Tube Investments of India · tone and specificity signals across the available quarters.
Language signals
What we have to recognize as we kind of look out for the next decade is that India is going to be capital short for what it needs to do. The number of sectors that have to grow in this country, right now, there's not enough capital in order to kind of fund this up. We are very careful about this saying, like, I don't want to be so burdened with debt that I can, that it makes me uncomfortable in the operating business.
EV is gonna take a little bit of time to pick up. We don't want to get into this quarterly cycle because it's gonna be very difficult to kind of, because then expectations will build up kind of unrealistically. Our only request is that if you can kind of give us that time, so we can build four new businesses.
In each of the businesses we have kind of revisited why there is not enough opportunity for growth. It's very similar to this Danaher approach. What we're doing is taking a more expansive view of where we can grow in each business. Yes, you're right, that is allowing us to kind of grow more bullish in terms of what we think can be achieved in each of the businesses.
The encouraging thing is that it's not just the vehicle performance, but basically it's the economics as well, which is the customers that have begun to deploy have basically begun to see at least a 10%-15% reduction in overall logistics costs.
We've taken any capital needs off TI CMPL off the table... after all the factories are built out, we will still have a significant amount of that portion in the bank, in excess of INR 1,000 crores, more like INR 1,100+ crores in the bank after everything is built out.
We are looking for double-digit growth... growth will be driven by construction, non-auto which is really showing good growth in the country; EV battery weight reduction opportunities where we have metallurgical and engineering strength; and exports where we hardly have any global market share.
At this stage, I would say that, though we did give that guidance, I don't believe we will hit [operational break-even] this year.
One is the refresh model, which is we are well on our way, and quarter two will see the launch of the same. Second is that one new subsegment seems to have emerged, which is on the higher battery pack side.
I don't think there's anything to discuss from that perspective. We don't first anyway discuss any of the family issues in the public domain.
If lithium-ion starts moving up, everybody will increase prices. Because it is the largest component of everybody's cost structure.
We are likely... to give you a growth rate of around three to five years, about 12%-15% in growth.
The only scalable solution for that business in the long term is for India to become an alternate export hub... China Plus One is now kind of beginning to play out.
Directionally, I believe that's correct. So EBITDA losses should be more or less steady state, and we maintain them at steady state.
In terms of specific terms of margins, Q2 we expected to be much better. Like in the bicycle business, you see the losses are under control, and we are operating at a break-even.
What's happening is we are scaling up as we are going across the geographies. The product acceptance has been quite good in the market. The feedback from the customers is exceptionally well.
We do understand that it has been kind of, we've not had basically profit improvement this quarter. Our current outlook is that there can have to be better, and we continue to basically stay bullish about our other businesses as well.
We have carefully and we have purposefully chosen not to go this route [retrofits] because we are convinced that, grounds up, EV is any day a better bet as compared to a retrofit on any of the vehicles.
If we look at the CapEx side... [it] depends on how we kind of get in. If it's kind of a new line of business, if it requires anything that's inorganic, then that requires more capital. Otherwise, it'll be more operational.
The fundamental thesis of these businesses kind of remains... good long-term growth in both these businesses... What we have to look at is... ensure that these businesses basically give us the growth and the profitability we need.
We are not giving any guidance on when the losses will stem in EV, because we're launching new products there. And that's a business, that's why we've raised money specifically into that business, so that we don't have to fund it further from TI.
It's definitely been much slower than we wanted, Jinesh. We've had a real challenge in that business, getting the product approvals from the customers we're working with.
In all businesses and all the competitors in that business are all fairly strong competitors, right? So there, we need to make sure that we are basically able to compete on the front foot in all of those four businesses we get into. So we want to be conservative there and raise enough cash.
We feel very comfortable that we have enough runway for at least two more years with the funds we have it.
My bandwidth question has always been asked. I think in all honesty, the bandwidth question was asked even when we were growing one company at a particular pace. But I think the opportunity that the country offers today is that level of growth. And if we are growing as leaders, we have to be able to handle additional bandwidth.
The PM E-DRIVE incentive benefit got reduced by INR 23,000 per vehicle as the quantum of eligible vehicle got exhausted. So there was a reduction in incentive benefit.
I would actually say that now is the time to double down on that business. It's not the time to kind of back off. And because the fundamental thesis, Sujit, to me, is still intact, right? Which is like all of the IC components and IC products in these businesses are going to get replaced over time.
I made some mistakes, kind of, you know, I've not, perhaps performed as well as we could have in certain segments. And perhaps I also underthought a bit as to kind of what it would take to kind of build out the business.
It's unlikely we'll do anything significant in TI-2 anymore, right? So I think TI-3 is just TI-3, if something were there, it's, we're still be open to, but I would say definitely there's no thinking of doing so much significant in TI-2 anymore.
We believe that that will continue. We are developing an approach that... we basically start thinking on the component side. CG will be more focused on the component side development, and TI Clean Mobility will be more focused on vehicle integration and being an OEM.
Some of this is a new concept, so no one is even really sure, you know, if it clicks, it clicks in a big way. You know, it takes a little time. There's a diffusion time that it takes for people to absorb, to change some behavior, you know, in terms of adoption. The benefit is very clear.
Temporarily, yes, there may be a setback to FAME, but FAME is not completely gone. It's got reduced now. And you know, once the elections are through, you know, I'm sure the government will work out some policies for some more time at least, till the EV adoption, you know, as per their plans that they have made, it starts stabilizing.
Out of 206 trucks deployed in the country [for heavy EV trucks in FY25], 172 trucks were deployed by IPL Tech. That's the kind of lead that IPL Tech has taken in the heavy electric commercial vehicles.
The plan is that for both these businesses [three-wheelers and trucks], the attempt would be within this financial year to achieve an operational break even.
We have signed a INR 8,000 crore contract for the next seven years' period of time, which is expected to start in Q4 of this year. Railway business, we expect to revive it back starting next year.
We are definitely seeing an upswing in the demand for the electric vehicles, especially in our heavy truck segment and also in the small commercial vehicle segment. In fact, we are sitting on a very good order book for the big trucks.
The challenges are primarily on account of deployment. In deployment, there are two parts to it. One is financing... Second is the challenges to set up the charging infrastructure for a given route. These two are the challenges which we are working towards, and we are hopeful we will untangle that.
Cost reduction across all our four platforms is a very important initiative, and it's a continuous and an ongoing process. Our Montra Electric Rhino was the first electric truck in the country to be certified under the PM E-DRIVE scheme, which happened in quarter four.