Thank you, Atharva. Good evening, everyone.

We are pleased to invite you to the Q1 FY27 post-results conference call of Varroc Engineering. The management team will be represented by Mr.

Tarang Jain, Chairman and Managing Director; Mr. Arjun Jain, Whole-Time Director and CEO, Business Unit 1; Mr.

Dhruv Jain, Whole-Time Director and CEO, Business Unit 2; Mr. Mahendra Kumar, Group CFO; Mr.

Bikash Dugar, Head IR; and Vishal Rawal, Head Finance Controller. Without further ado, I now hand over the call to Bikash for the disclaimer.

Bikash, over to you. Yeah.

Thank you, Mihir. Thank you, Equirus, for hosting the call.

Okay. Just a small disclaimer.

Today's discussion may include statements which may constitute forward-looking statements. All statements that address expectation or projection about the future, including, but not limited to, statements about the strategy for growth, business development, market position, expenditures, and financial results are forward-looking statements.

Forward-looking statements are based on certain assumptions and expectation of future events and involve known and unknown risks, uncertainties, and other factors. The actual results, performance, or achievement could, thus, differ materially from those spoken in any such forward-looking statements.

No obligation is assumed by the company on forward-looking statements. With this, I hand over the call to our Chairman, Mr.

Tarang Jain.

Thank you, Bikash, and thank you, Mihir and team Equirus, for hosting the call. I am Tarang Jain here, and good evening to everyone.

India's economy has remained resilient in quarter 1 of FY27, April to June 2026, supported by a strong domestic consumption, improving rural demand, healthy infrastructure spending, and accommodative financing conditions. These macroeconomic tailwinds translated into one of the strongest quarters for the Indian automotive sector, with passenger vehicle sales reaching record levels and broad-based growth across two-wheelers, commercial vehicles, tractors, and exports.

Improved affordability, rising consumer confidence, robust freight activity, and accelerating EV adoption supported demand, while rural recovery particularly benefited two-wheelers and farm equipment. For the auto component industry, the positive environment led to higher production schedules, improved capacity utilization, and stronger opportunities in electronics, EV systems, lighting, and advanced vehicle technologies.

Despite the ongoing risks from commodity price volatility and global geopolitical uncertainties, the overall outlook for Financial Year 27 remains positive, with India continuing to be one of the fastest growing automotive markets globally. In quarter 1 of Financial Year 27, we saw strong growth across all the automotive segments on a year-on-year basis.

On a year-on-year basis, two-wheelers grew by 22.8%, three-wheelers grew by 39.1%, passenger vehicles grew by 16.8%, and commercial vehicles grew by 15.2%. The EV two-wheeler volume on a year-on-year basis grew by 91%.

Despite seasonality effect on a quarter-on-quarter basis, we still saw a growth on two and three-wheelers. Two-wheelers grew by 2.7%, three-wheelers grew by 3.4%, passenger vehicles degrew by 7.5%, and commercial vehicles degrew by 16.9%.

In quarter 1 of Financial Year 27, the company registered a very strong growth of 29.9%, and a consolidated revenue reported is Rs 26.3 billion. The growth was supported by both India operations, which saw a growth of 28.6%, and also overseas revenue growth.

The momentum of growth in the overseas business, which started in quarter 4 of Financial Year 26 and gathered further pace in quarter 1 of Financial Year 27, registering a 45.6% growth on a year-on-year basis. As emphasized in our last earning call, our foremost priority remains accelerating revenue growth across both India and the international markets.

Our EBITDA for the quarter was around 8.5% as compared to 9.5% during the similar period last year. Our PBT before joint venture and exceptional items for quarter 1 FY27 came in at 4.3% of revenue, an improvement of 20 basis points on a year-on-year basis.

The profitability in this quarter was adversely impacted by higher commodity prices due to war-related costs, higher tooling sales, and the business mix. Despite that, the Indian operations reported a 10.6% EBITDA margin and around a 7% PBT margin.

The revenue from supplying to electric vehicles in this quarter was around 15.8% of revenue and grew by 87% on a year-on-year basis. In the overseas electronics and lighting business, we have further won some business, notably for our lighting operations in Thailand.

Sequentially, the losses from the overseas operations as well as from overseas R&D is reducing. We hope to maintain this momentum of increasing revenue and hence the profitability here.

We continue to invest not only in technology, but also in people and strengthening our capability. Recently, we have appointed Mr.

Eric Hammond as the Chief Technology Officer for our Business Unit 1. He comes in with 25 years of global automotive technology and engineering leadership experience, with deep expertise in electrification, software-defined vehicles, connected systems, embedded software, functional safety, and cybersecurity.

He has successfully led large-scale global R&D organizations, developed next-generation mobility technologies, and partnered with leading automotive OEMs to deliver innovative and safety-critical solutions. As emphasized earlier, in India, we continue to leverage our strong customer relationships, technology capabilities, and expanding product portfolio to capitalize on opportunities emerging from electrification and the premiumization trends.

In our overseas markets, we are strengthening our presence through deep customer engagement, enhanced engineering capabilities, and focused business wins, positioning ourselves as a reliable global partner. In quarter 1 of Financial Year 27, our net new business wins with an annualized peak revenues of Rs 5,991 million.

The net debt of the company in quarter 1 of Financial Year 27 is Rs 5,268 million, which is an increase of Rs 316 million from the last quarter, mainly due to the increase in net working capital of Rs 441 million due to higher revenues. The net debt-to-equity is very comfortable at 0.28.

The average ROCE of the company is around 24% in quarter 1 of Financial Year 27. In this volatile new normal environment, we continue to strengthen our company for long-term growth and performance by taking appropriate decisions and meticulously executing them.

Our endeavor remains to improve the contribution margin, control the fixed costs, generate free cash flow, and improve on the return on capital from all the business segments in which we operate. With this, I will now ask MK, our Group CFO, to walk you through the presentation and give more insights into the financial performance.

We have uploaded the investor presentation to the stock exchanges as well as on the website. Over to you.

Thank you, Tarang. Good evening, everyone.

Let me take you through slide number 7 in the presentation, which is on the highlights for Q1. As our CMD explained, Q1 revenue was at 2,634 crores, which meant a growth of almost 30% year-over-year.

Out of this, if you if you eliminate inflation-related impact, it could be a 4% difference. Within this 30%, Indian operations registered close to 29% growth, and the overseas operations saw a growth of close to 46%.

Now, you may recollect that last quarter, in Q4, also we registered significant growth in the overseas operations, so that is continuing now also. More than the percentage, it's the direction which is important here.

Then revenue from EV models in Q1 was at 16% of total revenue, which again was a phenomenal growth of 87% year-over-year. Coming to PBT during Q1, it was at 4.3% versus 4.1% shown last year.

EBITDA came in at 8.5% compared to 9.5% last year, but this was largely impacted by the war-related impact. Basically, the war-related impact at EBITDA level was totally coming to about 0.75%.

This has two parts, actually. The genuine under-recovery impacted us to the extent of 0.5%.

The remaining 0.25% at EBITDA level or PBT level was driven more by the numerator-denominator impact. Then coming to net debt, net debt was at 527 crores compared to 495 crores.

This was largely because of the front-loading of capex, which we explained in the previous calls also. Now, regarding the order wins in terms of net new business annual peak revenue, it was close to 600 crores.

Prominent wins were relating to the four-wheeler lighting business win for our Thailand operations from a prominent customer. We also restated the e-mobility volumes in India based on the recent trends, so that also increased the overall peak revenue potential.

Another significant improvement in terms of the capital efficiency metrics is relating to ROCE, ROE, and and of course, the EPS improvement also. If you take out the exceptional items in Q1 of last year, which was basically relating to the accounting adjustment which we had to do after the exit from China JV, if you compare the ROCE, last year same time, we were at 23.6%, it went up to 24.6% now.

A significant improvement in return on equity also from 11% to 16.4% this time. In terms of EPS also, last time it was 11.5 rupees on annualized basis, which is now 20.3 on annualized basis.

That's a significant improvement compared to last time. Coming to the other points, of course, the patents filed continues to be strong at 135-plus patents.

Going to slide number 8, this is about the industry performance. As all of automotive industry continued the good run which started during the GST simplification exercise.

In Q1 also, the two-wheeler grew by almost 23%, three-wheeler by 39%, passenger vehicle by 17%, and commercial vehicle by 15%. All these are year-over-year growth numbers.

Within this, the EV two-wheeler volume registered a growth of 91% year-over-year. On sequential, quarter-on-quarter basis, two-wheeler had a marginal growth of 2.7% and three-wheeler by 3.4%.

Passenger vehicle had a degrowth of close to 7.5%. Going to the next slide, slide number 9.

Basically, EBITDA came in at 8.5% versus 9.5% last year. If you compare with the previous quarter also, it was 9.7%, now it is 8.5%.

If you really look at the reasons for this, we also had a significant tooling sale in Q1, sorry, at a lower margin, which is more like a significant one-timer. Of course, there'll be some tooling sales every quarter to a small extent, but this was a large number.

That impacted close to 0.8%. Other major reason was the war-related inflationary impact which I spoke about, so that was about 0.75%.

That was the performance during this quarter. If you really look at PAT, if you take out the exceptional items in Q1, there is almost a 70% growth year-over-year in Q1.

The next slide, we updated this information where you can see what happened in terms of geographical segmentation: India and overseas. India, if you really see, it was like 29% year-over-year growth and 10% sequential growth.

In terms of EBITDA also, year-over-year growth was 22%, and PBT was like 41%. Overseas business also, we can see continuing, improving trend from the earlier quarters.

The loss parts relates to the R&D investments, which we started largely from Q2 of last year. That's why it was significantly lower in Q1 of last year.

Here again, we see improvement compared to the previous quarter. Coming to the next slide, which is about reduction in net debt.

There was a marginal increase in net debt this quarter compared to the March end, March end number. Like how I explained, this was largely driven by the capex front-loading, which, this year is going to be a capex-heavy year, as we explained in the previous calls also.

This was needed to support the growth. Even with this increase also, the net debt-to-equity was below 0.3 at 0.28, and net debt-to-EBITDA was below 0.6.

The next slide is about the the revenue breakdown and the customer breakdown, which is more for information. Slide number 13, we again gave the the order book status.

We started with 3,509 crores at the beginning of the year. Current quarter, we added close to 600 crores.

Out of that, close to 500 crores has been taken to start of production already. All this is in terms of annual peak revenue potential, not actual numbers for this year.

In terms of mix also, if you really see, the Bajaj, non-Bajaj mix shows Bajaj mix of 58% in the annual peak revenue and two-wheeler and three-wheeler at 75%. Let me stop here.

I'll be happy to take your questions. Thank you.

hi. Thanks for the opportunity.

Congrats on a great set of numbers. First question, you had reported an order win of about 600 crores this quarter.

Can you please provide the split between the four-wheeler lighting order and the e-mobility one?

The bulk is e-mobility, which is a volume expansion on our existing running programs. I would imagine I think two-thirds is e-mobility, and then the balance is a combination of four-wheeler lighting, I would say the more significant portion of the balance is a four-wheeler lighting business win, and then I would say, different smaller business wins across product groups.

Okay.

For your overseas order book, now there have been some reports of expected delay in launches by some overseas OEMs. Do you foresee a situation wherein you would face a delay in your order book execution for your overseas business?

Yes. Just to answer this question, we've reported some wins in past quarters, and it's really across multiple customers and multiple programs.

Just to answer your question, our main message so far has been that we will be continuing to increase our revenue in our overseas locations. This will certainly still take place because we're not dependent on any one customer here.

Okay. Also, for your traction motor business, you had earlier indicated that you are in advanced discussions with an OEM ex-Bajaj.

When should we expect that order win to flow in?

We've already announced one business win, which we expect is going to begin imminently, I would imagine, in fact, in quarter 2. Then there is two further customers where, I would say, we're in fairly advanced discussion, where also I would expect SOPs to take place in this financial year.

Okay. Also, given the strong demand momentum that we're seeing across the automotive industry, and more so for the EV industry where we have a much higher content, how should we think about growth for Bajaj for the domestic business for this year, if you can put a number around it, yes, sir?

Okay. Honestly, I think it's difficult to predict a forward number, especially if we're talking about a forward number for one particular customer.

Of course, if EV penetration continues to grow at the rate at which it has been growing, I would definitely imagine that our e-mobility business would gain further significance in our overall revenue. Hence, as a natural result of that, Bajaj would also become more salient than it is today in the overall revenue.

Having said that, from an EV perspective, like we've just talked about, there is further customers also that we expect will come on board.

Okay. Also, last one on margins.

You mentioned about 50 bps of under-recovery this quarter. Now, how much of that you expect to recover from your customers going ahead, and how should we think about margins for the full year?

The efforts are already underway, we should be getting it between this quarter and next quarter, most of it.

Okay. Thank you.

That's it from my side. Thank you.

Yeah. Thank you so much, sir, for taking my question.

The first question, which you again indicated a bit already, is on the e-mobility segment. Based on the order book that you have, how sustainable do you think the growth is, because this quarter was a very strong quarter?

I would say the order book is fundamentally strong, right? We're a primary supplier to essentially the market leader when you combine two-wheeler and three-wheeler.

From that perspective, I think growth fundamentally depends also on EV penetration, which is something that we see gaining momentum rather than reducing in momentum. Further to that, like we talked about, we have incremental customer gains also, which, in my mind, coupled with the fact that the content in an EV that we have is so high, I would imagine that growth really continues to take place.

Just to add to that, see, looking at the situation globally now, due to this Iran war, we do see a very positive, maybe you can call it structurally a shift also in the consumer mindset to move towards EVs, at least in a two and three-wheeler space. Of course, the moment, you see the main volumes are today more in a scooter segment, which is 20% to 30% of market, but now we're looking at OEMs also looking at motorcycles now.

Going forward, we do expect that even the motorcycle segment will see EV penetration as we move forward. We being one of the very significant players in this EV powertrain segment, I think we stand to gain from it going forward.

Yeah. Thank you so much.

Sir, the other question would be on the electronics Romania segment, you've given a separate slide on it. Could you please share the key customer segment and, because we don't have a previous quarter or previous period revenue, how is the revenue trending there, and what are the key drivers, the electronics Romania segment?

Bikash this side, Arvind. Earlier, the our Romania unit Romania location used to support was the was the captive for lighting business, so that was clubbed under the lighting revenue.

Now since we are doing more related to EE architecture, so that's why, and the business which we have won is towards those only, so that's why we have segregated that, and the growth in that Romania business is going to grow. Because of that, we are showing how the we are showing that slide separately now.

Bikash, who would be the key customers out there,

or the

segment?

Yes. No.

Maybe I'll try to answer this one. Basically, our Romania electronics plant is focused on passenger vehicle electronics.

As Bikash mentioned, the focus is on a variety of low-voltage and high-voltage electronics, and we've already announced some order wins in past quarters, and we believe this will continue.

Sure, sir. Thank you so much.

I have a very small data query. When I look at the revenue breakdown that you have in slide 13, I believe the overseas forging, which is 3.3%, that is a part of the ICE powertrain business when we move down and you have the actual numbers?

That's right.

That's correct.

Okay. Thank you so much, sir.

That's all from my side. Thanks a lot.

Hi. You briefly discussed about this, but can you tell us the progress on the top three EV players discussion?

Okay. I would say there is a top three in two-wheeler and also the top three in three-wheeler.

Today, we are essentially engaged in terms of business relationship with each of the three. Right?

In fact, and from a e-powertrain perspective, one we already have significant business with, and when I say there is two that we're further engaged with, it is essentially two more from this list of the top three in both these segments. We've also been able to win business, not necessarily for e-powertrain, but for other product lines with another one of these top three players.

Really, I think, across the board, I think the engagement with the market leaders here has been extremely strong, and we expect that that will convert into more significant revenue, like I said, through the financial year. Okay.

No,

actually, I meant I think in the last concall, actually, we had discussed about the progress on the two-wheeler EV side for the EV powertrain products. On that, we had mentioned that we are in advanced stage with one of the top three.

Do we understand that we are now in discussion with both the top three players ex-Bajaj? Yeah.

Again, I will repeat, right? With one of them, we're in discussion for the e-powertrain.

With another one of them, we've already won business for another technology product, which we've done in Q1. Okay.

Understood. The SOP which is starting in Q2, this is with another EV player, right, am I right in understanding?

Yes.

That is

another EV player with investment from an extremely significant global OEM.

Okay. Understood.

The second question is on the overseas, actually. I think there was one project which was expected to start from H2 of this fiscal.

Are we on track for that? Second question is on the overseas again.

Given the robust business we have done so far, the progress which we have done, do we expect a break-even for the overseas earlier versus the previous guidance of Q4 exit?

Maybe just to clarify the second question. The second question, I believe that our message stays the same.

We're not changing our message from the past. Regarding the first question, in terms of the launch that you are mentioning in mid-year this year, we've already had a few new launches this year in our Romania electronics location.

I believe that's the one that you are referring to. This is also why we are seeing an increase in revenue quarter-on-quarter in our business overseas.

This will continue to increase in subsequent quarters.

Basically, it's progressing well.

Okay. Understood.

Thank you.

Hi. Our largest customer has taken over a global OEM, KTM.

Is there any potential for business over there that we've gotten, any inquiries?

Of course. Even prior to this, we did a fair amount of direct business with KTM.

Post this, I would say, more complete takeover, there is incremental opportunities that had arisen in line with the strategy that Bajaj Auto follows with KTM now. Yes, there is definitely a couple of immediate opportunities, and we hope, over time, this translates to more.

Okay. Perfect.

Could you quantify them or too early?

I'd say it's too early to quantify because KTM is a brand with a very high SKU mix, right? You go at this really step by step in terms of how you grow in there.

Understood. Perfect.

Thank you.

Hi. Sir, I hope I'm audible.

Yes.

Great. Sir, many congratulations on a very robust set of number, and I hope this trend continues sustainably.

Just two quick questions more from a forward-looking point of view. We onboard Mr.

Eric. Now how does the strategy change with him coming on board?

Are there some new avenues that we are looking to come in basically into e-axles, or would it focus more on ADAS? If you could throw some light at what sort of a market are we trying to chase and how to look at customer wins happen?

I know it's not going to happen overnight, but how do you see that from a structural point of view for the company? I think it's a very important and a very good appointment.

How does it move the needle or helps Varroc grow? That's one question.

Yeah. I would say the strategy does not necessarily change.

I feel Eric comes on board and I think really complements, with his experience, the path that we have set out for ourselves. Eric has a vast experience with e-powertrain, and this is also where, when it comes to two and three-wheeler EVs, I would say really we are e-powertrain market leader.

From that perspective, I think strengthening our position in this core segment, which, as we see, also is an extremely high-growth segment, I would say is a critical priority. Of course, as a part of the roadmap, we look to expand this capability into other market segments.

I would say Eric definitely comes with the experience to really lend to that. Whether it is in terms of addressing higher-voltage systems, whether it is in terms of addressing, let's say, really more X-in-1 kind of concepts, we believe this is where the market is moving towards.

We believe we have the core capabilities required to execute it. I think with Eric, I think we also achieve the experience of having seen and done that.

Like you, we are also very excited by the appointment. Yes.

Okay. Makes sense.

Very good. Sir, just one more part onto the order wins, right?

We see a good traction coming on. How do we look at new engagements that are taking place, right?

There are some new OEMs which have set up their shop in India, in the EV system like VinFast and everyone. You see that incrementally we can get in that supply chain also, and they are also having a very large expansion plan, we could be part of it.

Just wanted some thoughts on that.

Yes, of course. With, let's say, the customers you name, and also the customers you allude to, we're already engaged, and we would expect to see some action in those spaces.

Okay. Many congrats, sir.

Keep delivering. All the best.

Thank you.

Thank you.

Hi. Thank you for the opportunity, and sir, congrats on the big beat on the revenue side.

First question on the revenue as well, it's nearly 2x that we have delivered and we have guided mid to high teens for '27. This is the first quarter we have delivered this kind of growth, what kind of expectation we can build going forward?

No,

I think that this year seems to be pretty strong for us, and though we have grown 30% this quarter, we do believe that probably for the whole year we could be achieving about at least between a 20% to 25% growth in this financial year, looking at how things are moving at the moment. That would be our expectation, because the second half last year was fairly good, considering that, I think 20% to 25% would be the right level of growth we would be achieving this year.

Please don't take it as a guidance, but it's more like our ambition.

Okay. Understood, sir.

Sir, also like earlier participant was asking question around VinFast and other player. Can you guide us any new client that we have empanelled or any other that it is in the pipeline so that we are seeing the visibility for even FY28?

I think especially in any new customer engagement, I think we generally cannot talk about that before there is actual fructification of SOP. Having said that, right, I think it is clear there is entrants, it is clear there are people entering the market.

It is clear also that existing incumbents in the market are looking to build more vehicles also for export. Wherever those opportunities are, we will look to participate.

We've already won some new customers also in this year, but thing is that we cannot disclose the names at the moment, but we are engaged, and definitely one of the objectives is to get in new customers also, not just rely on existing customers, who are very important to us, but yes, we're expanding our customer base also in India as well as abroad.

Great, sir. Sir, going forward, we are targeting diversification on the customer and some certain percentage that we are targeting from each customer, or Bajaj will be keep continue major customer for Varroc?

We've said this before, but I would say our path is not necessarily a customer diversification strategy. I think our path forward is really a product line and competence-driven strategy.

There is clear product lines where we look to drive growth and where we look to drive focus. As those materialize, I think it really depends on how the end customers also perform in the market, which determines the customer mix for us.

The point here is that, like we've said before, that see, Bajaj Auto continues to remain a very important customer for us and will be always. Having said that, I think we are actually kind of also kind of growing with quite a few other customers.

Going forward, you will see that increased revenues coming in from many other customers also, not just from Bajaj.

Sir. Sir, just last question on the order book side.

This time, we have a major customer around 70% 72% from the EV side versus ICE was 28%. We are going to see this kind of revenue shift on the segmental side, I understand we are 95% powertrain agnostic.

We are seeing much demand from the EV side and as well as on ICE, or how it is going on?

I think there's a few different questions in there. Firstly, I would say we are not 95% powertrain agnostic.

In fact, I would say I think only around 70% powertrain agnostic, the balance comes from our ICE powertrain and e-powertrain business. Yes, I think like we said earlier also during this call, we expect the balance to move more towards EV product, really driven by the fact that EV penetration is increasing.

Right? This does not mean that ICE is declining in absolute terms, but it means that in terms of the percentage of our growth, we would expect more to come from EV.

Okay. Great.

Thank you, sir.

Hi, sir. Congrats on a good set of numbers.

My question is regarding our overseas business. Firstly, can you let us throw some light on how the order wins do we see going forward?

Secondly is on our margins, that we see that the losses have come down. By when do we expect to break even in terms of EBITDA as well as on PBT, and what do we see steady-state margins going forward?

Yes. To the first question regarding what we're projecting in the future as order wins.

I'll just say again that when it comes to the past year, I believe we have mentioned certain significant order wins, and certainly we are expecting to see this also in the future. In subsequent quarters, we believe we will be mentioning certain significant order wins, both in the electronics as well as in the lighting space overseas.

Yeah.

Yeah. As far as the margins are concerned, previously also we explained, in two-wheeler, we already make money.

We are on the positive side already, two-wheeler overseas. Only in Romania, we have been having challenges.

Earlier also, we explained that by end of this year or by Q4 in Romania, we will reach EBITDA break-even. Coming to the overall guidance, we generally go by PBT targets.

Our long-term strategy is to take it to 10% PBT in the next 3 to 4 years.

All right. Thank you.

Hi. Sir, my question was basically on the EV powertrain products.

Here, if we see the revenue has grew around 56-odd percent on a year-on-year basis, but if you see the industry volume growth has been in a range of 80% to 90-odd percent kind of a range. Sir, just breaking it into what kind of ASP decline are we seeing because of the scales increasing, and can throw some light here what is happening here in terms of volume growth and ASP growth?

I would say a couple of things here. I think one definitely, I think ASPs have declined, but I would say this is really driven by improvement in the product composition.

Honestly, I don't know the exact number of the top of my head versus the comparable period, but yeah, I would imagine maybe high single-digit kind of decline in ASPs. The second topic also that we have here is especially through the early part of the quarter due to labor challenges both in our own plants and also in our supply chain, we were definitely challenged for April and also maybe a little bit of May, but that is now really fully recovered.

I think that is also probably contributed slightly lower number over there.

Right, sir. Just a follow-up here, sir, that going ahead, we know EV volumes are expected to grow at a good 30%, 35% kind of a CAGR for next 5 years.

Here, given the volumes increasing, what kind of ASP because of product engineering or because OEMs also will be pressurizing you in terms of reducing the cost or some sort of stuff. In terms of this, what could be a sort of a trajectory here wherein I definitely think revenue growth will not align with the volumes, but some color on how this OEM contracts happen or whether in terms of the costing of the product?

You ask me, I don't think OEMs anymore are really insecure about what is the cost of their product. I think there's a fair amount of work that has gone in over the last 5 years to really bring product to a far more cost optimal level.

Now, of course, there's always scope for improvement and opportunities for improvement, and I think that will continue to happen. I wouldn't expect some very material change in terms of when I say material, I wouldn't expect double-digit changes in ASPs that will take place.

In fact, I think potentially the opportunity for us is really comes through, let's say, more integration of components into smaller boxes, and that's actually an ASP increase opportunity. I think the end answer will be a balance in between both somewhere.

To cut it short, there's a few different trends running, but I wouldn't expect significant ASP decreases taking place.

Okay. All right, sir.

Lastly, given the speed at which the electric vehicle growth is increasing right now, what would be the capex strategy here? Are we increasing the allocation here?

Some color on that.

This year will definitely see significant this this year will definitely see higher capex expenditure than what we've seen over the last 2, 3 years. A large portion of that is, yes, in terms of our e-mobility capacity expansion, and also capacity expansion to service the EV models that we're supplying to even with our engine-agnostic product.

That's the reason we front-loaded also the capex.

All right. Sir, can you quantify the capex guidance for this year and next year?

We 500 to 550 crores in that range. This includes both India and overseas also.

Sir. Thank you.

Hi. Thanks for the opportunity, and congrats on great set of numbers.

My first question is on our customer split. While we understand that Bajaj volume has grown, that the content in Bajaj has also grown for us, how should we assess our progress in other OEMs?

In the past, you had mentioned that there is a possibility of further acquisition of land to support Japanese OEM and South India-based OEM. How should we assess our progress both in ICE as well as EV powertrain products in non-Bajaj customers?

See, I think if you look at the progression of our order book, there is definitely a very large amount of outside of Bajaj Auto business wins that have taken place. Right?

Even today, we see, I think also given the fact that the market is growing, even today we see significant demand for product lines across our product categories taking place outside of Bajaj Auto as well. Having said that, I would definitely say, given the content we have in EVs and given the fact that we are a primary source at Bajaj Auto for EV, and the growth rate of EV, I would expect that the absolute revenue there also would continue to grow, and grow fairly quickly.

Where we end up as a percentage, honestly, hard to predict past a point. The expectation is that we grow whether with Bajaj Auto, whether outside of Bajaj Auto also.

That's

helpful, Arjun. If you can help us understand that say, 'x' number of products you were supplying to Japanese OEM, and there the share of business of Varroc went from A to B, some quantification and is there a necessity of setting up a manufacturing facility in southern India for supporting these.

Any quantification you can do in terms of number of products or how we have grown in few OEMs, whether Japanese or the South India or the new OEMs that we have entered, some quantification would be helpful, Arjun.

I think the simplest quantification I could probably give you right now is in terms of maybe what we've done in Q1, right, where if we look at our India business, we've grown, let's say, I think 30%, and we've seen the phenomenal growth in e-mobility. I would not say that our customer mix percentage has really changed too dramatically.

Right? I think the easiest way to put it is, we're growing fast, but we're growing fast in Bajaj Auto, but also outside of Bajaj Auto.

Sure. Fair enough.

My second question is on margin. Now, when we look at EV business, now it has come to a scale where possibly we can assume, or you can correct me, that the margin could be sustainable.

How different are EV margins versus ICE margin? Considering you have a strong line of sight with the customers, considering the pricing dynamics that are expected to play out when customers come down the pricing curve on EVs, how should we expect the margin trajectory to change?

Again, I would say from a pricing and margin standpoint, right, I think the right metric to look at is not necessarily EBITDA, because EBITDA even within different product lines we do for ICE is very different based on the capital intensity of the product. Right?

Really, I would say at a PBT level, I would imagine today ICE as well as EV to be comparable, because, ultimately, again, we've talked about this before, but ultimately pricing even for an EV needs to be sustainable, and OEMs recognize that, because otherwise how do you drive capacity increases in a growing market?

Yeah. Final question for Tarang.

Tarang, looking at a balance sheet, that's significantly improved over a period of time. Now clearly, possibly we can become net cash next year.

Keeping that in backdrop, are we considering expanding into newer growth avenues, looking at inorganic opportunities? What are the areas that we are considering to expand inorganically?

See,

inorganically, honestly, we would be more keen on either it could be electronics or e-powertrain, these areas, and also in the area of aftermarket. Aftermarket also we are experiencing a strong growth.

I would say more on the four-wheeler or the exports front. Aftermarket we are more keen over there if we get an opportunity with the right company.

Otherwise, we are very keen, of course, of any acquisition opportunity or a joint venture when it comes to e-powertrain or other kind of electronics, it could be e-electronics or it could be also other electronics where we are playing even for the ICE engine. It all depends whether there could be some customer acquisition also.

Yes, exports focus is definitely there, where we make an acquisition, we should be able to get also into some export markets. This would be critical for us.

That's something we are very open to, whether JVs in India, or it could be some acquisition where there's an export opportunity in these areas. What we see also is a lot of opportunities on organic growth, whether it's in India or our plants abroad.

We'll be focusing because nowadays it's pretty expensive also to go in for acquisitions. It's pretty expensive.

When you're already looking at a 20%, 25% growth organically, then we have to see whether inorganic makes sense. We'll have to weigh in, we have to have a balancing approach.

We'll only go for something inorganic if it makes some sense financially, where we can see that exponentially grow that already existing business into a good level. Unless that is there, we will not go into any inorganic, because organic, definitely there is a strong focus to grow strongly year-on-year.

Yeah. Largely, the acquisitions would be in India?

Yeah. We are interested largely in acquisitions in India.

Yeah. A final question to MK.

Sir used to give us some PBT margin kind of a number that we can expect by end of the year. Any sense you can give on that front?

Jhawar, we don't give that kind of guidance, but we have this medium-term target of touching 10% soon. That one holds good.

Anyway, you can extrapolate, I guess, on the current performance.

Sure. Medium term would be 2 years?

3 to 4 years.

That's our wish.

Yes. Yes.

Thank you so much. All the best, team.

Thank you.

Thank you.

Yeah. Hello, sir.

Good evening. Thanks for taking up my question.

Hello? Am I audible?

Yeah.

Yes, please.

Yeah. Okay.

My question is on the working capital. You have mentioned that it has increased.

Has there any change in the receivable days from OEM customers, or it's mainly from the inventory side?

No, there's no change in the receivable days. Yes, inventory went up to some extent, largely in preparation to the peak season which is coming up.

Second thing is these war-related recoveries, which we just spoke about, they need to be now converted into invoices and then need to be collected. It's a temporary increase which we see because of that.

Oh, okay. Sir, earlier you have guided that the company is going to achieve a zero debt in FY28, with the debt increase, can we see that it will be still be pushed a little further?

No, we'll stay with that for now, but yeah, we will always try to do it as soon as possible.

Yeah. Okay.

Sir, can you please just specify, if you can, how much has 360 Cr that you have spent so far, can you just split where have you spent, new capacities or any new EV lines? Can you please just specify?

What you said? 350?

You're talking about for last year or?

No. The debt that has been increased due to capex, 316 Cr.

No. It's not entirely because of capex spending.

Capex spending during quarter 1 was about 160 crores. Most of it went into the capacity increases.

That number is in million, not in crores, the debt increase of 316 million.

Oh, okay, sir. Sorry, sir.

I in crores. Thank you very much, sir.

Congratulations on good set of numbers.

Hello?

Just wanted to know your next 2, 3 years of overseas, how do you leak overseas turnover, and can you just split the margins of how can the margins directionally be in Romania kind of thing and the two-wheeler which we are profitable, but on the Thailand four-wheeler lighting? Where do we see this journey happening in next 2, 3 years?

What kind of orders we are bidding? It's a larger orders we are bidding going ahead, or just we can get some sense how big this overseas business can become.

Yes. I'll try to answer your question.

If you compare to last year, we believe that this year our revenue in the overseas business can be, and here I'm referring to the overseas electronics and lighting business, this can be double. This is something that we can say.

In terms of, let's say, if we talk about, let's say, margins, here I believe our CFO already mentioned that in 3 to 4 years, yes, we're targeting also to get to a 10% PBT number in our overseas business. That's what we can say as of right now.

In terms of what our strategy is for overseas, here, of course, the focus is on electronics, particularly on the passenger vehicle side, and also on lighting, this would be both for passenger car as well as for two-wheelers. Where we're expecting the biggest growth is going to be when it comes to passenger car electronics and passenger car lighting.

In terms of why do we feel this will happen, it's mainly because in passenger car electronics today, or there is a lot of evolution in the electronics architecture. There's a lot more electronic content in vehicles, both when it comes to high-voltage parts, more to do with, of course, the electric powertrain, or low-voltage parts such as body controllers, ADAS, infotainment, etc.

This is the space that we are trying to play in. We've already announced certain large orders in past quarters, and we believe this will continue.

Yes, we're not giving you an exact number right now in terms of how big this business can become in the next 3 to 4 years, but certainly we're expecting to grow significantly compared to where we are today.

What kind of aspiration we have by FY30 this number can be close to 3,000, 4,000 crore kind of thing or just a ballpark number?

I think our CMD also explained earlier that by FY31, our intention is to double our overall revenue to 20,000 crores from around 10,000 crores that we do this year.

In that, overseas would be how much?

Yeah. I'm coming to that.

Out of that, maybe around 25% to 30% could be the overseas part.

20%, I would say.

Yeah, 20% would be overseas, 80% would be India.

Okay. Okay.

Okay. This this quarter, we had tooling revenues which we were, what what were the revenue, tooling revenues this quarter?

This is about 70 crores.

That impacted 0.8% of your margins?

Correct.

That means how does it mean, sir? 0.8 is that means there is a loss on this tooling revenues?

No. 0.8% on the overall impact.

See, compared to the normal business, there is a significantly lower margin which we make on tools because this is basically to generate part revenue in the future. These are one-time things which come every now and then in one or two quarters.

Okay. Ballpark, the 12% margin which normally we do in the India business is likely that for Q2 we can see that coming?

It has basically a couple of parts. The one-timers like tools and all, of course, should not come to this extent in the subsequent quarters, at least in Q2.

There are things like the inflation recovery, which is more like an arithmetic impact because the same number goes up in numerator and denominator. To recover that disadvantage, it may take maybe one or two quarters.

Otherwise, the other impacts, we should be able to see a recovery in Q2, most of it in Q2.

Sir, one request is there: why can't we provide breakup of number of clients? We are only showing Bajaj and rest of Bajaj.

Most of the auto ancillaries, if you see, they would be showing us the kind of client breakup is there. This would help us to know that how the pie is moving.

This becomes very difficult for us to judge that where the pie is moving now, which client we are concentrating, which client we are gaining market share or something like that. It would be really helpful if you

Sure, we'll look into that. We understood.

Okay. Thanks a lot, and wish you all the best.

Thank you.

Hi, sir. Just came back into the queue.

Sir, just the annual report was very well articulated, right? It definitely gives a direction of a 20,000 crore ballpark revenue, right, in FY31.

That number, just wanted one clarification, that is solely based on the current product profile and the organic business growth, correct? Any inorganic would be on top of this.

Is that the right understanding?

No, there will be about maybe 10% of that which will come from inorganic route also.

Okay.

Maybe something from non-auto also. Okay.

If I understand connect the dots together, 10% PBT added 20,000 crores revenue FY31 is probably the management vision to grow, right, in a nutshell? Okay.

We envisage for preparing for FY31 revenue, the order book has to get built probably, say, by FY28, FY29, right? Is that the right understanding, a large extent?

That means that we are working in that direction to fill up, and we are that close to the customers that we will be able to fill up and deliver on this guidance. In a nutshell, what I'm trying to imply is that there is a very solid customer relationship that's getting built right now, and we are getting the right traction from the targeted client is that the right implication of all of these things?

That's true, but it also includes the organic growth on the existing business also, which is already with

us,

plus the inorganic things we explained. Yeah.

That's the intention.

Fantastic. Congratulations, sir.

Right. We'll talk again probably next quarter.

Thank you so much.

Thank you.

Thank you.

Actually just a data-keeping question. Out of this EV revenue of 16% which we have disclosed, how much is that from Bajaj, and how much is that from non-Bajaj?

What was it last quarter?

I would imagine three-quarters would be from three-quarters would be from Bajaj Auto, yeah. Honestly, last quarter, I will not know off the top of my head, but I would imagine a similar-ish kind of pattern, right?

Few percentage points here and there.

Okay. Got it.

Thank you.

Thanks to everyone. I would like to again reiterate that the journey ahead is filled with opportunity, backed by strong capabilities, strategic clarity, and the passion of our people.

We are confident of achieving our aspirations while creating lasting value for every stakeholder associated with Varroc. Thanks again for joining the call and for your continuing support.

Thank you.