Key takeaways of the call

Sharp 71% fall in sales was primarily on account of extended lock down and low scale operations permitted for the first half of Q1FY21. 78% drop in auto industry production volume.

All facilities of the company are now operational across the globe and production levels have witnessed month on month improvement in utilization levels. Plants operated at about 70% pre Covid levels in July 2020 and is currently operating at about 80% in August 2020.

Production at overseas operations of the company have also resumed with august production levels stand at 85% in Europe, 75% in Mexico and 60% in ASEAN.

So far 2-wheelers have done well than 4-wheelers due to good harvest and DBT to Jandhan account. The company is optimistic as preference for private transport in COVID times improve demand outlook and also per-capita vehicle ownership to increase. Indents received from OEM are also showing month on month improving trend. Efforts to have adequate inventory before festival season also to drive production. If the momentum continues Sep 2020 volume to be in line or higher than the Sep 2019 volumes. Secondly last year there was lot of demand which did not convert to sales due to transition from BSIV to BSVI. Some part of that demand is now expected to covert to sales and support the industry. Lastly the government is expected to expedite the scrappage policy by taking steps in that direction. Formally the growth is expected to back in the medium-term.

India so far has witnessed good monsoon adequate and well distributed rainfall which augurs well for good khariff sowing. So rural demand is likely to sustain, with sharp recovery in demand for 2Wheelers, tractors and farm equipments/implement YoY basis. While 2w may sustain the momentum and expect to lead the recovery followed by PV and CV catching up fast.

Delay in commissioning of plants by 4-6 months for 2W alloy wheel and Sensors. Trial runs are currently underway forthe two wheeler alloy wheel plant and commercial production is expected to start by September 2020 with full ramp up by mid next year.

HTS sensor line has been commissioned now and the commercial production is expected to start from Sep 20 onwards. However other products of sensor project are delayed due to covid pandemic.

Sensor project is also delayed due to equipment which are from China got delayed due to COVID. The sensor project has 3 leg with initially planning to have small capacity of HTS sensor and then added CAM &crank and wheel split sensors. While the HTS sensor part has been completed, the facility for CAM & crank and wheel split sensor that was expected to start manufacturing by fourth quarter of current fiscal now got delayed by 6 months.

Update on Harita Seating merger: Hearing scheduled on Aug 24, 2020 with NCLT Delhi and Sep 9, 2020 with NCLT, Chennai. Matter has been delayed by COVID pandemic. Post the approval the transaction will take another 3 months to complete.

Large part of rights issue proceeds (issue size of Rs 243 crore) to be used to retire debt

Revenue mix – Switches Rs 127 crore (or 30% vs. 37% in Q1FY20); Lighting Rs 119 crore (or 29% vs. 24% in Q1FY20); Acoustics Rs 66 crore (or 16% vs. 12% in Q1FY20); LMT Rs 26 crore (or 6% vs. 14% in Q1FY20)and Others Rs 80 crore (or 19% vs. 13% in Q1FY20).

MIL is looking to reduce power, rent costs;in short-term it has also resorted to salary cut.

New Orders: MKA has bagged orders for LPDC alloy wheels from leading Korean OEM; Clarton Mexico has received orders from Ford for electronic horns. CH nominated for 0.3 Mn horns by large Korean OEM in India. Nominated for oil temperature sensors by Japanese 2W OEM. Roof top mounted switches to a Japanese OEM.

Expect about Rs 100 crore plus incremental sensors revenues in FY22.

Lighting business have strong order wins in PV (three orders from Japanese OEMs - 2 for tail lamps and one for head lamps from MSIL) and order pipeline in India backed by Technology from Delvis. Normal annual sales run rate is about Rs 150 crore for Delvis.

Steep drop in LMT division revenue/share in Q1FY21 is largely due to larger PV decline. The PV production was significantly lower compared to two wheelers and more over in PV the production is for lower end models where steel wheels are used. Moving forward, expects the demand to pick up with ramp up in higher end models demand/production. Further only in June 2020 the PV production started but with 2Wheeler players especially one major having large export orders has took the lead once relaxation happened.

LED content in 2-W, 4-W at 35%, 25-27%, respectively, in FY20 and is set to increase, going forward.

LPDC alloy wheels – It's too early to comment on revenue at the moment. The supply to first Korean OEM to start by around next year Diwali coinciding their new product launch, which is an SUV. The recent order from second Korean OEM the MOU is for 75000 wheels per year and the supply to start by middle of next year.