In an interaction with Sunil Bohra, Group CFO and CEO (Safety and Comfort Systems), Uno Minda
The domestic automotive industry has been providing multiple opportunities of growth with changing consumer behaviour, use of advance technologies, preference toward clean energy and government interventions through safety regulations
In Q1FY24, the company’s revenue surged by 21 per cent on YoY basis to Rs 3,093 crore while the net profit zoomed by 24 per cent on YoY basis to Rs 173 crore. What were the contributing factors to your performance?
Uno Minda has been consistently reporting robust growth every quarter. We continued our growth momentum in Q1FY24 as well. Our diversified product portfolio built over decades with focus on world-class quality and advance technologies has been the key reason for such a sustained outperformance. During the last quarter we have witnessed growth amongst all our product segments led by automotive lighting, alloy wheel and electric vehicle-specific products. We recently commissioned a new four-wheeler lighting plant in Gujarat and a new EV-specific components plant in Farukhnagar, Haryana. Both these plants are ramping up production with increase in volumes from underlying orders. With a good start, the rest of the year also looks promising with multiple plant commissioning and start of production for various new orders.
How does the acquisition of Minda Kosei Aluminium fit into the long-term objectives of the company?
The passenger car alloy wheel industry has grown multi-fold in the last 4-5 years. During this period, the alloy wheel application has increased from 13 per cent to about 40-45 per cent now. Minda Kosei Aluminium (MKA) in which Uno Minda already had a majority stake of about 77 per cent has been the key beneficiary of the expanding alloy wheel market, commanding a dominant market share. We are confident that the passenger car alloy wheel market will continue to grow manifold with increasing application factor, wheel size and vehicle volumes.
Considering the growth potential, we acquired the remaining stake of 22.64 per cent in MKA, making it a wholly-owned subsidiary. Besides, the board also approved the composite scheme of merger of MKA and other Kosei joint venture companies i.e. Kosei Minda Aluminium and Kosei Minda Moulds. The merger will further strengthen our leadership position in the passenger car alloy wheel market, simplifying group structure and facilitating achievement of economies of scale.
Can you shed some light on your capex plan?
The domestic automotive industry has been providing multiple opportunities of growth with changing consumer behaviour, use of advance technologies, preference toward clean energy and government interventions through safety regulations. To capitalise on these opportunities, Uno Minda has also been expanding its capacities and capabilities. We are currently undertaking around 8-9 expansion projects involving automotive lighting, automotive switches, alloy wheel and EV-specific products which will be commissioned over the next 3-4 years. We will be incurring expenditure of around Rs 700 crore to part finance these projects and for sustaining capex in FY24.
We have also advised on our strategy of buying a large plot of land to meet our current as well as future requirements. The revised strategy will serve a dual purpose. First, it will expedite future expansions as it will eliminate any delay on account of land acquisitions. Secondly, we can build bigger plants and consolidate our existing plants to be able to better manage our operations and achieve economies of scale. We plan to incur expenditure of Rs 400-500 crore over a period of the next two years to create these land banks in all the major automotive hubs.
How is the company exploring the various export possibilities given that India is now being seen as part of the global strategy known as China+1?
Uno Minda after establishing its mettle in the Indian market has increased its focus on the export market. As part of the organisation’s business transformation exercise in 2021, we opened a new marketing office and strengthened our marketing team in ASEAN and European markets. We already had connections with leading global OEMs with manufacturing facilities in Spain, Germany, Indonesia and Vietnam but we were selling only a select few products to these OEMs.
Under our revised plan we now offer our entire diversified product portfolio of over 20+ products. We are also organising multiple technology shows at OEMs’ facilities in Japan, Korea, Thailand, etc. to showcase our technology capabilities. We have gained considerable success from our concerted efforts with addition of a marquee American two-wheeler OEM and becoming a global supplier of seats for a leading American agriculture and heavy equipment OEM. We now boast of almost all leading global two-wheeler OEMs as our export customers.
What is the existing percentage of your order book that derives from the electric vehicle (EV) sector and how do you foresee the trajectory of EV revenues in the upcoming years?
Uno Minda has been at the forefront of the electrification trend. While our existing product portfolio is engine agnostic, we saw electrification as an incremental opportunity. We have now built one of the most formidable EV-specific product portfolio of over around 10+ products for electric two-wheelers and three-wheelers, most of which are under production and are going into line fitment of OEMs.
With such a strong portfolio, we have won multiple orders from established two-wheeler OEMs as well as new-age electric two-wheeler OEMs. The total annual peak revenues from the orders for electric vehicles now stand at Rs 2,500+ crore including Rs 1,350 crore for EV-specific products. I would like to highlight that we have been communicating only annual peak revenue potential from these orders. The lifetime value of these orders is significantly higher.