpat Jain
opening
“The secondary volume continued to remain strong in the quarter three and as we go forward overall with the new launches that are planned, we expect strong momentum in our e-mobility volumes and revenue.”
Dalpat Jain
opening
“We will be using some part of our internal accruals and free cash.”
Dalpat Jain
opening
“Positive thing is the target company is highly profitable with normalized EBITDA margins of more than 28% and with the significant scope for growth in the push pull cable segments where they operate.”
Dalpat Jain
opening
“With that I will be happy to take questions.”
Ashutosh Tiwari
qa
“Firstly on this Excel control linkage acquisition, can throw more light in terms of where we basically it gives us synergy benefit and which kind of customers we can target with this ?Its a profitable business that we have seen in the PPT, but where it fits in our Kind of business.”
Nagesh Basavanhalli
qa
“So there is obviously B2B synergies, there is supply chain synergies its incremental product because also going forward there will be a lot of work in the areas sensors and the sensors which will go into both traditional engines as well as electric vehicles.”
Nagesh Basavanhalli
qa
“In terms of the growth you're right, If you look at the last three years CAGR, it's roughly about 22% and they have put in the Capex investments back in 2019 which really puts them in good stead that kind of gets them ready for the next couple of years.”
Dhananjay Mishra
qa
“So when we will be implementing the phase-II of the battery standard.”
Dhananjay Mishra
qa
“So again our primary sale will be impacted maybe in April?”
Risks & concerns — 2 flagged
So FY24 we will have fully impact of this consolation in our Penal, right?
— Dhananjay Mishra
Some slowdown was there in L3 in quarter three.
— Sanjay Behl
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Q&A — 12 exchanges
Q
Firstly on this Excel control linkage acquisition, can throw more light in terms of where we basically it gives us synergy benefit and which kind of customers we can target with this ?Its a profitable business that we have seen in the PPT, but where it fits in our Kind of business.
Nagesh Basavanhalli
So clearly they are in the business of push pull cables. They are in the area of levers, steering and transmission systems, electronic throttle, levers and pedals. we are in the higher margin segments which include the basically the commercial vehicles, construction equipment, Marines, SPV, etc. Roughly 30% of their business comes from international and 70% is from domestic. Obviously they are dealing with most of the auto majors in the country. I'm talking from a commercial vehicle standpoint, maybe with the exception of 1 MNC. So there is obviously B2B synergies, there is supply chain synerg
Q
So just the extension of last question. So when we will be implementing the phase-II of the battery standard. So again our primary sale will be impacted maybe in April?
Sanjay Behl
So just to add on to the last one, also part of the cost is also getting neutralized by the price increase that we have taken across our portfolio. So, I think that part is there. Coming to your AIS phase-II question, we are currently in a preparation mode, already for our transition to phase-II. The cutoff is 31st of March. So, we are getting ready for almost all the product line that we have to transition seamlessly without any hiccup in primary sales. That's the current readiness that we are working towards. So, we don't anticipate any major disruption at this point of time. OK, so 10,000 m
Q
My question is also on 3-wheelers. What is the situation there?
Dalpat Jain
So basically, in terms of the overall revenue and the market part of the MLR plus best way. So we've been steadily improving on 3-wheeler both in L3 and L5 segment that we have. Last quarter, we have actually done the highest ever L5 volumes and also continue to improve our position or sustain our position of a very good quarter two that we registered so almost the 6 | Greaves Cotton Limited (www.greavescotton.com) same number we repeated despite the market. Some slowdown was there in L3 in quarter three. We were able to hold to our volumes there and grow significantly in L5. So, that would be
Q
So my question is, there’s a lot of pessimism in the 3-wheeler industry in India and we realize It’s the essential part of transport system. Do you think the market is underestimating the power of Next upcycle in 3-wheeler industry? Can we see higher volumes in the next up cycle versus the previous up cycle? 7 | Greaves Cotton Limited (www.greavescotton.com)
Nagesh Basavanhalli
’When you look at the 3-wheeler industry, moving people and moving cargo. The passenger and cargo. As a general group advantage because not only we supply engine to a series of automakers on one hand, but from our life cycle value extraction. We supply 3-wheelers both L3 and L5, L3 at the lower end and L5. Sanjay already alluded the kind of where we are, but if I take a step back the industry size, basically L3 and L5 is more or less when you look at the monthly sales and the trending annual sales is more or less the same. L3 has been growing significantly, L5 has been significantly impacted d
Q
Now if you look at the subsidies, it was around Rs. 116 crore as on 31st March 2022. How much subsidies are receivable as on 31st December 22 and how are you looking at the subsidies in the future?
Dalpat Jain
So Rohit in terms of the absolute amount the receivable subsidy has now gone above Rs. 225 crores. So that’s the total receivable subsidy from the government because last five months they have been asking for the details and processing that. In terms of the status, they already spoke about it to the agencies, all the details have been provided and companies working with government to get that released as soon as possible. OK, and my other question is with related to auto EV Mart Company has 2 stores of Auto EV Mart in Bangalore and Thiruvananthapuram respectively. How much revenue contribution
Q
I have a very basic question since my understanding is a little bit limited. So like if I want to track the primary and secondary monthly sales for your company in terms of EV. I’m talking about 2-wheeler and 3-wheeler. What is the basic source to check it? and just another request like I have checked that we are not disclosing the monthly data. Basically like several others or traditional auto company or two Wheeler Company does. So is there any specific reason for that? So if you explain a little bit.
Dalpat Jain
So Subrata 2 parts of your question, One in terms of the secondary sale, so for secondary sale there is a database with Vahan. So Vahan Portal gives you data of the registered vehicles. Obviously there are certain anomalies in the sense of time gap, because from the time the vehicles are actually sold to the customer and till the time it is registered to that extent the Vahan database updating take gets delayed. Loan portal being the source for the secondary sales and subject to certain things which are like couple of states are not covered and the second, registration may take little time fro
Q
I had one question with respect to the secondary sales for Electric 2-wheeler. If we look at Vahan Portal, there are two data lines available, one for Ampere and another named Greaves Electric Mobility private limited. I understand the first one is for Ampere brand, what’s the other one for? 9 | Greaves Cotton Limited (www.greavescotton.com)
Dalpat Jain
So both are the same one. I think when the company registered name got changed from Ampere vehicles to Greaves electric mobility. So to that extent, the registration data when they’re happening under two names that the data what is getting reflected over there. But from company point of view, both of them together is what you need to see as the total volumes both are for Ampere branded vehicles only. OK and with respect to battery, are you sourcing the batteries from Indian OEM or are you importing from outside? The lithium-ion battery. All the batteries assemblers are Indian. All the batterie
Q
So we did understand why your sales went down in Q3 FY23. But what I fail to understand is why your secondary sales have declined in January. Could you please explain that?
Dalpat Jain
While the primary sales were on hold, that’s where the inventory at the dealer level got reduced. There is a Vahan registration number which has a lag with secondary sales. Because when you sell it to the customer, customer then either through a dealer or through some, directly goes to an RTO to register. Registration depending on the state can happen the same day or can get delayed by 45 days in some States and all the registrations don’t get accounted for in Vahan portal there. So the number that you’re seeing for January is a number of registrations which happened in January, which would ha
Q
So I think just a follow-up question. One of the participants also asked based on the response on that question, like the other 2-wheeler companies which are listed or the traditional 2-wheeler companies to disclose the numbers that what is the kind of numbers they have sold it out in the previous months. We are not putting up that number in the Stock Exchange filing. That is the first question from my side and the second when we see our comparative analysis visa vis the other players, whether it is a traditional one like the TVS motors or the one which are similar to us like the Ola or the Et
Dalpat Jain
So one in terms of December secondary sales, like Sanjay already mentioned, October and November were highest ever for Greaves electric mobility and December due to AIS 156 Company had calibrated its production and then the new vehicles which had to be manufactured and sold. There was a process of entire ARAI certification fame-II certification which got completed before the regulatory date and once the homologation was completed, after that, the complete restarted production and then the inventory started going back in the 11 | Greaves Cotton Limited (www.greavescotton.com) market. Sales is h
Q
My question is on the acquisition side, they're doing 28% EBITDA margin and as after we done the acquisition. So, what level we will be on the margin side?
Dalpat Jain
If you look at Greaves standalone, we are at 10.7% in Q3 FY23 and if you add hypothetically, let's say the current revenue run rate, they are at around Rs. 40 crores or RS. 45 crores of quarter. If I add that revenue and I add the EBITDA margin, the consolidated margin for quarter three would have been 12.8% - 12.9%. OK, and going forward, what is the growth rate that we are targeting? You are asking for Excel control linkage? No, overall, as a company for Greaves. As you know, we don't give formal forward guidance but having said that, I'm sure you're monitoring the kind of numbers what's hap
Q
So, we have mentioned that we'll be launching this mechanical BS6 for 3-wheelers. So how would the cost come down with that compared to the current engine that we have?
Dalpat Jain
So, the G-435 our older version which is now launched with BS6 compliant norms and that has been launched in the market. The price difference is almost 15% between the electric version and the mechanical version and in terms of margins it's almost 300 basis points higher for the company. Ok so our customer accepting it like say will it is volume for this product increase going there? Yes, the initial response has been good. So G-435 the clients who have taken out of the four or five major OEMs we have, couple of OEMs started with G-435 and they have in market share growth on a relative basis o
Q
Thank you all for attending and thank you for the insightful questions. As always, management team is available If you have any questions, you can reach out over the next several days. Thank you again for your time and attention. Have a great day. 16 | Greaves Cotton Limited (www.greavescotton.com) For further information, please contact Jaylaxmi Kumar Sr. General Manager- Marketing & Corporate Communications Greaves Cotton Anvita Raghuram / Bhushan Khandelwal Churchgate Partners +91 22 4171 1700 investorservices@greavescotton.com +91 22 6169 5988 greavescotton@churchgatepartners.com Note: Thi
Management
Speaking time
Dalpat Jain
23
Sanjay Behl
15
Moderator
13
Ashutosh Tiwari
11
Nagesh Basavanhalli
6
Dhananjay Mishra
6
Rohit Bahirwani
4
Aniket Mhatre
4
Jyoti Singh
4
Gaurav Gupta
3
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Opening remarks
Nagesh Basavanhalli
Thank you, good afternoon, everybody. Thank you for taking the time. Good evening and welcome to the Q3 FY23 conference call. At the outset, as the industry and we as a company are transitioning from our metal-based engineering company to electric electronics, mechatronics type of a company. We are glad to announce that today we have signed a binding term sheet for the acquisition of Excel control Linkage Private Limited. One of the key players in the areas of mechanical and electronic motion control systems. The highlight of this acquisition is that it's a very profitable business. It offers complementary product portfolio with several different customer and industry segments. It fits in with the overall Greaves strategy of transitioning to the mechatronic and electronic capabilities. It’s also helps us with our export and other opportunities for the future. While we get into the more details in the Q&A on this, we also would like to talk about other things that have happened in Q3 FY
Dalpat Jain
Thank you Nagesh. Good afternoon, everyone. I'm sure you would have got the financial results for Q3 FY23. Just few key highlights. If you look at the consolidated revenue of the group, we reported total revenue of Rs. 514 crores, which is 6% higher than the same quarter of previous year but lower than the sequential the Q2 FY23 and main reason being like we had spoken about it in the previous quarter in the electric mobility, particularly for 2-Wheelers. With the new guidelines on AIS 156 for the battery. The products were made according to the new guidelines and by the time the production restarted we had to recalibrate or strategically halt the production during the quarter so that impact impacted the primary revenue. Which will be made-up as we go in the subsequent quarters. So, if you look at the breakup of consolidated revenue of Rs. 514 crores, Rs. 365 crores came from standalone business and Rs. 142 crores were the consolidated revenue of Electric Mobility. The good news is as
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