How is the three-brand strategy shaping up and the growth that it is likely to yield over the long term?
The year gone by has been pretty good for us although the last two-three months have been somewhat tepid. However, our three-brand strategy – one for the automotive space, one for the non-automotive space and one for the lamps — had good traction. We continue to believe that although our first half growth has been somewhat lesser than our normal pace, we still believe that second half will be good despite a muted Q3.
Our aftermarket has been solid, our automotive exports have been solid and there has been good traction in the non-automotive space. Overall, we have had a good quarter. With the dollar-rupee now reversing in our favour, rupee has come down from 73 to about 70, below 70 as of last day of the year. The currency fluctuation also will be aiding us favourably in our P&L. We see a pretty good time so far, and going forward we expect to continue to have a robust business.
For the revenue mix that you are looking at currently, how are you positioning yourself?
We are fairly well split in the two-wheeler space. On a consolidated basis, our spilt will be about 33-34% and I would say about 20% to 22% in after market in the automotive as well as in the non-automotive space. We have a fairly well-balanced product and sector mix. About 10 years ago, we were 95% in the two-wheeler space. Now even in terms of global and Indian business, our Indian business will be about 58% to 60% while 40% will be our global business. That 40% is expected to grow robustly in the next two-three years. We expect we will go to 50-50 in the next two-three years time.
Because of currency fluctuations, what is the expectation on margin performance?
Our margin guidance at the EBITDA level on a consolidated basis is between 14% to 16%. In the first half, it was 14.5%, about 75 bps point below our last years performance. But over the end of the year, we will be in the same band, somewhat higher than where we were in the first half. It is just that in the last two-three years, our margins were closer to 16% but we are well within our range. We continue to be hopeful and confident that in next year also, we will be in the 14-16% EBITDA band.
How is the scenario looking like in the second half, in light of the muted auto demand?
Q3 has been muted for the Indian OEM automotive manufacturers. Up to November, the automotives have grown only about 2-3% whereas two-wheelers still clocked about 11% or 12%. Within the two-wheelers, two of the top four are with the single digit growth whereas the other two had a significant double digit performance.
Since we are working with all the players for us also on the OEM business side there has been a minor setback but that has been easily offset by our very robust aftermarket business as well as our automotive exports. We have multiple balls in the air. Some of them have gone up pretty high. Overall, we are still comfortable as a basket and our growth for the third quarter which has been a fairly muted quarter for Indian automotive. We are very much well on the budget and so we are quite fine with it.
Your four-wheeler market share expanded to 35% from 20% five years ago but in the current market, how are you looking to increase the number of clients?
Within India, we have a certain space where we work but globally, particularly in the European and North American markets, we have been able to get new traction. In fact, as I had mentioned in the earlier interviews we are setting up a brand new plant exclusively for export of cables for the global OEMs and that includes BMW, Volkswagen, Renault Nissan, Ford, etc, both for the European as well as the US market.
The traction that we are getting is in the international business of OEMs that will continue to be strong. In the next three years, we expect to double our exports of cables from India to our global customers.