Thanks, [Allarid?] .

Good morning and thanks to everyone for joining in to Automotive Axles 1Q FY '27 earnings conference call. From the management side, we have with us Mr.

Nagaraja, who is President and the Whole-time Director of Automotive Axles Limited; Mr. Raman K, interim CFO; and Mr.

Krishna Kumar, Whole-time Director, Meritor HVS India. Now I'll ask Mr.

Nagaraja for an opening remark, post which we'll open for Q&A. Over to you, sir.

Good,

thanks, Sailesh. Good morning, everyone.

Thanks for joining us for this FY '27 quarter one post-results call. As you're aware, the market was relatively moderate, but even with that, we had a really good results.

If I can recall, this is probably one of the highest EBITDA percentage we ever achieved. What we will do is Raman will run you through the financials and then we will open up for question and answers.

Over to you, Raman.

Thank you, [NG?] .

Good morning, everyone. Thanks for joining in for the earnings call today.

I'm happy to present the following set of numbers. For the quarter for the Q1 ended June 26, our revenue from operations stood at 5,168 million and we had our other income, which includes treasury and non-treasury income, which is about 103 million.

This was also, like there was a lot of market recovery that helped us, have a good other income in the quarter. Overall, our cost of raw materials, like overall our metal cost, was about 65% for the quarter.

This is kind of helped by some one-off that we had to a small extent, and then also some favorable mix from the products that we have sold in the quarter. Then, our employee benefit expenses came down when compared to sequential quarter, mainly for couple of reasons.

In the last quarter, we had deployed a lot of workforce because the volume was quite significant and and then, we had pulled back. The other thing that we had in the last quarter was also when we had the long-term settlement, we had, taken some impact in Q4 as well, which is which is now moderated in in the current Q1.

Our other expenses remained fairly, in line with the revenue. We our other expenses stood at 813 million.

Overall, the EBITDA stood at 702 million, which is at about 13.6%. In the last quarter, we reported 12.4% EBITDA.

At the same time, last year, we had reported 11.7% EBITDA, as Nagaraja mentioned, this is one of the highest EBITDA that we have reported. Moving down, I think, we had the EBIT percentage also stood at about close to 12%, which is again close to a 1% improvement quarter-over-quarter and close to 2% improvement year-over-year.

See, broadly to note is there is some bit of help because of the mix that, helped us also, in this quarter. The momentum is is that, we'll try to hold on to this.

Especially in the other expenses, some bit of details are like, we had some cost headwinds, especially with respect to the post-war during the war, the LPG and we had some increases in the tooling consumables and so all that, we have been absorbing the cost. We are in the process of negotiation and all that.

At this point, this takes into consideration the cost increases that has happened in this quarter. Moving on, the profit for the year stood at 455 million.

Obviously, net of the OCI, it is 452 million at about 8.7%. Again, this is and with the EPS of about ₹30.

I think in in the Q1 in the last four years, I think this is the highest quarter EPS that we have reported. That's from me.

I'm happy to take questions after Krishna's view on the market. Over to you, Krishna.

Thanks, Raman. Good morning, all.

I would probably bring our attention to how we ended the last FY, especially the Q4, and then how we were looking at the overall FY '27. Most of this was the fact that FY '26 was at the peak going back to the FY '19 levels, and then usually in the Q1, we see a dip.

Even though we did see a dip almost like a 30%, but that quarter Q1 ended up to be one of the highest in the past several years at almost 110,000 vehicles in M&HCV segment. Just yesterday, the MPC was giving the further outlook for rest of the year and quarters, but also there was a very specific mention on how the manufacturing industry performed in Q1, which also ended up in a very high GDP growth rate of around 7%, outperforming the earlier forecast.

Q1 as such, the market performed very well. There were a couple of tailwinds.

The momentum was carried forwarded and the OEMs did a very good job in maintaining the production and the sales in both retail and dealer. Overall, it was a product mix as well as the new products that we launched, all that helped us keep that momentum from Q4 of last year.

As a result, as Raman explained, our financial performance also showed up in a very similar way. With that, probably, Sailesh, we can go for questions.

Thank you. We will now begin with the question and answer session.

Anyone who wishes to ask a question may press * and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press * and 2.

Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.

The first question comes from the line of Sukrit Patel with ISight Fintrade. Please go ahead.

Good morning to the team. I have two questions.

My first question to Mr. Nagaraja is, beyond the regular outlook, what are the top two to three execution priorities you are focusing on in the next few quarters?

Alongside that, what do you see as the biggest risk in demand shifts, regulatory changes, or competitive pressures, and how are you preparing to manage them while strengthening Automotive Axles' position in the driveline and axle space? That's my first question.

I'll ask my second question after this. Thank you.

Okay.

Thank you, Mr. Patel.

I'll take the first part of the first question, and then probably Krishna can answer the second part. Like we mentioned, our first priorities is to ensure that we are ready with the capacity investment, what we have been doing to recollect that, we are implementing a phase one and phase 1A of capex, and nearly 40% of those investment already done, and we have already started some level of production in that.

With this, we are expecting Q4 to be again a stronger demand might be coming there. We are preparing for ourselves.

At the same time, like what Raman mentioned, one of the other area we are looking at it, how do we continuously improve our automation, bringing in more of automated lines, again, focusing on both safety, quality, as well as improve our productivity so that we can continuously not only improve our top line, but at the same time, add to our already stronger bottom line. Krishna, can you take up second part of the question, please?

Sure. Thanks, Nagaraja.

Specifically, the regulations and some of the trends that we have been very closely monitoring, if we look back probably 10 years ago, it was all about the emission norms in BS-III, BS-IV, and then there was also this axle load rating increased and some of the fuel economy norms. We are behind that.

All our products today are protected and performing well for those changes. Then in the recent years, last four years, the BS-VI change, and then the OBD-1, OBD-2 that followed with that.

We do see a minimum impact on our product lines because of those recent changes. Going forward, in the next four years up to 2030, we are anticipating AEBS norms and type two endurance breaking and the BS-VII as well.

These three may not have a significant impact on our product lines, but what we are anticipating in addition is the more stringent pass-by noise norms and HFEE phase 1B. Both of these what they mean is our products have to be more noise sensitive or should be having noise levels less than the current levels, what is in the industry.

Other trend that we are seeing in the industry is the increasing horsepower. There was a time when 60% to 80% of the market was within 120 to 180 horsepower.

That is significantly shifted over the several years and it will continue to do so. We will be in the range of 300-plus horsepower in most of the heavy-duty applications.

For that, our current product strategy and the products that we have launched recently and the ones in the pipeline are well matched. With that, I think, to summarize the regulations, we don't see a big impact on our product lines in the next four, five years.

Considering the market trend, yes, our products are getting bigger. There is a clear trend of higher hp and also shift towards the 4x2 tractor trailers for which we already have a few products in the pipeline and in the market as well.

Thank you.

My second question, again Mr. Krishna, yourself is, just want to understand a forward guidance from a partnership point of view.

How are you aligning Meritor's HVS Indian collaboration with Automotive Axles to drive long-term growth? What risks do you see in global supply chains, technology adoption, or industry dynamics, and how are you preparing to mitigate them?

Just want to understand your guidance on this. Thank you.

Sure. Thank you so much.

Let's talk about the next 5 to 10 years horizon for the CV industry, mainly in M&HCV. There are a couple of things.

Once, as I said, the regulation, the product mix, which is typical for any industry, and that's Indian industry is also following. The advantage for us is we already have products in the Western world, which have gone through these changes.

It's about a matter of bringing them to India to specific applications because our OEMs still operate in a very different powertrain segment. When that happens, it's bringing the products here, the technology is available, the timing is important.

Second one is, which is more on how we are working as two companies working together to serve the market. How is the demand shaping up in the domestic market, and what kind of changes in the product will impact the capacity and the investment what AAL is planning to do?

This is not new for us. This is something we've been doing for several years since the formation of both the companies, and we're continuing to do so.

One other aspect which you also touched upon is we're also looking at as a overall global supply chain for Cummins Drivetrain Systems, how India can play a role. This is again not new, but with the new investments coming in, we have been more deliberate on what actually is our strength and where India can play a major role in contributing to the rest of the Meritor or Cummins Drivetrain Systems.

Both of them together, which is more of a commercial vehicle and the export scenario, we are also looking at the other industries, like defense, for example. Defense is a very totally different ballgame.

It requires a lot of patience. The gestation period for the products is much longer.

Since they are all tender-based, they require a totally different set of mindset. Even though there may be some overlap in the products, but we also need certain unique features and I would say, demanding applications that defense poses.

We need a differentiation in the product line. Then the last piece is the aftermarket, where there are things that we are doing within the MHVSL, where we are selling through our distribution, the captive Meritor products, and also this is more for MHVSL, we are also increasing our All-Mix product range.

That also will grow with the market. One watch here is as we get into new products, the end market and the application demands more reliable products.

That means that will have some way at, starting from maybe five years from now, we'll see because of the increased reliability, the parts that used to get replenished probably within like one year or 18 months will probably extend to three years, six years. This is bound to happen with the technology progression that we are seeing.

Thank you,

and best wishes.

Thank you so much.

Thank you.

A reminder to all participants, you may press * and 1 to ask a question. The next question comes from the line of Milan Jain with Green Portfolio.

Please go ahead.

Hi, thank you for the opportunity, sir. My question is around the capex line of the ₹120 crore program.

I'm sorry to interrupt, Milan. You're not quite audible.

Could you please use your phone on the handset mode in case if you're on hands-free?

Hello, am I audible now?

Yes, a little bit.

Hello. Yeah.

My question was around the capex line of the ₹120 crore program. My question is that roughly about how much is the genuine growth capacity versus the equipment replacement?

Because I am asking from the guidance of the MHCV volumes broadly being flat about 5 lakh till FY '20 FY '30, and the shift of 8x2 to 4x2 tipper shift is pretty low in. I want to understand what's the break-up of that capex program.

It is a little bit I know, challenging to split it in that particular way. The way we are doing is obviously when we are putting up a new capex, it is to either to upgrade the existing line or equipment or to completely replace that with a fully automated equipment.

The bottom line is we are putting up enough capacity to see the next two years to three years whatever the market growth is going to happen. Like Krishna mentioned, and also keep us ready so that the peak volumes which comes in a particular month or a quarter, and also the opportunity available for the potential exports, we will be having there.

Roughly, again, the capacity depends on the product mix. Roughly, I would say that we are looking at anywhere between 25% to 30% capacity improvement.

All right, sir.

Also, my second question was around the next capex phase that hinges partly on the export outlook, and also the Bharat Forge that has acquired the American Axles' Indian business. I want to understand that how are exports and OEM opportunities are allocated between American Axles and Automotive Axles?

Again, we did mention during our last couple of investor calls, American Axles and Automotive Axles, we are competitors. We don't have much information about what American Axle is doing, but we are focusing on our existing customers and trying to increase our share of business and also acquire new customers and export is mainly for the other CDBS global entities.

That way, our focus is on what we already have and how we can improve upon that. We cannot comment on any of our competitors' strategy or their plans.

I understand, sir. Thank you.

That's all from my side. I wish you all the very best.

Thank you.

The next question comes from the line of Saket Kapoor with Kapoor Company. Please go ahead.

Namaskar, sir. Hope I'm clearly audible to you.

Hello. Hello?

Yes, please.

Yeah. Namaskar, sir.

Thank you firstly for the opportunity. Sir, I joined a bit late.

If you could have explained in the opening remarks also, there is a margin expansion on a Q-on-Q basis. Is it a result of any price hike that we have received that has been factored into or what explains this margin expansion?

Going ahead for the current financial year, what should be the steady state of the PBT margin or EBITDA margin that we envisage?

Raman, you want to take that?

I'll take that. See, our top line kind of varies along with the market.

If you see in the last quarter, I think we had reported about ₹660 ₹669 crores of revenue. This time, obviously, the market was at the peak.

This time, our revenue stands at around ₹527 crores. When you ask about on a percentage terms, that is the range, somewhere between 7.5% to 8.5% is the margin range that that you can at least as a overall band that you can take.

We'll be operating at that level. I was mentioning the PAT, not the EBITDA.

I think this is something that we have as a target, and we'll be working in this range. Okay.

Sir, even on the 2030 roadmap also, this is what the margin range will be, or we will improve upon with the product introduction also and our capacity also moving up? Second point is, sir, I think so for the current year, there will be an additional capacity that will come into play.

How will this current year shape up in terms of the volume understanding, if you could throw some light? Okay.

See,

I think your previous question was about the next few quarters, right? That's where I gave the broad range of for the quarters.

When you see at 2030, obviously, again, the market is expected to move up north, as well as we are also increasing our capacity. That's going to bring in some economies and the scale benefits.

Obviously, we will be moving up the ladder in terms of the margin, keeping 2030 aspirations in mind. I believe that that answers that part of the question.

Second thing, on the capacity expansions, see, overall, when you see our return on assets has always been pretty strong. I think we will be continuing to focus on that, maintaining the return on capital employed and trying to improve that upon.

I hope that answered your

Sir, I am trying to get some more sense of how are the incremental volumes likely to play in the ensuing year. Also with our new product introduction, I think so, and also with the incremental capacity, how are things shaping up for Automotive Axle for the year '26-'27?

If you could just give some more ballpark understanding in terms of some quantitative number, that would suffice.

I think we we try to avoid giving a, kind of a future guidance. Broadly, as Raman mentioned, as we bring in a capacity, there is a certain business if you are not able to address it, either because of a capacity constraint or otherwise, those are all the potential addressable business opportunity that we will be looking into.

At the same time, like Raman mentioned, if the market volumes, like a previous year, if it goes slightly higher, or, we'll be able to do a much better conversion at a much better margin compared to, the existing one. The bottom line is capacity we are putting just to make sure that we are ready when the opportunity comes.

Otherwise, with the in the in this industry, if you don't put the capacity, you cannot even go after any potential new opportunities. We continuously, like Krishna mentioned, looking at adjacencies, looking at the defense segment and all other areas, and also increasing share share of business with existing customers.

The prerequisite is, we have the required capacity, not just at internal capacity, but also through the supply chain. Okay.

Sir, the small point which I am trying to make understand, given the current business environment, what are the likelihoods of our company performing in comparison to the previous financial year in terms of volume growth? Secondly, sir, I think so with some notification from the state government bus department in terms of some floor height and all were pending when you addressed your investors in the last call.

Any further clarification on the same and the introduction of those axles into the buses? What's the road map?

If you could just articulate these two points.

Krishna, can you take that, please? Yeah.

I would probably answer that much more broadly. See, we keep talking about the product mix impact, and product mix is something that is pure end-market demand.

For example, there are seasonal demands, for example, the buses, school buses, specifically. They all get into the order boards just before the school starts, the replenishment.

Today, what we are broadly seeing this year and maybe most part of next year, the demand is through the replacement cycle for the overall industry. The vehicles that sold, let's say, 2017-'18, and then there was a glitch in between because of the COVID, they are now getting into this eight years, seven, eight years, nine years service period from the first owner.

That is going to be a big shift in the volume that we are seeing. When that happens, in 2017-'18, we did not have the heavy tonnage GVW vehicles.

Today the end customer has an option to upgrade to probably, let's say, instead of two 6x2s, he can go straightaway to a 10x2 or a 4x2 tractor trailer. This is where we are focusing right now.

We want to ensure our capacity and the products available for the demand, they are balanced so that we hit the numbers with the right product mix. The second is, which is a segmental shift, which is what we were talking about in the earlier investor calls is about the bus axle.

As I mentioned last time, the floor height is probably now every OEM has a different way of addressing that. Which is good news because most of the cases there is no need for a completely different product.

It's within the existing product portfolio, whether it is with us or not, OEMs are able to manage it. Our plan for the product launch in the bus, that is still in the pipeline.

The validation is going through. I mentioned about the lower noise level requirements.

That is where we are focusing. We don't want to do another iteration knowing that there is a pass-by noise regulation that is coming in.

We want to ensure the product that we launch has everything covered in terms of regulation and also market need. I hope that answers very broadly what you are trying to ask.

Sir,

just to conclude here, the reason which we were wary about is now behind, and now the product introduction will happen as per the plan. That understanding is correct

because

there was some ambiguity earlier, sir.

That is true. We took time to understand the regulation.

That's true. Thank you.

Okay.

Lastly, sir, on the volume increase, if you could just give us some sense, how is the current market dynamics from the OEM shaping up in terms of their program schedules? Also with new product introduction from our side, what should investors look forward in terms of the volume growth?

Because turnover is a function of RM conversion. Secondly, sir, did we lost some market share from our main OEM, Ashok Leyland, for this quarter in terms of total pie, sir, if these two points, if you could just throw some more light, sir?

Okay.

Let me give a very high-level outlook. Beginning of this year, we had a projection which was 15% to 20% lower than the last year.

Now the revised forecast, which is also what the industry is speaking about, is it could be less than 5% to 10% dip compared to the last year. Just for reference, last year, the industry volume was 480,000.

If you do the math, we should be north of 450, best case, same as last year. That's how the rest of the year may span out.

Q4, as expected, is going to be another peak quarter for us, barring the headwinds that we see, the geopolitical tension and the monsoon effect. These are the two things that we are watching very closely.

However, currently, because the delayed monsoon, that is helping the industry because there is still good amount of freight movement, and the replacement is also happening. Coming to the other part of the question, share of business, product mix impact definitely has some impact, but that is not new for this year, that is always.

When there are more buses and that is exactly the reason we want to launch the bus axle, we do see a slight dip, but it's not a loss of market share of business, it's basically how the market behaves. Sir.

Thank you, sir, for answering all the parts. Only sir, then to conclude, Q2 is also in line with what exactly we have exited Q1 since you said that delayed monsoon and all have kept the demand engine on the uptick only.

This is what should be the steady state of deliverables since we are now in the month of August, if only if you could give some qualitative number of how the environment has shaped up post the exit of the first quarter. I am there, sir.

Hello? Hello.

I'm just thinking, already I answered in terms of the overall industry outlook. The best case is match last year, and the trend will be very similar: reasonable Q2, increasing demand in Q3, barring the monsoon question that I had, and then Q4 ending at a peak.

That's how we see as a qualitative overall year. Theek hai, sir.

Thank you for all this elaborate answer, and hope to connect again. Thank you to the team, sir.

All the best. Namaskar, sir.

Thank you. Okay.

Participants, please press * and 1 to ask a question. The next question comes from the line of Samarth with Janak Merchant Securities.

Please go ahead.

Hello, sir. Am I audible?

Yes, Samarth.

Sir, I have only two questions. First is our overall sales growth has been lower than the CV production in the country for quarter one.

Have we lost any market share to our leading customer? Going forward, as even American Axle enters the larger truck axle, do you see any potential loss of market share after two, three years?

Thank you.

Thank you, Samarth, for the question. The the answer largely is the product mix and how we were able to convert some of the increase in the market in the last year last quarter.

Combined to that, maybe you do see a dip, but if you really look at how we performed from the previous quarter of last year to this quarter with a 30% lower market, we were actually better than 5% as per what Raman has, already given the financials. Also, the conversion of the new business, the products that we launched, that also contributed largely to the bottom line there.

Coming to the second question there, the the company that you're referring, it's not new in the industry. They have been there in the industry for several years, and both of us are doing businesses in the same segment with somewhat similar products and customers.

For us, our strength is our product strategy and the manufacturing capabilities that we have in country. I don't see that is a threat.

It is any to competition how they would play out in the market, and which is independent in this case.

Sir, can you be more specific in terms of market share, which are the categories where we have a good market share and where we overlap more with the product profile of American Axle?

I can talk about our segment-wise presence. Our heavy presence is in the heavy-duty segment.

That's globally also our strong foothold. All the new products also that we are planning to launch in the heavy-duty, when I say heavy-duty, it's 40 ton and above.

Of course, the competition data is available in the market. You can get independent reports, but the overlap today is minimal, which means the focus for both the companies are probably different.

We are, as I mentioned, following the market trend and to be sure we have the right product when the trend changes, and that's what we have been doing for the last 30, 40 years. Okay.

Thank you, sir.

Thank you.

A reminder to all participants, you may press * and 1 to ask a question. The next question comes from the line of Kapil, an individual investor.

Please go ahead.

Sir, my question is regarding defense and mining application. What percentage of our products are used in these sectors, and do we have a planned strategy to increase those market share in defense and mining?

Thank you, Kapilji. Defense, as I mentioned, it requires a totally different mindset.

It's not a high volume, I would say, it's more application-demanding, high-intensive product. That is number one in terms of product.

Second is the way it spans out from the date we get the RFQ to the SOP, that can be anytime between 3 to 10 years in some cases. We have been very watchful.

We do want a diversified revenue, but then we don't want too much dependency on defense also because it requires, if you really want to develop something unique, it requires a lot of investment and a completely different bandwidth. Currently, our presence out of the revenue that we are generating, maybe defense goes 5% to 10% depending on how the tenders are awarded.

Some years it is lower, some years when the tenders come back-to-back, it can be higher. Coming to mining, that's something we are not really pursuing because the deep mining or the big mining equipments what we see in India, one, the volumes are very low.

Second, even though we may have the product portfolio globally, that is a totally different animal altogether. They're very different from the on-highway products.

How we are typically engaging with the customer is to understand their overall strategy, how they want to play, and then introduce or offer them our global product portfolio. We had few products in the past, but unfortunately, those OEMs could not deliver them into the market.

It's again a very niche market which, I will not say we want to stay away, it's just based on the size of opportunity and the bandwidth and the focus what we have today in the M&HCV without compromising that, that's how we are playing. Fine.

Thank you.

Participants, please press * and 1 to ask a question. The next question comes from the line of Shikha Mehta with Time and Tide Advisors.

Please go ahead.

Hello, sir. Good morning.

Am I audible?

Yes, Shikha. Yes, sir.

I just actually had a few clarifications. I joined the call a little late.

Could you help us with our export percentage for the quarter? Hello?

Shikha. Raman, you want

to answer that? See, it's our export is close to 8%

to 12%. I'm sorry to interrupt, Raman sir.

You're not audible. Please come a little closer to the microphone.

Is it better now?

Yes, sir. Please go ahead.

Yeah.

Shikha, our exports are traditionally in the range of 8% to 12%. I think that's been what we have seen in the last year.

This time we were slightly better off in terms of exports. We were at about 13% for the quarter on the overall pie.

We expect this to remain above the 8% to 12% range for the year, or this was just something that happened this quarter?

No, it was only a marginal shift. If you see, maybe average if you take even 10%, it's only close to 3% upwards.

We would be in that range, 8% to 8% to 12% will be the broad range overall in the year. Obviously, if there are opportunities that comes, maybe we may fare better in the future.

Understood. Sir, there were a few new products that we were developing, especially for bus axles.

Can you shed some light on that? I think there was earlier some change in law because of which we were a little tentative.

What is the scenario now, and how are we expecting this to move forward?

I can take that. The regulation changed on the low-floor bus, which is the reason we were reviewing back the product spec.

That is behind us. Now we do understand all the OEMs have different strategies and it doesn't matter to the design specification of the product spec what we were planning to introduce.

On the future-looking, forward-looking regulations that are coming in, especially from the pass-by noise standpoint, we are again going back to the drawing board and ensuring the product spec what we have is also going to cover the noise levels that the industry will need. This will require a little bit more design iteration to get to the right detailed gears and other things that will contribute to this.

That is work in progress, and we are pursuing this considering we want to be present in the long run, not just a short-term market share gain.

Right, sir. Other than this, do we have any other new products that are to be launched or that have been launched in this quarter?

We are launching a new tandem axle, which is already in pilot batch and it's getting into production mode as we speak. This is a 160 tandem, we are launching this with one of the large customers.

Got it. Sir, lastly, I think last quarter we had discussed that for around 30% to 50% of Ashok Leyland's requirements, we are the sole supplier.

Would that still hold true for us, and can you comment a bit on our market share with them?

Yes, that's how we want to play in the market. We would like to have all the new products that we launch, we want that to be a single source.

However, each OEM, it's not just about the Ashok Leyland, each OEM has a dual sourcing strategy, and timing is what they look for. Broadly, yes, we want to have a combination of common, also single-source status for the products that we have launched.

Sorry, what was your second question there?

About the market share, sir.

Market share, I answered that in the previous questions. It is largely the product mix impact.

The new products that we launch, the segmental shift that we see, seasonal shift that we see, depending on that, it is not a fixed number. It always changes month-over-month, quarter-over-quarter.

What we ensure is we get what has been agreed with that customer, that minimum share of business.

Understood. Broadly, we would have maintained our market share with Ashok Leyland.

That's true. That's true.

All right.

Great. Thank you.

Thank you for answering my questions.

Participants, please press * and 1 to ask a question. The next question comes from the line of Anand Darshan.

Please go ahead.

Good morning, sir. Thanks for the opportunity, and congrats on the great margin this time.

My first question is on the cost-reduction measures, sir. In this quarter, we did see a sharp rise in steel prices, and even the gas cost went up.

How did we manage to control those conversion costs, sir?

I'll take that first part, [NG?] , if you don't mind.

Yeah.

On the steel prices, see, all the commodities are always settled back-to-back with the customer. We don't have any impact.

It's a complete pass-through of all the commodities, be it steel, casting, forgings, any commodity increase will be passed through. The second part of the question on the conversion cost, yes, there were price increases that are there.

Which we have absorbed this quarter, but in parallel we are working with our customers to offset the impacts in the future. [NG?]

, you want to add anything to this? No, good.

Good. Also, like last time we told, just in time, our electrification of one of our furnace was completed, so that also kind of helped us to manage production in spite of we're running with a lower or less availability of LPG.

Right, sir.

Sir, my next question, you had mentioned export percent had improved to 13% in the current quarter. What's your mix to Meritor Group and non-Meritor, sir, and did we find any logistics issue in the export part?

I'll take that. Again, we export only to the CDBS global, centers or global plants.

We always have the, this is almost for the last two, three years, we always have one or the other, the logistic is always a challenge. Sea freights rates are changing kind of a randomly.

Sometimes it is really ad hoc. We're trying to, bring in a system where we're trying to plan very well ahead, especially for some of the imports what we do.

At the same time, in many of the cases, the export is ex works, we kind of get a support from our customers also. That's the nature of the, the freights, sea freights are always challenging, non-predictable.

Far, it was not a major hurdle for us, at this point of time.

Right. That's it.

Thanks.

A reminder to all participants, you may press * and 1 to ask a question. The next question comes from the line of Kapil, an individual investor.

Please go ahead.

Sir, kindly explain in simple terms, what is the support we are getting from Meritor? Our agreement was extended till '27, I have read.

How it was in the past, how it is present, and what could be the future? The support and the role of Meritor or the collaboration with Meritor of our company?

Okay. Yeah.

As you can see, the Meritor gives us all the new product licensing, and they also help us test those products for India-specific applications. Also, the global products cannot be applicated as is because the local or domestic truck configurations are totally different.

It requires a different kind of the endurance testing. Meritor not only brings in this expertise, both in terms of developing or updating the design to suit India application, but also do a application analysis.

Then also, as a part of the service agreement, they also work with our customers in terms of applicating these products. They also kind of help us in formulating the product strategies and then go-to strategy.

That has been already being done, and that will continue for the foreseeable future. Okay.

Thanks.

Thank you.

A reminder to all participants, please press * and 1 to ask a question. The next question comes from the line of Saket Kapoor with Kapoor Company.

Please go ahead.

Sir, only a small clarification on the part. You mentioned that we were penciling in a degrowth for the industry for the current financial year at 20%, and now we are revising it to 5%?

I missed your number on the same.

I can take that. Yes, you're right.

Beginning of the year or even before that, when we were looking at the forecast for FY '27 and knowing where FY '26 ended, we were looking at 15% to 20% lower market. Today, the revised forecast that we are having for rest of the year, that suggests it could be 5% to 10% within that range.

The best case is if the industry navigates all the geopolitical cost escalations, the monsoon plays out well for rest of the year, and then we see a comeback from September, October, and the festive season helps us, then the best forecast we have is going back to last year. Okay.

Mainly it is because of the geopolitical and the logistics issues that led to the lowering or was it the higher base and consolidation is expected from the industry for the current year? Means what factors led us to lower down first of all the estimates?

Our view is how the last year ended, and to certain extent, what has started happening in Q1 and so Q4 of last year and the Q1 of this year, the geopolitical tension. Combined both, we had a lower, but to start with, it was all how the last year ended, and we kept the same outlook considering what is going on in the other headwinds that I mentioned about.

Now, the delayed monsoon is actually helping a better sale even today. Otherwise, we would see a dip in this quarter as well.

That is holding on. Then the festive season and coming back to a strong Q4, that was always there.

I think the Q2, Q1 to some extent and Q2 is going to help us bring volumes which otherwise we would have considered lower than last year.

Thank you. Ladies and gentlemen, that was the last question for today.

I would now like to hand the conference over to the management for the closing remarks.

Thank you, Sailesh. Thanks once again for all of you to join this call and then getting the clarification that you are looking for.

Hopefully, the team has answered all your questions. Then again, just to kind of summarize, like Krishna mentioned, we are looking at the market which may be 5% to 10% lower compared to last year, or at the best case, it can be match the last year volumes.

Our share of business has been steady, while there is always a focus on looking at how we can continuously work to increase the share of business. We have both the headwinds and tailwind.

Headwind is a monsoon, we don't know how it is going to play out. Barring that, there is a potential opportunity for us to look at keeping the sales steady and stronger.

With that, we are signing off. Thanks once again for having confidence in Automotive Axles.

Look forward to the next quarter's investor call. Thank you.

Thank you, sir. Ladies and gentlemen, on behalf of 361 Capital Market Private Limited, that concludes this conference call.

Thank you for joining us, and you may now disconnect your lines.