Q3FY26 is best-ever quarter on revenue/EBITDA after Q1FY26 worst-since-IPO.

There's a lot of uncertainty relating to tariffs - how are customers reacting? In terms of schedules and long-term thinking. Is there a need to evaluate setting up facilities outside India in the US?

Risk can be modeled, uncertainty is not modellable. In the last 1.5 months I've had 20 times the calls from investors and journalists than I have from customers. Apart from one customer, nobody has really called us. Net net we have 40% of our total revenue to US, in which we have identified 3% where there could be some risk of either revenue loss. Almost everything else seems to be, at least for the two-year period, nil to low risk. Our competitors in both our major product categories tend to be from China. In an event in which tariffs are imposed on every country, it is basically then your relative pricing that comes into place. The gap has actually widened much more. 3% of our total revenue is what we would say is that medium risk in the next 12 to 18 months.

Could you talk about the whole traction motor opportunity for India, particularly railways and traction motors?

Traction motor right now we are in two-wheeler and three wheeler. Of course we want to expand to light commercial vehicles, buses, passenger cars, but that will happen in due course. We foresee at least for this year, it is growing quite rapidly on its own. We are developing high voltage traction motors because to approach the bigger weight segments or larger vehicle category at low voltage is not a sustainable way of doing it.

Going to this humanoid opportunity that you talked about, is there any timelines? What stage of development are we at, and competitive landscape - a lot of this is China focused.

Currently this supply chain is pretty much dominated out of China. Now if you look at what is happening in the world, it is actually a global trade reset. When that supply chain shifts, people who are capable and who have the competence to develop parts around gears, reducers and motors have a far higher likelihood of success. We are at a certain technology readiness level, but success in these things is binary. We've been working on it for almost a year now, so we are fairly confident, but commercial success is the only success that will matter and that remains as always binary.

How do you think about your ongoing investment in Mexico for compliance with USMCA? Would this plant be more of an assembly plant and what is your investment in Mexico plant?

We are going ahead with phase one. It is currently in progress. Our first few customers are actually Mexico companies producing there. So it isn't for USMCA, for us at least, if that customer re-exports to US, that would be their thing. The first customer is actually not in the HS codes in the auto tariffs. Rohit, you can talk about. At this moment, we are looking to invest a number which is below $10 million. That's the first stage.

How should we think about margins? FY25 adjusted for 19 crores is around 25%. Should this be back to over 26% as the key customer production normalizes.

How it will go forward will depend on how each different geography does. We are only at the end of the first month, and tariffs still haven't kicked in the US. Railways will start adding from 1st June. Now the moment you add an 18% EBITDA business to a 27% EBITDA business, obviously the numbers will not stack up to the same 25-26. So end of next quarter we will give you a range, but if you just do the math, 27x80 and 18x20, you will come to somewhere closer to between 24 to 25.

Is there any impact of China's restriction on rare earth magnets on production of traction motors?

We have inventory right now, so nothing yet. We are working with our suppliers to do get them the export licenses. Magnetization can be also achieved with lower grade magnets. They can even be achieved by ferrite magnets, to be honest. It just makes the motor much heavier. There could be compromise on the product bit that you let go of certain weight restrictions in which we are working with our customers. So this is not an unsolvable problem. We are also exploring other sources and other suppliers who are not in China.

With respect to non-BEV business, our revenues have consistently declined for last 3 quarters on a YoY basis. What are the challenges and how do you expect this overall business to evolve in the next 18 to 24 months?

Non-BEV revenue, there is no challenge as such. Non-BEV revenue is basically starter motors. ICE is actually declining, so starter motor revenue is on a natural decline path as EV penetration goes. In Driveline, it's actually not anything to do with our thing. We have a large market share. However, if the industry, the underlying industry does not grow, it is obviously challenging to grow when you already have high market shares, especially in India.

Who do you think is likely to absorb the tariffs?

As tariffs are taxes on whoever imports it. We mostly do either Ex-works or DAP, so we are exporters. We are not the importers. Now 25% tariff is not something that can be absorbed by anyone because nobody makes 25% net margin. Which is why eventually the consumer, the end consumer pays for it in the form of higher end product prices. In 3% of our total revenue there is medium risk, but the risk is not a margin dilution. It is actually that that business might just disappear. Eventually, the consumer pays.

We have seen some of your US customers refocusing on some of their ICE projects given the softness in EVs. Are you seeing any green shoots for your traditional ICE business in the coming years?

Strangely, yes, so that's been one of the I'd say weird second order impact of all of this which is going on, that we are now suddenly getting starter motor RFQs which had kind of dried up. Last couple of years we were not getting any starter motor RFQs. We have suddenly have a lot of starter motor RFQs. In fact, last quarter we won a couple of large starter motor orders. Nobody will set up capacities for a declining product - it would mean people who are relatively better positioned which means they are outside China and maybe outside Europe, which pretty much means you have to be in India or US, you will get a lot of new orders.

Are there any plans to open offices or factories in China as they seem to be leading EV vehicles?

We have a plant in China, where we do these suspension motors, so we have a team there. So that's already there. I don't think ignoring China is a wise option. So we will continue to work. We are not political or ideological, we are a company. We will continue to work with our friends and customers in the US. We will continue to work with our friends and customers in China. There is nothing concrete for a second plant, but if it happens, of course, we'll let you know.

Sona was planning to develop a Magnetless motor. Have the constraints on rare earths pushed them to accelerate this development?

Yes, that would be the wise thing to do, that we should accelerate, there are limits. I think we have updated on this before that it wasn't reaching the required efficiency. The technology is very sound. The efficiency wasn't coming to that. In 2021 itself, we had announced the development of a non-rare earth, or rare earth free motors. Those we already have. Net net, one conclusion we have to draw that if any material's supply can be used as a geo-strategic negotiating tool, we must find ways to counter that threat in the future. It is a less dependable world now.

Does your software have adjacency for humanoid robots?

NOVELIC's specialty is in radar sensors. So as of today, not really, because the first wave of humanoid robots that are being developed are not going to be used in situations that are very hazardous. Radar comes into play when cameras are not enough, like you are going in rain, snow, where visibility can be restricted. Currently that is not the case, so there is limited applicability of radar, which is why motor and drive line is what we are focusing on.

With EV two wheelers in the market for some time, strategy of OEMs of insourcing versus outsourcing - which way are OEMs going?

I think there'll be a mix, as it has been in every component over the years. Some will insource, some will outsource. Whoever is outsourcing at some point will think it is a great idea to insource and vice versa. The total market is so big, which is the one good thing about working in a large industry that you will always have room to grow despite all of these ways.