With your ventures into now semi-conductors, aerospace, health and medical CDMO, how do you create cost or capability synergies that enhance the overall ROCE at a group level? And which of these synergies are quantifiable in terms of capital efficiency?
Thank. I'll take this question. Look, everything is driven by our focus, which is to be a globally preferred sustainable solution provider. So, with an open mind and this 'Not Yet' attitude of Motherson, of course, we get a lot of opportunities, but we are extremely selective for the ones that we go after. And they have to show us a possibility to deliver 40% ROCE down the path. I mean, of course, there is an investment time. There is a time where these capacities have to be built up, new Greenfields have to come up , the orders have to be won. But you must remember that we only get into these businesses once the customer support is there and the customer is directing us to be able to do it. So, w e kind of prove it out in a small way, perhaps in India , a nd then we have global ambitions with that product or that technology or that industry, and that customer usually is a blue chip or a leading customer with the global spread and depth. So, the whole idea is to again, with us being hugely successful on the automotive side ; it was actually a platform that was built by papa on this operational excellence, financial discipline, follow the customer kind of mentality and we're using that same strategy to go after these new industries. And of course, we have strength in, for example wiring harness , we have strength in plastics, we have strength in all of that. So , we go after those kinds of places where we can draw from the group synergy, but it's not only to that. We also get technology partners. For example, the consumer electronics, we have a global partner called BIEL, who has the technology and our job is to be able to scale that. So, we kind of de-risk that with having a partner who's fully capable. There are many such ways and means. We don't just follow one path. But the business plan has to make sense, and it has to show us a path to 40% ROCE and it's the entrepreneur's job to be able to make sure that we are able to get that funding and the team over here to make sure that the financial discipline is there and that they execute to perfection. We've shown that in the last 5 years, having zero business in aerospace and consumer electronics to we are now , with God's grace, one of the fastest -growing companies out there with a significantly large order book , executed for the world's best customers in these industries. I hope that gives you the confidence of our capability as we were able to convince those customers. And of course, as these places scale, you will also see the translation into ROCE and that the capital promise of returns is also maintained.
In the modules and polymer division, there is a very good margin improvement we have seen, and you have talked about this potential margin improvement in the earlier quarters as well. So, can you talk about what, I mean how much of this is sustainable? And is there more left in terms of the benefit of the transformative measures you've taken in Europe?
Yes. Thanks for that question. I think we have talked about this with the previous quarters where we have done a lot of acquisitions also, and we have tried to streamline because the growth has also come in those regions. The customer asked us to do a whole bunch of acquisitions over there, as you know, in the last couple of years and it was a good time to kind of streamline and restructure and make sure that all our plants are positioned for the long term. So, we did announce that in the previous quarters of some restructuring costs that we had taken and you're seeing the benefits of that. Of course, I think there's always more to do , to drive more efficiencies with the onset of AI, with the onset of more automation, our focus on robotics, our in-house capabilities. We believe that there is a lot more that, of course, we want to bring in and drive efficiencies. As you know, Motherson does not believe in export business. We source locally, produce locally, supply locally. So , we have to be constantly on our toes in every country, whether it is low cost or high cost to be able to sustain our operations as that's our responsibility. So, this is an ongoing thing. But as you can see, obviously, the steps that we had taken have resulted in the positive way that customers are still getting the quality that they deserve and are recalibrating , even the customers doing a recalibrating of what's coming out in EV and ICE and there was a lot of uncertainty over there, which models will take off and not. And as we are getting more and more clarity as well and our restructuring thing is happening, I t hink we're able to deliver better performance, but more to come on this.
We keep saying about the pressures that the European OEMs are facing within China as well as this risk whether Chinese OEMs can become bigger in Europe. From your perspective, is that something that worries you? I know you're present with both Chinese and the Europeans, but the overall exposure of the business is higher in Europe. How do you assess this risk for your business?
I don't think we take a guess as to which one is going to do better or not. Look, automotive business, you've been there for some time, but we've been there for a long , lifetime actually. We've seen somebody going down and then with the next model, next thing, he is back on the top. So, there's much to say. I don't think this thing is going to happen with EVs as you project it. But anyway, time is on our side. We are very sure that the best car, which you as a customer will choose is going to do well. So, it's not going to be only Chinese cars, which will do very well or something like what you alluded to. I think everybody has a very clear need and focuses on the kind of kilometer it does in a day, and that kind of decides which kind of vehicle he's going to go for, but time and again, we don't want to get into that particular argument. But I think time will show that actually everything is going to come back. I would recommend that you please have a look at the Neue Klasse from BMW, and you will understand what the west is capable of.
On the electronics side, so your plants have started to ramp up and there's a bigger facility which will come in 3Q FY '27. But beyond this, any more activity you're seeing there?
Yes. Look this plant that's coming up is fully already spoken for. But this has opened up a lot of doors for other customers. We will be coming back to you in time and telling you about other wins. Of course, our idea is to completely diversify this business. But showcasing that we can scale a large plant for a new customer, for a new technology, for a new product is something ver y important and something we take very seriously as our reputation is definitely on the line. So, to be able to attract even more customers, we have to show them what we are able to do. I think that's happening now. The customers are extremely interested in our capabilities and how we have been able to expand this business in such a short period of time. And I think we are extremely excited about what that brings. So, more to come on this. And definitely, this will be a place where we will look to have significant wins of new customer names and product lines as this new plant comes up and we can showcase it even more.
First question is on the strong ramp-up of aerospace and the consumer electronics business, which you mentioned we have done in the quarter. So possible to give some indication like of the INR 4,000 crores emerging business revenue in the quarter, what percentage, if you can throw some color about the contribution from the consumer electronics and aerospace businesses in this quarter?
Siddhartha, as you know, our emerging business has registered a fair amount of growth, is more than 50%. It has mainly two major components. One is that two set of businesses which you called out, which has registered a fair amount of growth. Consumer electronics has grown sequentially by 75% and Aero has also registered a year-on-year growth of north of 40%. We have also consolidated Atsumitec first time, and that is also getting reflected in emerging businesses. At this stage, we are not giving breakup at individual business level, but it's safe to assume that these businesses will continue to grow at a rapid pace. As we had called out on Page 15 of our presentation, the consumer electronics capacity will be doubled by Q3 of fiscal '27 and which will also help us in improving the performance of this business and its contribution to the emerging businesses in the quarters to come.
But like for consumer electronics, you mentioned that we will be probably touching the run rate of 16 million plus by end of FY '26. Where are we right now? If you can give us some indication of the current status, it will help us appreciate the increase in the next few years?
Again, I can't give you the exact number, but it's a fraction of that.
And on the Modules and Polymer segment specifically, like you mentioned that the growth had sort of multiple tailwinds from both forex, commodity and all. So possible to highlight what will be the euro growth for this business in the current quarter? And given that backdrop, I mean, the margin improvement has been quite commendable. So, some more thoughts there that given the challenges we see in some of the businesses globally, commodity costs also rising, is some of this improvement on the margin sustainable or there can be some cost pressure we can expect in the longer term or medium term going ahead?
Over there, the commodities obviously play a little bit, but it's plastic which is the most dominant one. There will be a small impact for the copper prices and things like that, but not as meaningful , as it is on the plastics and engineering plastics side. Most of the expansion in the margin that you're seeing over there is definitely due to operational improvements. There could be some small ones due to currency movements and stuff like that. But in majority, we are seeing that the restructuring measures and everything that we have put in into Europe, that's playing a part. And a lot of our operations globally are more stable and growing in this area, and especially the India side also contributes to it and that's also doing fairly well. So new model launches, new programs that are coming in, some of the old programs leaving out, restructuring, all of this is helping and which was under pressure in the last few quarters because we were waiting to do all of this. And like I said, from here, we definitely look to push on. There's more to happen from here.
This aerospace to semi-conductor pivot is, that's a clear long jump, right? I mean what is that single constraint to your mind that might hamper it to scale? I mean, is it customer trust you think, because we are still early on or is it engineering depth or maybe capital or leadership bandwidth? And what concrete steps you are taking to make it kind of a repeatable playbook and not a one-off?
That's the way Motherson works. We are known as a 'Not Yet' company. Once we get into something, once we put in our resources, we put in our engineering, we put in our capital, we don't run away. Tell me which plant we have closed in the last 20, 30 years? Which technology have we entered into and then walked out? I mean we can go on. But we are that company , w e will never say no. We are known as a 'Not Yet' company. These are things that we all sit down at the top and we agree. So yes, this is worth something that we want to get into, and we want to be somebody in this particular game. We are not enthused just by turnover numbers or something and we are not a company which runs away. We've never run away. So , we are there for the long haul. We would definitely follow it through. That's all I can say because it's not very subjective. So, that's why I can tell you that.
And just one final question on capex. We have done about INR 4,200 crores capex so far in the 9 months. Where will we end up this year? And any guidance for FY '27?
So earlier this year, we gave guidance of around INR 6,000 crores plus 10%. We believe our exit number would be well within this guidance. As far as next year is concerned, allow us a quarter. During the March year -end call, we'll probably give you update on the next year's capex outflow.
Just to clarify because we do a lot of R&D and experimentation, is it fair to say that we follow kind of a "fail-fast" model and we only scale up the winners or what is not fragile or what doesn't die out of those experiments and then we gain the confidence and the sort of empirical evidence that what we are putting the capital deployment strategy is fit for the purpose. And is that how you also approach?
Yes, off course. For the automotive side, where we are quite mature, we are able to do a lot of those things in-house and have those customer relationships for a very long period of time. So , we're able to do things which we know that they want to grow , or they're interested in and they want to grab. For the newer ones, we have a relatively more de -risked way by joining up with partners like we have done in consumer electronics. And even in the aerospace side, if you see our entry was through partnering with a company called CIM Tools, which already had that customer portfolio and those technologies in there. And all we have to do is work together with them to further enhance it and to scale it. So that's the strategy that we use. We do not go for any blue ocean kind of technologies where we are burning a lot of money and hoping that the customer would grab it. It's a more consistent approach and more derisked approach where we follow the customer.
Vaaman, with aerospace now Tier 1 at Airbus in semi-conductors and emerging as a high-margin sort of an adjacent space on the same precision platform, I mean, which two, three operating metrics over the next, let's say, 2 years would prove this is a self-reinforcing aerospace semi-conductor virtuous kind of a circle, not just parallel growth or not something which is a flash in the pan kind of. How will they differ from aerospace earlier Tier 2 phase, because you have jumped from Tier 2 to Tier 1. I mean I'm more interested in what can we track to see if this aerospace semi-conductor virtuous circle is taking shape?
I think first thing is that you must look at is our customer list. With customers like Airbus and Boeing and what they are seeing and how much they want to grow in India. On our Investor Day also, we had people on the panel that were talking about it. I think that should really give you the confidence that they are here for the long term. They're putting up meaningful capacities, and their order book wins are significant in India. So, that makes it quite there for the long term. I don't think this is a fad or something like that. So, t his is something that's important. I think we have built partnerships , i t's not something that's happened overnight. We were seeding this aerospace division since 2017. It took us multiple years to break in and get a customer. It was not something that was easy and took a lot of time as well. And again, that should give you the confidence that it's not something that is 'off the cuff '. Semi-conductor on the other side, of course, is something that is extremely new in India. You will seeing only a few companies that are investing to go after this because the entry barriers are quite large. There's a lot of technology that is needed. And we're working with, some of the top names in this industry, not with more Tier -2s or Tier -3s kind of companies. We're talking about companies with a big stature in the U.S. that are looking to set up footprint in India and support their supply chains globally. So again, all the customers that we are going after are the well -reputed names or the top names in the semi-conductors. You take their names, they'll feature in the top 5- 10 teams of the category, which have multibillion-dollar market caps, sometimes even hundreds of billions. These are very, very strong companies with strong development cycles and very strong entry barriers to come in. So if you come in, then you make investments, you foster relationships, and it's something that is quite difficult to do. So again, all of this has been extremely calculated by us, a lot of time has been spent on it. And all investment decisions come with this are here to build capability, foster partnerships with even technology partners that are, again, putting equity into the company so that they are fully versed into it. And that's how we do business. We're not taking the car off for nuts-and-bolts kind of operations that can be moved overnight with the wind. We are building capability, technology and partnerships here.
Just quickly on the integrated assemblies facility segment, we have seen a very marked improvement in margins. Could you just help us understand what has driven this? And can we expect this to be sustainable going forward?
Yes, I can start. Look, Integrated assemblies has now been with us for a couple of years. So of course, now they are fully integrated. They are drawing on the group strength. They are being able to get into a lot of their numbers with a lot of depth with t he group strategy and synergy and our customers are also appreciating that we bring a lot more synergies to the table because integrated assembly only does the assembly side and the manufacturing side is not done by them. But in the last couple of years, working together, we've also been able to enhance their capabilities, go after some product line that they were not doing before, doing some more manufacturing in-house to support their kind of operations. And, of course, the focus on the financial discipline that Motherson brings together with the expert leadership of Frederic over there, really turned up the keys to the next level. You're seeing an excellent focused approach to improve the margins over there, which was the playbook of Motherson because this was not a sick company or something like that. We paid a fair value for it, and we saw the synergy strength that it would bring t o the next step for the assemblies and logistics side of Motherson and that's playing out. So hopefully, this continues, not hopefully, I'm sure it will continue with the focused efforts. And the team will continue to grow from here. This is, again, an excellent example of focused execution and teamwork that Frederic and the whole team were able to bring and show an improved performance even in tough conditions.