Fiem Industries Limited — Q3 FY25 earnings call

Call held 13 Feb 2025

Management summary

Fiem Industries delivered a strong Q3 FY25 performance, outperforming the industry with 22.15% revenue growth driven by robust 2-wheeler demand and increased LED adoption. The company is strategically expanding its 4-wheeler business with new project wins from Mahindra and investing in advanced electronic capabilities, while navigating challenges in its Gogoro partnership. Management maintains a positive outlook for FY26, expecting continued growth and stable margins.

Highlights

  • Revenue for Q3 FY25 stood at INR 590.1 crores, marking a 22.15% year-on-year growth.

  • EBITDA for the quarter was INR 77.88 crores, with an EBITDA margin of 13.2%.

  • Profit After Tax (PAT) increased by 17.64% year-on-year to INR 47.41 crores.

  • The percentage of LED lighting within total automotive lighting increased to 61% in Q3 FY25 from 57% in Q3 FY24.

  • The company incurred a capex of INR 36.94 crores in Q3 FY25, bringing the 9-month FY25 total to INR 108.78 crores.

  • Cash on books was INR 217 crores as of Q3 FY25.

  • Mahindra & Mahindra's LED number plate project approved for multiple models, with production expected to commence in Q1 FY26.

  • The Gogoro partnership is currently on pause due to international headwinds, with tech transfer expected in the next couple of quarters.

Key financials

  1. Sales ₹590.1 Cr +22.1%YoY
  2. EBITDA ₹77.88 Cr
  3. EBITDA Margin 13.2%
  4. PAT ₹47.41 Cr +17.6%YoY
  5. LED Lighting Mix 61%

What they filed

Q1 FY27: revenue up 17.6%, net profit up 12.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue612 593 639 659 715 +17%690 +16%751 +18%775 +18%
EBITDA81 78 85 89 99 +22%98 +26%110 +29%104 +17%
Net profit50 47 59 58 64 +28%63 +34%71 +20%65 +12%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Capex ₹36.94 Cr this quarter · ₹125 Cr (FY25) planned internal accruals
    • Normal capex for current 4-wheeler requirements
    • Strengthening electronic capabilities (advanced design software, EMI/EMC testing, electronic manufacturing facilities)
    During the quarter, the company has made a capex of INR36.94 crores taking the total capex to INR108.78 crores for 9 months of FY '25. Now we had guided for INR125 crores to INR150 crores of capex. We've already spent INR108 crores for 9 months already. Another INR25-odd crores would be sort of spent in Jan to March. So that so we are broadly in that range for the current year. And for the next year, the number could be anywhere from INR75 crores to INR100 crores additional. This does not include any new greenfield 4-wheeler plant. This includes the normal capex, which takes care of the current requirement of the 4-wheeler. And these are all investments which are returnable from Gogoro. These are part of the agreement with them. So the cash balance is almost same. There are basically 2 big reasons. One is the dividend payout that has happened in the same quarter. And whatever is the additional capex we are doing, this is all from internal accruals.
  • Liquidity Cash ₹217 Cr Cash balance remained similar to previous quarter (INR 220-230 crores at Sept end) due to dividend payout and funding capex from internal accruals.
    So my question is, if I look at September cash balance, it's still around INR230 crores, INR220-odd crores. And as of December, it is still around similar levels. Yes, your observation is correct. The cash balance is almost same. There are basically 2 big reasons. One is the dividend payout that has happened in the same quarter. And whatever is the additional capex we are doing, this is all from internal accruals.

Guidance & targets

Revenue Growth

  • FY25 Revenue Growth Revenue Growth · FY25 · Medium confidence very robust
    FY '25 is going to be very robust

    — J.K. Jain

  • FY26 Revenue Growth Revenue Growth · FY26 · Medium confidence higher growth than historical 20%
    FY '25 is going to be very robust, and we see no reason why the demand momentum should not continue into FY '26 as well. Both rural and the urban markets are showing positive. can we expect FY '26 to be at a higher growth than our historical growth rate of 20%

    — Management

  • Revenue Growth (next 3 years) Revenue Growth · next 3 years · Medium confidence better than industry and 15% to 20%
    We've always done better than industry and 15% to 20% is something that we definitely would like to get to, definitely not less than that.

    — Management

Margin

  • EBITDA Margin Band Margin · next couple of years · High confidence around 13%, 13.5%
    We don't give quarter-by-quarter margin guidance. We've kind of said that we ideally like to work in a band of around 13%, 13.5%, but we don't give any other specific guidance, especially quarter-over-quarter. This is what our intent would be over the next couple of years.

    — Management

Capex

  • FY25 Capex Capex · FY25 · High confidence INR125 crores to INR150 crores
    Now we had guided for INR125 crores to INR150 crores of capex. We've already spent INR108 crores for 9 months already. Another INR25-odd crores would be sort of spent in Jan to March. So that so we are broadly in that range for the current year.

    — O. P. Gupta

  • FY26 Capex Capex · FY26 · High confidence INR75 crores to INR100 crores additional
    And for the next year, the number could be anywhere from INR75 crores to INR100 crores additional.

    — O. P. Gupta

What to watch in Q4 FY25

Gogoro Tech Transfer Completion

next couple of quarters
Current on pause
Target should happen in the next couple of quarters

Why it matters

Resolution of the tech transfer is crucial for potential future business from the Gogoro partnership or leveraging the technology elsewhere.

That process is as of now at pause, as we said, because of the global challenges. We expect that technology transfer to happen that should happen in the next couple of quarters.

Risks & concerns

  • Gogoro Partnership Uncertainty

    medium

    Gogoro faces 'significant headwinds' internationally, and its India strategy is 'unclear,' leading to the partnership being 'on pause.'

    Management acknowledged

  • Competitive Pricing Pressure

    medium

    The company operates in a 'super competitive environment where customer always want lower price.'

    Management acknowledged

  • Margin Volatility due to Product Mix

    medium

    Margins are 'broadly same' across LED/conventional, but 'product mix is important' and can cause changes, not just volume growth.

    Management acknowledged

Q&A highlights

6 direct
Gogoro Partnership Status and Investment Partial
Gogoro is facing significant headwinds in the international market. I don't know if you have picked up those comments. They have a lot of challenges that they are facing at global market, which is India strategy yet remains unclear and which is why we are not seeing any significant uptick from where we updated since last quarter. It is right now on pause. ... money is kind of insignificant. It's under INR10 crores. So it's a very small number that also is reimbursable.

Reveals significant challenges and uncertainty in a previously highlighted strategic partnership, with minimal financial commitment but a pause in progress.

Asked by Garvit Goyal

4-Wheeler Business Strategy and Revenue Contribution Direct
as per our strategy, we are first finding entry points into 4-wheelers. Revenue is not our immediate target... Our plan is to move up the value chain and obtain orders for higher value... revenue will follow, but we are following our strategy of FIEM Group to go step-by-step in this field. ... the content today is insignificant. And therefore, we are not chasing revenue as of now. We are chasing our presence in various models because that will open bigger markets for us in the future.

Clarifies the long-term, strategic approach to the 4-wheeler segment, prioritizing market presence and value chain progression over immediate revenue, indicating a slower ramp-up for this segment's financial impact.

Asked by Garvit Goyal

Evolution of Automotive Lighting Market and Addressable Market Size Direct
Our typical lamp of LED today would cost around INR8,000 to INR10,000... The overall market, which was approximately INR2,600 crores now is around INR8,000 crores to INR10,000 crores market just for exterior lamps. But the interior lamps and MEL lighting are also getting added. So the overall market potential of lighting only in India is going to around INR10,000 crores to INR15,000 crores in the future.

Provides a clear perspective on the significant increase in realization per lamp due to LED adoption and the substantial growth in the total addressable market for automotive lighting in India.

Asked by Ravi Purohit

Margins Despite Increasing LED Mix and Topline Growth Partial
our margins, whether it is LED or conventional are broadly in the same range... Margins in LED gross margin...Sorry, go ahead. ... whether it's LED or conventional, the margins are broadly same at customer level... product mix is important.

Addresses analyst concern about lack of operational leverage despite strong topline growth and higher LED mix, indicating that margins are relatively consistent across technologies and heavily influenced by product mix rather than just volume.

Asked by Hitesh Goel

Capex Plans for FY25 and FY26 Direct
Now we had guided for INR125 crores to INR150 crores of capex. We've already spent INR108 crores for 9 months already... And for the next year, the number could be anywhere from INR75 crores to INR100 crores additional.

Provides clear numerical guidance on capital expenditure for the current and next fiscal year, indicating continued investment in existing requirements and electronic capabilities without a new greenfield plant.

Asked by Khush Nahar

Fire Insurance Reimbursement Status Direct
INR30 crores is already received in the month of September. And nothing above that as of now, right? ... And rest of the things are under process.

Gives an update on a specific one-time event, confirming partial reimbursement and ongoing process for the remainder, which impacts liquidity.

Asked by Shubh

Progress on New Technologies and R&D Direct
this initiative of ours and new technology is quite well appreciated by our customers. And we did the technology show, and we are quite deeply engaged with our customers. So currently, with 2 customers, we are working on proof of concept... one of the technology has got more traction, and we will be shortly receiving a statement of requirement and RFQ from one of the customers, and that is a result of all the hard work we have done in last 1.5 years on technology.

Highlights the company's focus on advanced technologies, customer engagement, and the potential for new business wins from R&D efforts, signaling future growth drivers.

Asked by Shubham Sehgal

Strategy for International Customers for New Technologies Direct
No, it is not the wish. As we said, we are a conservative organization moving in robust planned step-by-step process. We don't want to jump. First, we will establish ourselves in Indian market. We will establish a good quality, and then we will approach international market.

Clarifies the company's cautious, phased approach to market expansion for new technologies, prioritizing domestic market establishment before venturing internationally.

Asked by Shubham Sehgal

3 min read 7 chapters

Detailed narrative

Q3 FY25 Performance Overview

Fiem Industries reported a robust Q3 FY25, with sales increasing by 22.15% year-on-year to INR 590.1 crores, significantly outperforming the industry's 8% growth. Profit After Tax (PAT) also saw a healthy rise of 17.64% to INR 47.41 crores. The EBITDA margin for the quarter stood at 13.2%, a slight decrease from 13.35% in the corresponding quarter of the previous fiscal year. This strong performance was attributed to a favorable product mix and robust demand from key customers like Yamaha and Royal Enfield.

2-Wheeler Segment & LED Adoption

The 2-wheeler industry maintained strong momentum, growing over 10% in the first 9 months of FY25, driven by rising rural income, urban demand, and new model launches. Fiem Industries capitalized on this trend, achieving a 22% sales growth in Q3 FY25. A key driver for this growth is the increasing adoption of LED lighting, which now constitutes 61% of the total automotive lighting, up from 57% in Q3 FY24. Management expects this trend to continue, with new models predominantly featuring LED technology.

4-Wheeler Business Expansion

The company is strategically expanding its presence in the 4-wheeler segment, prioritizing market entry and value chain progression over immediate revenue targets. Its first LED number plate project for Mahindra & Mahindra's 3XO, Thar, Scorpio, and other models has been approved, with manufacturing facilities also approved and production slated to commence in Q1 FY26. Additionally, an order for the XUV700 refresh model has been secured, and final samples for a European OEM were submitted last week, with the process moving as per plan.

Gogoro Partnership Update

The partnership with Gogoro is currently on pause due to 'significant headwinds' faced by Gogoro in the international market and an unclear India strategy. While the financial investment in this partnership is 'insignificant,' under INR 10 crores and reimbursable, the technology transfer, initially hoped to happen quickly, is now expected in the 'next couple of quarters.' Management indicated that Gogoro might not heavily pursue the Indian market, suggesting a reduced volume potential from this collaboration.

Capital Expenditure & Liquidity

Fiem Industries spent INR 36.94 crores on capex in Q3 FY25, bringing the 9-month FY25 total to INR 108.78 crores. The full-year FY25 capex is projected to be within the INR 125-150 crores range, with an additional INR 75-100 crores planned for FY26. This capex is for normal requirements, electronic capabilities, and 4-wheeler segment needs, not a new greenfield plant, and is funded entirely through internal accruals. The company maintained a healthy cash balance of INR 217 crores at the end of Q3 FY25, similar to the INR 220-230 crores reported at the end of September, despite the capex and a dividend payout.

New Technology & R&D Initiatives

The company is making significant investments in strengthening its electronic capabilities, including advanced design software, EMI/EMC testing, and electronic manufacturing facilities. R&D and design capabilities are also being expanded at subsidiaries in Italy and Japan. These initiatives are well-received by customers, with the company working on proof of concept with two clients and expecting an RFQ shortly for a technology that has gained traction. The long-term strategy involves establishing a strong domestic market presence with these new technologies before expanding internationally.

Margin Dynamics and Raw Material Pass-Through

Despite the increasing LED mix and strong topline growth, EBITDA margins remained within the 13-13.5% band, as margins for LED and conventional products are broadly similar at the customer level. Management emphasized that product mix plays a crucial role in margin outcomes, rather than just volume growth. Regarding raw material cost fluctuations, the company has a defined pass-through process with OEMs, where any changes are discussed and implemented on a quarterly basis, ensuring that cost increases are passed on without significant delays or pushbacks.

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