Thank you. Okay. First question is from Gunjan. Hi Gunjan. Your line is open. Please go ahead.

Sure, PLI is always Rohit Nanda’s subject, so I'll let him comment on this.

So Gunjan, we would not be disclosing the PLI numbers separately because of customer confidentiality and commercial reasons we've decided not to disclose it separately, but we've recognized the full year, PLI income in the 4th quarter. So if, let's say if we have to take out the first 3 quarters impact, that would be about 19 crores.

Okay, so first 3 quarter impact would be 19 crores, so I mean that only that, yeah…

So I will add to it Gunjan, so basically, look, 8 motors have received certification and approval. The capex, etc. for all of those have been done, and the approvals came at various dates. So, if you net off the expenses which are associated with getting said approvals and the audits done, that number is for the 3 quarters is around 19 crores.

Okay, got it. And while we are at this, you know Vivek if you can also talk about the whole traction motor opportunity, you know, while there's a lot of uncertainty in the other parts like you mentioned that, you know, India, is going to be big with railways, traction motors. Could you just talk about, you know, some of these segments as well?

So yeah, I mean, India opportunity as you know, is actually you know better than me, what the India automotive segment and opportunities are. We continue to have fairly…

No, I mean more from traction motor perspective

So 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. Nothing. 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, not a sustainable way of doing it. So we want to get it first time right. So we want to go with hi gh voltage. As you know from, well, grade 10 physics, power is voltage x current, so the higher the voltage, the lower the current, which means lower wires, lower wire harnessing, so lower the cost of doing that motor and inverter set. So that's where the efforts are right now.

Okay and, you know, going to this humanoid opportunity that you talked about, is there any timelines to it? What stage of development we are at, and you know, if you could talk more in terms of, you know what is the competitive landscape here from my understanding a lot of this is China focused at the moment, so I'm just trying to understand, you know, how do we stand in terms of competitive positioning and what stage of product development we are at.

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So, excellent question, Gunjan. In a way, the answer to your question is also there in your question. Currently, this supply chain is pretty much dominated out of China. Now if you look at what is happening in the world, we are, it is not a tariff and ever ybody looking at one segment. It is actually a global trade reset pretty much. Now that supply chain has to shift. 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. However, as you know, in any technology readiness level, even if you go to level 7, which means you have the prototype ready, it can be installed in a vehicle , if the customer doesn't give you an order, it doesn't mean anything. So we are at a certain technology readiness level, but success, as you know, in these things is binary. When we get an order, we will make that white circle blue , and we will tell you what we have won, but till you win, it means nothing. If you have the greatest product in your lab and you can't sell a single unit, it doesn't have really any meaning, but we've been working on it for, let's say , 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.

Okay. All right. I'll join back the queue.

Thank you, Gunjan.

Yeah, so Vivek we have a few questions from the question box. These are from Jinesh. So one is, how do you think about your ongoing investment in Mexico for compliance with USMCA? Would this plant be more of an assembly plant with a large part of value-added in India, and what is your investment in Mexico plant?

Wow, a lot of questions rolled up into one question. So 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. So, as you know, heavy trucks, off-highway vehicles, etc. not included in the auto tariffs. So that's the first set of customers. Investment, etc. 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.

Okay. The second question is, are we largely done with the inventory restocking at the key customer? By when do you expect normalized sourcing from the customer?

Good question, but a little early to tell, as, Jinesh, I mean Jinesh is fairly well studied on this subject, so he will know it's only been a month since the new model launched. So how much time it will take to go to ramp up and go back to what the earlier model run rate was, we don't know, a little early. I

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think we will know by the end of this quarter, by the end of June, that how much time will it take to get to the run rate of previous production.

And third question is, 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.

So two things there, One, 19 crores is just one thing that has been taken. There were also one-time cost this quarter which were fairly significant also, that we have not netted off. If we net that off, Rohit, that would be even a smaller number, right.

Yes. Not disclosing that number, but the thing is that I hope you are adjusting 19 crores both from revenue and profit. So, the margin is actually more closer to 26% if you were to do that, anyway, and yes, there are a few one -time costs which are in the P&L done in this quarter.

So, how it will go forward will depend on how each different geography does. Again, we are only at the end of the first month, and tariffs still haven't kicked in the US, so we don't know what demand outlook will become. Second, railways, as you know, 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 ma th that you take 27% is what we did 27 %x80 and do 18 x20, you will come to somewhere closer to between 24 to 25. So that's very logical and mathematics.

Okay, there are few more that have come in on the question box. This is from Ayan. Is there any impact of China's restriction on rare earth magnets on production of traction motors?

So I did cover that in the opening statement itself, but happy to do it again Ayan. We have inventory right now, so nothing yet. We are working with our suppliers to do get them the export licenses. Sat you can give more details on other efforts also we are trying to make.

We are also working on alternate raw material and the magnets both which are not having heavy earth. So, many front we are doing, I mean, we are working with the government officials, we are working with the suppliers, existing suppliers, new material, new grades, to ensure that's, I mean, we have the continuity of production in our lines.

Thanks, Sat, but just to give everybody context, 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, so it's not very efficient. There are different grades. Some things, heavy rare earth may not be available, some are. So 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. It can ha ve some short-term

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impact if we can solve it directly and get the supplies started in the next 4 or 5 weeks. The impact is pretty much nothing. If not, also we are working on, like I said, Plan B, Plan C, Plan D, all sorts of plans. We're also exploring other sources and other suppliers who are not in China.

Okay, then, another question we have from R ituraj. With respect to non-BEV business, our revenues have consistently declined for last 3 quarters on a YoY basis. Just wanted to understand the challenges the company is facing in this business. How do you expect this overall business to evolve in the next 18 to 24 months?

So non-BEV revenue, there is no challenge as such. Non -BEV revenue is basically starter motors, which, as you know, although a lot of people would tell you that EV is not growing and ICE is growing, ICE is actually declining, so starter motor revenue is on a natural decline path as EV penetration goes, starter motors will decline, especially the ones which are pure diesel and gasoline, which obviously we shared in our product distribution. 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. It can be explained why last year was not so g ood for commercial vehicles and, off highway vehicles, and hence that bit is there. But there's nothing, I'd say at the company level.

Okay. Then this question is from Kartik. Who do you think is likely to absorb the tariffs?

Okay, so as tariffs are taxes on whoever imports it, right. We mostly do either Ex-works or DAP, so we are exporters. We are not the importers. So tariff is paid by whoever imports it. 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 is what eventually happens. And again, there is no such thing as like 5% you take 5% I take. I saw some analyst who done a 25%, half the EBITDA and say 12.5% one person will take 12.5 % other, which is the most simplistic way to look at it and the perhaps the wrongest way to look at it. It is going to be binary because what will happen when you have something that was, let's say ₹100, now it became 125. You can either ask the person who was at 100, that, hey, my price has become 125, You give me a 25% discount. To the answer of that is, of course not. What do you do then is try to find someone who is lower than 125, right. B ut if you have done this to every country in the world, effectively the new price is 125. And hence either you find someone, in which case you will switch to the next guy, which is why I said that 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. They will give it to whoever, even if it's 5% less, it will just go. So that's how it plays out in real life. There is no distribution. Unfortunately, as has been observed over the last 100 years, whenever tariffs have been done and tariffs have been done in many countries. Eventually, the consumer pays is what the net conclusion is. One

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example very close to home is if you ever bought expensive cars in India. I can guarantee you, BMW or BMW suppliers are not absorbing the tariff , you are. So you buy a car at double the price of what it would cost in Germany or UK because the Indian governments put those tariffs. Same thing. This is where it plays out, but yeah, of course, what is the impact that because the prices are high, far less numbers in volumes will be sold because the prices have become higher and demand is not completely elastic. It is inelastic. And how much inelasticity is there in the system, we will all together find out over the next 6 to 9 months. You know, I'm being asked all these economics questions. I took one elective in my final year of engineering, and I had one semester in my business school, and my total knowledge of economics is just that.

Okay, the next question is from Ja y Kale. Hi Jay, your line is open. Please go ahead.

Good evening. So my first question is, we have seen some of your US customers, you know, speak about past 2 -3 months refocusing on some of their ICE projects given the you know, softness in EVs over there. So in that context, are you seeing any green shoots for your traditional ICE business in the coming years, which was expected to steadily decline?

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, pretty much completely. 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, so different and again excellent question Jai, because what does it also speak because nobody will set up capacities, new 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, is what I think is a fairly visible second order impact.

My second question is regarding your Clear Motion and your suspension motor. You had a order win and probably the supplies would have started. Any conversations on this technology with other customers in advanced stages? How is this technology getting adopted by other customers, and we had mentioned about very big TAM, how is that progress going on with new customers?

So, Sat do you want to update on the launch? This one is the one exception we'll make because it is disclosed. And the customer, end customer is Nio, so we can talk about that.

Yes Vivek, so CMI launch or the Nio launch happened, in the last quarter. The vehicle which is ET9 is doing pretty good. We are getting a good reviews from our customers as well as from CMI. So far it's looking very great, I would say

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and there is a lot of opportunities. We are in discussion with the customer on other vehicle applications. So it's a very nicely taken by the industry and it's doing a pretty good job, so.

Then Jay, if you can get some videos or any feedback from the Shanghai Auto Show, where this was displayed finally to the public in full, you'll see that it was quite well received.

Okay, Vivek, there are a few more questions in the queue. I'll just read those out. This one is from Ajay. 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. Anything more, of course we are always exploring new opportunities, and I don't think if you want to succeed in automotive from a supply chain perspective or a market perspective, you can do it by ignoring China. 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. And if there is opportunity, certainly. There is nothing concrete for a second plant, but if it happens, of course, we'll let you know.

Okay, and then there is a question from Ji nesh, a clarification: the one -time cost that is significant and not disclosed, is it related to acquisition of railways or something else?

Rohit, would you like to take that?

So, acquisition-related costs anyway are separately disclosed so that we've shown as an adjustment to PAT. So, this is some other one-time cost.

And did you indicate adjusted margins would have been 27% without this cost?

So I think Vivek has broadly answered this. I think, the thing is that like I said in my commentary also there is a change in the product mix also . This quarter like we informed during our last quarter call also, because of certain model changes, there is one part of the business which was adversely impacted in this quarter. So suffice it to say I would add that basically the margins were lower in this qua rter primarily because of the change in the product mix. So going forward, the margin obviously will be a function of how the product mix changes. I mean if it reverts back to the original product mix, yes, we revert back to the original, or earlier defined, you know, margin limits, which we say like 25 to 27% is the range which we give. So finally, that's the range it should be in. So we don't want to be pinn ed down to a specific number whether it is 27% or 28% or 25%.

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Okay, and then there is a question from Rishi. Sona was planning to develop a Magnetless motor. The constraints on rare earths pushed them to accelerate this development?

I would say 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. Bu t we will continue to work on that. It's good to accelerate that for sure. That is on Magnetless, but as you also know, I think in 2021 itself, we had announced the development of a non-rare earth, or rare earth free motors. Those we already have and as I mentioned that we can do them even as of today, but that requires a customer acceptance. Like I said, it does increase the weight of the motor, so we need customer approvals for those. Maybe customers will have more urgency and hence they will approve. But net net, I have to say 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. So it's a good wake up call that anything from anyone that you depend on totally, you should not. It is a less dependable world now.

Sure, Vivek I had a couple of questions on your products.

There's another question which is actually quite good from Shrivatsa . Let me just answer that because I can see the Q&A box. Does your software have adjacency for humanoid robots, because it is a really good one. See NOVELIC’s specialty is in radar sensors. So as of today, not really, because the first wave of humanoid robots that are being developed, we've explored this a great length by the way, are not going to be used in situations that are very hazardous. Radar comes int o 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. Also as a part of the bomb, it is just much, much bigger.

Okay, thanks. Actually that is what even I was going to ask. So then one more question is on the other new products. So what will be the content per vehicles for these products if you can give some indication, and would it be fair to say that one of the reasons that you have also won these orders despite the tariffs changes is because there is, there's no competition for this type of products.

Less competition. There is never no competition, by the way. Competition is what keeps you good. Competition directly causes excellence. A lack of competition is actually a very sad state to live in. So, there is limited competition on that scale of precis ion and a top delivery capability. And as Praveen very nicely depicted in the technology road map, the goal is to continue going from component to subsystem to system to ensure our customers get what they want, and their pain points are addressed. We really do not, I know it might sound ideological or philosophical, but what we're

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trying to do is solve the customer's pain and give them that solution. Rather than say this is the value per vehicle that is… The customer doesn't decide because of what we want , the customer needs to get… so who do you put first? I know it's a philosophical point, but for us it's always going to be customer. What they want we should be able to do and give the best solution we can and not think of how much value do we get if your capabilities sets keep increasing and you solve bigger and bigger problem for your customer. The value you derive from that will obviously and naturally be higher and higher, so that's, our answer to this.

Any indication on the value per vehicle? For both of these actually.

No, there's no point. Why would I give out. I mean, you're asking me to give price while I'm saying it is competition sensitive, that'd be pretty self-goal type event.

Sure, I think we've run out of all the questions in the question queue. I do see one raised hand, so, Linda will you take that question from Jay?

Yeah. Okay the next que stion from Jay. Hi Ja y, your line is open. Please, please go ahead.

Yeah, thanks for taking my question again, just one question, you know, now with EV two wheelers present in the market for quite some time, from an EV specific components like motors, you know, strategy of OEMs of insourcing versus outsourcing, probably no w would have been more evolved. Are you seeing, you know, one way the OEMs are going that either, you know, incrementally they're thinking of more of insourcing or do you think that, most of the OEMs will continue to have outsourcing of EV specific components.

I think there'll be a mix, as it has been in every component, Jay, over the years. Some will insource, some will outsource. Whoever is outsourcing at some point will t nihink it is a great idea to insource and vice versa. The guys insourcing will realize that their technology is falling behind. They will then move to outsourcing. This is a wave that's been going on in automotive for a very, very long time. You know, when we started making differential gears at that time also, most people used to make their own, even now a lot of OEMs actually make their own. But there has been, most people shifted from make to buy, but there are people who are in the middle go back for some model they'll try to develop on their own, etc. so that continues. T he 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.

Thank you team, I think we have run out of the questions, so I'll just pass it back to Vivek, for any choosing remarks.

No, nothing. Thank you so much for listening. I know uncertainty is a terrible feeling for most of you. Most of you might be feeling worried or not knowing what answers are. I think one comfort that we can give is, regardless of how

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much uncertainty there is, companies who do well are not the ones who sit in the middle of this fog and wait for this fog of uncertainty to pass, right. You have to try and move as close to the edge of the fog that whenever it starts dissipating, you're th e first out. And we're fairly cognizant of that and try to move fast. So that's where we leave it. Amit is always there to answer your questions and please keep calling him. So that's all from us.

Ladies and gentlemen, on behalf of Nomura, I would like to thank you for joining this call and also thank the management of Sona Comstar for giving us the opportunity to host this one. Have a good day everyone.

Thank you, Kapil, thanks everyone, bye.

Thank you everyone for your time. You may now drop off the line.

This is a transcription and may contain transcription errors. The transcript has been edited for clarity. The Company takes no responsibility for such errors, although an effort has been made to ensure a high level of accuracy.