Operator: Ladies and gentlemen, good day and welcome to the Q2 FY 2027 Results Conference Call hosted by Motherson Sumi Wiring India Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Now, I hand the conference over to Mr. V.C. Sehgal, Chairman of the company. Thank you, and over to you, Mr. Sehgal.
V.C. Sehgal: Thank you. Good evening, ladies and gentlemen, and thank you for joining us today. I warmly welcome you to the Motherson Sumi Wiring India Limited results call for the Q2 of FY 2027, and I am thankful for your continued confidence in the business. I am pleased to announce that the company has delivered a strong performance during this quarter. The revenue growth is supported by higher customer volume, new program launches, and contributions from our greenfield plants.
V.C. Sehgal: Our investments in new capacities are supporting the increased demand from our customers, and while our team's main focus on managing quality-related headwinds and improving operational performance. We remain confident about the long-term prospects of the automotive industry in India, and will continue to invest in capabilities and keep capacity in line with our customers' evolving requirements. With that, I would request Vaaman to take over and take you through the performance of our company and also introduce the other members in the call. Over to you, Vaaman.
[Director] (Motherson Sumi Wiring India Limited): Thank you, Baba. Good evening, everyone. We are pleased to report a strong performance this quarter, with revenue growing 47% year-on-year and 19% sequentially. EBITDA increased 34% year-on-year and 45% sequentially, while profit after tax registered growth of 35% and 54% respectively. Let me take you through the key drivers of our performance. The passenger vehicle industry continued to witness healthy growth, with volumes increasing 25% year-on-year and 14% sequentially. We grew ahead of the industry, reflecting the continued trust of our customers and our ability to capture growth opportunities. Vehicle premiumization, which is driving higher content per vehicle, along with our participation in new model launches across both EV and ICE platforms, supported our performance. EVs accounted for 10% of our revenue during the quarter and 9.3% for the H1 of the year.
[Director] (Motherson Sumi Wiring India Limited): Our three greenfield plants also contributed meaningfully to growth, enabling us to support higher customer volumes. The ramp-ups have progressed well, with the plants now operating at an optimum utilization level. Moving to margins, EBITDA margins stood at 9.2%, improving from 7.6% in Q1 through continued focus on operational efficiencies, which led to a resilient performance, while headwinds from higher copper prices, minimum wage revisions, and other inflationary pressures remain. Copper prices increased by approximately 6% sequentially and 54% year-on-year. As we have highlighted previously, copper is a pass-through item with a typical time lag of about three months for recovery from majority of the customers. We are continuously engaged in constructive discussions with our customers to recover these incremental costs. Now, let's look at the outlook. Passenger vehicle demand remained strong during the quarter.
[Director] (Motherson Sumi Wiring India Limited): However, the H2 of the year will be compared against a higher base following the GST reduction implemented last year. Based on current visibility, we expect the industry to continue registering healthy growth. The combination of healthy industry growth, continued premiumization, driving higher content per new vehicle, and new model launches provide a favorable backdrop for us. With that, I now have with me Pankaj Sir, Anurag, and Gulshan to address your questions. Moderator, please open the floor.
Operator: Thank you very much. We'll now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking your question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask the question. First question is from Kapil Singh from Nomura. Please go ahead.
Kapil Singh: Yeah. Good evening, sir. Congratulations on a very strong performance for the quarter. My first question is just on the outlook for the H2. Vaaman, you mentioned that, of course, growth will be slower, but when we look at absolute terms, most of the OEMs have actually given a fairly strong H2 growth guidance. In absolute terms, can we expect that the H2 can be better than where we are in the Q2? Are there some more new programs starting which could support growth in the H2 ahead of the industry?
[Director] (Motherson Sumi Wiring India Limited): Yeah, thanks for that question. Look, Q3 is usually a strong quarter because of all the festive period that, as you know, has all kicked in, but it is also a precursor before that is the Shradh period, so a little bit of a balancing out there. But of course, we are very hopeful. I think, of course, the GST cut provided a very strong boost, and we are hoping that the momentum continues.
[Director] (Motherson Sumi Wiring India Limited): Like all the OEMs are saying, I think, at the same time, we were very focused to deliver the capacities when the growth had kind of slowed down, so we kind of kept focus and made sure that we were ready for this kind of period. So, we are completely ready. I think the ramp-ups, like we said, have gone really well, and we are really hopeful that this festive period, again, continues to deliver very strong revenue growth. Pankaj Sir, Gulshan, if you can add anything to that?
Pankaj Mital: Yeah. Vaaman Sir, as you said, you are right that the momentum continues at the moment. The momentum continues, and yes, what he mentioned was that the kind of growth which is with respect to the last year, because this was after GST cut, the momentum has been continuing, and it continues. So, definitely, we do believe that there should be continuous growth as we move forward. But the range of growth in terms of percentages may not be as wide as what it was with respect to last year.
Kapil Singh: And sir, there are more programs starting in the H2 as well?
Pankaj Mital: I mean, programs have been continuously coming in, so definitely carmakers keep launching new vehicles, this will be a continued process.
Kapil Singh: Okay, sure. And sir, the second question was on margin. What we have seen is that gross margins have been under pressure, and you mentioned about copper as well. Are we also, on a quarterly basis, getting the claims from the customer? When we look at other operating costs, they have been fairly well controlled. So, just some color here, like how you are, what exactly are we doing here that other operating costs have been continuously coming down as a percentage of the sales? How should we look at this? Is there scope for this to keep coming down further, or there are certain expenses you have controlled, and they could increase a bit in the H2? Thanks.
[Director] (Motherson Sumi Wiring India Limited): Pankaj Sir, please go ahead.
Pankaj Mital: Well, see, Kapil, basically, when the greenfield sites came up, there have been costs, and the revenues were not there. As revenues keep coming in, then when we look at the ratios, they improve. For us, as a company, our endeavor has always been to be frugal. We have always austerity measures in place. We will continue to move up on that path. I mean, I am not giving you a forward-looking statement, but that is the endeavor which we have. It all depends on how the markets fluctuate and what happens. But that is the endeavor of the company to remain optimized for cost manufacturer, of course, and keep investing in the future growth and in the new technologies, and keep investing in new technologies, new processes, and also digitization and automation as we move forward.
Kapil Singh: Oh, okay. Sir, we are getting the claims on a quarterly basis as we had expected, because I am just trying to understand the gross margin has come off. Are there claims pending here which will result in a gross margin improvement as well as we go forward, or it will happen more through backward integration programs?
V.C. Sehgal: I think, Kapil, there are two things. One, the copper impact and also the wage impact. These things are under negotiation with the customers, and you will see normally a 3-month or a 6-month lag is there. So, within this financial year, we will report better numbers.
Kapil Singh: Excellent. Thank you so much, sir. Best wishes, and look forward to that.
Operator: Thank you. Next question is from line of Raghunandhan N.L. from Nuvama Research. Please go ahead.
Raghunandhan N.L.: Congratulations to the entire team, Pankaj Sir, Anurag Sir, Gulshan, on all-round beat. Good to see EBITDA margin at a four-quarter high. Sir, you just indicated that discussions are constructive with customers, and for both input and minimum wage inflation, price hikes are likely to be received over a period of 3 to 6 months. Just a clarification here. For the minimum wage inflation, would you receive the entire pass-through or a partial pass-through?
V.C. Sehgal: It is under negotiation. I do not know what the why should be partial. I did not understand.
Raghunandhan N.L.: I mean, it is not index like copper, where 100% is generally a pass-through. So, because this is a negotiation, I was just trying to understand whether the customers will expect some part to be absorbed by the company.
V.C. Sehgal: Of course, and we try to do our best to get full recovery from them.
Raghunandhan N.L.: Noted, sir. That is good to hear. EBITDA margin is at a four-quarter high. On the raw material cost to revenue, it is still high at 70% of revenue, almost at an all-time high. Do you expect that as the pass-through happens of cost inflation, the margins will sequentially improve? Generally, you also work on backward integration, so would that also help performance going forward?
V.C. Sehgal: Anurag? Gulshan?
Anurag Gahlot: Yes. Obviously, these are, as the commodity price, which is copper in our case, is on the lag of a quarter with the major of the customers. So, in our next quarter, we will see a recovery of that. So, there will be definitely an impact on that also. Localization is, yes, always on our cards to work towards that, and we are in a right direction to localize for the imported components.
Raghunandhan N.L.: Noted, sir. Thank you for that. In the press release, you have also highlighted the ramp-up of greenfields. Kharkhoda plant in Q1 itself had achieved a high optimal utilization. Is it fair to assume that Gujarat plant and Pune plant have also seen better utilization in Q2 versus the previous quarter? If possible, can you indicate whether the greenfield, all three put together, have they reached optimal levels of utilization as per your own targets?
V.C. Sehgal: Anurag?
Anurag Gahlot: Yes, sir. As Vaaman sir has also said in his commentary, these three greenfield plants have progressed, the ramp-up has progressed well, and now we are operating at a very optimal utilization level. I can just tell you that there are no greenfield at this moment. Now they are with all the regular plants also. We are considering like that in total when we are doing the capacity utilization.
Raghunandhan N.L.: Got it, sir. Thank you so much, and best wishes for future. I will fall back to the queue.
Operator: Thank you. Next question is from line of Joseph George from IIFL Capital. Please go ahead.
Joseph George: Hi, thank you for the opportunity. The question that I had was on the deficiency of, or the lag in terms of the copper price pass-through. Assuming that copper prices stabilize at the levels seen in Q2, how much under-recovery is left in terms of, say, gross margins or the way you look at it?
V.C. Sehgal: Does it probably I didn't understand the question. But see, over a period of time, it all equals out, whether the price is going up or going down. But Anurag, Pankaj, if you can understand this better.
Pankaj Mital: Can you clarify your question, please?
Joseph George: Yeah, sure. What I meant by under-recovery is, assuming copper price has been very volatile over the last four, five quarters. If I assume that copper price stabilizes at the levels seen in Q2, as in it doesn't increase or fall from the Q2 levels, how much more price increases are due from the customers, which will reflect in the upcoming quarters?
Pankaj Mital: Basically, as the team has informed that we have a lag of mostly a quarter. In some cases, smaller cases, it had been up to six months, but mostly, majority is three months. That is the lag. If the copper prices will stabilize on a quarter-on-quarter basis, it is there, but it has not stabilized, then we cannot predict this now. To answer your question, in one quarter, two quarters, three quarters, if they remain exactly the same, then you will buy and sell at the same price.
Joseph George: Okay, fair enough. Thank you.
Operator: Thank you very much. Participants, you may press star and 1 to ask a question. Next question is from line of Kaustubh Ghogale from Kamana Holdings. Please go ahead.
Kaustav Bubna: Yeah, hi. Thanks for taking the question. My question is around this whole content per vehicle topic. I wanted to understand, after speaking with EV automobile companies who are transitioning to EV in India, like for example, Mahindra and other companies, they all say they are shifting fully to zonal architecture. Once you shift fully to zonal architecture, that whole argument of content per vehicle actually is not there because the amount of wiring needed is much lesser.
Kaustav Bubna: I wanted to understand how your view on this, where is this growth that we are showing today coming from, and how much of this growth is at risk because of a lot of our customers moving to zonal? If you could give some color on, in-depth color on that, it will be appreciable as it will help understand how to look at growth going ahead.
V.C. Sehgal: You are disturbing the holidays. We have been hearing this transition to electric vehicles for approximately, Pankaj, 20 years?
Pankaj Mital: Yes, sir. To answer this question, it is not a straightforward answer, sir, to your question, because this transition to zonal architecture has been there for a very long time. Maybe the benchmark would be, if you will look at globally also, that where the zonal architecture has been implemented and in how many out of the total platforms which any carmaker has across. So far, we have seen that there has been a content increase.
Pankaj Mital: There have been discussions on the Because the aspirations of the people and also the innovations of the carmakers to not just let it be a car, but it is more than just a mode of transportation. That has led to content increase. So it is not about the architecture alone, but it is about the innovations which the carmakers have brought in into making that product something more than just transportation. So it provides huge amount of things to a person who is in the car. So, that has been fueling the
V.C. Sehgal: Hello? Yes?
Pankaj Mital: Yes, can you tell me?
V.C. Sehgal: For more information. Yeah, we can hear you.
Kaustav Bubna: Yeah. Okay, great. Thanks for that. Also, the second question is, does the company have the full gamut of these high-end specialized wiring harnesses and cabling for cars? Because I also hear that some customers have to get some components for their interconnecting systems from third parties because Motherson Sumi Wiring doesn't have the full diameter wiring options yet. Is that true?
V.C. Sehgal: Sir, approximately 7 to 8 million components and terminals, et cetera, are used in wiring harnesses. You mean to say you know of a company which does all that by itself?
Kaustav Bubna: No, I am just trying to understand from you where-
V.C. Sehgal: Oh, no. No, no. Listen, wiring harnesses, particular thing, that components, every component has a customer-designed components. So, Toyota design, Suzuki design, Honda design, like that. So, it is not practically feasible that you are making everything yourself. We, of course, have our own manufacturing of wires and components. We have collaboration with Sumitomo for that. So, it is a very long discussion if you want to understand that. And it is not so easy to make you understand the type of components in a wiring harness are phenomenal.
V.C. Sehgal: The range is out of the world. So, my thing is, you make whatever you are using the maximum, you make it yourself. Also import from different customers, according to the sources that they say that they are important. But all the components cannot be changed individually. It has to be as per drawing. The drawing specifies which customer specifies which component in the wiring harness. Because you have on field, you have a lot of maintenance and all these things are required. So, you cannot make anything by yourself and just attach it.
Kaustav Bubna: Okay. Thank you so much for your answers. Thank you.
V.C. Sehgal: You are welcome.
Operator: Thank you. Next question is from Shubham Batra from Amber Asset Management. Please go ahead.
Shubham Batra: Hi, sir. Thanks for taking my question, and congratulations on a very strong set of numbers. I just wanted to understand, if I go back to 2023, 2024, 2025, we used to do around 35% kind of gross margins, which have come down to 32.5% in FY26 and have further come down to 30%. This is likely due to copper impact, but wanted to understand that hypothetically, if copper stabilizes at where it is, then what will be our normalized gross margin that we should think about in the coming years?
V.C. Sehgal: Pankaj? Anurag?
Shubham Batra: Hello?
V.C. Sehgal: Normally, we do not guide on the margins. We always talk about gross.
Pankaj Mital: Well, you see, we always work on return on capital employed, and you would see that the company has maintained very healthy return on capital employed despite all these uncertainties in the market and also the increase in commodities. You would appreciate that we strive to get where the value-add, what we are doing. If the commodity price goes up, then the best for us is to get that recovery. In a medium term, you would not see that there is a sudden sharp increase because when the customers are compensating us for these increases, then it is a numerator-denominator effect. Whereas the margins remain healthy, it is still as a percentage you may optically see that it is something like what you are seeing today. Our results are-
V.C. Sehgal: Pankaj, he is talking about three years ago, the margins. That time, the international wiring harness was also a part of this. Maybe the answer is there somewhere, if you understand.
Shubham Batra: Basically, I am trying to understand that because of the numerator-denominator impact, how much of gross-
V.C. Sehgal: No, I do not understand numerator and denominator. Can you please tell me how many years ago did you quote the figure?
Shubham Batra: Sir, I am basically looking at FY25 and FY24 gross margins.
V.C. Sehgal: In 2024, MSWIL was there?
Shubham Batra: 2024 and 2025.
V.C. Sehgal: 2024, MSWIL was not there, sir.
Pankaj Mital: Yes. No, 2024, MSWIL was there. So, he is comparing MSWIL only.
V.C. Sehgal: Oh? MSWIL only.
Pankaj Mital: Yeah. So, for us, sir, we do not provide a guidance on the margins because while MSWIL we see as one company, it has huge number of programs. We have hundreds of programs, multitude of customers. It is a combination of everything what we see in our results. Therefore, directionally, company has always been focusing on managing its stock, its capital in the most optimized manner, and that is where we continue to focus on return on capital employed.
Shubham Batra: Got it, sir. Secondly, sir, I wanted to understand, since now greenfields have also ramped up well, what would be your current capacity utilization across the company?
Pankaj Mital: Sir, our capacity utilization has been a stated policy in the company. The moment it hits around 80%, we are in an expansion mode. You would see that as the volumes of the customers keep growing and the customers are putting up new facilities, the company will set up and expand its facilities. The company has expanded its facilities in the past 2, 3 years to ensure that we are ahead of time and we are in a position to support our customers' growth. We never second-guess their growth, and that's the reason why we have been able to support our customers today.
Shubham Batra: Got it, sir. Okay. Thank you, sir. That's all.
Operator: Thank you. Next question is from line of Ankur Poddar from Svan Investments. Please go ahead.
Ankur Poddar: Hi, sir. Congrats on a very strong set of performance for the quarter. Most of my questions have been answered. Just one clarification is on the greenfield itself. You mentioned that they have reached optimum level of utilization, and now we should look at it at a consolidated level with our base business also. Is it fair to assume that the margins for the greenfields have also reached our company-level margins?
V.C. Sehgal: Pankaj? Anurag?
Gulshan Pahuja: I think we don't talk about the margins as a plant-wise level or for the greenfield specifically. What you are seeing, the total margin, it is for the overall performance of MSWIL.
Ankur Poddar: Okay. Understood.
Gulshan Pahuja: Yes.
Ankur Poddar: Yes, sir. Please go ahead.
Gulshan Pahuja: No, no. That is covered now.
Ankur Poddar: Okay. All right. Understood. Just a follow-up on the previous participant's question on the CapEx that we are looking forward for this year and going forward. Can you give us some guidance there?
Gulshan Pahuja: For this year, we have already laid out the guidance that is largely in line with what we had in the previous year of INR 200 crores, approximately.
Ankur Poddar: For FY28?
Gulshan Pahuja: FY28, it all depends on our. Because we are supplying to our customers, so right now, their schedules have not finalized where we are setting in. In terms of giving you the indication in terms of the capitalization and price movement for FY28 would be very difficult. But as we said in the beginning or so far that obviously the growth is there, and we are looking at the capacity expansion and all. That will be there. But in terms of quantifying it, how much it would be, that clarity would come in the upcoming time when it would be laying down.
Ankur Poddar: Understood. That is all from my side. Thank you and best wishes.
Gulshan Pahuja: Thank you.
Operator: Thank you. A reminder to all the participants, you may press star and 1 to answer question. Next question is from the line of Audrey from Koji Advisors. Please go ahead.
[Analyst] (Koji Advisors): Hi, this is Sanjay here. Congratulations for great numbers. I had just one clarification and one question. The clarification was that, are we saying that if EBITDA has lagged revenue growth, it is primarily due to raw materials, copper prices, and wage growth? Hello?
Gulshan Pahuja: Pankaj?
Pankaj Mital: Yeah.
Gulshan Pahuja: Sir, can you clarify that question?
Pankaj Mital: Yes, sir.
Gulshan Pahuja: Sir, can you clarify that question again in terms of how you are looking at the EBITDA with the revenue growth? Just for my understanding so that I would be able to answer.
[Analyst] (Koji Advisors): Well, if you just look at your own figures, your revenue growth has been higher than your EBITDA growth, right? In a sense, you have not been able to take advantage of operating leverage, and there may be two very good reasons for it, which so far in this discussion seem to be the lag in the pass-through of copper and other raw material, and the other is the wage growth that has been imposed due to regulation. Are these the two major factors that have contributed to this, or am I missing anything else?
Gulshan Pahuja: I understood your question now. The point is, if you just look at the revenue growth, the revenue growth is 47%, in which the copper growth contains 12%. If you just take out the copper inflation, as you are aware that we do not charge anything on the copper, it is completely a pass-through. If you take out the revenue growth is 35%, and our EBITDA is around, growth in EBITDA is 34%. So practically on the similar lines where we are. Minimum wage impact are still there in this quarter, but due to continuous work on our cost optimizations, cost austerity measures and all, we try to control our cost as much as possible so that we would be able to have the better operating leverage in the results. That is you are looking at it.
[Analyst] (Koji Advisors): Right. Just one question. Across industries, actually, because of the sharp volatility in raw material prices, there have been moves to cut down the lag from three months to one month. Is this happening with you guys also? Is there any chance that the OEMs will agree to a shorter lag period in coming quarters or months?
Pankaj Mital: If something happens on that account, we will keep you informed. So far, there has been a lag period. Of course, there have been discussions, as you mentioned. Once anything happens, then as Mr. Sehgal mentioned that lot of topics are network solutions which happen with the customers. We work as partners along with our customers to find solutions to the issues which are facing on the industry and to find any amicable solutions at the end of the day.
[Analyst] (Koji Advisors): Okay. Thank you. Thank you very much. Congratulations once again.
Pankaj Mital: Thank you, sir.
Operator: Thank you very much. Participants, you may press star and one to ask a question. A reminder to all the participants, you may press star and one to ask a question. As there are no further questions, I now hand the conference over to Mr. V.C. Sehgal for closing comments.
V.C. Sehgal: Thank you. Thank you all very much to make sense of what we have achieved. We are all very excited. We believe these particular questions have been answered over time, and late they come, so we try our best to make you remember the history. Thank you all very much. Have a great weekend. Bye-bye.
Operator: Thank you very much. On behalf of Motherson Sumi Wiring India Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines. Thank you.
Pankaj Mital: Thank you.
