NDR Auto Components Limited (NDRAUTO) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to NDR Auto Components Limited conference call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Gavin Desa from CDR India. Thank you, and over to you, sir.

Thank you, Nirav. Good day, everyone, and a warm welcome to all of you participating in this Q1 FY '27 earnings conference call of NDR Auto Components. We have with us today Mr. Pranav Relan, Whole-Time Director; Mr. Vikram Krishan Rathi, CFO and Vice President; Mr. Rakesh Rustagi, GM, Finance and Accounts; and Mr. Rajat Bhandari, Executive Director and Company Secretary. Before we begin, I would like to mention that some statements made in today's discussions may be forward-looking in nature and are subject to risks and uncertainties. A statement in this regard is available in the presentation on the exchanges and shared with you earlier. We will start the call with opening remarks from the management, following which we will have an interactive Q&A session. I now invite Mr. Pranav Relan to share some perspectives with you with regard to the operations and his outlook for the business. Over to you, Pranav.

Good day, everyone, and a warm welcome to our Q1 FY '27 earnings conference call. Thank you for joining us today. This has been an eventful quarter for NDR Auto Components. I will touch upon the key highlights in a bit, but let me first quickly take you through our numbers. Revenue, driven by execution of our strong order book, stood at INR 221.45 crores for the period under review. Our EBITDA margins remained healthy at 11.8% despite the environmental and supply chain challenges the sector has been faced with. This is testimony to our operational efficiency and our increasing emphasis on efficiency. Q1 FY '27 EBITDA and PAT stood at INR 26.44 crores and INR 16.40 crores, respectively. In June 2026, we commenced operations at our NDR Hayashi facility at Bangalore, the plant which will manufacture sunshade. It enables us to diversify our product portfolio and enhance the value we offer to our customers. We are also delighted to inaugurate our new facility under the subsidiary NDR Auto South in Anantapur. The SOPs will start from Q2 FY '27. This plant optimally positions us to efficiently cater to seat trims and frame requirements of our OEM customers with operations in South India. Lastly, it was our pleasure to welcome T. Suzuki-san, the CEO of Suzuki Motor Corporation Japan as the guest of honor at the celebrations on July 2 to commemorate the 40th anniversary of our group company, Bharat Seats. Sales volumes to our partner OEMs continue to improve, reflective of both capabilities and encouraging environment. Our endeavors continue to deepen our relationships with our current customers, enhance the number of OEMs we partner with, and expand and enrich our portfolio of offerings. These initiatives take time, but we are optimistic that our efforts will translate and enable us to create sustainable value for all our stakeholders. The auto and auto component industry is going through exciting times, and we believe there is considerable opportunity for an entity with quality operations and a deep understanding of this space. We will now be happy to take your questions.

[Operator Instructions] The first question is from the line of Tanish Vhora from InvesQ PMS.

Actually, I wanted to ask on the order book side, can you provide some segregation based on the products which we have? Like what is the segregation for the order book? And also wanted to understand the pathway for the INR 3,000 crores of guideline and how one should read -- and also on the order book, how one should read like will it be a revenue -- recurring revenue or is a onetime revenue?

So the INR 3,000 crores target continues to be our endeavor, and we will update you on that progress. The order book that we have, you can add it to our existing revenue, and that is what the number of businesses that we book currently.

Yes. On the order book, can you provide some segregation based on the products we have? Like for the seating, how -- what is it, and maybe ambient lighting or some other?

So most of the products are from the seat frames and the seat covers. In addition to that, we're also going to set up a plant for seat insert. So, that is going to be there. There is going to be a new plant for seat latch, and there's going to be a new plant for seat belt reminder system. In addition to that, there are some new ambient lighting orders that we've received, but that's a smaller part of the order book.

Okay. And sir, also, how do you see our margins shaping going ahead with our products expanding? And can we assume that we will stick to our current ROCE going forward?

So our margin should be at a similar level, and our ROCE also should be at a similar level.

Next question is from the line of Jatin Chawla from RTL Investments.

Congratulations on a very strong performance on the margin side, especially this quarter, where there were a lot of margin pressures on commodity. My first question is, you've highlighted in your presentation a new ambient lighting order. So if you could just talk about some more details in terms of the size and what client?

So we've got a couple of new models from Maruti Suzuki. The size is a little small, but they should be starting in 2028.

Okay. Got it. And your overall order book is at a similar level, I think, as the last quarter's order book at INR 650 crores. So has there been no kind of change in the overall order book broadly?

So we are actually bidding for a lot more business. So, as confirmations come, then we'll share that quarterly.

Got it. When I look at your overall revenue growth this quarter and over the last few quarters, the top line growth is now largely in line with the production growth at your key client, Maruti. Earlier, it used to be a lot higher. I understand there is an element of model seasonality in this. When do you start -- when do you see this kind of starting to change in NDR's outperformance over the key clients' production schedule starting to kick in?

So, as soon as our new projects start -- I think our South project is starting sometime this quarter. And then, we have NDR Safety and [ SBR and latch ] starting sometime early next year, we should have an update to this number.

Got it. And for the recently launched Brezza, there is a lot of excitement around the model. Are you continuing to supply what you were supplying for the outgoing model?

Yes, we continue to supply 100% of the model.

Got it. And in this quarter release, you also talked about an INR 8 crore extra, I think, spend on NDR South. So are you looking to further increase the capacity at NDR South?

So we actually took debt to fund that. We're converting that into equity.

Next question is from the line of Saket Kapoor from Kapoor & Co.

Firstly, thank you for the changes made to the investor presentation that looks much better and more informative. So please do align them going ahead also. Sir, when we look at your Slide #8, wherein -- about the project expansion update you have given, I think so, there are 2 projects that are commissioned -- that will be commissioned for this year. Firstly, about the ambient light, which you have mentioned for June '26, that is the first quarter, and then about our -- the South unit at Anantapur, which is expected at July '26. So taking into account, how will the ramp-up happen? And what should we expect for the remaining part of the year to add to the incremental revenue profile? And sir, you were mentioning, answering to the earlier participant, about some debt-to-equity conversion. I missed your point there. If you could just first explain that?

Okay. So for NDR Safety, I think we had invested [ CapEx ] -- sorry, NDR South, we had invested -- taken debt to invest in that. Now we've converted that into equity. The second question is regarding the project. So seats -- NDR South is going to start operation sometime in the next 10 or 15 days. We inaugurated that. So, that should add to the revenues. And then, for the third project, NDR Hayashi, that's a joint venture that we signed with a Japanese company. We've got some sunshade business that has started. And in addition to that, we've got some ambient lighting business, which will start in 2028.

Okay. So the ambient and the sunshade business is expected to contribute from FY '28?

The sunshade business has started. The ambient lighting business will contribute from 2028.

Okay. And for the Southern unit, we have already commissioned, as mentioned in your presentation, where you have also displayed the photograph. So this will add to the totality for this quarter and going ahead, this INR 23 crores CapEx in the seat trim business?

So we inaugurated the plant. It is starting production in another maybe 10 to 15 days. So Q2, you should see some [indiscernible].

What should be the revenue profile for the remaining this year and when run at full capacity?

The revenue potential for that plant is about INR 70 crores to INR 80 crores, subject to how the model performs.

Okay. Sir, taking into account our EBITDA margin trend, what are we doing exactly to improve upon it? Because we are in this band of 11%; correct me there. And going ahead also, with the commissioning of the facility and the ramp-up therein, how are we seeing our EBITDA margin trending, sir, going ahead?

So our EBITDA margin should be at the similar level, should be at about 11% to 12%. And all our commodities are indexed, and that is why we are able to maintain these margins.

Okay. Now, shifting to the P&L part, sir, I think so, the other expenses line item has gone up this quarter again on a sequential basis also and definitely on a year-on-year basis. So what explains this increase on a sequential basis from a revenue of -- yes, please. You got your question.

We've had a lot of marketing expenses as we're trying for a lot more customers. In addition to that, we've also had some R&D expenses because we have to make prototypes for new customers.

So this is one-off only? This will get even out going ahead?

These expenses will tend to continue as we're trying to grow aggressively. In addition to that, we've also hired some people for our growth.

Okay. So this should be the trend going ahead, then? That is what the EBITDA number is. So, that has been factored. So this is what the new normal should be. That is what you are trying to convey?

Yes.

Okay. Sir, and on the growth in the revenue part, sir, I missed in your opening remarks, with order book at INR 650 crores as on June, and I think you spoke about some bid pipeline also. We did revenue growth of 19% -- 19.5%. So, that is what the likelihood run rate? Or with the commissioning of the project, the new one, this will get a big uptick going ahead?

It should have a slight uptick going ahead.

Right, sir. And on the Bharat Seats part of the story, sir, if you could just throw light, how are things shaping up and what should we expect? That is where the share of profit from joint venture is being mentioned, that is INR 1,78,00,000? That is also a lower number.

So, that is the share of profit from Bharat Seats. In addition, there is also some loss from our NDR Hayashi joint venture. So I think that is why the number.

Next question is from the line of Manish Gupta from Equinox Investments.

Sir, this is regarding Bharat Seats only. So in Q1, Bharat Seats has grown revenues by about 35%. So would you say that the growth that you witnessed has exceeded the expectations that you had?

Yes, I think it has exceeded the expectations that we had.

All right. Sir, what would be the main contributing factors to this largish growth? And are these [ successes ] sustainable?

Yes, these numbers seem to be sustainable, and [indiscernible] market is doing quite well.

Okay. And sir, in light of this, let's say, higher trajectory of revenue growth in Bharat Seats, you had earlier given a top line guidance of about INR 3,000 crores to INR 3,500 crores by financial year '30. So would you be encouraged to revise that guidance upwards?

So, that should be about INR 3,500 crores for Bharat Seats by 2030.

And sir, apart from -- I mean, this premiumization of seats that's happening, air-conditioned seats or ventilated seats, so does that premiumization also flow to Bharat Seats? Or is it part of NDR component?

So most of the premiumization comes to Bharat Seats as it has the final seat assembly. The premiumization for the frame and the seat cover tends to come at NDR.

All right. And sir, besides 4-wheeler seats, is Bharat Seats also going to -- earlier there was some plan about railways field or something. So are you thinking of adding some more lines to Bharat Seats?

No plans to do railways. We will stick to 4-wheeler seats and some [ carpets ] and some 2-wheeler seats.

Next question is from the line of [ Sai Kiran from Purnartha Investments ].

A very good set of numbers. Sir, I wanted to understand from the cost advantage side, so in Q3 of FY '26, we mentioned we have cost advantage. So can you give a brief like what -- how we have a cost advantage? And can you give us a spectrum compared to competitors where we fit in?

So we've been making some -- so we're probably the most backward-integrated seat player, and our scale helps us. I think we make more than 1 million seats now. So I think that gives us cost advantages.

Okay. Got it. And sir, can you give a breakup -- so we have a target of INR 3,000 crores revenue by 2030. So can you give a breakup between existing and new facility, how much of that could be contributed?

So the INR 3,000 crores target is our endeavor that we wish to achieve. Our current revenue is about INR 220 crores quarterly. You can add our order book to that. And our goal is to do about INR 2,000 crores from our organic business. The INR 1,000 crores organic part is something that we're still working on -- inorganic.

Got it, sir. And just one last question. So we are doing customer diversification. So I just wanted to know what new products are coming in. Can you share some points on the same line and who -- and the customers you are in talk with? And are they in the final terms? Or are they still going on?

So customers we are continuously discussing with, I think, the obvious ones are the Indian customers that we're targeting. But the stage, we don't want to share at the moment. Once something finalizes, we'll let you know.

Next question is from the line of Khush Nahar from Electrum PMS.

Sir, a couple of questions. So first, when do we expect the INR 650 crore order book to be in the full ramp-up phase by this year? Secondly, are we planning any CapEx depending on the customer commentary on the 2 nonproductive -- as of now nonproductive lines that we have on our books? So any visibility over there in terms of CapEx? And lastly, what would be the asset turn that we're expecting on the total INR 150 crores CapEx that we're doing for the different plants and different products?

So this INR 650 crore order book should come incrementally till 2030. We haven't given -- we're not giving a breakdown of it right now. In terms of CapEx, we are looking to acquire new business for the 2 empty lands we have. So once we acquire new business and we think it's viable to set up a plant, that's when we'll announce it. I'm sorry, what was your third question?

The overall asset turn on the INR 150 crores combined CapEx that we have planned across different plants and different products.

It should be approximately 4.

Next question is from the line of Dhananjai Bagrodia from Alchemy Capital. Dhananjai, your voice is breaking. Can you come in a better reception area, please?

Can you hear me now?