Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Quarterly revenues increased by 29% to approximately 28,900 crores.
- EBITDA rose by 44% to 2,785 crores.
- PAT surged by 65% to 994 crores compared to the same quarter last year.
- Strong performance from both organic businesses and acquired assets.
- Diversification towards non-automotive businesses, including aerospace and consumer electronics, is gaining traction.
Negative Points
- Certain macroeconomic challenges remain, such as inflated commodity prices and increased logistic costs.
- Light vehicle production remained largely flat year-on-year, with softness in demand in developed markets like Europe.
- Increased net debt by 3,000 crores due to M&A closures and higher working capital requirements.
- Organic growth excluding acquired assets has been largely flat on a year-on-year basis.
- CapEx guidance remains high at 5,000 crores, plus or minus 10%, which could strain financial resources.
Q & A Highlights
Q: Congrats on a great result. Can you provide more details on the organic growth excluding acquired assets? Do you expect this trend to continue given the muted vehicle production growth?
A: There are quarter-on-quarter variances due to new business launches and macro factors like premiumization and SUV trends. Overall, we see growth in both organic and acquired businesses, though there may be small variations in quarters.
Q: On the Consumer Electronic Component business, where we are looking to invest about 2,600 crores, is this entirely for our JV?
A: Yes, this investment is for the JV and our consumer electronics business, including glass and electronics assembly. We expect some business to start in the second half of this year, with ramp-up continuing over the next few years.
Q: Can you elaborate on the aerospace business and its current order book?
A: The aerospace order book spans over 10 years and is firm. We are investing significantly in new facilities to support this growth, and you will see a ramp-up in the latter years.
Q: How is the slowdown in Europe and America, and the delay in EV launches impacting your business?
A: We maintain a balanced approach, supporting both ICE and EV programs. Our diversification strategy helps us grow even when there are slowdowns in specific regions or product lines.
Q: Regarding the enabling resolution for potential capital raise, is this to maintain a 1.5 net debt to EBITDA ratio?
A: The 1.5 ratio is a comfort level, not a strict target. Our financial policy remains at 2.5 times net debt to EBITDA. The resolution is to proactively manage our capital structure for future growth opportunities.
Q: Can you provide more details on the synergies from recent acquisitions?
A: It is early days for the synergies. We take our time to deeply understand and integrate acquisitions. More synergies will come as we execute our plans and understand customer requirements.
Q: What is the expected return profile for the new consumer electronics division?
A: We aim for a 40% ROC. The consumer electronics business has shorter cycles compared to automotive, and we expect faster development and asset turns, leading to quicker profitability.
Q: How do you see the non-automotive business growing in the medium term?
A: Our goal is for 25% of our business to come from non-automotive sectors. We are seeing strong growth in aerospace, defense, and medical segments, and expect significant contributions in the next five years.
Q: Is there any pending payment for the acquisitions concluded?
A: There are some minor payouts due to contractual arrangements, but nothing significant. We expect to deleverage in the coming quarters as working capital normalizes and cash flow improves.
Q: Can you comment on the impact of the current slowdown in Europe and America on your business?
A: Our diversification strategy helps us mitigate regional slowdowns. We continue to grow by focusing on premiumization, SUV trends, and increasing content per vehicle. Our presence in 44 countries also provides resilience.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
