Sunil Bohra, Group CFO of Uno Minda shared details of the company's latest agreement with China-based Suzhou Inovance Automotive and its potential benefits with CNBC-TV18.
On June 6, Uno Minda entered a Technical License Agreement with Suzhou for the manufacture and sale of select high-voltage category electric vehicle products.
The products will be applicable for both passenger and commercial vehicles in the Indian market.
The products in question include Charging Control Unit (CCU), EV inverter, EV motors and next-generation 3-in-1 electric drive systems.
This is the verbatim transcript of the interview:
Q: What is this technical licence agreement that you have signed. One of the positives that the Street is viewing this with is that it will increase your kit value. I am reading a Kotak note, which states the kit value could be ₹1.5-2.5 lakh, much higher than what it is currently.
A: As you know, for the two-wheeler electric vehicle (EV) segment, before I come to four, I will give a bit of background. We have been a frontrunner in terms of setting our EV portfolio for a two-wheeler and three-wheeler segment and we have been communicating that we are working on the four-wheeler EV segment also. Three months back, we signed a technical license agreement (TLA) with Starcharge for wall-mounted chargers. Yesterday, the board approved the signing of TLA with Inovance with an intention of converting that TLA into a joint venture, subject to approvals.
Coming back to the TLA, the kind of product profile which we will build, we will have an e-motor, inverter, power supply which includes onboard charger (OBC), direct current (DC-DC) converters, etc., we will have eCompressor, eControllers, eAxle. So, there are multiple products which will come into the fold from the EV perspective. We all know that the Indian EV market is growing at a significant pace. Last year, the passenger vehicle (PV) segment grew by almost 70-80% and the market looks very aggressive. The government is focusing on green energy. So, with all this put together, we believe that we will be the frontrunner in the four-wheeler EV space as well as we have been in the two-wheeler and three-wheeler EV space.
Q: Will the kit value of these eAxles along with alternating current (AC) chargers range between ₹150,000 and ₹250,000. Is that a rough number we should work with?
A: You are right, that is a good range to work because a lot also depends on the size of the car, whether it's a 50-kilowatt or an 80-kilowatt or 150-kilowatt or 200-kilowatt motor, etc. So broadly the range is right, but a lot also depends on what the market is absorbing, whether the market goes with the lower segment, A-segment EV cars or B-segment or C-segment. But broadly, the range you spoke is right.
Q: Kotak is estimating the supply of eAxles and chargers can be closer to ₹2,600 crore in terms of revenue contribution for Uno Minda. A rough math indicates they are factoring in around 1.3 lakh units. Is that correct? Is the aspiration to get around ₹2,600 crores?
A: We do not speak about numbers because eventually, it all depends on what is the size of the EV market going to be. It is only a multiplication factor that you just spoke about in terms of the kit value versus the industry volumes and our share of business. So, it's I think anybody's guess what the EV penetration is going to be and what will be the application factor in terms of the various categories we spoke about. So, on a broad range yes, we should be looking at a significant revenue potential from this business but as of now, I won't comment on the absolute numbers because as I said the EV volumes is a very unpredictable range as of now.
Q: The penetration for passenger vehicle currently is at 2%, right?
A: That is right.
Also Read: Uno Minda shares hit record high on new EV partnership; Market cap crosses ₹50,000 crore
Q: The note assumes 20% electrification of passenger vehicles by 2030. 20% is a big jump. Do you think it's possible? Electrification of course is the future, timelines of course we don't know but your own thoughts.
A: I will not comment on the year but 20% will definitely be a number maybe by 2030-2032 because as of now there are projections of 17-20% by 2030, everybody has different assumptions and that is why I said, normally we do not comment on the penetration or the volumes. But yes, as we move forward, I am sure the market will see at some time 20% penetration as well.
A: Absolutely.
Q: And the agreement would be that you will sell this here in India to OEMs here?
A: Manufacture and sell in India.
Q: Have you already spoken with original equipment manufacturers (OEMs) with regards to this? Have you done a check about what is the competitive landscape in these products and what is the scope?
A: Absolutely, like any new business you get into, you will obviously speak with your customers, and we have spoken with a lot of our customers who are working on a very aggressive EV profile. We also know the fact that the market is small, and it will grow. A lot of our customers may be importing or working to see how we localise. Also, it is important to note that our partner Suzhou Inovance, they are one of the largest in China, their group revenue is over $4 billion and their automotive business is more than a billion dollars. So very sizable company and they are dealing with a lot of larger players globally for these EV products. So, that also give us a head start in terms of your discussion with your local customers.
Q: You ended the previous fiscal with a revenue of over ₹14,000 crore and a lot of different parts of the business are firing. Your EV order book is close to about ₹3,800 crore. Give us the overall snapshot for this year as well. To what extent will you be able to grow the EV business and is it at similar margins to the rest of the business? As the EV business grows, is there any reason to expect an improvement in the margin profile? You are at about 11.5% margin of FY24, right?
A: Yes, 11.3% and year on year (YoY), we increase our business points. But the order book, ₹3,700-3,800 crore is the annualised revenue. It's not a cumulative order book. We always speak about the annual peak revenue, and this is all based on what our customers are guiding us, maybe in FY26 or FY27 in terms of volumes which they have provided us, and always the volume is sort of a joker in the pack. But yes, that is a number. In terms of margins, I would say a little earlier to comment because as of now volumes are very less. But as we move forward, as you build scale, as we achieve those kinds of revenues, we do expect the margins to be broadly in line with our average margins. But yes, they are, as of now, a little lower, because the volumes are small, the costs are all fixed, and also there are a lot of components. So, all in all, yes, margins today may be a tad lower than what our group average margin is, but as we move forward and as volumes ramp up, we do expect improvement in the margins as well.
Q: In FY25, are you expecting to book revenue of ₹3,800 crores from the EV business?
A: FY26-27.
Also Read: Uno Minda Q4 Results | Auto components maker declares dividend of ₹1.35, profit jumps 58%
Q: Where is that revenue number now for EVs?
A: As of now our revenue number for the EV segment and the last quarter, because I think it's important to see run rate because the market has been growing sort of phenomenally. So last quarter, we have delivered almost ₹180 crore. So, if you analyse that, it's almost ₹700 to 800 crore of sales for last quarter in terms of analysed number.
Q: One clarification on this TLA that you all have signed. Will you all be paying some royalty? If yes, could you quantify it?
A: I will not be able to quantify, but in every joint venture, you have a technology partner who brings on board the technology, you obviously pay royalty in return and as Uno Minda, we also get some sort of a management fee to run the operations and all other the support to the joint venture. So, it's a partnership approach.
Q: Could you give us a rough number about the royalty, the technology you are getting, which is fabulous, and it's showing good growth potential, good kit value as well. But what could it be - a couple of percentage points? Just give us a rough range at least.
A: It is confidential information, so we will not be able to share the number as of now.
For more details, watch the accompanying video
Catch all the latest updates from the stock market here
On June 6, Uno Minda entered a Technical License Agreement with Suzhou for the manufacture and sale of select high-voltage category electric vehicle products.
The products will be applicable for both passenger and commercial vehicles in the Indian market.
The products in question include Charging Control Unit (CCU), EV inverter, EV motors and next-generation 3-in-1 electric drive systems.
This is the verbatim transcript of the interview:
Q: What is this technical licence agreement that you have signed. One of the positives that the Street is viewing this with is that it will increase your kit value. I am reading a Kotak note, which states the kit value could be ₹1.5-2.5 lakh, much higher than what it is currently.
A: As you know, for the two-wheeler electric vehicle (EV) segment, before I come to four, I will give a bit of background. We have been a frontrunner in terms of setting our EV portfolio for a two-wheeler and three-wheeler segment and we have been communicating that we are working on the four-wheeler EV segment also. Three months back, we signed a technical license agreement (TLA) with Starcharge for wall-mounted chargers. Yesterday, the board approved the signing of TLA with Inovance with an intention of converting that TLA into a joint venture, subject to approvals.
Coming back to the TLA, the kind of product profile which we will build, we will have an e-motor, inverter, power supply which includes onboard charger (OBC), direct current (DC-DC) converters, etc., we will have eCompressor, eControllers, eAxle. So, there are multiple products which will come into the fold from the EV perspective. We all know that the Indian EV market is growing at a significant pace. Last year, the passenger vehicle (PV) segment grew by almost 70-80% and the market looks very aggressive. The government is focusing on green energy. So, with all this put together, we believe that we will be the frontrunner in the four-wheeler EV space as well as we have been in the two-wheeler and three-wheeler EV space.
Q: Will the kit value of these eAxles along with alternating current (AC) chargers range between ₹150,000 and ₹250,000. Is that a rough number we should work with?
A: You are right, that is a good range to work because a lot also depends on the size of the car, whether it's a 50-kilowatt or an 80-kilowatt or 150-kilowatt or 200-kilowatt motor, etc. So broadly the range is right, but a lot also depends on what the market is absorbing, whether the market goes with the lower segment, A-segment EV cars or B-segment or C-segment. But broadly, the range you spoke is right.
Q: Kotak is estimating the supply of eAxles and chargers can be closer to ₹2,600 crore in terms of revenue contribution for Uno Minda. A rough math indicates they are factoring in around 1.3 lakh units. Is that correct? Is the aspiration to get around ₹2,600 crores?
A: We do not speak about numbers because eventually, it all depends on what is the size of the EV market going to be. It is only a multiplication factor that you just spoke about in terms of the kit value versus the industry volumes and our share of business. So, it's I think anybody's guess what the EV penetration is going to be and what will be the application factor in terms of the various categories we spoke about. So, on a broad range yes, we should be looking at a significant revenue potential from this business but as of now, I won't comment on the absolute numbers because as I said the EV volumes is a very unpredictable range as of now.
Q: The penetration for passenger vehicle currently is at 2%, right?
A: That is right.
Also Read: Uno Minda shares hit record high on new EV partnership; Market cap crosses ₹50,000 crore
Q: The note assumes 20% electrification of passenger vehicles by 2030. 20% is a big jump. Do you think it's possible? Electrification of course is the future, timelines of course we don't know but your own thoughts.
A: I will not comment on the year but 20% will definitely be a number maybe by 2030-2032 because as of now there are projections of 17-20% by 2030, everybody has different assumptions and that is why I said, normally we do not comment on the penetration or the volumes. But yes, as we move forward, I am sure the market will see at some time 20% penetration as well.
Q: And these are products, which you also highlighted, which is combined charging units, eAxle, inverter, motors --- so, you get the technology for all of this?
A: Absolutely.
Q: And the agreement would be that you will sell this here in India to OEMs here?
A: Manufacture and sell in India.
Q: Have you already spoken with original equipment manufacturers (OEMs) with regards to this? Have you done a check about what is the competitive landscape in these products and what is the scope?
A: Absolutely, like any new business you get into, you will obviously speak with your customers, and we have spoken with a lot of our customers who are working on a very aggressive EV profile. We also know the fact that the market is small, and it will grow. A lot of our customers may be importing or working to see how we localise. Also, it is important to note that our partner Suzhou Inovance, they are one of the largest in China, their group revenue is over $4 billion and their automotive business is more than a billion dollars. So very sizable company and they are dealing with a lot of larger players globally for these EV products. So, that also give us a head start in terms of your discussion with your local customers.
Q: You ended the previous fiscal with a revenue of over ₹14,000 crore and a lot of different parts of the business are firing. Your EV order book is close to about ₹3,800 crore. Give us the overall snapshot for this year as well. To what extent will you be able to grow the EV business and is it at similar margins to the rest of the business? As the EV business grows, is there any reason to expect an improvement in the margin profile? You are at about 11.5% margin of FY24, right?
A: Yes, 11.3% and year on year (YoY), we increase our business points. But the order book, ₹3,700-3,800 crore is the annualised revenue. It's not a cumulative order book. We always speak about the annual peak revenue, and this is all based on what our customers are guiding us, maybe in FY26 or FY27 in terms of volumes which they have provided us, and always the volume is sort of a joker in the pack. But yes, that is a number. In terms of margins, I would say a little earlier to comment because as of now volumes are very less. But as we move forward, as you build scale, as we achieve those kinds of revenues, we do expect the margins to be broadly in line with our average margins. But yes, they are, as of now, a little lower, because the volumes are small, the costs are all fixed, and also there are a lot of components. So, all in all, yes, margins today may be a tad lower than what our group average margin is, but as we move forward and as volumes ramp up, we do expect improvement in the margins as well.
Q: In FY25, are you expecting to book revenue of ₹3,800 crores from the EV business?
A: FY26-27.
Also Read: Uno Minda Q4 Results | Auto components maker declares dividend of ₹1.35, profit jumps 58%
Q: Where is that revenue number now for EVs?
A: As of now our revenue number for the EV segment and the last quarter, because I think it's important to see run rate because the market has been growing sort of phenomenally. So last quarter, we have delivered almost ₹180 crore. So, if you analyse that, it's almost ₹700 to 800 crore of sales for last quarter in terms of analysed number.
Q: One clarification on this TLA that you all have signed. Will you all be paying some royalty? If yes, could you quantify it?
A: I will not be able to quantify, but in every joint venture, you have a technology partner who brings on board the technology, you obviously pay royalty in return and as Uno Minda, we also get some sort of a management fee to run the operations and all other the support to the joint venture. So, it's a partnership approach.
Q: Could you give us a rough number about the royalty, the technology you are getting, which is fabulous, and it's showing good growth potential, good kit value as well. But what could it be - a couple of percentage points? Just give us a rough range at least.
A: It is confidential information, so we will not be able to share the number as of now.
For more details, watch the accompanying video
Catch all the latest updates from the stock market here
(Edited by : Shweta Mungre)
First Published: Jun 6, 2024 2:55 PM IST
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