Samvardhana Motherson International Ltd Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Gunjan Prithyani - BofA Securities - Analyst : Just two questions. Firstly, on the acquired assets, the revenue seems pretty much in line with last quarter, but there's clearly been deterioration in the profitability. So is there something that which was one-off in this quarter, anything to call out there?

Question: Gunjan Prithyani - BofA Securities - Analyst : This, I guess, would be applicable to the entire business itself where all the costs have been taken forward, and you will see some of these costs easing through in the second half, which would mean margin improvement in second half. This is more applicable from a margin improvement perspective?

Question: Gunjan Prithyani - BofA Securities - Analyst : Okay. Got it. My second question is on the leverage. I mean you did speak about the working capital. But if I look at in the span of six months, actually, despite raising of fairly sizable equity money, the debt has remained pretty stable. So how should we think about working capital reversal? And also, if you can share a little bit on how whenever the normalization happens, the deployment or the opportunities that we've been talking about, how should we think about that? Is that something which is in the next 12 months, it can take longer? Any thoughts around that?

Question: Gunjan Prithyani - BofA Securities - Analyst : Great, that's helpful. And if you can comment on the growth opportunity. I will join back the queue.

Question: Amyn Pirani - JPMorgan - Analyst : My first question is on Europe. You had done a significant restructuring last year. And this year, we've seen some of your large customers in Europe actually shutting down plants. So my question was that was your restructuring in anticipation of what is happening at your customer end this year in Germany and Europe? Or does this mean that there is more restructuring to come based on the actions of your OEM customers?

Question: Amyn Pirani - JPMorgan - Analyst : Secondly, since you've decided to utilize the QIP proceeds for reducing debt, and then whenever the organic opportunities come up, I'm guessing you'll have to lever up again. So is it because you believe that the debt that you may have to take for the inorganic opportunities will come at a lower cost because you could have kept the cash balance also. So I'm just trying to understand from an allocation point of view, like how you're thinking about when you need to lever up and what are the interest rates going to be?

Question: Amyn Pirani - JPMorgan - Analyst : I just want to know how are you thinking about it? Obviously, analysts will never be happy.

Question: Joseph George - IIFL Securities Limited - Analyst : Just one question. When you mentioned that the second half of the year will be much relevant 2Q, is that related to the typical seasonality in the business where we see a stronger second half compared to Q2 because of obviously summer holidays, et cetera. Or are you really seeing an improvement in the underlying business, excluding the seasonality impact? And if so, what are the factors?

Question: Suhrid Deorah - Paladin Capital Management LLP - Analyst : I just had a broad industry question. As an outsider, it seems to me that the Chinese auto manufacturers are becoming more aggressive and more relevant not only in their own country, but in other countries. Could you give me a sense for how you guys think about their presence and how the company is positioned to take advantage in terms of working with them.

Question: Gunjan Prithyani - BofA Securities - Analyst : I just wanted a little bit more color on the consumer electronics business. You mentioned that the first batch of production happened in November and you'll get into mass production. So anything that you can share now in terms of the revenue scale up of the business.

Question: Gunjan Prithyani - BofA Securities - Analyst : And if I were to take from the INR3,000 crore run rate that you put for the emerging businesses, and this will add in, is there a number that you can sort of talk about for the exit of emerging business revenues because this is -- there are many things which are going on here on the aerospace, on consumer electronics on the medical side as well. So anything that we should keep in mind as an exit revenue run rate that is possible in this segment? I mean, I'm talking about the entire emerging business piece.

Question: Avish Bhansali - Chanakya Capital Services Pvt. Ltd. - Analyst : I just wanted to know that if you see on the segment side of the modules and polymers, the margins have declined like by 130 basis points. So any color on that would be very helpful.

Question: Joseph George - IIFL Securities Limited - Analyst : I had a follow-up question on the consumer electronics business. So if I recall, right, from, I think, either 1Q or the last fourth quarter con call, there were two pieces to the consumer electronics piece. One was the assembly business and second was component manufacturing in the joint venture with BIEL. If it's possible, can you give an update on the two of them separately? And secondly, the large plant that you mentioned will come up in 1.5 years, is it assembly or the component manufacturing? Just some clarification there.

Question: Joseph George - IIFL Securities Limited - Analyst : And that's the one coming up in 1.5 years?

Question: Raghunandhan NL - Nuvama Wealth & Investment Limited - Analyst : One question, the profit share from associates has seen a large jump both on a YoY and QoQ basis. Any specific entities which have done well? Anything you can call out?

Question: Raghunandhan NL - Nuvama Wealth & Investment Limited - Analyst : On the order book side, being a powertrain neutral company, we have strong exposure to all powertrain vehicles, how do you classify the focus on hybrids? What would be the share of hybrids in our order book and current revenues?

Question: Raghunandhan NL - Nuvama Wealth & Investment Limited - Analyst : And also fair to assume that content per vehicle is generally higher in hybrids compared to ICE?