Some notes from Q4FY21 concall:
- Manpower optimization, interest cost saving resulted in higher profitability in FY21.
- Depreciation being higher in Q4 due to all capex being capitalized is the reason for lower PBT in Q4.
- All new client business is on track. Whatever forecast of volume was there, they have already started, we are on track.
- New capex is on time, and is fully ready. Trial and validation is going on.
- In the past we have always improved the profitability/margins. Input costs are inflating. Only way out is to have a very serious thrust on efficiency improvement. Reducing wastages. Improve utilization. We do have agreements to pass on RM prices in some places.
- By next year, 3-4% of our revenue will be from components which end up in EV. One of our clients is launching e-scooter in Europe.
- In terms of Value added, differential gear is much lower than transmission gear in both ICE and EV.
- Even in EV, gears we are producing shall have more value addition than differential gears.
- EV gears are going to be high precision, higher technology required for manufacturing. Gross profit margins will be much more. Technology is different. Investment is also much higher. All our New technology and capex is EV friendly.
- For the new capacity We are billing already. Capacity will remain lul for a year and then be utilized. Validation happening.
- Austria ZF client, chassis components, top end premium car. BMW 7 series car. We are entering in car segment. This will be futuristic 2022 car. (this is their entry into premium passenger car market) We have also bagged 2-3 more projects from them. Are in discussion for new projects.
- We involve ourselves when new platform is being developed by customer. We get concept drawing. We work in tandem with customer R&D and our own process R&D team which is manufacturable product which gives good value for clients, and good margin for us. We do build to print but give our ideas to customers too. 15% of all our people work in process R&D with clients.
- One of the Major contribution in business is assembly now. Technology is customer driven. We invest our money very judiciously. We dont create tech then hunt customer, customers come to us we always work on customer driven model.
- We created Entire drive or kinematics of the e-scooter for the european scooter is something we are working on. They came to us few years ago this was outside our competence zone back then but in last 3 years we ramped up. We invest where customer demands. This electric scooter will be on our drive train. We will be a single source for the next 10 years. If they are saying certain volumes, they will commit to it.
- In one instance in terms of error tolerance: Customer wanted 50 PPM error margin, we are doing 20 PPM for the last 7 years.
- I call myself custodian of shareholders funds, not MD of company.
- High margins are a mix of many things. I dont claim we have pricing power. Customers are very large. But same customers if i give concurrent technology solution which they dont get from other suppliers, every minute spent is 200 Euro. But if we give them good solution, we are able to get good pricing. They keep upgrading vehicle platforms every 2-3 years, in that way we get increased business. If we provide solutions, they happily provide money.
- 1st we started with after market them moved to OEM. Even with piaggio first we were in 3W then we went into a critical 2W. Margins come with value addition. Our vision is always to keep upgrading our value addition for client every year.
- Word flows very fast. We supply to BMW and KTM. Generally competitors dont buy from same supplier. But we have that command because of customer experience in the past. We provide entire technology under 1 roof. Entire Gear Solution is provided by us.
- 10 years ago there was a japanese guy who was our customer. In 2007-8. We were 30cr company. He told Mr singh that for your company, you should create a pyramid which has a wide base. 1st 7-8 years we only grew 5-6%. I took their advice very seriously. Key requirement then was becoming a key technology company. Hidden strengths which the outside world might not know. Those 7-8 years we were not focussing on topline growth. Very silently working on creating a strong technology focussed company. Since the company is so strong, we are growing.
Disc: invested, owned