Samvardhana Motherson International Ltd Q3 2025 Earnings Call Transcript

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

Question: Aditya Jhawar - Investec Bank plc - Analyst : Congratulations on good numbers -- resilient numbers in a tough environment. My first question is on our emerging business. It would be great if you can give a breakup of revenue of the emerging business as we had given in Q1 presentation.

Question: Aditya Jhawar - Investec Bank plc - Analyst : Okay. And Kunal, on the consumer business, how should we expect a ramp-up over the next one to two years? Any broad numbers you can share with us?

Question: Aditya Jhawar - Investec Bank plc - Analyst : That's good to know. And any update on the JV investment. So our JV partner was supposed to infuse equity with 10% stake and scaling up to 49%. Any update on that, Kunal?

Question: Aditya Jhawar - Investec Bank plc - Analyst : Perfect. Perfect. My final question is on the wiring harness business. Pretty impressive margin expansion despite weak revenue print. So if you can help us understand that, what drove this expansion? And should we expect this margin as more of sustainable going ahead?

Question: Aditya Jhawar - Investec Bank plc - Analyst : Okay. Sorry, just to summarize, I mean, you mentioned that there was a favorable product mix as well as geographic mix along with cost savings. Is that right, Pankaj?

Question: Kapil Singh - Nomura Securities Co. - Analyst : Congratulations for a very resilient performance. My question is on emerging businesses. We see -- we started this consumer electronics plant, but emerging business revenue has seen a bit of a dip in December quarter. Also, the margins are holding pretty steady. Usually, when we start the new plants, sometimes there is an impact coming on account of that also. So if you could help us understand seasonality of revenues and also if there could be some impact on margins or to start off with itself, we are making good margins in the Consumer Electronics division. And by when do you expect to hit optimal performance in that division?

Question: Kapil Singh - Nomura Securities Co. - Analyst : I also wanted some color on Consumer Electronics division. How much time does it take before it hits optimal profitability profile for the first plant?

Question: Kapil Singh - Nomura Securities Co. - Analyst : Sure, sir. And one question I had on your interest cost, if you could give some color here. It's been still on -- a bit on the higher side. Are there any onetime elements here? And how do you think about on a normalized run rate at current level of debt?

Question: Gunjan Prithyani - BofA Securities - Analyst : Just following up on the emerging businesses. Could you also give some color on the aerospace piece because there was a pretty healthy order book that you all had flagged earlier on that. And you also flagged in this presentation about the becoming a Tier 1 supplier for the commercial REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 14, 2025 / 12:00PM, SAMD.NS - Q3 2025 Samvardhana Motherson International Ltd Earnings Call aircraft. So if you can give some color on the -- where the revenue for this business stack up, how should we think about the growth on the aerospace side?

Question: Gunjan Prithyani - BofA Securities - Analyst : Sure. I'm just trying to get the revenue sort of some color because I think this is a pretty small piece, if I look at FY24, right? It was somewhere around, I think, INR300 crore, INR350 crore. I'm just trying to get some sense with the acquisition and this execution, how big can this be? Can this be like 3 times, 4 times of where the FY24 revenues were?

Question: Gunjan Prithyani - BofA Securities - Analyst : Okay. Got it. And my second question --

Question: Gunjan Prithyani - BofA Securities - Analyst : Okay. Got it. The second question I had was on the Japan piece. Congratulations again. It looked like a pretty good acquisition. If you can share two things. One, when do we expect the payout and consolidation of this business, on the time lines? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 14, 2025 / 12:00PM, SAMD.NS - Q3 2025 Samvardhana Motherson International Ltd Earnings Call And secondly, where would be Japan -- after this acquisition concludes, where would Japan stack up in terms of percentage contribution to our revenues? Because I think that's been a white space for us. If you can share how big Japan exposure will become with this acquisition?

Question: Gunjan Prithyani - BofA Securities - Analyst : Okay. Got it. This is pretty useful. Just the last question from my side on the SAS, the integrated assembly segment, the margin, of course, there has improved a lot, but you also talk about how you're able to find avenues for growth from other segments as well. If you can sort of talk about how that business is growing? Is it more to do with the in-sourcing that we had spoken about when the acquisition was done? Or is it some other cross-selling opportunities that you're seeing? So some color on that, please?

Question: Amyn Pirani - JPMorgan Chase & Co - Analyst : My first question is on the announcement that you've made for becoming a Tier 1 supplier for commercial aircrafts. Can you specify what components or parts you'll be making for this?

Question: Amyn Pirani - JPMorgan Chase & Co - Analyst : No, that's actually this Tier 1 with this company is actually quite a big thing. So yes, we'll wait for more details on whenever you can share. Secondly --

Question: Amyn Pirani - JPMorgan Chase & Co - Analyst : Look forward to it. On the consumer electronics piece, just a clarification. So you've already started ramping up one plant. I see in your presentation two more plants coming up next year. So is this for the same product line and the same partner? Or are we something else? If you can just help us understand on that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 14, 2025 / 12:00PM, SAMD.NS - Q3 2025 Samvardhana Motherson International Ltd Earnings Call

Question: Amyn Pirani - JPMorgan Chase & Co - Analyst : And just lastly, on the Atsumitec acquisition, which again seems to be a decently profitable business with good revenues. Historically, you've been almost exclusively powertrain agnostic. I think you started doing acquisitions and with this one, where you are getting into things, which are related to more engine kind of components. So should we assume that going forward, you are relatively more open to doing this? Is there a slight change in thought process, given there is so much uncertainty regarding ICE EV? How should we think about this?

Question: Jinesh Gandhi - AMBIT Capital Private Limited - Analyst : A couple of questions from my side. One is when we talked about consumer electronic CapEx of close to INR2,000 crore, it was for all the three phases put together, right?

Question: Jinesh Gandhi - AMBIT Capital Private Limited - Analyst : Got it. And any sense on how much we would have invested in the first phase?

Question: Jinesh Gandhi - AMBIT Capital Private Limited - Analyst : Got it. Okay. And second, with respect to -- you have said the revenues from acquisitions post third quarter FY24. Any sense on what will be the EBITDA contribution from those acquisitions?

Question: Raghunandhan N. L - Nuvama Wealth Management Limited - Analyst : Congratulations, sir, for strong results. Sir, firstly, you highlighted about container prices, which has come down by 15% between Q3 to Jan. This certainly indicates positive on working capital. But freight cost is generally 2% of our sales. Would this also be benefit be partly retained or fully passed on to the customer?

Question: Raghunandhan N. L - Nuvama Wealth Management Limited - Analyst : Sir, stand-alone business profitability is lower. Would this be partly because of front-ending of certain costs for upcoming capacities? Any one-off impact that you can highlight?

Question: Raghunandhan N. L - Nuvama Wealth Management Limited - Analyst : So we would not be doing the new capacities building for increase in supplies to Motherson Wiring because they have a lot of CapEx capacity additions happening over the next three quarters?

Question: Raghunandhan N. L - Nuvama Wealth Management Limited - Analyst : Yes. So at our stand-alone, would the capacity needs to be increased to supply to Motherson Wiring business?

Question: Raghunandhan N. L - Nuvama Wealth Management Limited - Analyst : Understood, sir. One clarification. On consumer electronics, you alluded to that there is an approval for the JV partner to take an equity stake. What would be the range of stake, sir? Would it be 40% to 49%, which was announced earlier?

Question: Raghunandhan N. L - Nuvama Wealth Management Limited - Analyst : Understood, sir. On the CapEx guidance, which was reduced INR500 crore and this reduction is in global businesses, to which segments would it relate to? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 14, 2025 / 12:00PM, SAMD.NS - Q3 2025 Samvardhana Motherson International Ltd Earnings Call

Question: Raghunandhan N. L - Nuvama Wealth Management Limited - Analyst : And region-wise, it would mainly be in Europe?

Question: Lakshmi Naryana - Tunga Investments - Analyst : Just if I look at your wiring harness business, how much -- what has been the India growth? Because I think last year, around 36% of our wiring harness business comes from India. So I just want to understand how that business -- what is the composition of the business in the last nine months, in India business? And how it has actually grown?

Question: Lakshmi Naryana - Tunga Investments - Analyst : No, I'm talking about the revenue growth, last nine months in your wiring harness business, what is the India part of the business growth?

Question: Lakshmi Naryana - Tunga Investments - Analyst : Okay. There's a JV with Kyungshin, right? So that is part of this entity, correct?

Question: Lakshmi Naryana - Tunga Investments - Analyst : Got it. Got it. And what -- there has been increased EBITDA margins in the wiring harness business. What is the margin band you like to operate this business at?

Question: Lakshmi Naryana - Tunga Investments - Analyst : And sir, this particular wiring harness business, do you also have anything which is made in India and exported outside? And how much is that?

Question: Lakshmi Naryana - Tunga Investments - Analyst : Got it. And also in your annual report, you had mentioned that there is a movement towards high-voltage wiring harness in the -- especially in East. Just want to understand how that has actually picked up in the last nine months sales either in terms of sales or in terms of order book? Is there any -- is it -- I mean you are getting a mix of high-voltage wiring harness as well as regular work. Can you just give some -- throw some light on that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 14, 2025 / 12:00PM, SAMD.NS - Q3 2025 Samvardhana Motherson International Ltd Earnings Call

Question: Lakshmi Naryana - Tunga Investments - Analyst : And what is the revenue that entity makes, the Kyungshin joint venture? That's included as part of this revenue, which you actually put in your presentation, right?

Question: Lakshmi Naryana - Tunga Investments - Analyst : No, the current joint venture with Kyungshin, which you have for Hyundai, that is part of this --

Question: Lakshmi Naryana - Tunga Investments - Analyst : No, no, my question is that is part of the -- I mean, the wiring harness business, which you report in this entity, that includes the revenues from that joint venture also, correct?

Question: Lakshmi Naryana - Tunga Investments - Analyst : And what is that revenue? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 14, 2025 / 12:00PM, SAMD.NS - Q3 2025 Samvardhana Motherson International Ltd Earnings Call

Question: Kapil Singh - Nomura Securities Co. - Analyst : Just one question I had on the Vision Systems business. We mentioned some effect of unfavorable platform and geographic mix. Could you elaborate a bit on this? And are you seeing we are at the peak of this effect or this could increase a bit in 2025?

Question: Kapil Singh - Nomura Securities Co. - Analyst : And can you talk a little bit about increased traction in China as well in this division? What really is happening over there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 14, 2025 / 12:00PM, SAMD.NS - Q3 2025 Samvardhana Motherson International Ltd Earnings Call

Question: Kapil Singh - Nomura Securities Co. - Analyst : And when you say adverse geographic mix, you -- basically, what I'm trying to understand, is it that China mix would be a little bit adverse on profitability compared to the Europe and US markets?

Question: Rishi Vora - Kotak Securities (Institutional Equities) - Analyst : Just one clarification on the results. In our consolidated numbers, other operating revenue has seen a sharp jump. Can you just give us some color on what has resulted in such a sharp jump? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 14, 2025 / 12:00PM, SAMD.NS - Q3 2025 Samvardhana Motherson International Ltd Earnings Call

Question: Rishi Vora - Kotak Securities (Institutional Equities) - Analyst : It is a part of other operating revenues. Is it --

Question: Rishi Vora - Kotak Securities (Institutional Equities) - Analyst : Because sequentially, there was a jump of INR250 crore. So just wanted to understand, is there something which you could highlight --

Question: Rishi Vora - Kotak Securities (Institutional Equities) - Analyst : No.