Sundram Fasteners · tone and specificity signals across the available quarters.
Language signals
We have reported an EBITDA of INR 238 crores at 17.5% compared to 17% for Q1 of last year and 15.6% for Q4. The borrowings are also showing a declining trend, and not only the borrowing, the working capital components as well.
Getting back to 19% or 19.5% may be a challenge, but definitely, there is room for another 1% up. Once the traction improves in the export segment and where the realizations have been historically higher, the margins will definitely grow.
The shift towards higher-tonnage vehicles and multi-axle vehicles has helped us in the sense that our participation has become much higher, and the pack value of our parts has improved. Similarly, in the tractor segment, the shift towards higher HP tractors has helped us.
We've had about 12% growth in the domestic segment... the profit for the quarter, again, I must report, is the highest at INR 140 crores for the quarter.
On the EV segment, I would say there is a pause for the moment. I think most of the EV programs from our major customers are getting deferred, depending on the market conditions, primarily in North America. So as of now, beyond what we had signed earlier, the industry itself has not moved much, and we have also not signed any new orders.
Wind today is about 4% of the overall revenue of the domestic sales, and the bulk of the wind energy revenue comes from domestic segment. And with the given revenue uptick, we have also taken up further expansion of close to about an investment of about INR 80 crores, which should see revenues for wind energy business kicking in additional volume from next financial year.
The market share which we would be commanding today is close to 40%-45%. In each of the product segments, we have competitors. And with respect to other product segments, I would say either we would be at number two level competing with others.
I think now, as Mr. Bharathan had explained, I think it's in the development and approval stage. I think it will be too premature to commit on the volumes or numbers that we are looking for this portfolio.
The major elements, raw materials have been stable, and we have experienced about a 2%-3% drop in the procurement levels. But this quarter, the product mix had moved slightly against us and where either the realization of the parts are lower or the RM content are higher.
For any part from the development, go ahead for the development to come to fruition, depending on the nature of the part, would take anywhere between 18-24 months. However, these activities have started a bit early, and so I think post-half of the next year, we should be able to see things coming to the [fruition].
While it appears to be a flat number, one should see it in the context of PBT before exceptional item, where the growth has been from INR 153 crore in corresponding quarter to INR 174 crore.
On the margins front, we have already moved from the 16% odd to 17% plus... we are directly going towards 18%. That's the broad guidance I can give you at this point.
The wind energy business... scaled up nicely, and the operating leverage is kicking in there.
Switching costs is not an easy proposition for the customer because it requires product validation, and it typically takes more than a year, and also a considerable amount of money. So the customers are always wary of switching from one supplier to another supplier for a few cents here and there.
There has been a significant inventory build-up, which has increased some of the conversion costs. As inventories get liquidated, we expect this to get corrected, and both the contribution margin and the PBT margin to resume its normal trend.
For capacity planning and capital expenditure purposes, we have a program life of five years. But based on past experience, we know that some of the products have much longer life, more than 10 years, in some of the cases where we've been supplying products. So we don't have to worry about the predefined time frame of four years or five years.
With the clarity emerging on the Class 8 trucks, first the date is finalized. It is going to be enforced from 1st of January 2027... With also a lot of turbulence getting settled on the tariff side, the situation is now slowly limping back to normal.
In all the segments, in the high horsepower because of the data center requirements continuing to be good, they are projecting about a 25% growth. The heavy duty segment also we are looking at upwards of 15% growth.
The management looks at it as the minimum growth that we should target is, let us say, at least a nominal GDP and + 2%. That is one way of looking at it, or 2x of GDP. Roughly, around 12%-13% is what the, how the business plans are formulated, capital allocations are made.