Fiem Industries Limited (FIEMIND) Earnings Call Transcript
November 13, 2020
Earnings Call Speaker Segments
Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY '21 Earnings Conference Call of Fiem Industries Limited hosted by Monarch Networth Capital. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note, this conference is being recorded. I now hand the conference over to Mr. Anubhav Rawat of Monarch Networth Capital. Thank you, and over to you, sir.
Yes. Thanks, Vikram. Good morning, everyone. On behalf of Monarch Networth Capital, I welcome you all to Q2 FY '21 Conference Call of Fiem Industries Limited. We will start the call with the initial comments about the results and future outlook of the company, and then we will open the floor for question and answers. So without much delay, I now hand over this call to Mr. J.K. Jain, CMD of the company. Over to you, sir.
Good morning, ladies and gentlemen. We welcome you all to the conference call of the financial results of the Fiem Industries for the first half and the second quarter of this financial year. I wish you all a good health in the time of COVID-19, the spread of which is still continuing. The company has released its results on 11th November. I believe you all got the chance to look upon the same. Along with me on this call, I have Mr. Rahul Jain, Director; Ms. Aanchal Jain, Director; Mr. Rajesh Sharma, Director; Mr. O. P. Gupta, CFO; Mr. Arvind Chauhan, Company Secretary and other financial team members. Before going to the financial and the question-answer session, listen, I would like to give you a brief about the industry and our performance. As I informed in my last call, post-lockdown during the month of June and July, sales has started picking up and had a -- post a good month with a 4% increase in comparison to other last year. As we see 2-wheeler industries, the domestic sales has remained almost flat in the second quarter. During the quarter, the company achieved a turnover of INR 371 crore, which is slight increase on year-on-year basis even during this COVID time. We believe that our focus to have diversified customer base has helped us to maintain this tenor. The decrease in sales to SMSI and TVS sales has been compensated by increase in sales to Yamaha and replacement market. Our sales to Yamaha has been increased for their export models as well. I have pleasure to inform you that we have also been awarded global contribution award 2020 from Yamaha Japan for our performance during 2019. Going forward, we are hopeful for continuing demand in the 2-wheelers, mainly because of the 2 reasons: increased demand from the rural and urban market; and preference of the people to have their own vehicles. We are quite hopeful that the demand outlook in the second half of this year should remain good, and we should be able to perform better. Regarding new product development and future business update, our R&D and design teams are continuously working for the new product development as per the plan of the OEM customers. Currently, more than 50 projects are under development and around 35 projects will come in next -- in production in next 3 years' time. With this, I hand over the line to our CFO, Mr. O. P. Gupta, to update about the financial. Thank you.
Thank you, sir. Good morning to everyone. I am pleased to inform that the company has achieved a total sales of INR 370.95 crore in the quarter 2 financial year 2021 as against the turnover of INR 368.24 crore in corresponding quarter of FY '19/'20. During the quarter under reporting, the company had hardened EBITDA of INR 49.8 crore, which is 13.43% in comparison to EBITDA of INR 41.30 crore in quarter 2 of FY '19/'20, which was 11.22% thereby registering an unprecedented growth of 2.21%. The growth is mainly attributed to the effective cost-cutting measures undertaken by the company in the wake of COVID-19. PBT of quarter 2 rose to INR 33.24 crore as against the PBT of INR 23.57 crores during the quarter 2 of FY '19/'20, showing a growth of 41%. PAT of the company stood at INR 24.67 crore against the PAT of INR 15.56 crores during quarter 2 of FY '19/'20, showing a growth of 58.54%. Coming to the investment. Company has made an investment of INR 4 crore in the fixed asset during the quarter under reporting. The total borrowing of the company stood at INR 72 crore as of September 2020. With this, I end this financial brief, and now the floor is open for question and answers. Thank you.
[Operator Instructions] We have your first question from the line of Varun Baxi from Equirus.
Congrats on a good set of numbers. So my question is pertaining to margin. Like we have achieved a growth of around 300 basis points in this quarter. So how much of this is -- I mean, sustainable going ahead once all the volume recovers and I mean, how much sustainable would be the short-time employee cost and the other expenses going ahead?
I think Gupta will reply.
Yes. Yes. Yes, if you see, we were not expecting this market would really bounce back so well in the 2-wheeler industry. During the month of April and May, there was a complete lockdown. And the company started having sales from June onwards only. And in the first quarter, rather the first quarter, which is a real quarter, this is the first real quarter of the company, where the impact of COVID has virtually magnified. And keeping in view the orders this company had, so we are expecting that whatever the loss the company has faced in the first quarter, the other 2 months. Beyond that, we are not expecting any further down in the sales. The sales for the third and fourth quarter, everything goes well, would definitely fall flat, and we are hoping that there will be some sort of an -- a recovery. As far as the margins are concerned, the company started taking very, very steep cost-cutting measures. So you will notice that this is the first time the EBITDA of the company has crossed 13%. It is 13.43%. And this is mainly attributable to the reduction in employee cost, which is, say, 2.48%, and other expenses has also been brought down. So the company can't do much in terms of the reduction in the raw material cost because it is a pass on [ really ] to the customer. So as the company is expecting, so the employees salary cut, of course, as the company has come back to pre-COVID level, the reduction in company has -- is over now. It is -- the salary has been restored from 1st October onwards and all the employees have been brought back to its original salaries. Of course, there are no agreements, but to keep the morale of the staff also very high. The staff has cooperated very well. So the management thought it fit that it is better that we should give full salaries to our staff, and the company is focusing, of course, on reducing other expenses. So in that light, before COVID, the company was working on a margin of 11% to 12%. And hopefully, if everything goes well, company will have a sustainable margin, which it has been earning over the year.
Okay. Sir, also on the new product. So we have been giving the guidance previously that, around INR 250 crores of revenue would be on from the new products that will be coming in. So any color on that? What is the status of the new products? And how do we look at it going ahead?
Mr. Rajesh [indiscernible]
Expect we are already working on 50 -- 50-plus projects added up and 55 projects to come within next 3 years. And out of which, we will be announcing that the 4 projects have already started supply -- under supply to Yamaha as well as the 2 products [indiscernible] during next month to tell you also. So we are on and we are working on to achieve the target, which is being announced by us of INR 250 crores.
Okay. And we expect to achieve this INR 250 crores in next 3 years, am I right?
Yes. Yes.
So we have next question from the line of Arun Kejriwal from Kejriwal Research.
Sir, my question is that with the traction that we are now seeing in the 2-wheeler industry, would it be fair to say that we are back on the growth path that we were seeing, say, prior to 2019/'20 when we saw that slowdown happening?
Yes. The trend is like that based on what we see after COVID, it has picked up like anything. And we are very much hopeful and that it will come to the pre-COVID then if we come to the previous, what we were thinking as for previous, and it will go up, definitely.
Okay. So on the 2-wheeler side, it has been really great going. How do you seeing the passenger car or the 4-wheeler set, [ please ]?
No, no, I'm sorry. We are in -- not in passenger car. I can't comment. But we are basically 95% in 2-wheelers.
Okay. And sir, one more question. On the lighting part, what do you see the role ahead for the company?
Basically, the new technologies are further emerging [indiscernible], and we are working on this. The LED share is going up and with the EV coming in, the more and more eligible car, because in EV, the LED is the only answer. In my opinion, the LED, what we were thinking that it will go in the next 3 years, 50% should be more, because of this COVID period, now the EV will come a little bit faster. That is, of course, our view.
We have next question from the line of Ashutosh Tiwari from Equirus Securities.
Congrats on the good numbers in the quarter. So just firstly, if I look at the -- your sales is flat Y-o-Y, despite the fact that your larger customer HMSI volumes have declined Y-o-Y in the quarter and your TVS was down maybe 23% Y-o-Y. So is it because Yamaha has strong pickup in Yamaha supplies, that's why have done better? And also, the -- any color on the global volume supply to Yamaha? Has started on to be [indiscernible] gain some more here?
Yes, exactly. You are right, because the Yamaha LED project, whatever is being developed by us for the export market have already started. So that will be for Italy as well as for Japan. And those are all fully LED products and LED products having [indiscernible] product that's our lamp, bi-function headlamp, which is being introduced in all of our Yamaha market worldwide. These are the 2 projects we have already started. And in the coming months, 2 additional products will also start in mass production.
Just to add regarding the question of how will this turnover. This -- you are right, the TVS and HMSI is compensated by Yamaha and replacement market as informed by its [ units ].
Okay. And, look, they're diversified customers. So one is going up and one is going down, so it's compensating everything.
Yes, yes, yes. Yamaha hasn't been very strong. So I just want to understand that, let's say, currently, in the first -- second quarter, I guess, Yamaha is around 11% of our total sales.
Yes.
Sure. So going ahead, like say, when there's 2 more orders, which were started to begin, you're saying over the coming months, when that ramp-up happens, where do you see Yamaha contribution to our sales going to, say, over, say, next year, as you say?
It should -- it could be better, because -- of course, the volumes are already projected, and we hope this will be good in volumes and good in our sales also.
No. I just want to understand, sir, quantification of that build in the [indiscernible] of 11% for second quarter. Can that go to say 13%, 14% next year in -- from Yamaha only? I mean, is that -- can you quantify what you gave them your Yamaha orders?
So I think next quarter will be better. When the year-end numbers will come, it will be reflected. But overall, the trend is increasing in Yamaha sales.
No, but Ashutosh, you have to understand that the volume, in any case, of Yamaha are going to increase. The -- what matter you're talking of increase in percentage, say, 11% to 13%, that depends on overall increase in sales, overall supporting our HMSI sales and TVS motor sales are increasing. But even if our percentage of say Yamaha, yes, remains same, still we are increasing the sales of Yamaha. So it's not a percent of or not a question sales amount, say, it is a question of increase in amount of sales. That is more important.
Sir, I got to point anyway. Yamaha is down to 9% to 11% [ dividend ], say other growth picks up and [indiscernible] or 11% and also next year, I think the growth will be retained on for us from this side. And so you said 2 more sides, 2 more supply will start over the coming months. Anything else also in pipeline on Yamaha sales?
Yes, they are not -- there are overall 7 products under development as of now, which will definitely be introduced by 2021 as well as 2022.
Okay. Okay. Okay. Yes. Okay. So I think Yamaha will then [ be good ] therefore going ahead. And Suzuki also, I think, we have grown versus -- is there some new orders or just because they do -- should be doing well, that's why?
Suzuki is doing well, but some of the projects with the existing -- their project line will start export also during last quarter of this year.
And this will be mainly, which geography?
Sorry?
Sorry?
Which geography -- which country we're going to export to?
They'll be exported to Japan.
Okay, and this is headlight, basically?
Yes.
That's commendable that we are being intending only of supplying to Japanese -- company in Japan is really commendable.
So of course, if you see all those 10 years before we started first supply from India that we bought Honda from [indiscernible] picks up. Thereafter year-on-year, we are adding up our customers, we are adding up our volumes for all those Japanese customers. Volume [indiscernible] it also go for [indiscernible] over to Japan.
Okay. And then, lastly, I think if I look at the profit on associate, I think that also has become positive now. So that Q -- that Aisan JV is now basically within the [indiscernible] of PAT cost, right?
Yes. Yes, you're correct. That's right.
So will any meaningful income will come from there? Or this -- or maybe they are small in our profit contribution?
Actually, if you talk of NAV, that initially one cannot comment, because the company has some brought-forward losses also. But what will I say is our capital is very well intact. That it's the negative NAV or reduction in NAV does not have any bearing on our investment. That's the key point. We may -- we will earn more, but we cannot lose our -- what is the investment. That is our understanding with our JV partner.
As you mentioned you have given some amount, INR 1 crore something, so I think you will not make losses over there, do you think?
No. I think this is the beginning of a profit, as of course, because of the deferred tax liability. Your losses are more so that definitely, you are getting an advantage in the tax. So this is the first time the JV company in this quarter has shown a profit of INR 1,920 lakhs. So hopefully, if things go well, then -- and when the company started picking for COVID headcount, and virtually, company will start showing some sign of improvement in this year. But next year, we are definitely expecting the profit from day 1.
Okay. Okay. And what kind of revenue you would have done some with Bank Angle Sensor in the current year? This quarter, sorry.
This is INR 10.5 crore.
This quarter, you're saying?
Yes.
Okay. And so we now have, say, a cash of around INR 115 crores, INR 117 crores and so debt is around INR 32 crores. So you have net cash of around INR 45-odd crores. I think going ahead also the CapEx is downward and down in March. So what do you plan to do with this CapEx cash generation or going ahead over next 2, 3 years?
No. Actually, it is not that the company will sit idle on the cash. This is not a company, which the company motive is to reduce, of course, the burden of debt. That is very well visible from the balance sheet. You'll see the [indiscernible] places than that. You see there is no working capital outstanding as of 30th September, which is a very, very big thing. And the company still has INR 116 crores in the bank that is very ripe. And apart from that, you have a term loan of INR 72 crores. So INR 110 crore term loan is being repaid every quarter. So by the year-end, the company will come to a term loan of INR 52 crores, and we are not having any working capital limit. Then it depends on if the company would be living -- company would be sitting on a cash, what opportunities come on the door of the company or company makes some understanding with the suppliers and then take some cash discount. Maybe the company would be -- company is very prudently working on their cash management. You must have noticed in comparison to every company in the peer group. So the company is very well effectively making use of and very judiciously taking call on their bank loans and every time.
Okay. So is there a possibility that dividend payout can increase some [ way ] for the better cash generation? And also, if you can highlight what is the CapEx basically going ahead in the next year, and this is also probably worth to be continued?
So next year, one cannot certainly comment. But this year, of course, sales are flat. The company at least would like to maintain dividend payout. So next year, you do not know what happens, what is in store for the company. It is very early. How does this COVID overturn or what will be the impact, but it has been very well seen that this COVID has really not impacted 2-wheeler industry. It has impacted initially, because there was a complete lockdown, but it has really bounced back for the 2-wheeler industry. So definitely, we are hoping if all goes well, even when the COVID is continuing, the sales are flat, then if the company -- if the country go -- comes out of COVID, but definitely, company and the management is expecting a reasonable growth.
No, but we already have capacity. So I think we do not need to incur much CapEx here next year. What are...
At the moment, we are working at 70% to 75% capacity. Still we can go up to 90%. So basically, it depends on the -- how the sales pick up next year, how the projection will have gone, then only we can plan for the CapEx. Otherwise, as such, we have no plan for any CapEx for the next years.
Okay. I got it. And lastly, on the apartment lighting, any new product that you can see right over there over the next 1 or 2 years?
Arvind?
So this is -- I mean, there are the new products which are -- apart from lighting, they are already in the production, the Canister, Bank Angle Sensor and the FPM, Fuel Pump Module.
And just to clarify, one thing that going ahead, we will not be wasting any money into this non-auto lighting part, right?
Yes, correct. Yes.
Your next question from the line of Anubhav Mukherjee from Prescient Capital.
Sir, in the earlier con call, you had mentioned that you were working on some project possibly 4Q. So any update or any update -- yes? Information on that?
What? Could you please repeat it again?
We are still under discussion. And so it would be -- we will announce once this business will be awarded to us. We are very closely working.
Okay. Okay. And sir, this quarter, what will be the contribution of exports to the revenue?
[indiscernible] Export?
Hello?
Yes. Export [ that you want ]?
It is 1.5%.
Yes.
Sorry, 1.5% of the sales?
Yes, yes.
Sir, but then, it doesn't feel like there's a large jump because like around 2%, 2.5% exposed there even for FY '20. So am I missing something given that you are mentioning that you're supplying from multiple international [ models ]?
Sir, you have to understand all exports to Yamaha, these are broader Indian [indiscernible]. It is not actually exposed to [ broader ] local rates. For us, it is local sale. But we are bound for export market. That is the way. We have to work out with our OEMs.
So sir, then what would you classify your actual export? Like do you...
This is only -- which is directly linked to the export. This is the only export.
And that is also to OEMs or replacement markets internationally?
Both, OEM.
Mostly OEM.
We have next question from the line of Priyadarshi Srivastava from Monarch Networth Capital.
Sir, I just wanted to know, have you added any new clients in this quarter? Or you're like -- have you had any new clients in this financial year, sir?
Yes. This coming quarter, we will be adding new customers that is, again, the Piaggio. And for their new scooter, having LED headlamps and taillamps. So we'll complete the requisite production will be starting to fly from just on to -- onwards only.
And Q3, new customers are now under pipeline, which we will announce most probably in the next quarter.
Okay. Okay. And just another question. What would be the receivable from EESL in this quarter, sir?
Cycle INR 20 crores -- yes. It is INR 21 crores. Yes, from EESL, it is still INR 21 crores that we are expecting to gradually recover.
We have next question from the line of Pritesh Chheda from Lucky Investment Managers.
Yes. Sir, a few clarification. You mentioned that there is INR 250 crores worth of business in next 3 years. That is Yamaha, Piaggio plus Suzuki put together? Or it is just Yamaha...
No, it is all combination. It's all combination, including Bajaj, TVS. Everybody, all our customer.
All customer? Okay. So this includes the export business of Yamaha and Suzuki as well?
Yes, everything. All projects put together.
Okay. Now so in the INR 371 crore revenue that we have booked in this quarter, has this INR 250 crore worth of projects started -- getting started executed? And if yes, then how much of that INR 250 crore over 3 years, okay? So is it at the end of third year, we reach INR 250 crore? Or it is INR 250 crore in 3 years combined?
No, no. Basically, it depends on the customer. How they are counting -- many, many things are in the pipeline for last 6 months, 8 months, many models out there, which they were supposed to launch, they have not yet launched.
So is it INR 250 crore -- maximum of INR 250 crore per annum? Or how have you arrived at this INR 250 crores?
Basically, total is...
Hello?
Yes, it is 3 years total.
Total of 3 years? Okay. Yes. Okay. And how much also basically, at the peak, it should be INR 250 crore divided by 3, about INR 80 crores to INR 100 crores. How much of that INR 80 crores to INR 100 crores would have slowed in this INR 370 crore of revenue, because I think supplies have already started, right, in a small way?
This is almost all -- this will be almost new business. Only 2 products are coming to production. So it will be -- most of the -- 90%, 95% -- more than 95% yet to come beyond the 2 projects.
Okay. Okay. My next question is based on the supply schedule that we have incrementally, do we see the revenue further moving up from the INR 370 crores that we have reported in quarter 2 as you move towards quarter 3 and quarter 4 directionally?
No, no, we are finding there increasing rate. So we are expecting good sales, good volumes.
Okay. And my last question is what is progress on Hero accounts?
So this we'll announce -- Hero, it is under...
Discussion.
Discussion, and it will come because Hero has taken Harley-Davidson. We are 100% in Harley-Davidson.
[Operator Instructions] We have next question from the line of Sahil Sanghvi, an investor.
Congratulations for the amazing results. My first question is, sir, what is your margin outlook? Can we go beyond 15% in the next 2, 3 years? And what would be the factors that would lead to that kind of margins?
Yes. Actually, if you'll see this quarter, you are finding very good profits. This is because of the policy of the company to effectively cut cost on all fronts, including employee cost. So what company -- over the period of time, even until March '20, and in all the conferences we have been only telling that our margin are in the range of 11% to 12%. And if there, the sales pick up, and so that will mean, of course, there will definitely be increase in margin to that, say, 0.5% or 1%. And with effect from 1st October, as we mentioned earlier, all the salaries have been restored to its original level. The management wants to keep the model of all employees fairly very, very high. And management thought it fit when it has the money at its disposal, so why not bring the salary back to their original level? So keeping all this -- having said that, keeping all of this in mind, because this salary cut has give an impact of 2.5%. So before exceptional item, if you see, the EBITDA is more than 14%. So of course, the endeavor of the management would, of course, be to reach to that level, but it is definitely not possible to predict it right now. The main focus of the management would be to first keep, to maintain the EBITDA margin of 12%. And if definitely there is an astronomical increase in the sales, so from INR 1,400 crores, and then it's going to INR 2,000 crores, definitely, you will see a real kick in the margins right there. So it all depends on the sales -- all the sales that is coming and the profit of the management.
Got it, sir. Got it. Secondly, sir, what is our plan of entering the CV lighting space?
Yes. We are still working because this year -- of course, this year, business for existing suppliers are a lot or more than sufficient. So it might not be possible on the direct sales. So we may -- we are very clearly working. And of course, the results will -- once results will be in our end, we will announce.
Okay, okay. And what's our share from the tractor in the CV lighting space?
At present, the share is not very big, but we are working on it. As we are supplying to -- over to Japan. And similarly, now we are supplying, so exports to Ulgara, India. So similarly, we are supplying to [ Suraj Madha ], which is now Mahindra. So slowly, slowly, we are increasing. And now our focus is towards these tractors as well as the commercial vehicles as well as [indiscernible]. So we are working on that and we have a separate division we are starting, and we hope -- we are very much hopeful that we'll get good volume from there.
Okay. So broadly, FY '22, we can expect some kind of volume from that space?
Yes. We are very much hopeful.
Okay, okay. And my third question would be, which new models have we started supplying in H1?
No. We are sorry. This is very confidential. Unless the customer announce their vehicle, we cannot do it. We are very sorry for that.
Okay, okay. No worries, sir. And are we supplying to Royal Enfield Meteor and Honda Highness?
Yes. Yes, we are supplying all LED in vehicles as well as the collision lamp and reverse, too. So this is what I love that's plastic parts also.
Okay. And what about Royal Enfield Meteor?
In Enfield Motor, we have had high-density lamps and blinker lamps altogether with that. And just -- it's production will start with this product.
And not only the many [indiscernible] of part content [indiscernible] from our [indiscernible].
Okay. Okay. Okay. And so then now what is our market share in India right now?
No. In the lamps, we have around 30%.
Okay. And the LED space, sir?
All put together, total overall is 30% share out of -- in 2-wheeler market, almost 35%. India also almost around 30%, 35%.
Okay. Okay. Okay. Lastly, sir, just one last question. What's our current LED versus the halogen lamp revenue split? if you can give me that?
Yes. See, for the current quarter, this is 41% is LED, 59% is halogen lamp.
We have next question from the line of Archana Reddy, an investor.
Yes, yes. Sir, I wanted to know about your plans of entering into new joint ventures in 2020.
We having them working out, and we'll let you know once the deal is done.
Okay. From the current joint venture then, [indiscernible] volume...
[Operator Instructions]
Hello? Yes. So, sir, yes. I wanted to know what will be your revenue potential from the current joint ventures and what will be the margin from them?
See, for current joint venture for current year, this INR 100 crores share is expected from SBA. And in terms of potential...
Yes, ESI.
Okay. Okay. And sir, what will be our tax rate going forward from here?
Yes, we have that. As you must have seen in the earlier -- in the last year or this year, the company had opted that lower tax rate. The company spent 25.17% tax.
Okay. Okay. And do we see the company being debt free since we are paying around like INR 10 crores per quarter?
Hopefully. But debt free does not mean a very good sign. It is a stoppage of expansion. Company would look for the expansion and try to reduce the debt if the expansions are very high. It depends on what comes in future and that [indiscernible] of the company. That all depends. Everything -- if there are no future projects and certainly for sure, by March 2021, that would be INR 52 crores. So of course, by the end of '22, the beginning of March '22, it will be just INR 10 crores, INR 12 crores. So that is the debt. It will go just like that if there are no fresh borrowings, if there are no further expansions. So it all depends on -- it is a very subjective statement.
Correct. Correct. And sir, lastly, I wanted to ask what's our current dividend policy?
Dividend policy, we are paying more than 20% payout of the profit. You have seen that. Rather from day 1, the company has been increasing dividend every year. Even during tough times, the company had made -- paid the dividend interim as well as the final dividend. So of course, you can -- the CMD is also online, and he's hearing your voice. Maybe if all goes well, if nothing more, it will remain the same. But for sure, there will be an increase, as Mr. Jain has a policy to distribute his company, some of the profits to all the investors. So every year, there's definitely a steady increase. What percent it is, it all depends on the profits.
We have next question from the line of [ Anish Mankad ] from JSP Investments.
Congratulations on a good set of numbers. So my first question is on our supply chain's agility to handle much more than anticipated demand like we saw in the current quarter. So what changes have you made to ensure that? And what are the risks that you foresee going forward?
As of now, we are not seeing any -- yes. So we are very closely, really working with the customer's requirement, and we are very sure to fulfill all the requirements as and when the -- their perception of production, basically getting almost low rate.
Okay, sir. So my second question would be, even though the plastic-molded parts have its requisite advantages, the ramp-up of them has been subdued for us. So what -- how do you see the segment pan out in the next 5 years?
It's basically...
Basically, we are in automotive lighting and mirrors. So this last big component is given by the customer. So our main line is automotive lighting. So basically, this is a sideline. This is one of the sidelines, like sheet metal, like this because like we are making Mazda -- all Mazda, Hyundai, Eicher Royal and Fiem and other people. So basically, these are all sidelines, not our mainline. Our mainline, main focus is only on lighting, lighting then mirrors.
Got it, sir. Sir, my last question would be in the capital allocation policy, have we considered a stock buyback rather than a dividend given the current valuations of the stock?
Yes. We're unable to predict.
Okay. But look, have you considered it on the Board, sir?
No, no. Not now. Not now.
[Operator Instructions] We have next question from the line of Arun Agarwal from Kotak Securities.
Congratulations on good set numbers. So my first question is -- yes, so my first question is on the revenues. If you look historically, we have always sort of outperformed the 2-wheeler industry revenue growth on a questionable basis. And I think adding new businesses to our -- to the automotive land business has played a good role in on the industry growth. So just wanted to have your outlook as to how do we see this particular strategy for the company going ahead? So apart from the growth, whatever we see on the land side, what do you see -- how do you see the new businesses or maybe if there are some things you could share could possibly play a part, which could grow a bit for you over the next maybe 5 years or so?
Basically, we are in OEM business. And any new thing to be won is handed by the customer, will definitely will be great here. That is how we have been able to do EFI, this carburetor and this sensor. So basically, we are open for this thing. And moreover, it is built on the feasibility.
Yes. But sir, something that we sort of now think within ourselves and in your plan, these are the few components that you could possibly add in our portfolio and you don't see how that pans out for you all? So -- and something on that side? So the customers to come with certain [ understanding ], or?
Basically -- yes. that scope always remains clear. It is not that we'll deny something, but is -- it is always in the customer requirement and then how we can make good progress on it. Own things for us for any new business.
Yes. We are very, very closely working with our customers. So we build on their ideas, their thinking and then based on the profitability for investment, we have to go through everything, then only we do further.
Sure, sir. Sir, my second question is on the margin. So we know you have reported very good margins this quarter and partly because of a lot of cost savings we had also some in the cost. Historically, we had on the EBITDA side, done 12%, 12.5% to 13% sort of margins also. And I think early in the call, you have said that with volumes improving, we could be 50 to 100 bps improvement in margin because of operating leverage. But could you also quantify as to the cost savings that we have done? Some would be structural in nature. So how much of that margin saving we can see we know that would continue going the next result?
Actually, if you see results of this quarter, if you study the parts from the cost of employee cut, there is a reduction in overhead expenses also though the turnover is same, is still the overhead has got it. It is down by 0.70%. So of course, endeavor of the company is to effectively cut all the cost, which is unnecessary and keep the morale of the employee very, very high. But -- and all increase in margin for sure depends on the increase in sales. So endeavor of the company would be to first, maintain the margin of 12% if the sales are flat. And if there is a very good demand on the sales, you will see that increase in margin is very well there. So it -- how much it will be half but kind of 1%, that depends how much is the top line is growing.
No, no. Basically, your question today, how we're saving at that rate? We are looking very closely. We are, by revisiting debts, all [indiscernible] all will be more like reducing our waste, administration costs, traveling costs, inequity, will bring down the cost. So many, many [indiscernible] where quarterly, we have put the solar, the energy. So we are going steadily and very interesting to have impact on other side also.
Yes, that is other expenses we have.
So these are the cost-cutting basically, apart from the sale [ rate ].
Yes, correct.
[Operator Instructions] We have next question from the line of [ Sufian Lakawala ] from Lalkar Securities.
I just want to understand, do we supply to Suzuki Access?
Yes, Suzuki Access, we are supplying taillamp and blinkers and mirrors.
The new model or the old one?
Sorry?
New model or the old model for the Suzuki Access?
Yes, new model. Old model also and new model also.
Okay. Only tail, not the head?
Not the head.
Okay. And second, lastly, I just want to understand how is the business environment you see from October onwards from the client's demand for the products?
Yes. Of course, the volume, which is being projected by customers are very good. And we hope sales will be booked from customer side, whatever projections we see momentum.
Can you see the momentum is better than Q2?
[indiscernible] much better than Q2, but depends after Diwali event. [indiscernible] That's how it's come to. So visibility's around early Diwali is normally 15%, the impact is very high. But sometimes, the impact is down. But due to the COVID, it doesn't seem that. So let us see and wait how will this come through. By then, we will be able to.
[Operator Instructions] We have next question from the line of Ashutosh Tiwari from Equirus Securities.
Yes. Sir, any thoughts on this PLA scheme announced by government? Any areas which is beginning [indiscernible] to us or it's still too early to say?
See, this is recently announced. So this is at policy level and the detail is yet to come. So once the details come, we are now monitoring. That means we are aware of this kind of own incentives from the government and definitely try to take benefit if something comes or if it's suitable to use.
It can be announced later what the policy is for because it is just the announcement. There are so many announcement earlier on.
This announcement will support the industry in [indiscernible].
But any idea which are the areas in auto where maximum [ both ] happens in India?
No, no. It all depends on the detailed guideline actually. And so many detail -- unless the details come, it is very difficult where this benefit can be taken.
[Operator Instructions] As there are no further questions from the participants, I'd now like to hand the conference over to the management for closing comments. Over to you, sir.
Yes. I believe we have been able to reply to your queries adequately. I would like to thank everyone for sparing your valuable time in participating in the con call. I also take this opportunity to wish you all a very happy, safe and [ fruitful ] Diwali. Please stay safe and be healthy. Thank you very much. Thanks a lot.
Thank you. Thank you so much.
Thank you very much, sir. Ladies and gentlemen, on behalf of Fiem Industries and Monarch Networth Capital, that concludes this conference call. Thank you for joining with us, and you may now disconnect your lines.
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