My first question was on integrated assemblies. Can you talk a bit directionally about the outlook for FY 27? You have highlighted 2x new program launches in comparison to '26, would that mean that this segment can have a strong growth in double-digits, high-teens for next year?
Yes. Look, I think it was very important year for MSAS. I think you've seen that Motherson has very strong capability in integrating large sized acquisitions and you can see the hard work done by the entire MSAS team and how they've been able to leverage on Motherson ecosystem and our customer relationships, our purchasing and the entire ability to look into more opportunities of growth within the customer group. So look, we are extremely pleased. Frederic and the team have done a fantastic job over there. They have really looked at all the places where we had leakages in terms of small red units and converted those, work closely with the customers winning new programs and also diversifying the base and bringing different product groups also in with meaningful discussions. So definitely, we see growth to happen this year as well. Of course, it all depends on how many cars the customers sell. I think in terms of program wins and where we are looking at in terms of diversification of the things that they are doing and the growth opportunities, we should definitely see meaningful growth come in MSAS. I can't guide you exactly on the numbers because a lot depends on the customer sales that happens since they are completely correlated to that. But we're extremely hopeful and positive that they will continue to grow from here.
I had three questions. My first question is on the cost increases that you highlighted. For example, overheads going up, energy costs, polymer prices going up. From the past, I recall that during the Russia-Ukraine crisis, when the same thing had happened, gas prices, polymer prices had shot up, there was a lag in getting the pass-throughs from the customers. And if I recall right, while copper is contractually arranged in terms of the pass-through, overheads and costs such as polymers are negotiated. Can you please help us understand what the situation is now? Is it contractual with respect to these overheads and polymer or is it negotiated?
Yes, it depends on customer to customer. There is a mix of both, because all customers follow their own styles. And definitely, the partnership with the customers is only getting stronger with the volatility and everything that there is in the market because they want meaningful supplier partnerships and no one is really looking to pull each other under the table just because of one macroeconomic event, which benefits one over the other. So, I think in times like this, the partnership and the things that are the relationships that we have with our customers really comes to the front. As you know, we have done numerous acquisitions, turned around companies for them, entered new products and they also understand that there are some things that are out of our control. So yes, in some customers, there definitely is a lag. Some customers follow the contracted approach. But there are always meaningful conversations to be had, and there is definitely a lag also that happens depending on the commodity. We were also putting a lot of reorganization kind of measures in and driving operational efficiencies and also trying to reduce some of our red units. And we've also had a very strong order book win. So a lot of those things are all playing off. Some of the new units have also launched, which are now taking businesses. So those fixed costs are being covered. So, it's a combination of all those things that you're seeing that strong performance has led to and definitely a lot is to do with close communication and relationship management with our customers.
My question was on consumer electronics division. I think the next plant will open in Q3FY27. So just wanted to understand what is the utilization level currently and how the revenues will pace here? Also, when I look at the top customers, consumer electronics customers are not reflecting in that list. So, have we included those customers also or where are they?
Yes. So I'll take some of it and Gandharv will probably support me on this. Look, the third plant utilization is zero right now because it's in start-up phase and then you will do the testing prototypes and all of that and that's when it will really come up. And once it comes up, actually, the timing is it goes very fast. So, unlike automotive, which takes a couple of quarters to ramp up or a year or so also to reach the highest volumes, on the consumer electronics side, when the order starts, it really comes at full-fledged levels. So, the timing that we've given you, that's when it will come up and the utilization will go significantly higher at that time. Right now, it's the smaller units, GF1 and GF2 which we are using, which are almost practically fully used up in what we are doing. So, the meaningful kick will come as soon as the third plant is operational and takes on revenues. And then you will see those numbers as they come because the order book for that only comes immediately before the program kicks off. That's when we get the full visibility. But we think that it will be at very, very good levels better than or as we budgeted for it for what the construction that we have made. So overall, extremely positive on that aspect.
On the restructuring, can you give us an update what percentage of the restructuring is complete? Should we expect more benefits to come through going ahead or are we already seeing most of the benefits?
Yes. Look, I think a big chunk of it is done. Of course, you're seeing the situation that is happening in Europe and a lot of macroeconomic issues continue to plague the region where volumes growth are not as meaningful as we have expected in the past, but yet Motherson continues to grow through acquisitions and increase in the value content that is going up. But yes, I think we definitely do see more possibility for us to restructure operations. And I think we will also continue to acquire operations and resize them to make them perfect. So, as you can see, we have significant headroom for acquisitions. All the acquisitions that we have done have been integrated really well. The customers will continue to look at us for solutions. And at that time, more resizing will be required because that is why those assets have come into problems, right? So, from that sense, I think we are operating at a fairly strong base. We will further drive efficiencies in our business, but the more meaningful volume growth will definitely come from acquisitions that we envisage will come just like they have in the last few years.
In your breakup of emerging businesses, if I look at lighting and electronics and I'm assuming that consumer electronics is part of that. Despite the very sharp uptick in consumer electronics, the revenue growth in lighting and electronics is just about, say, 30%. So, is it fair to say that the lighting business has had a fairly tepid year or am I over estimating the impact of consumer electronics here?
I think lighting and electronics definitely had a very strong year. I mean, I think, again, you're not seeing that meaningful rise because GF3 is still to come up. As soon as GF3 comes up, you have to understand that GF1 and GF2 are minute size compared to what we are building at GF3. GF3 is the largest facility that we will have in Motherson. It's a size of 33 football fields that is going to come into commission. So that I think you should really look at this number next year. And then you will see the real impact of the electronics business that comes on stream. On top of that, we are doing numerous more initiatives. You've seen some releases also about Motherson Electronics, where we are looking to do our own PCBAs, our SMT lines. We are building a lot of strength on that, even on the wiring harness side, a lot of focus is going into electronics with the new technology that is coming over there and the EVs and things like that. I think it's a wait and watch.
GF1 and GF2, you mentioned that in Q4, you're hitting the annualized run rate of 14 million to 16 million units. So GF3 will be a multiple of this or like any broad indication are you giving right now?
I can't give you, but yes, it will be multiple of it because that's how it's designed to be. It was us to prove to the customers that we are capable. And now we are building a big plant to come in. So, wait for a couple of quarters to really see that number because the most exceptional part of this business is that the order book only runs for that 1 year, right? The next year, you get the next order. It's not like automotive where it's a gradual increase, then moves into high, then the thing starts to decline. It goes straight 0 to 100 because you have to produce as much as you can as soon as you win the order for the selling season.
Just starting with the consumer electronics. Earlier, we had talked about INR 2,600 Crores capex in that business. Where are we on that number and in this capex guidance of next year, have we increased it or is it already included in this?
Thanks, Binay. You're right. That was the guidance which we gave last year. For the current year, we are in the process of finalizing the numbers. It should be broadly in the range of what we guided in the last year, but allow us a quarter to come back to you with the firmed up numbers.
The 16 million exit number that we talked about, that is unit number. Any guidance on what is the revenue per unit?
Look, we can't guide on that yet. I think, again, let it become meaningful by GF3 and I think that's the time where we will start to talk more about the exact numbers once it's a meaningful size. Right now, again, just GF1, GF2 are too small to be able to disclose those numbers in a meaningful way. Let GF3 come out, and you will see a much clearer picture and that will have the meaningful impact for you as well.
On aerospace. We have two facilities coming up in the first quarter of FY 27, both in India. We had a very strong FY 26. What kind of growth do you see in the coming year?
Look, the order book for the aerospace is at record number for us. 1.6 Billion is the order book. So, with these two facilities, we'll cater to that additional demand. I think this year, again, we are hungry for more growth and perhaps if we are able to secure some big orders, and also look at some acquisitions, that number will continue to grow. But these two plants are for the new capacity and order book that we already have in hand, which is about 1.6 Billion.
So we're doing a capex of INR 2,600 Crores in a consumer electronic business, that's probably larger than most of the EMS companies in India. And the kind of growth that we've done 7.5x of Y-o-Y is also incredible. It's like we found a new TAM to deploy our D.E.M.A.L. capabilities. So, going forward, this year also, can we expect maybe not 7.5x, at least to 5x growth Y-o-Y for the consumer electronics business?
Look, this is a very key point for Motherson. We have realized electronics is core to a lot of the products, not only touching the automotive side, but of course, as an independent segment as well. And that's why we are deploying more and more capital to it, building more competency, adding on to the team. You'll also hear about potential new joint ventures that we are forming, acquisition opportunities that are strategic and inorganic growth. So, all of this will definitely lead to meaningful multiples of growth in the Electronics division. Now of course, a lot depends on again, our ability to execute and the customers' confidence in us, but we are completely committed to having a lot of growth in this division.
During the Q2 PPT, you had mentioned that our order book for the consumer electronics and aerospace business was close to USD 3 Billion. And today, you mentioned that our aerospace business is close to USD 1.6 Billion order book. So, is it fair to assume that the rest of it is consumer electronics?
It's safe to assume that next time I have to be more careful with my words because you are, but yes, look I think overall and it's not just that one plant that we're looking at. It's complete electronics, like we are buying a lot of our own PCBAs, from our SMTs and things like that as well. So all of that will meaningfully contribute in this coming year because our own Electronics Company, which is going to be doing a lot of SMT lines that we are setting up that will contribute. And we're going to bring a lot of that purchasing in-house. So that, along with the consumer electronics, along with our increasing focus on electronics and the other segments. That's something that we are targeting. Now it may come plus/minus 10% to that number. But yes, we are hopeful that it is on the positive side and continues to grow from here.
Broadly, this consumer electronic business JV, even though it's JV, it'll be consolidated, right? And what margins are we looking at, close to 20% margins for this business?
Look, I would want even more, but look, all I can say right now is that with GF3 scale, I think it's definitely better than what our group is doing at the moment. Of course, I cannot give you an exact because we don't guide on margins, but this should be helping to increase our ROCE because the investments have been done and the returns will start to come. And like I said, give us some time, I think we are very excited about the business.
My first question is regarding our global OEMs or our customers, they have recently kind of given write-downs on their EV investments. And also in recent quarters, they've mentioned of supplier compensation regarding that. Have we received some of that in this quarter?
We don't know what you're talking about. I don't know which guy has given compensation to this in the past for the investments and all that. We were never on that. We were always on the right side of the thinking that everything is not going to become EV. So we were agnostic to the engine right from the beginning. Motherson is a financially strong Company. We have, that's why they're winning business from our customers. They have a deep relationship with them. On our products, whatever our contracts work, that is what we have rightfully taken from our customers and given them what they expected from us, the product and the quality that they expected.
When is the Nexon's deal going to be completed and when will we start booking revenues?
This is Pankaj here. We expect the closure sometime in the end of June, beginning of July. And that's the time when it should get consolidated with the regulatory approvals being in place. Some of them are currently in progress, so that's our expected timing.
When we look world over, we are seeing that yields are going up across the board. So want to understand your debt, is it protected from short-term spike in yields or will we see higher interest costs going forward?
So, we have a combination of both fixed and floating. It's a diversified portfolio. To a certain extent, it's protected and for the balance, it's a conscious call which we have exercised. But the net debt to EBITDA is probably at the lowest level that we have seen, even though we have had the strongest capex outflow. So, I think we will continue to reduce this number going in the year. So, wherever it is unfavorable or moving in that direction, with the cash flow generation that we are doing, we will have a significant opportunity to actually pay that out through our positive cash flow.
On EVs. It's 22% of order book. Can we also get an idea of what percentage of revenues are EVs currently and will most of the ramp-up in revenues now come from EVs given the scale of order book?
No, not at all. I think the revenue component is 11% around that. But look, the split - well first, I want to say that, look, we are engine agnostic in the sense that we are not really doing too much parts, which is directly impacted. We are able to support those variants that are both EV and non-EV. That's the majority of the business, even though we have done some strategic acquisitions to start looking at that, but the majority of the business is still hugely agnostic to what the powertrain is. The customers moving forward into only an electric kind of a mindset, have now shifted and said that they will move in all kind of powertrains. They will also offer all solutions. They will also offer ICE. They will also offer electric and they will also offer hybrid. We do not envisage a huge shift happening in a short period of time. Surely, electric is growing in the portfolio, although it keeps moving up and down and has volatility. But we believe that the market will never be so that it will only be electric or something like that.
On the aerospace business, would it be fair to say that out of the INR 2,400 Crores odd revenue, a large part of this would still be a business which is still being done in Europe, but your expansion is mainly India. So, there should be a large scope for expanding margins here as these revenues go up?
I mean you always hit the nail on the head. Actually, we were looking at the order books and the Indian order book is perhaps even larger than what we have in the European side. So, the growth is coming in a tremendous fashion. I think you all saw on our Investor Day that we had the customers there and how they're looking at Motherson to partner and grow their order book share in India. So, it's extremely exciting what's happening on the aerospace side. Not only are we looking at that, we're also looking meaningfully to penetrate the semi conductor business through the capabilities in aerospace because they are complementary.
Going back to the auto business. We have this one comment on Slide number 2, where we are saying that European OEM launches in FY 27 expected to support growth. And we know that Europe is having a weak summer for auto production. These launches that you talk about, are they the usual course of business or this year, you have an exceptional number of new launches coming through?
Yes, it's a very good point. I think, I guess, one, our restructured footprint is going to help us because we are definitely leaner in these locations. And definitely, the new order wins are coming with exciting new attributes in the car. All of them are content heavy and value increasing. As you can see, a lot of the new EVs are coming with a lot of feature-rich content. So, a lot of the new cars are coming with exciting new technologies, exciting new materials and the way that we are going after these with the content heavy kind of stuff, we definitely believe that these launches will help both meaningfully in top line and bottom line for us.
In wiring harness division, there is an extremely strong margin expansion of 170 bps Q-o-Q, and this is despite the copper price increase and also some contraction in margin in Motherson Wiring India. So, what is the driving factor for this margin expansion? Is it mainly operating leverage across the global entities like PKC, Stoneridge?
Yes, it's mainly because of the operational improvements. And since it's a global business, so there were some entities in some parts of the world, which had not performed well earlier, which have done better in this quarter. And you're right, there is an impact of copper, which is a lag, which we should be recovering in the coming quarters. And as we move forward, we see also that markets recovery in the North American side will also come in, which should also help us to become even much better.
Input cost inflation like commodity, there is an automatic pass-through with some lag. On energy gas price, freight cost, there has been some increase in the recent months. Would these higher cost reflect in Q1, is there an automatic pass-through here with customers or would that happen through negotiation?
So, all these costs in the quarter gone by, the impact was there only for a few weeks, which was not necessarily very significant. But you are right, in the current quarter, most of the industries have incurred these additional costs. In our businesses, generally these are matter of negotiations. We have very strong relationship with our OEM customers and over the period, albeit with the lag, we should be able to recover most of these increase in the cost from the customers.
Leverage position is very strong at 0.8x. And there was one comment where you indicated that debt will continue to reduce. Given the uncertainty, wouldn't you be looking at more inorganic opportunities or would there be debt reduction? How should we look at that?
At Motherson, we continue to evaluate inorganic opportunities. Whenever we come across any inorganic opportunity in line with our philosophy, generally, at the behest of the customer, will certainly explore. But as Vaaman mentioned as a response to earlier question, we'll continue to generate healthy cash flows, and we will use these cash flows for supporting our organic growth in the form of capex and wherever required or possible we will also retire debt to ensure that we utilize these cash flows in the meaningful manner.
The order book that we have right now, taking out the aerospace, do we expect it to increase by Q3 FY 27. And would the entire execution come in FY 28 for the order book given the order cycles for 6 months to 12 months, as you mentioned?
No. So, for consumer electronics is that much. But the automotive, it's more 2 to 3 years depending on how we have won it and that will go on for the next 5 years. So aerospace is even longer than that. It will come within, again, 2 years or a little bit less than that, but that will go on for maybe 10 years, maybe even longer than that because as you know, the airplane platforms last for sometimes 20 years, even longer than that. Now you see that the complete strength of Motherson, the D.E.M.A.L, you have the fast-moving consumer electronics space where everything is already decided in 1 year, the new product, the order win, the order execution it is all within 1 year to move towards the medical devices, which is perhaps a little bit longer towards more automotive, which is even longer towards aerospace, which is the longest and goes all the way up to order execution of 10 years' time.
In terms of net revenue, what would you say your 2030 Vision would be?
The net revenue? It's gross revenues, it's a gross target because it's a vision for the entire group, and that's a 108 Billion gross revenue target, not net. Yes. And I think that is something that we have done over the last 50 years as well. We have very high ambitions. So the idea is to think, to think out of the box to get ourselves out of the comfort zone and to live our purpose, which we have defined for the Company. For us, top line is vanity, bottom line is sanity, cash in the bank is reality. That's our dream. That's our ambition. But we will be opportunistic. At the same time, we will be financially disciplined and we will only go after opportunities that the customer wants us to be. So, we are preparing ourselves for 108 and we will be ready for 108. The opportunities have to present themselves.
On the emerging business. If you see the precision metal and modules segment, that has seen a stellar growth of 2.7x. If you could just talk a little bit about what is driving that and what is the outlook going forward for that segment?
Great question. I think that's another key area for us to grow. I think machining is a core focus for us. You've also seen the growth happen meaningfully there because of Atsumitec acquisition will reflect over there. So, a large part of the growth over there. And I think, again, the team has done a wonderful job to integrate these acquisitions that we have said add meaningfully to the top line and bottom line. While maintaining all the other ratios and improving them for the rest of the group. The business itself is also growing. We have done a couple more acquisitions in this also in the past, like Rollon etc, that we had announced. And all of them are firing really well and machining continues to be an area that has growth and has meaningful contribution and something that we are extremely focused on because that does not just pan on the automotive side, but also on the aerospace and potentially consumer electronics in the future when we win those kinds of businesses as well.