Automotive Axles (NSE:AUTOAXLES) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Automotive Axles Limited Q1 FY 'twenty seven Post Results Earnings Conference Call hosted by three sixty one Capital Market Private Limited. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Sailesh Raja from three sixty one Capital Market. Thank you, and over to you, sir. Yeah. Thanks, Larry. Good morning, and thanks to everyone for joining into Automotive Axles 1Q FY twenty seven earnings conference call. From the management side, we we have with us mister Nagaraja, who is present and the whole team director of Automotive Axles Limited, mister Raman K, interim CFO, and mister Krishna Kumar, whole team director, METOH India.

1:08 So now I'll ask Mr. Nagaraja for an opening remarks, post which we'll open for Q and A. Over to you, sir. Good thanks, Shailesh. Good morning, everyone. Thanks for joining us for this FY twenty twenty seven quarter one post results call. First of all, as you are aware, the market was relatively moderate. But with the even with that, we had really good results. If I can recall, this is probably one of the highest EBITDA percentage we ever achieved. What we will do is, Raman will renew through the financials, and then we'll open up for question and answers. Over to you, Raman.

1:58 Thank you, Angie. Good morning, everyone. Thanks for joining in for the earnings call today. So I'm happy to present the following set of numbers. So for the quarter... For the q one ended June 26, the revenue from operations stood at $500,168,000,000, and we had our other income, which includes treasury and non treasury income, which is about 103,000,000. So this was also, you know, like, there was a lot of market recovery that helped us, you know, have a good other income in the quarter. And overall, our cost of raw materials, like overall, our metal cost was about 65% for the quarter. So this is kind of helped by some one off that we had to a small extent and then also some favorable mix from the products that we have sold in the quarter. So and then, you know, our employee benefit expenses came down when compared to sequential quarter, mainly for a couple of reasons. In the last quarter, we had deployed a lot of workforce because the volume was quite significant and and then we had pulled back. And the other thing that we had in the last quarter was also when we had the long term settlement, we had taken some impact in Q4 as well, which is now moderated in the current Q1.

3:17 And our other expenses remain fairly, you know, in line with the revenue. So we rather expenses stood at INR $813,000,000. So overall, the EBITDA stood at INR $7.00 2,000,000, which is at about 13.6%. In the last quarter, we reported 12.4% EBITDA. The same time last year, we had reported 11.7 EBITDA. As Nagaraj mentioned, this is one of the highest EBITDA that we have reported. And moving down, I think, you know, we had the EBIT percentage also stood at about close to 12%, which is again close to 1% improvement quarter over quarter and close to two percent improvement year over year. So see, broadly to notice, there is some bit of help because of the mix that, you know, helped us also, you know, in this quarter.

4:07 And, you know, the momentum is is that, you know, we'll try to hold on to this. Especially in the other expenses, some bit of details are like, you know, we had some cost headwinds, especially with respect to the post war... During the war, you know, the LPG, and we had some increases in the tools and consumables. So all that, we have been absorbing the cost. We are in the process of negotiation and all that. But at this point, this takes into consideration the cost increases that has happened in this quarter. And moving on, the profit for the year stood at 455,000,000. Obviously, net of the OCI, it is 452,000,000 at about 8.7%. So again, you know, this is... And with the EPS of about 30 rupees. So I think in in the q one in the last four years, I think this is the highest quarterly EPS that we have reported.

5:01 So that's from me. I'm happy to take questions after Kishan's view on the market. Over to Kishan. Thanks, Raman. Good morning, all. So I would probably bring our attention to how we ended the last FY, especially the Q4, and then how we were looking at the overall FY 2027. Most of this was the fact that FY 2026 was at the peak going back to the FY 'nineteen levels. And then usually the Q1, we see a dip. Even though we did see a dip almost like a 30%, but that quarter Q1 ended up to be one of the highest in the past several years at almost 110,000 vehicles in M and HCV segment.

5:56 And just yesterday, the MPC was giving the further outlook for the rest of the year end quarters, But also, there was a very specific mention on how the manufacturing industry performed in Q1, which also ended up in a very high GDP growth rate of around 7%, outperforming the earlier forecast. So Q1, as such, the market performed very well. There were a couple of tailwinds. The momentum was carryforwarded and OEMs did a very good job in maintaining the production and the sales in both retail and dealers. Overall, it was a product mix as well as the new products that we launched, all that helped us keep that momentum from Q4 of last year.

6:46 And as a result, as Raman explained, our financial performance also showed up in a very similar way. So with that, probably, Shailesh, we can go for questions. Thank you. We will now begin with the question and answer session. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Sukrit Patil with EyeSight Fintrade.

7:35 Please go ahead. Good morning to the team. I have two questions. My first question to mister mister Nagaraj is Beyond the regular outlook, what are the top two to three execution priorities you are focusing on in the next two quarters? And alongside that, what do you see as the biggest risk in demand shifts, the regulatory changes or competitive pressures? And how are you preparing to manage them by strengthening Automotive Axles position in the driveline and Axle space? That's my first question. I'll ask my second question after this. Thank you. Okay. So thank you, Mr. Patel. I will take the first part of the first question and then probably Krishan can answer the second part.

8:21 So like we mentioned, our first priority is to ensure that we are ready with the capacity investment, what we have been doing to recollect that we are implementing a Phase I and Phase Ia of CapEx. And nearly 40% of those investments are already done and we have already started some level of production in that. So with this, we are expecting Q4 to be again a stronger demand might be coming there. So we are preparing for our self. At the same time, like what Raman mentioned, one of the other area we are looking at it, how do we continuously improve our automation, bringing in more of automated lines, again, focusing on both safety, quality, as well as improve our productivity so that we can continuously not only improve our top line, but at the same time, to our already strong bottom line.

9:33 Kishan, can you take up the second question second part of the question, please? Yes, sure. Thanks, Mathuraj. Specifically, regulations and some of the trends that we have been very closely monitoring. If we look back probably ten years ago, it was all about the emission norms in BS3, BS4, and then there was also this load rating increased and some of the fuel economy norms. So we are behind that. All our products today are protected and performing well on those changes. And then in the recent years, last four years, the BS6 change and then the OBD1, OBD2 that followed with that. We do see minimum impact on our product lines because of those recent changes. Going forward in the next four years up to 2030, we are anticipating ABS norms and Type two endurance braking and the BS7 as well. These three may not have significant impact on our product lines, but what we are anticipating in addition is the more stringent pass by noise knobs and HDFE Phase 1B. So both of these, what they mean is our products have to be more noise sensitive or should be having noise levels less than the current levels what is in the industry.

10:56 And other trend that we are seeing in the industry is the increasing horsepower. There was a time when 60% to 80% of the market was within 120% to 180% horsepower. That is significantly shifted over the several years and it will continue to do so. And we will be in the range of 300 plus horsepower in most of the heavy duty applications. And for that, our current product strategy and that products that we have launched recently and the ones in the pipeline are well matched. So with that, I think to summarize the regulations, we don't see a big impact on our product lines in the next four, five years. Considering the market trend, yes, our products are getting bigger.

11:41 There is a clear trend of higher HP and also shift towards the fourtwo tractor trailer for which we already have a few products in the pipeline and in the market as well. My second question, Mr. Kishan, your sense is, I just want to understand a forward guidance from a partnership point of view. How are you aligning Emeritus, HCS Indian collaboration with Automotive Axles to drive long term growth? And what risks do you see in global supply chains, technology adoption or industry dynamics? And how are you preparing to mitigate them? Just want to understand your guidance on this. Sure. Thank you so much.

12:27 Let's talk about the next five to ten years horizon for the CV industry, mainly in the inventory. So there are a couple of things. Once, as I said, the regulation, the product mix, which is typical for any industry and that Indian industry is also following. The advantage for us is we already have products in the Western world, which have gone through these changes. So it's about a matter of bringing them to India to specific applications because our OEMs still operate in a very different powertrain segment. So when that happens, it's bringing the product here. So the technology is available. The timing is important. Second one is, which is more on how we are working as two companies working together to serve the market.

13:18 How is the demand shaping up in the domestic market? And what kind of changes in the product will impact the capacity and the investment what AL is making planning to do. This is not new for us. This is something we have been doing for several years since the formation of both the companies and we are continuing to do so. One other aspect which you also touched about is, we are also looking at as an overall global supply chain for Cummins dry plant systems, how India can play a role. So this is again not new, but with the new investments coming in, have been more deliberate on what actually is our strength and where India can play a major role in contributing to the rest of the Meritor or Cummins drivetrain systems.

14:03 So both of them together, which is more of a commercial vehicle and the export scenario, we are also looking at the other industries like defense, for example. And defense is a very totally different ballgame. It requires a lot of patience. The gestation period for the product is much longer. And since they are all tender based, require a totally different set of mindset. Even though there may be some overlap in the products, but we also need certain unique features and unique, I would say, the demanding applications that defense poses, we need a differentiation in the product line. And then the last piece is the aftermarket, where there are things that we are doing within the MHOSL, where we are selling through our distribution the captive, the product.

14:51 And also we are this is more for MHVSN. We are also increasing our all mix product range. But that also will grow with the market. One watch here is as we get into new products, the end market and the application demands, more reliable products. That means that will have some way at a starting from maybe five years from now, we'll see because of the increased reliability, the parts that used to get replenished probably within like one year or eighteen months will probably extend to three years, six years. So this is bound to happen with the technology progression that we are seeing. Thank you. Thank you, and best wishes. Thank you so much. Thank you.

15:45 The next question comes from the line of Milan Jain with Green Portfolio. Please go ahead. Hi. Thank you for the opportunity, sir. My question is around the CapEx line of the one twenty two Sorry to interrupt, Milan. You're not quite audible. Could you please use your phone on the handset mode in case if you're on hands free? Hello? Am I audible now? Yes. A little bit. Hello. Yes. So my question was around the CapEx line of the INR120 crores program. My question is that roughly about how much is the genuine growth capacity versus the equipment replacement? Because I am asking from the guidance of the MSCV volumes broadly being flat about 5 lakhs till FY 'twenty, FY 'thirty and the shift of eighttwo to fourtwo kipershift is actually lowing.

16:37 So I want to understand what's the breakup of that CapEx program? So it is a little bit challenging to split it in that particular way. The way we are doing is, obviously, when we are putting up a new CapEx, it is to either to upgrade the existing line or equipment or to completely replace that with a fully automated equipment. So the bottom line is we are putting up enough capacity to see the next two years to three years, whatever the market growth is going to happen. And like Kishan mentioned, and also keep us ready so that the peak volumes which comes in a particular month or a quarter and also the opportunity available for the potential exports we will be having there. So roughly, again, the capacity depends on the product mix. Roughly I would say that we are looking at anywhere between 25% to 30% capacity improvement.

17:50 Okay, all right sir. Also my second question was around the next CapEx phase that in this partly on the export outlook and also the Bharat floor that has acquired the American Axles Indian business. So I want to understand that how our exports and OEM opportunities are allocated between American Axles and Automotive Axles? Again, we did mention during our last several last couple of investor calls, American Axles and Automotive Axles, we are competitors. We don't have much information about what American Axles is doing. But we are focusing on the our existing customers and trying to get additional increase our share of business and also acquire new customers and and our exports is to the mainly for the other CDBS global entities.

18:49 So that way our focus is on what we already have and how we can improve upon that. We don't have we cannot comment on any of our competitors' strategy or their plans. Okay. I understand, sir. Thank you. That's all from my side. I wish you all the best. Thank you. The next question comes from the line of Saket Kapoor with Kapoor Company. Please go ahead. Namaskar, sir. Hope I'm clearly audible to you. Hello? Yes, please. Yeah. Yeah. Namaskar, Thank you for... Firstly, the opportunity, sir. I joined a bit late. So in your... If you could have explained in the earning or or opening remarks also, there there is a margin expansion on a q on q basis.

19:41 So is is it that... Is it a result of any price hike that we have received that has been factored into? Or what explains this margin expansion? And going ahead for the current financial year, what should be the steady state of the PBT margin or EBITDA margin that we envisage? Raman, you want to take that? I'll take... Yeah. I'll take that. Okay. See, like, it's... See, our our our top line kind of, you know, varies along with the market. So if you see, you know, in the last quarter, I think we had reported about $606,100,000,000... 669 crores of revenue. This time, obviously, the market was at the peak. This time, our revenue stands at around 527 crores.

20:27 So... But when you ask about on a percentage terms, you know, that is the range, you know, somewhere between seven and a half to eight and a half percent is the margin range, you know, that, you know, that you can, you know, at least, you know, as a as a overall band that you can take. So we will be operating at that level. And I was mentioning the path, not the EBITDA. So I think this is this is something that we have as a target, and we'll be working in this range. Okay. Sir, even on the on the 2030 road map also, this is what the margin range would be, or we will improve upon with the with the product introduction also and our capacity also moving up? And second point is, sir, I think that for the current year, we would be... There will be an additional capacity that will come into play. So how will this current year shape up in terms of the the volume understanding if you could throw some light?

21:25 Okay. See, I think your previous question was about the the next few quarters. Right? So that's why, you know, I gave the broad range for, you for the for the quarters. But when you see at at 2030, obviously, again, the market is is expected to to to move to move up north as well as we are also increasing our capacity. So that's gonna bring in some economies and and and and the scale benefits. So, obviously, we will be moving up up the ladder in terms of the margin, keeping 20, 30 aspirations in mind. So I think I believe that that answers that part of the question. And second thing on the capacity expansions, see, like, overall, when you see our our return on assets has has always been, you know, pretty strong.

22:10 So I think I think we will we will be continuing to focus on that, you know, maintaining our return on assets or rather the return on capital employed and and trying to improve that upon. I hope that answers your question. I am trying to get some more sense of how are the the incremental volumes likely to pay play in the in the in the ensuing year? And also with our new product introduction, I think so, and also with the incremental capacity, how are things shaping up for Automotive Axles for the year 2627? If you would just give a some more ballpark understanding in terms of some qualitative number that would suffice. So I think we try to avoid giving kind of a future guidance.

22:59 But broadly, as Raman mentioned, as we bring in capacity, there is a certain business if you are not able to address it either because of a capacity constraint or otherwise. Those are all the potential addressable business opportunity that we will be looking into. But at the same time, like Raman mentioned, if the market volumes like a previous year, if it goes slightly higher, we'll be able to do a much better conversion at a much better margin compared to the existing one. So the bottom line is capacity we are putting just to make sure that we are ready when the opportunity comes.

23:45 Otherwise, in this industry, if you don't put the capacity, you cannot even go after any potential new opportunities. So, we continuously, like Kishan mentioned, looking at adjacencies, looking at the defense segment and all other areas and also increasing share of business with existing customers. So the prerequisites, we have the required capacity, not just at internal capacity, but also through the supply chain. Okay. Sir, the the small point which I'm trying to make understand, given the current business environment, what what are what are the likelihoods of our company performing in comparison to the previous financial year in terms of volume growth? And secondly, sir, I think to read some notification from the state government bus department in terms of some some floor height and all were pending when we... You addressed your investors in the last call. So any further clarification on the same and the introduction of those Axles into the batches? What's the roadmap?

24:50 If you could just articulate these two points? Kishan, can you take that, please? Yes. I would probably answer that much more broadly. So we keep talking about the product mix impact. And product mix is something that is pure end market demand. For example, there are seasonal demands, for example, the buses, school buses specifically. They all get into the order board just before the school starts the replenishment. But today, what we are broadly seeing this year and maybe most part of next year, the demand is through the replacement cycle for the overall industry. So the vehicles that sold, let's say, 2017, 'eighteen, and then there was a glitch in between because of the COVID, they are now getting into this eight years, seven, eight years, nine years service period from the customer. So that is going to be a big shift in the volume that we are seeing. But when that happens, in 2017, 2018 we did not have the heavy tonnage GVW vehicles. So today the end customer has an option to upgrade to probably let's say instead of two six by two, he can go straight away to a 10 by two or a four by two tractor trailer. So this is where we are focusing right now. So we want to ensure our capacity and the products available for the demand, they are balanced. So that we hit the numbers with the right product mix. The second is, which is a segmental

26:20 shift, which is what we were talking about in the earlier investor call is about the massacre. As I mentioned last time, the floor height is probably now every OEM has a different way of addressing that. So which is good news because most of the cases, there is no need for a completely different product. So it's like within the existing product portfolio, whether it is with us or not, OEMs are able to manage it. And our plan for the product launch in the bus, that is still in the pipeline, the validation is going through. And I mentioned about the noise requirements, the noise level, lower noise level requirements. That is where we are focusing. We don't want to do another iteration knowing that there is a classified noise regulation that is coming in. So we want to ensure the product that we launch has everything covered in terms of regulation and also market needs. I hope that answers very broadly what you are trying to ask.

27:18 Just to conclude here, so the reason which we were very about is now behind and now the the product introduction will happen as per the plan. So that understanding is correct before... Because there was some ambiguity earlier, sir. That is true. We we just try to understand the regulation. That's true. Thank you. Okay. And lastly, sir, on the on the on the incremental on the volume increase, if you could just give us some some sense, how is the current market dynamics from the OEM ship... Shaping up in terms of their program schedules? And also with new product introduction from our side, what should investors look forward in terms of the volume growth? Because turnover is a function of RM conversion.

28:05 And secondly, did we lost some market share from our main OEM for this this quarter in terms of income in terms of total pie, sir? These two points, if you could just come more like, sir. Okay. Let me give a very high level outlook. So beginning of this year, we had a projection which was 15% to 20% lower than the last year. And now the revised forecast, which is also what the industry is speaking about is it could be less than 5% to 10% compared to the last year. And just for reference last year, the industry volume was 480,000. So if you do the math, we should be north of 450,000, best case same as last year. So that's how the rest of the year may span out. And Q4, as expected, is going to be another peak quarter for us, barring the headwinds that we see, the geopolitical tension and the monsoon effect. These are the two things that we are watching very closely. However, currently, because the delayed monsoon that is helping the industry because there is still good amount of freight moment and the replacement is also happening.

29:20 Coming to the other part of the question, share of business. Product mix impact definitely has some impact, but that is not new for this year. That is always. So when there are more buses and that is exactly the reason we want to launch the bus cycle, we do see a slight dip. But it's not a loss of share of business. It's basically how the market behaves. Okay, sir. Thank you, sir, for answering all the parts. Only, sir sir, then to conclude, so q two is also in line with what what exactly we have exited q one since you said that the red monsoon and all have kept the demand engine on the uptick only, and this is what should be the the steady set of deliverables for... Since we are now in in the month of August. If only if you would give us some qualitative number of how the environment has shaped up post the exit of the first quarter.

30:22 I'm there, sir. Hello? Hello, Please go ahead. I'm just thinking, already I answered in terms of the overall industry outlook. The best case is match last year and the trend will be very similar, reasonable Q2, increasing demand in Q3, barring the monsoon question that I had, and then Q4 ending at a peak. And that's how we see as a qualitative over on year. Thank sir. Thank thank you for all the the elaborate answer and hope to connect again. Thank you to the team, sir. Thank you.. Thank you. The next question comes from the line of Samarth with Chavak Merchant Securities.

31:14 Go ahead. Hello, Am I audible? Yes, Samarth. So I have only like two questions. First is our overall sales growth has been lower than the CV production in the country for quarter one. So have we lost any market share to our leading customers? And going forward, as even American Axle enters the larger trucks, the larger truck axles, do you see any potential loss of market share after two, three years? Thank you, Samaji, for the question. The answer largely is the product mix and how we were able to convert some of the increase in the market in the last year last quarter. So combined to that, maybe you do see a dip. But if you really look at how we performed from the previous quarter of last year to this quarter with a 30% lower market, we were actually better than 5% as per what Raman has already given the financials. And also the conversion of the new business, the products that we launched that also contributed largely to the bottom line there.

32:37 Coming to the second question there, the company that you are referring, it's not new in the industry. They have been there in the industry for several years. And both of us are doing businesses in the same segment with somewhat similar products and customers. So for us, our strength is our product strategy and the manufacturing capabilities that we have in country. So I don't see that is a threat. It is any two competition how they would play out in the market and which is independent in this case. Sir, can you be more specific like in terms of market share, like which are the categories where we have a good market share and where do you where we overlap more with the product profile of American Axles?

33:29 I can talk about our segment wise presence. So our heavy presence is in the heavy duty segment. That's globally also our strong foothold. So all the new products also that we are planning to launch in the heavy duty. When I say heavy duty, it's 40 ton and above. And of course, the competition data is available in the market. You can get independent reports. But the overlap today is minimal, which means the focus for both the companies are probably different. And we are, as I mentioned, following the market trend and to be sure we have the right product when the trend changes. And that's what we have been doing for the last thirty, forty years. The next question comes from the line of Kapil, an individual investor.

34:31 Sir, my question is regarding defense and mining application. What percentage of our products are in these sectors are used in these sectors? And do we have a planned strategy to increase those market share in defense and mining? Thank you, Kapilji. Defense, as I mentioned, it requires a totally different mindset. It's not a high volume nor very, I would say it is more application demanding high intensive product. That is number one in terms of product. Second is the way it stands out from the date we get the RFQ to the SOP. That can be anytime between three ten years in some cases. So we have been very watchful. We do want to diversify the revenue, but then we don't want too much dependency on defense also because it requires if we really want to develop something unique, it requires a lot of investment and a complete different bandwidth.

35:37 So currently, our presence out of the revenue that we are generating, maybe defense goes 5% to 10% depending on how the tenders are awarded. Some years, it is lower. Some years, when the tenders come back to back, it can be higher. Coming to mining, that's something we are not really pursuing because the deep mining or the big mining equipments what we see in India. One, the volumes are very low. Second, even though we may have the product portfolio globally, that is a totally different animal altogether. They are very different from the on heavy products. So what we are typically how we are typically engaging with the customer is to understand their overall strategy, how they want to play and then introduce or offer them our global product portfolio.

36:28 We had few products in the past, but unfortunately, those OEMs could not deliver them into the market. So it's again a very niche market, I will not say we want to stay away. It's just based on the size of opportunity and the bandwidth and the focus what we have today in the M and HCV without compromising that. That's how we are playing. Okay. Fine. Thank you. The next question comes from the line of with Time and Tide Advisors. Please go ahead. Hello, sir. Good morning. Am I audible? Yes, Shika.

37:14 Yes, sir. I just actually had a few clarifications. I joined the call a little late. Could you help us with our export percentage for the quarter? Hello? Yeah. So see if we can add focus of now close to eight to 12%. I'm sorry to interrupt, Raman, sir. You are not audible. Please come a little closer to the microphone. Is it better now? Yes, sir. Please go. Yeah. So, Shikha, our exports are are traditionally in the range of eight to 12%. I think that's been, you know, the... What we have seen in the last year. So this time, we were, you know, slightly slightly better off in terms of exports.

38:03 So we were at about 13% for the quarter on the overall price. To remain, you know, above the 8% to 12% range for the year, or this was just something that happened this quarter? No. It was it was only a marginal shift. So, like, if you see, maybe average, you could take even 10, it's only upon, you know, close to, you know, 3% upwards. So we would be in that range. Eight to eight to 12% will be the broad range overall in the year. You know, obviously, you know, if there are if there are opportunities that comes, you know, we'll be... You know, maybe we may fare better in the future. Understood. And so there were a few new products that we were developing, especially for bus access. Can you shed some light on that? I think there was earlier some change in law because of which we were a little tentative.

38:56 What is the scenario now? And how are we expecting this to move forward? I can take that. So regulation changed on the low bus, which is what the reason we were reviewing back the product spec that is behind us. Now we do understand all the OEMs have different strategies and it doesn't matter to the design specification of the product spec what we were planning to introduce. But on the future looking, forward looking regulations that are coming in, especially from the passer by noise standpoint, we are again going back to the drawing board and ensuring the products like what we have is also going to cover those the noise levels that the industry will need. So this will require a little bit more design iteration to get to the right detailed gear and other things that will contribute to this. So that is work in progress.

40:00 And we are pursuing this considering we want to be present in this in the longer, not just the short term market share gain. Right, sir. And other than this, do we have any other new products that are to be launched or that have been launched in this quarter? So we are launching the new Tandem Axles, which is already in pilot batch and it's getting into production mode as we speak. This is a one sixty tandem, so we are launching this with one of the last customers. Got it. And, lastly, I think last quarter, we had we had discussed that for around 30% to 50% of Ashokalin's requirements, we are the single sole supplier.

40:54 So would that still hold true for us? And can you comment a bit on our market share with that? Yes. That's how we want to play in the market. We would like to have all the new products that we launch. We want that to be a single source. But however, each OEM, it's not just about the industrial, each OEM has a dual sourcing strategy and timing is what they look for. So broadly, yes, we want to have a combination of common, also single source, the status for the products that we have launched. Sorry, what was your second question there? About the market share, sir.

41:40 Yes, market share is I answered that question in the previous answered that in the previous questions. It is largely the product mix impact. So the new products that we launch, the segmental ship that we see, seasonal ship that we see, depending on that, it is not a fixed number. It always changes month over month, quarter over quarter. But what we ensure is we get what has been agreed with that customer, that minimum share of business. Understood. But broadly, we would have maintained our market share with Ashok. That's true. Yeah. That's true. Alright. Great. Thank you. Thank you for answering my questions. The next question comes from the line of Anand Darshan.

42:33 Please go ahead. Good morning, sir. Thanks for the opportunity and congrats on the great market as well. My first question is on the cost reduction measures, mean, this quarter, we did see a sharp rise in steel prices even the gas cost went up. So how did they manage to control those conversion costs? So I'll take the first part, N. G, if you don't mind. Yes. So on the steel prices, see all the commodities are always settled back to back with the customer. So we don't have any impact. It's a complete pass through of all the commodities, be it the steel, casting, forging, any commodity increase will be passed through. The second part of the question on the conversion cost. Yes, there were some price increases that are there, so which we have observed this quarter, but we end up in parallel, we are working with our customers to offset the impacts in the future. NJ, if you want to add anything, please?

43:34 No. Good, good. And also like last time we told just in time our electric electrification of one of our furnace was completed. So that also kind of helped us to manage production in spite of we are running with a lower or less availability of LPG. So my next question had had mentioned export percent had improved to 13% in the current quarter. So also it's still Meritor Group and non Meritor, sir. And did we find any logistics issue in the export part?

44:24 Okay. I'll take that. Again, we export only to the CDBS global, you know, centers or global plants. We always have the, you know, this is almost for the last two, three years. We always have one or the other, you know, the logistic is always a challenge. See price rates are changing kind of randomly. Sometimes it is really ad hoc. So we are trying to, you know, bring in a system where we are trying to plan very well ahead, especially for some of the imports what we do. But at the same time, in many of the cases, the export is Xworks. So we kind of get support from our customers also.

45:11 But that's the nature of the freights, sea freights are always challenging, non predictable. But so far, it was not a major hurdle for us at this point of time. The next question comes from the line of Kapil, an individual investor. Please go ahead. Sir, kindly explain in simple terms what is the support we are getting from Meritor. We have extend our agreement was extended till '27, have read.

45:59 So how it was in the past? How it is present? And what would be the future? The support and the role of Meritor or the collaboration with Meritor from a company. Yeah. So as you can see, you know, the Meritor gives us the... All the new product licensing, and they also help us test those products for India specific applications. And also the global products cannot be replicated as is because our the local or domestic truck configurations are totally different. It requires a different kind of you know, the endurance testing. So, Meritor not only brings in this expertise, both in terms of developing or updating the design to suit India application, but also do a significant application analysis.

46:54 And then also as a part of the service agreement, they also work with our customers in terms of applicating these products. And they also kind of help us in formulating the product strategies and then go to customer go to strategy. So that has been already being done and that will continue for the foreseeable future. The next question comes from the line of Saket Kapoor with Kapoor Company.

47:44 Please go ahead. Sir, only a small clarification on the part. You mentioned that we were mentioning in a degrowth for the industry for the current financial year at 20%, and now we are revising it to 5%. I missed your number on the same. Yes, I can take that. Yes, you are right. Beginning of the year or even before that, when we were looking at the forecast for FY 'twenty seven and knowing where FY 'twenty six ended, we were looking at 15% to 20% lower market. But today, the revised forecast that we are having for rest of the year, that suggests it could be 5% to 10% within that range. The best case is if the industry navigates all the geopolitical cost escalations, the monsoon plays out well for the rest of the year and then we see a comeback from September, October and the festive season helps us, then the best forecast we have is going back to last year.

48:48 Okay. And mainly it is because of the geopolitical and the logistic issues that led to the lowering? Or was it the higher base and consolidation is expected from the industry for the current year? Means what actually what factors led us to lower down first of all the estimates? Our view is how the last year ended. And to certain extent, what has started happening in Q1 and so Q4 of last year and the Q1 of this year, the geopolitical tension. Combined both, we had a lower but to start with, it was all how the last year ended. And we kept the same outlook considering what is going on in other headwinds that I mentioned about. But now the delayed monsoon is actually helping a better stay even today. Otherwise, we would see a dip in this quarter as well.

49:39 So that is holding on. And then the festive season and coming back to a strong Q4, that was always there. So I think the Q2 Q1 to some extent and Q2 is going to help us bring volumes, which otherwise we would have considered lower than last year. Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for the closing remarks. Yes. Thank you, Shailesh, and thanks once again for all of you to join this call and then getting the clarification that you are looking for. Hopefully, the team has answered all your questions.

50:26 And then again, just to kind of summarize, like Kishan mentioned, we are looking at the market which may be 5% to 10% lower compared to last year or at the best case it can be matched last year volumes. Our share of business has been steady, while there is always a focus on looking at how we can continuously work to increase those share of business. So we have both headwinds and tailwind. The headwind is a monsoon. We don't know how it is going to play out. Barring that, there is a potential opportunity for us to look at keeping that exports the sales steady and stronger.

51:12 So with that, we are signing off. Thanks once again for having confidence in Automotive Axles. Look forward to the next quarter's investor call. Thank you. Thank you, sir. Ladies and gentlemen, on behalf of three sixty one Capital Market Private Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.