CIE Automotive India Limited analyst Q&A

Thank you very much. We will now begin the question and answer session. The first question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services. Please go ahead.

Hi. Quickly if you can share what was the impact of steel price decline or the commodity cost decline in the India business?

It has been an impact of almost around 3% of decrease.

For the European business it seems the euro revenues in euro terms have declined by about 5%, is that correct and is that largely because of steel price pass through impact?

You are saying Europe revenues have..

Euro revenues constant currency basis seems to have declined by about 5%.

But there is also a steel impact there, s o the forex impact and the steel impact are actually cancelling out in Europe in this qua rter, s o what you see is the rest of it, it is actually declining.

In fact as the exchange rate impact and the raw material impact are canceling each other the reality is that our business in Europe grew more or less at the level of the market so our growth of 7% is in line with the market, but slightly below because we have the impact of Metalcastello as Vikas explained in the script Metalcastello is suffering a little more because we are selling big percentage to the US and the US market is going down because of the higher interest rate there. So the off highway market is negatively affected by this impact but we think that the recovery will come during 2024 so there is a certain decline and Metalcastello will recover during 2024 that is our expectation.

Got it and can you update us on the EV order wins in the European business , what is the salience of that now for us, EV in the European business order book?

Jinesh as we have explained we are looking four major orders two in Metalcastello which are expected to start ramping up, s ome small bits have already started but they will start rank ramping up next year in Metalcastello that we have talked about 28 to 30 million these are two orders and then we have orders both at CIE F orgings, steel plates, aluminum forgings like right now they are small but what is happening in Europe is that EV sales per model is very low at this point of time. So eve n though the penetration looks high the sales per model is small so the ramp up is a little slow, but we expect all these four orders or four or five orders to start ramping up from 2024 onwards and we will see good results there.

So just as a su mmary of the new project allocation, the new orders that we are getting in Europe for example you can see that 74% of our new orders this year, everything that we got 74% of what we got this year are for electric vehicles, so you can see that the mo ve and the launches in Europe are concentrated in EV so this is good news for us because we are in line with what the market is doing . In Metalcastello all the businesses that we are getting from all these baskets 50% is also for electric vehicles so in this year so that means that we are also well aligned with the future and in India that you know that the electrification is coming but it is slower and at lower pace at a lower speed than in the rest of the regions . Approximately 10% of our new orders are f or EV s. So let us say that our new order portfolio is perfectly ali gned with the market evolution, s o I think we can be comfortable with this transition to happen and of course the key thing for us will be how to manage this transition for example in this moment most of our EV program mes that we are waiting for to start are being delayed by the customers because of different reasons some lack of batteries or certain market difficulties that our customers have but they will come for sure. So during next month we will see these new players starting and ramping up okay so overall we can say that the evolution of the new orders is pretty exciting and also that we will see the new projects starting and ramping up soon as our customers promised us.

It is Rs. 1.1 billion.

This is after considering the cash at German operations, right?

Yes.

The cash at German operations will be receiv ed duri ng the month of October so in September the sale was not yet secured, it was secured in October so this is without including the German operation so that will be reduced by the amount that we will get from the German operation sale.

Got it. So this will probably become net cash post this receipt. Last question from my side any thoughts on repaying debt at the European operation level given the sharp increase in interest cost considering we have cash in which is parked with the parent?

Jinesh we are looking at our cost of borrowing and the income we get in the cash pooling so we have some arbitrage there so to the extent we have a positive arbitrage we will continue . Until we have some real need in the business for the cash instead of netting it off.

Got it. Great thanks and all the best. I will come back in queue.

Thank you. The next question is from the line of Nitin Arora from A xis Mutual Fund. Please go ahead.

Thank you for taking my question. Just on the Europe production side though when we look at your nine months production versus your sales, you are pretty much in line with what market production is, but just wanted to take a heads up from you when we look at Q -on-Q production ha ve really declined very significantly in Europe can you throw some light is something transitory in nature or you think this pressure will continue on the production , if you can throw some light on that and then I will take up the second question?

So you are talking about Europe sales in this quarter as to Rs.62 million versus the previous quarter, right?

So basically when you give the market update in your presentation you talk about production, right which is down 17 -18% July to September versus April to June you have given in your presentation Europe results so I was just trying to understand is that because Q-on-Q optically will go down because of the summer season, but this time the fall is quite drastic. When we look at your nine months production data of Europe versus your sales it is pretty much in line 14% growth but we are trying to look that it is something you are looking more this production run rate to continue or there is some improvement is coming in Europe as far as production is concerned for your clients?

Q-on-Q that drop of 17 or 15%, the market has dropped 17 we have dropped 15 which is very much a factor of seasonality in August almost three weeks are off , so three weeks out of 12 weeks is of f like in a quarter so you see that kind of drop in the sales and in Q4 also please bear in mind in December one week is off so obviously in Europe H1 is always better than H2, in India it is the reverse because we have the festive season in the second half so this is very much in line with seasonality, the market is what it is , there is no panic in the market, there is no demand drop in the market this is pure seasonality.

Every year there is seasonality but we do not see that much drop it is fine I will tak e it offline that is fine. Second is w hen we look just on the India business especially on two wheelers because one of your large clients is still ramping up on exports which we are not seeing that much ramp up happening but generally on the two wheeler side you are seeing production ramp up happening that is one from your let us say large clients and few other clients and second in terms of margin improvement from here, we are seeing that few of the OEMs are clawing back margin, they are not giving easy margins out to the ancillaries and down the chain can you throw some light on that as well as far as margins are concerned just those two questions?

On the two wheeler side you are right, the exports has not recovered as much as we h ad thought. On the YTD basis two wheeler exports are down about 20% overall and you are right one of our strategic anchor customers Bajaj is very dependent on exports and of course we suffer accordingly but the point is that domestic market is certa inly looking up. If you look at the retail sales data from the dealers association FADA you will see there is some good news there. Yes, it is slow growth but it is coming back. So on two wheelers we do think that the festive season will give a little bit boost to the two wheeler numbers in India. To your second question on margins from OEM that is the constant dialogue that we have with our OEMs. Yes the OEMs are always interested in optimizing their ma rgins. We are obviously interested in optimizing our m argins. We are part ners and this dialogue continues.

My question was that is it something 16 -17% is somewhat we will try to maintain or you see further from synergies though you have articulated earlier also that maximum synergies have been taken in, but do you see further scope from here of improvement?

That is a pretty good question. In fact what we think is that we still have room to improve our internal efficiencies that is our main fight in our operations. We have all the verticals doing great job to continue improving and we think that we will be able to continue this journey and the room for improvement is there and we have already i dentified the gaps. So my answer is clearly yes also this market growth that we expect and business growth that we allow for the next quarter will also support us on this margin improvement. We have a lot of projects in the pipeline that are delayed as I explained before and once these projects are ramping up , we will see certain improvements a lso. So overall I wou ld say that the margin improvement is a never ending story. We need to continue improving. A lways we said that the gap compared to our European or Mexican operations is still high in India. We think that we can do our production even b etter. So that is what we are doing trying to be really competitive in India and get the appropriate margins for the company. So my answer is very clear to you is just we need to improve the margins. We think that we can do it.

Great. Thank you so much team. All the best. Thank you.

Thank you. The next question is from the line of Nitish Rege from ChrysCapital. Please go ahead.

Hi, thank you for the opportunity. I have a few questions. The first question being you have mentioned new project ramp up in the PPT could you please elaborate on those are these large projects and which segments are we targeting for this?

To answer your question of course Ander will add to whatever I say and you have to understand in Ind ia we have been m aking growth capex of about 20 0 to 250 C rores, like 2000, 2500 million for the last two to three years so a substantial growth capex close to I would say if you take from the year 2021 to now and even one more year ahead if you loo k at it, we would be in t he range, as I said average of 200 to 250 Crores every year. So all of this is against committed order so some of these orders have not ramped up to our satisfaction but they will ramp up because we know that there is growth in the market. When this ramp up you will see better growth results also not just margin results but better growth results in India that was the point we were making . In terms of what are those for example we have a new plant at CI E Hosur, we have had expansion in the a luminium EV four wheeler space at our aluminum plant , we have made investments in Mahindra’ s EVs new models which are in the course of ramp up , new tractor models are coming in from Mahindra so there is a whole lot. As I said in India we have been investing across the board in almost every vertical . Every vertical we expect growth. Some of this has been delayed and therefore we are saying growth will come. We have been caught up in this quarter at a bad time other than that we do expect all of this to ramp up.

No there is no news at this moment on this. The sunroof business in India is doing well, is growing and we will analyze intern ally and come back to t he Board and of course then to the market.

So right now we have not taken a decision. We have noted this. I think you know even in the past this has been asked, we have noted this. We will come back to you with an an swer give us some time on this.

Just one more question the last one. So as per my calculations we will be ending with around 500 Crores of cash this year so any thoughts on M&A?

M&A is an integral part of our day-to-day operation. We keep looking for stuff so we are looking for stuff. At this stage we are not at any advanced stage that we can talk about but yes we are looking for opportunities in India. We are not looking for opportunities outside India. We are looking for oppo rtunities in the areas where adding customers, adding new ways of doing business, so different segments like aluminum, four wheelers. W e are looking at our new customer base , etc. So we keep looking for it but one thing I must say that we will not do an M &A just because we have cash. We w ill do M&A if we think it is appropriate for us that is something like please bear that in mind.

The next question is from the line of Nikhil Kale from Invesco. Please go ahead.

Thanks. My first ques tion was on Metalcastello. Can you just help us understand what was the decline in Metalcastello revenues for Q3 and also for the nine month period?

In Metalcastello we have a decline because of the market evolution in US of approximately from 15 to 20% in this Q3 and Q4 okay that is what we expect for the next quarter . Then what we are told is that in next calendar year there will be a recovery okay so the situation is that now we have this 15 to 20% drop and then we will see perhaps in Q2 -Q3 next year we will see the revam p again on this business. However, also we have the new program me for the electric vehicles in US that we are now launching and preparing everything. So the ramp up will start. So we will be able to compensate this drop a nyway wi th this electric vehicle business.

Just the number that you mentioned 28 to 30 million kind of order wins for Metalcastello that will take a couple of years to kind of ramp up to peak revenues will that be correct?

Got it and just secondly I think IHS is kind of expecting produc tion to be broadly flat for Europe car market next year but then given your commentary on the orders kind of ramping up fair to assume that you would outperform the end market production growth?

Okay that is our interest and our intention but it is true that IHS is saying that the European market will be flat in the next four or five years at around 17 million cars that is why together with the electrification, we will see a very challenging scenario in Europe. However let us say new project allocation that we have had in the electric vehicle field, I think we will be able to let us say overcome this situation and of course gain market share that is our interest, yes.

Got it. Thanks. I will get back in the queue.

Thank you. The next question is from the line of Vimal Jamnadas Gohil from Alchemy Capital Management Private Limited. Please go ahead.

Yes Sir. Thank you for the opportunity. S ir my question is on the India bu siness you commented that you spent alm ost 500 to 750 Crores on growth capex with committed businesses from customers. Now just trying to think aloud as to why will the customer not go ahead despite the market seeing good signs of growth if you look at the new mod els, they are flying off the sh elf right now so where exactly is the challenge the orders potentially should have come and why should there be a delay in the first place?

They depend on specific projects Vimal. Y ou are right, the m arkets a re not doing badly especially for f our wheelers, two wheelers is not doing well , some of the models that I talked about are EVs, so we talked about the aluminum four wheeler EV production so there are specific areas. Of course in general the markets, especially for light vehicles, doing well no doubt about that so some of this is for exports. In specific areas the ramp up has not been as fast as we thought but it will happen so you are right . I am not saying there is a market problem and that is why this thing is happening. No, it is just a delay it will come , no issues.

So what you are saying is these are newer models which are taking time to ramp up maybe the customer is focusing on the existing model is that understanding correct?

Look at the EV models for example this year on four wheeler EVs there has been some slowdown in some model areas I am not saying customer is doing this or that this is general evolution of new models, s ometimes it gets delayed , a project gets delayed by two, three months, four months, six months that is normal.

The signs of revival are we already seeing it or is that a few months away still?

Revival of what?

These projects ramping up?

Yes it will ramp up. Yes we are looking at it. In the next, next few months, yes.

Right so as we speak, we are seeing signs of these orders coming back or ramping up.

No these orders have not gone away. It is just that those introductions are just taking more time that is all.

Understood Sir and Metalcastello we have a very large exposure to off highway vehicles is that understanding correct and which is why we experiencing deep cyclicality?

Yes that is right.

Sir the revival should be sharp righ t because if the slowdown has been bad so the revival should be equally sharp has it played out similarly in history and can that we expect in the future as well?

Yes. We expect that yes we will see the revamping of this business in the next months okay probably not immediately, not in the Q4, not in the Q1 but meet next year we will see this recovery for sure and as I told you before we will have additionally all the entrance o f the electric programs that we have got for US for another customer so with these two effects we will see that our sales in Metalcastello will come back to the normality and we will see growth again okay but yes we need to as we are now in the bottom side of the cy cle we need to suffer this drop in the next one to three quarters that is our expectation but we are optimistic and we have everything prepared to go up and to ramp up again soon.

Just one followup there the 28 to 30 million order s is in the passenger vehicle vertical for Metalcastello?

That is right. For Metalcastello yes for the US market light trucks.

Light trucks?

Yes.

That is right.

Understood. Alright. Thank you so much and all the very best.

Thank you. The next question is in the line of Harini from Sundaram Alternates. Please go ahead.

Good afternoon Sir. Sir just one clarification so always our goal was to grow in as far as the market grows we at least tend to or have a t arget of growing more than 5 % to 6% higher than the industry growth line for the markets where we cater either in India or in Europe, at least from the past two quarters we have been seeing a bit of slowdown on that front so how do you see it coming forwar d in the next one to two years, do you see that expectations to be coming back in place?

Yes no that is what we have said . Some of our ramp up has bee n delayed but yes you ar e right. Our aim in India is to grow 5% and plus higher than the weighted average market. We have different segments in which we operate. Y ou have to take a weighted average . Yes in the medium term since you are asking a question over two to thre e years ye s that is our intent. That is also our intent in Europe and as I just mentioned that Europe the market is flattening but even there we want to grow higher than the market through all these new orders that we are looking at so over a two year period whatever we have said in the past holds. This quarter as I said it is a specific case of ramp up not having happened so let me put it simply. This quarter is not representative of what we are planning to do when it comes to growth numbers in India.

Understood Sir. Another portion if you could just give out so generally we have the new customer orders contributing to around 25% of the growth so are we in the same track going forward, h ow is the thing on the new customer additions , a re we somewhere on track in that?

No is the question ma dam is that are we making new customer additions is that the question?

Yes Sir.

Just to put things in perspective. I think in India we have almost 50 customer s with more than sales of 10 million per annum okay so out of this almost half would have been added in the last two to three years so customer addition is an important part of our strategy so it includes increasing our buying from our selling to our existing customers , trying to g row our middle cus tomers and adding new customers. A ll three aspects we are l ooking at and we will continue to look at and that is what I am saying we now have 50 customers in India with more than 10 million sales per annum okay.

Understood okay Sir thank you.

Thank you. The next question is from the line of Pratik Kothari from Unique PMS . You may please go ahead.

Good afternoon and than k you. Vikas again on India growth sorry multiple questions have been asked but again in the first nine months we have grown at the 6% , industry volumes have grown at 6% but on a sales basis industry has grown at 15 % to 20% Mahindra, Bajaj, Ashok Leyland, and Tata are major customers the major OEMs which have reported numbers and what is e xpected so I understand that new platforms are taking time to ramp up and this is incremental growth which needs to come in but for existing models and for existing product s and existing industry which itself is growing at say 15% in this nine months or maybe Maruti has grown at 25% in the first nine months or is expected to grow at 25% in first nine months there our growth is only say 6% on a sales basis how do we reconcile this number?

I do not think like if you look at the prod uction numbers the weighted average production growth for YTD nine months is about 4% if you look at it and we had a very good Q1. If you remember Q2 and Q3 we have been like Q2 was around 5% for us and the weighted average market growth was 1% there are d ifferent numbers that are reported but if you look at the production numbers of various OEMs then you can clearly see the weighted average growth for YTD nine months is roughly around 4%.

But then we are comparing industries volume growth to our sales number?

We have to also take into account the steel impact which is not there. We did mention steel impact in this quarter was about 3% so if you take that steel impact 6 + 3 roughly is 9% versus a weighted average market growth of 4% so but like steel is you have to keep it aside because at the end of the day growth is wh at it is and to your specific question on different OEMs different OEMs have done differently . Mahindra Auto continues to do exceedingly well there is no doubt about that. Mahindra Tractors on a YTD basis may be a little lower than on a YTD basis. Maruti and Bajaj again maybe similar. Bajaj might be a little lower. If you look at the production numbers you have to understand Bajaj is 50% exports so that is the situation so we do track the market and this is our readi ng on a weighted average basis about 4% we have grown 6% without the steel impact. S teel impact has been substantial this year but as we have said in the past that is something which is part and parce l of the business so when you talk about the YTD results this is how we look at our results and going forward things will be better.

Correct point taken but by only limited point was steel also impacts the OEMs when they sell right so OEMs are growing at 15% on a sales basis and our growth is like 6%?

No we look at numbers the production numbers not like their sales numbers we do not track. We look at their production numbers and what we are talking about when we compare the market, we compare the production numbers. For us that are what is important whether how they pass o n the sales, etc., we have not looked into that. We have not analyzed that for the OEMs but whenever we talk about the market we talk about production numbers not ev en sales domestic sales. P roduction numbers includes domestic sales and exports and the effect of inventory, etc., that they have so that is how we look at the market.

Sure fair enough sure and second on margins first of all a com mendable job in margins we have come all the way to 17 , o ur aspirations are even higher so give n your process engineering company it is commendable what we have done hearty congratulations on that just a question on that given we are not a product c ompany and a process engineering company so how is it that our customers the OEM they also would be looking at our numbers the margins that we report how do they allow us to make this kind of margin and given our attempt to keep margins at such a high leve l and this might be one of the best in the industry in terms of competition, etc., does that not hamper us given the margins that we are changing?

No our customers are our partners so we are not in competition with our customers so as long as we mee t the requirements and based on our efficiency level that is to us so when Ander speaks about margin s he talks about efficiencies but that does not mean we will not meet the requirements of the customers whatever they are so as long as we meet the requirements it is okay and if they ask us for price reductions, etc., that of course we will have to work tha t out. That is a constant dialogue our customers are our partners. T hey are not in competition with us and I said earlier they optimize their ma rgins and we optimize our margins. Our focus when it comes to margin improvement in India remains efficien cy. In fact you had asked the question in the last call when Ander ha s given a long answer on what we are doing to improve margins . If you go back to t hat answer it has nothing to do with pricing, i t has nothing t o do with customer requirements, t hey are all int ernal. If you recall it was automation, it was production per person , input and output ratios, and layouts. These were the things that we talked about last time and that is the focus for us so therefore whenever we talk about efficiency improvement in Indi a there is a long way to go on the engineering aspects itself. A fter that of course whatever the customers ask us we will try and meet the requirements as far as possible. They are our partners. The y are not our competitors, okay.

Correct so lastly the efforts that we make internally for improvement efficiency productivity largely is for us to keep and not that we have to share it with the customer?

No therefore we did the a rrangements there. They might have their own requiremen ts. All that I am saying is our margin improvements in India we do think that from an engineering aspect we still have room to improve. How much we share with our customers and what we share with our customers is different issue . A ll that we are s aying is we do see lot of prospects for improvement on the engineering site in India still . That is where we are at this moment.

Great. Thank you and all the best.

Thank you . The next question is from the line of Priyaranjan from HDFC A sset Management Company. Please go ahead.

Thank you. So just one thing if I am not wrong I think because you have mentioned about 6% growth have a impact of say 9% of adverse impact of commodity so for a YTD basis is it fair to assume that the volume growth was 15% is this what you wanted to say?

No the weighted average volume growth of the market was 4% on a YTD basis in India.

Yes that I understood but for you because you had a 9% adverse impact of commodity of steel price so your volume growth was 15%?

Not 9% 3% of decrease.

So 3% for this Q3 for YTD?

For YTD we hav e to work it out . We will have to work it out but you take this as representative that is what we were talking about.

So the volume growth probably will be three plus whatever YTD?

It is not that we do not have growt h. Yes the steel normally when the market is growing very high the steel impact does not matter as much but right now because of tr actor growth and two whee ler growth which is a little like Bajaj, Mahindra Tractors and even Maruti is on a YTD basis 0, 0 so when you see this then the steel starts having an impact but having said this that is part and parcel of our business. We cannot like keep talking about it so it is what it is but yes when our ramp up happens elsewhere I think you will see better growth numbers.

Understood and any thoughts on the two technology which we have been talking in the past particularly on the aluminum forging side as well as the plastic in India any thoughts on that when can we start because aluminum I think because of the ele ctrification in Europe we might have to put some plant or some whatever changes it might have to do in the plant so how soon or how fast we are in that process?

Aluminum forging is in Europe that is what we are doing. We have already started to do it in a small way. There have chassis parts and big parts that we have in Europe and where we have said same machine s being used but th e process is slightly different. You need to do heat treatment. Aluminum is a soft metal so some proce ss parameters would be different so in Europe we have already started doing it. In India right now the need for aluminum forging is lim ited. Whenever it happens we can do it as I said we are doing it at Galfor so we can bring the knowhow to India on the process side not a problem at all. As far as plastic is concerned I think we have always said that we will go the M&A route for plastics . We already have composites which are doing very well by the way. Composites when we talk about EVs in India we normally do not talk about three wheeler EVs but three wheeler EVs in India is a success story. It is a very big success story especially Mahind ra three wheeler EVs. It is that division of Mahindra is doing very well and we are big suppliers to them and our composites division is doing well so that wil l hopefully continue to do well. O n the plastic side otherwise we will do through an M&A what we have always said the inorganic root and that depends on opportunities. R ight now we have nothing in the pipeli ne but yes we keep looking for it.

Understood and lastly on the strike in US so any impact potential impact in the 4Q numbers because of the strikes at various OEMs in US?

So till now the impact of the American workers strike in Ford, in Stellantis and in General Motors is very limited okay . In fact I am talking about impact for CI E was very limited in September and proba bly we can not have in those customers an impact of 10% till now in October so it is not relevant and coming back to CIE India we have only certain impact on our forging activity in Mexico where we supply to GM through Tier-1 and we are seeing certain minor impact there so till now the impact of this strike is not relevant . Okay we will see what is going on in the next weeks but till now the situation is completely under control.

Thank you. The next question is from the line of Jigar Shah from Svan Investments. Please go ahead.

Thank you team for ta king my qu estion. I am Vishal Shrivastav here from S van Investments. I have few questions . Most of my questions have got answered. I have a few questions regarding European operations just wanted to know is there any trigger left in the margin improvement in the European operations from here on in CY 2024 and CY2025 and if yes where this improvement will come from , will it come from the mix of new orde rs which you have already bagged the kind of product mix improvement or value addition improvement through that can you throw some light on that please?

Okay the margins in our Europeans operations were negatively affected last year during 2021 and 2022 . We were negatively affected because of the energy price increase and the steel price increas e and also we have a third reason that is the big inflation that we have been suffering and during 2023 we have been able to first the reduction of the energy prices the energy electricity prices ha ve gone down to stable levels at around €100 per megawatt that is where we are now so this reduction in cost has allow ed us to recuperate certain margins. A lso we have negotiated with the customers all the st eel and energy update systems so most of our customers have accepted that th ese cost drivers need to be in dexed so that has been done so we have recuperated the margin that we lost and finally we have the inflation where we are negotiating with the custome rs and okay that is much more difficult issue to discuss but overall what we have done is we have been abl e to recuperate the margins th at we had before the crisis. T hen for the future we expect to keep our margins, to keep our business profitable and it w ill be very complex in this flat scenario to continue improving okay so the businesses are really stretche d and opti mized and the further improvements are not easy to get, but overall I would say that our aim is to maintain our margins in the current situation once we have recuperated them from the last year drop.

Fair Sir thank you. S ir one more question regarding the new orders which we have got in Europe Sir are these orders are through replacement of the existing programs or these orders are new programs which will lead to our market share gain?

Most of the products that we are getting in Europe are for electric vehicles that will replace the current internal combustion engines okay so we can expect that the electric veh icles will replace the internal combustion the current programs so th is is a clear substitution okay. The good poi nt or the good news for us in regarding this new programs that we are allocated now is that approximately exactly 74% of the total new orders are for electric vehicles okay so that means that in the future we will see more and more electric vehicles in Europe and we will have a growth important growth in that segment so that is the message but coming to your question yes I think that there will be a substitution from the electric vehicle substituting the internal combustion engines.

Just last question if I can squeeze in Sir as our mix towards these execution of these electric vehicle programs improves I think is this understan ding right that in that case our probability of margin improvement will be more as our value addition be comes higher in those kind of platforms?

Okay it depends on the product but if the value added that we are getting is improving of course we will have the opportunity to improve our margins. In the case of Metalcastello for example when we are talking about these electric vehicle components that are much more complex component yes we expect to improve our margins as the added value and the complexity of the product is growing . Also I can tell you that in India we are doing also the same pro cess. W e a re increasing the added value of our components and growing in the complexity that means that we will be able to continue growing. Perhaps I missed this point in my previous answer when we were talking about the improvement on internal efficiencies but als o the change on the portfolio and the increase of the complexity of the products will give us room for this margin improvement. Of course we need to take the risk of making more complex product and that is also additional effort from our engineers and from our production people but that is the trend and that is exactly what we are do ing in Europe and also in India. In both regions we are with the same path.

Fantastic Sir. Sir thank you for taking my question Sir. Thanks and all the best team.

Thank you . The next question is from the line of Bharat Sheth from Quest Investment Advisors. Please go ahead.

Thanks for the opportunity. The q uestion is for Ander. Ander Vikas has given some color on this aluminum forging so whereas we have aluminum forging in Europe and aluminum casting in the India side so how are we seeing and when do we expect that really alumin um forging can really emerge for a big business like aluminum casting in India and what are the challenges difference between these two process es and if you can give little more color as well as the end user?

We will see the a luminum forging coming to India soon for small applications probably in two wheeler sector we already have certain aluminum forging components and for the four wheelers forged aluminum is let us say premium car component okay . That is why the volumes that we can expect in India for aluminum forging are lower than other technologies mainly because of these premium cars that they use this kind of aluminum forgings. In Europe we are getting these new programs this aluminum cha ssis component for premium cars. We are talking a bout premium cars like Jaguar, Land Rover or Mercedes or BMW . Those are the companies that they use this chassis component in made in aluminum very expensive components and that our bet for our European business and if this trend is coming to India and the re is th ese premium cars being produced in India in the future we will be ready to do that okay so m y view in this moment is that this aluminum chassis component will be produced in Europe at the first stage and for the two wheeler in certain small components will be also producing in India okay that is the answer to your question.

Fair and second qu estion Vikas when we are saying this two wheeler is down we understand is largely export whereas in domestic how are we seeing because in our presentation we have said that CRISIL is anticipating 7% of a growth in two wheeler po st FY2024 and then going so how do we really read this and what is on ground things are happening?

Who is saying 7% growth in two wheeler market in 24?

CRISIL statement which we have published in CRISIL research.

CRISIL research okay.

9% to 10% to 11% in FY2024?

CRISIL publishes sales data we are talking about production data so when you are looking at those sales numbers they are domestic sales so domestic sales is recovering in India as we talked about. E xport sales have yet not recovered . I think the latest data suggests that exports in India on YTD basis I have said this earlier in this call itself was 20% d own so you have to look at both but yes the good news is the domestic market for two whe elers in India seems to be recovering but it is recovering slowly . It is not as if there is a huge recovery so I think that trend will continue.

Secondly on the tractor how do we see really see on the ground there was a concern on the monsoon and September was a good rain so how are we seeing?

So on tractors?

Yes.

Now tractors I do not think at least for the next few quarters we think it will be stable on a sequential basis. T hat is our expectati on of the tractor market so you are right so the monsoons unfortunately in India was like a sinusoidal curve so June was very bad, July was extremely good, August was extremely bad if you remember the driest August in 25 years and September was decent so now that ha s its own impact. An agricultural expert will tell us that that has its own impact the water bodies , etc., and all that so we do not expect tractors to grow too much in the coming months. Of course there is a festive season that will have some im pact but t ractors are expected to remain stable . I f you look at the tractor numbers I think Q3 numbers was negative year-on-year but we do think it will remain stable at the se quential level. That is our reading if we are proven wrong we will be happy about that.

Last question to Ander see in Europe also we have seen some decline in Q3 and Q4 also will remain softer whereas in India also our volume ramp up has not been in line with our expectation so how much operating leverage do we have to a gain apart from our internal efficiency to improve the EBITDA margin?

As I mentioned before we are continuously working on the internal efficiency improvement okay. We are following our internal metrics on productivity on let us say cycle time reduction, cost reduction on the maintenance cost reduction, all these kind of things we are doing in order to improve our margins . I can tell you that most of our verticals are well prepared to continue improving so we all have certain room for impro vement all verticals and let us say that we have strong action plan in each one in order to continue improving. That means that if we can be also more competitive in certain comp onents and gain more market so overall our approach is to be really efficient in order to be in the market with the proper margins. A lso I mentioned before that the new products that we are launching are much more complex products than the products that we were producing before so with this new products we have a higher investment a nd of cour se higher added value and this requires higher margins in order to get the return on investment okay so everything is linked but the company’s evolution in the last yea rs has been really good. Y ou can see that our EBITDA margin g rew from some 201 6 we were at 10% and now we are hitting this 17% with the important growth and we expect to continue growing and matching CIE margins our parent group margins that were the ultim ate target that we have okay so overall the room for improvement is still ther e. It is true that if the market helps us and there is an additional jump in the market we will have easier job to improve the margins . If the market continues let us say has a little bit decelerated as it is now we will be struggling but we will be working in order to get this half a point more or 1% more to our P&L so the room and the actions are clear. E verything is identified . All the verticals has the opportunity to improve so in that sense I am optimistic and that my main job at this moment because th e new orders are also being acquired at a very good pace so we need to launch and to wait that our customers succeed with the launch of this product.

Fair and thank you and all the best team.

Thank you. We will take that as our las t question. I would now like to hand the conference over to the management for closing comments.

As always I would like to thank you all the participants for their well directed and clever questions they made. T hank you for supporting and trusting our company and also I would like to say thank you to all the CIE India team for their hard job and th e good results they are getting. T hanks to this effort and in these d ifficult times . T hank you very much everybody.

Thank you . On behalf of ICICI Securities that concludes this conference. T hank you for joining us. You may now disconnect your lines.

This statement has been edited to ensure quality