Good afternoon, everyone. Our performance in the first half of financial year 2026 shows the strength of our business model and the discipline with which we are executing our long-term strategy. Despite a broadly stable volume environment, total volumes contracted only marginally by 0.9%. We delivered strong earnings momentum with profit after tax of 26.3% in H1FY 2026. This outcome reflects a healthy combination of margin expansion and operating leverage. Gross margin improved by 296 basis points and consolidated EBITDA margin rose 305 basis points year-on-year. Evidence of our focus on pricing, product mix, and cost control. Earnings per share increased to INR 8.22, reaffirming the quality and sustainability of our profitability. Regionally, we continue to see solid traction. In India, shunt sales grew 25.23% in Q2, driven by robust demand from smart meter and industrial sectors.
Across Asia, excluding India, sales climbed 38.5% as we deepened customer engagement and expanded into new accounts. These gains more than offset temporary softness in certain export markets. In the Americas and Europe, shunt volumes were impacted primarily by timing and channel recalibration rather than any structural weakness. Several customers moderated call-offs to balance inventories after earlier builds, while a few OEMs deferred orders as part of annual pricing and design approval cycles. We view these effects as transitory. Feedback from our global customers remained positive, and underlying demand pipeline for precision resistors and assemblies remained strong. As these customers rebalance and resume normal scheduling, we expect our momentum to stabilize and inventories to return to more appropriate levels through the second half of the year. Looking ahead, the outlook remains encouraging. Our end markets, smart metering, industrial automation, and mobility electronics, continue to offer multi-year growth visibility.
We are focused on extending our leadership in high-value assemblies, improving cash conversion, and accelerating both forward and backward integration initiatives that deepen customer partnerships and strengthen margin quality. Thank you for joining us this afternoon. Over to you, Shantanu. I think you were supposed to introduce first, and I've gone the other way around, so you can do the introduction part now.
No problem. Thanks, Sumer, and thank you for those opening remarks. Welcome, everybody, to Shivalik Bimetal Controls Limited's Q2 H1FY 2026 earnings webinar produced by ELEVISE. I'm Shantanu, Director of Investor Relations from Dickenson, and I'll be moderating our call today. Joining us from Shivalik's management team are Mr. Sumer Basant Monga, Executive Director; Mr. Kanav Gupta, Head of Sales and Marketing; Mr. Rajeev Ranjan, Chief Financial Officer. Please note that this conference is being recorded and that some statements in this call may be forward-looking based on current expectations and subject to risks that could cause results to differ materially. You can download Shivalik's investor deck and press release from the links in the community chat or from the company website or the NSE directly. Thanks for those opening remarks, Sumer. We'll get straight into the Q&A session.
Just as a reminder, if you're struggling to raise your hand, if you're on desktop or laptop, look for the Reactions button at the bottom of your Zoom window. Click on it, then select Raise Hand from the options. Your name will appear on the queue, and I will call on you. For mobile or tablet users, tap on the more dot dot dot button at the bottom right of your screen, then select Raise Hand from the menu. Perfect. Great. So we'll start with the first participant asking questions. So the first participant will be Deepan Shankar. Deepan, your line is unmuted. You can go ahead and ask your question.
Hello. Hello. I'm audible?
Yes, Deepan. Go ahead. Please ask your question.
Yeah. Thanks a lot for the opportunity. So firstly, from my side, congratulations for a strong set of numbers. So the only thing we wanted to understand is volume growth has been muted for a couple of quarters now, straight for even shunts and also bimetals. So what are the strategies we are adapting to see improvement in volume growth over H2 and also how do we look at the outlook for FY 2027?
Yeah. On the volume side, basically, we'll see the market globally has been a little muted, especially in the western part of the world. That's why our push is more towards what Sumer was saying, that we are moving towards assemblies to add more value. And we'll see that Q3, Q4 of our financial year will start seeing more value addition for us to push those numbers to our expectations and for our expectations. Additionally, we have also kind of added some new accounts into our customer base. And as currently, what we are doing is we are seeing that there are pilot sampling, sample lots going, which should convert into random commercial supplies in the coming quarters, which should further increase volumes for us.
Okay. And what is the key reason for strong gross margins improvement? Is it from product mix change or raw material price going down?
So raw material pricing does not really have a very strong effect on our margins, mainly because there's a pass-through of cost entirely. So that doesn't have a major impact. But what we have been talking about in the past is that we have been going into forward integration initiatives, which has already begun, and we have gone into more value-added processes. So for example, if we had a large customer account wherein we were supplying materials in strip form, that has gone more into components. And our entire development strategy or marketing strategy has been more oriented towards higher value-add products. And that is what we are seeing now converting into numbers. So although you will see a lesser growth in the top line, but you will continue to see an improvement in the bottom line because of those products.
Okay. Thanks a lot and all the best.
Thanks for your questions, Deepan. Next question will be from the line of Dhruv Jain. Dhruv, your line is unmuted. You can go ahead and ask your question.
20Thanks for the opportunity. So in the last six months, we've seen multiple headwinds in our end markets. But just wanted to understand, and you also mentioned the outlook for the second half looks better. I think in the last earnings call, you had mentioned that you're looking at 12%-15% top-line growth for the full year. Now, if I just do a back calculation, it basically means that for the second half of the year, you will have to deliver anywhere between 16%-20% of top-line growth. So just wanted to understand if that still, I mean, the double-digit growth for the full year still holds true, or do you think that's going to be more of an FY 2027 sort of phenomenon?
So we were absolutely on track with during our last call. What had happened was that you see a large portion of our customer base and a large portion of our expected growth was to come from our customer base in the U.S. based on whatever forecast we had. So we had some kind of optimism from there. Now, what we are seeing with this 50% tariff that's been placed on India, we have not lost any business because of that, because it's impossible for our existing customers to start immediately buying from alternate sources. So we have not lost business. But what we have seen is a reduction in orders and reduction in focus because nobody wants to, on extra inventory, pay that 50%, number one, obviously. So they've come down to as little as buying as possible for obvious reasons.
Also, what they are doing is they are forecasting lower volumes, assuming that the markets are not going to be that great in the coming months in the U.S. So what we have seen is we've seen certain reductions there. Now, if we hadn't experienced that, we feel that in the last quarter, we could have been at least 2%-3% higher growth numbers if that had not happened, which means that, yes, we would have still probably, instead of a target of 16% or something in order to achieve double-digit growth for the second year, but it would have been closer to maybe that number would have been closer to 12% or 13%, and that sounds more doable with the current focus and the current expectation that we have.
Although by the end of the year, if we were expecting, let's say, a double-digit growth of somewhere between 12%-15%, that comes down by maybe 4% or 5%. It could end at just a higher single-digit or maybe touch a double-digit. It's hard to say. We do have optimism for the second half of the year.
Sure. And my second question is on margins, right? So you mentioned about the value addition bit. And in the last four or five quarters, we've seen a consistent improvement in margins. So just want to understand that is this the optimal level of margins that we should work with going forward on a sustainable basis, or is there room for further margin improvement from here as well?
See, with our current strategy of focusing development activities only in or mostly in areas where there's more value addition, which results in another issue, which is more of a development issue, the development time increases, you see, because anything that has a higher value add, obviously, that means there is a technical barrier or a technical difficulty in developing that, so sometimes it can take longer to develop, but once it does develop, it has a substantial impact on bottom line. Now, to give you some perspective, if we are doing extremely small-sized resistors, which 80% of all of our new development in the last 24 months or so has been related to small. Now, as we see more and more of that business converting, and we will continue to see that business converting into those developments converting into regular business.
So we do expect that before this growth in margin plateaus, we will continue to see for a few quarters this percentage improving further because as we speak, those things are being converted. We are getting 10% of a certain business. Then in a year's time, they'll give us 20%-30%. So over the next two- or three-year horizon, we should continue to see that improvement in margins because all the developments, see, it's very easy to predict that for us because we know what developments we have done. And those developments are all mostly higher value-add. So they may not have a very huge impact on top line alone. Let's say that, let's say, a certain part of those developments are adding only over a three-year period, maybe INR 40-50 crores to top line, but they add a very high substantial amount of value-add.
That makes the overall numbers really look good. Part of our strategy has always been to focus on such initiatives.
Just to understand this better, this 23% EBITDA margin, realistically, say, over the next four quarters, can it improve by about 200 basis points?
It's possible. We feel that in a three-year, let's say, in a three-year horizon, it is possible to take it up another couple of % beyond that. Now, of course, during that time, if we feel that there is a high top-line opportunity for us to add a certain product, which can add a substantial number, but obviously, it's at the cost of margin, then an overall number may look different. But such a project, if something like that gets added, then it's a different story. But as of now.
Like to like.
Yeah. With our existing business, we don't see that happening. We should continue to see an improvement.
Sure. And my last question is on the new products, right? So be it the PCBA offering or the bus bars, right? I mean, I remember the last quarter you had mentioned that in the fourth quarter onwards, we'll start to see some sort of revenue coming from the PCBA side. Just want to understand, are we on track for that? And if any guidance you'd want to give on that for F27 for the full year in terms of new product contribution? Thanks and all the best.
I think kind of the PCB update along with the busbar, I think we'll be able to give a better.
Yeah. Yeah. So yes, as we mentioned last time, Q4 seems to be the time where we will be starting to see some revenue generation from the PCBA assembly. And we see that this has a potential to give us, at least in the near term, which is next financial year, a top line of about INR 50-70 crores.
So, to answer your question in a very simple way, yes, it's on track as of now, what we had in mind or the developments that we had in mind. It's as per schedule.
Thanks for your question, Dhruv. Participants can raise their hands again for follow-ups, and you'll be rejoined into the queue. Our next question will be from the line of Ayush Agarwal. Ayush, you can unmute yourself and go ahead and ask your question.
I hope I'm audible.
Yes. Continue.
Great. Great numbers, Sumer, kind of in challenging times. I mean, we have been investors for around eight years now, so amazing execution over all this period. Great data representation as well. We have been trying to make more sense of the data that we have been presenting. So what I would like to understand is that, especially in this quarter, in the shunt side of business, volumes have gone down and realizations have gone above INR 3,290 above per kg on a basis. Earlier, it was around INR 2,000 per kg back in FY 2023. So we'd really like to understand that when you mentioned that, okay, we are moving from strips to components. But apart from that, is it also the base metal price going up? Is that in effect showing here? Is there a risk that whenever volumes come back, realization might go down?
So some comment on this will be really helpful.
I think it's a multiple. It's basically multiple things here. We are basically talking about we've always been talking about the product mix. The product mix also kind of plays a role. So as the product mix becomes more favorable, you'll start seeing that the numbers are the realization starts going up. Also, additionally, of course, metal price also does play a role. So of course, that also brings an impact on the overall prices, which we've already discussed in the past that it gets transferred. So whatever metal is impacting on the material to us goes on and gets passed on to the customer. So when it comes to actual valuation of Shivalik is concerned, it doesn't really impact or hamper that to us.
And what we've also been talking about in the last few quarters is that our focus has been more and more on moving into assemblies, moving into component levels so that we can add more value and bring more on the table for Shivalik in these difficult trying times. And that's what we have been doing in the last one and a half years, and we'll continue to do that.
That's really great to hear. My second question is on the smart meter side. Given the scale-up which is happening, what sort of numbers can we see from smart meters on the shunt side and also on the relay side in FY 2027 and 2028?
Oh, I think we mentioned this last time also. We are very hopeful, very positive. These numbers are already reflecting in our quarter two results. In fact, Q3 should be even better. We are getting more acquisitions. And I think for us, this is something which is a real growth area and a lot of activity, a lot of new developments are happening for Shivalik in this specific domain. And I think we have a very positive and a bright future when it comes to this specific area of operations.
Also, kind of as we have developments in some of the smaller components, it's a little bit misleading. These numbers where the overall production yield looks like it's not gone up as much or it's gone down because those are adding more value, but as far as the quantity in kilos.
Percentages are concerned are very small, yeah.
Smaller. Now, what's happened is, in order to clarify this answer even more, some of our highest or heaviest material resistor business or shunt business used to come from Vishay, which has remained either in some types of part numbers flat and some types of product categories. It has gone down drastically, and what has happened as a result, it shows lesser production of shunts, but then overall still a growth in resistors and overall still a growth in the bottom line, but overall output in terms of kilos looks like it's going down, so it's a little bit misleading. If you have a lower value add but a very high volume, weight-wise volume material, it will show very different numbers.
Whereas in a particular quarter, if you do more sales of a very high value add but a very small component, it will show a very, very different set of numbers. So it can vary a lot, that product mix, as you mentioned, kind of.
Yeah, that's correct.
Great. Final question from my side. In our presentation, we have also mentioned a couple of very interesting industries. One is data center, and second is the energy storage system pack. And both are picking up traction in India and, of course, globally. So if you can mention that, what sort of products do we have here? And when can we see meaningful contribution from these two applications in the next two, three years?
Oh, on data centers, we've always been very, I would say, excited in this area. We've talked about it in the past as well. For Shivalik, all our products form a part of, in some form or the other, they form the part of the CapEx of the data centers. And more and more growth in that part of the industry would bring in opportunities for our bimetals, for our contact business, as well as for the resistors. And that's why we are very excited for all these three products of ours in this specific area and domain. In fact, with AI coming in, the demand and the requirements for our kind of components and our kind of products is expected to get 3x of what is currently being used in the existing data centers.
So from that perspective, we are seeing that there's a lot of traction there, and there will be a lot of opportunities coming in for our components and products.
Also, a lot depends on something similar to if you remember, we've been talking about how we face challenges with the relays that are used in smart meters. So to some extent, this applies to other such high-growth applications as well. So a lot depends on where the product, where our parts are going to be used. Our parts are not directly sold to these applications or manufacturers or makers of these applications directly, whereas our parts go into devices that would further go into that. So a lot depends on how fast developments of those happen in regions where we supply, especially like India, for example. So we do see movement in that area. We do see customers moving really fast to develop these things here rather than relying on import.
So, for example, a lot of our OEMs are fixing up contracts with Google's and so on for building up these various data centers. And directly, indirectly, once they sign up their contracts with them, it definitely brings an opportunity for our products and the growth that that would bring in.
Thanks for your answers, Sumer and Kanav, and thanks for your question, Ayush. Our next line of questions will be from Saloni Jain. Saloni, you can unmute your line and go ahead and ask your question.
Thank you for the opportunity. Am I audible?
Yes, please proceed.
Yes. So first of all, congratulations, team, on such great results during challenging times. My first question would be on your plans regarding to onboarding OEMs directly to actual tariffs in the U.S. along with the muted environment there. So on that, have we onboarded any OEMs as direct customers? And also your outlook on taking market share in assemblies given longer approval cycles?
That's correct. In fact, Saloni, our agenda and our objective has always been to kind of get on board more and more OEMs. And that's what we've been doing. All our efforts are being placed towards building end-use applications and towards getting to those end-use customers. But you also have to understand that a lot of our products and components go through those assemblies and built-up modules, which Shivalik has been talking about in the past and have been telling you that we are trying to move towards making those assemblies so that we can kind of directly get into those OEMs. And that is what our endeavor has been in the last year, year and a half, where we are focusing on moving more towards making these assemblies so that we can onboard OEMs directly rather than route them through different channel partners.
Sure. Okay. And my second question is, you had also mentioned in your past calls about a partner with whom you are indigenizing nickel alloy. And that was expected to happen in October, right? So how are we on track there? And what are the inventory costs and base benefits that you are looking from this indigenization for us?
The results for that development have been better than expected. Some of the base-level grades, which are slightly more straightforward in producing, those are now at the final stages of testing. So far, we've been seeing good results, which means that maybe in another three to four months' time, about 20%-25% of our total raw material consumption, we should be able to source locally, which will have an improvement to some extent. The real gain would be changed probably next year when that number would go closer to 50%. That's when we should be able to see a positive impact on both our cost of materials as well as the working capital cycle.
Thanks for your question, Saloni. Our next question will be from the line of Aniruddh Shetty. Aniruddh, your line is unmuted. You can go ahead and ask your question. Hi, Aniruddh. Your line is unmuted. You can go ahead and ask your question.
Yeah. Hi. Am I audible?
Yes, please go ahead.
Okay. Thank you for the opportunity. So just one question. Given that over time, we will be doing products where the volume will be lower, but the realization may be much higher. We might do assembly wherein the margins might be lower, but the absolute profit can be higher. And we're doing so much on automation. Should the right financial metric that us as investors be focusing on, is it going to be absolute EBITDA given that there could be a lot of movement about that? And if so, then what is aspirationally, what is the EBITDA growth that you guys are looking at over the next few years given there's so many opportunities and so many new developments that you're all working on?
Thanks, Aniruddh. So actually, see, this is something that's happening alongside our other plans to have an impact on the top line as well. So there are projects that we are working on actively wherein more than value addition, an example could be what we were just talking about, something like, let's say, a PCB assembly or some of the other forward integration activities that we are doing. Some of those developments and what we are even actively looking at at this point, which we haven't spoken about, many of them are also about a lower EBITDA margin, but very high impact on top line. So those two activities are happening alongside. That is why earlier, during another question, I had mentioned that it can go the other way around as well.
So today, we feel that some of our developments, which are converting into business right now, are adding more and more value. So we're seeing a different set. But if we quickly go into an opportunity where we can add 100 crores to the top line in a shorter period of time, but at a lower EBITDA, then on overall numbers, we'll look different. So it's very difficult at this stage for us to say that what that aspiration or what that target would be because it can swing in either way. But I think the right way to look at it is that we, as a management team, are working towards both or multiple such opportunities in both areas. So we're not just looking at high-value-add opportunities with a minimal impact on top line. We're working equally on both.
And the vision also of us as a company at this point of time is to look at both because we understand the value of sustaining this profitability by adding these smaller top-line businesses with high margin. Also, because that contributes more to the margin, we can afford to maybe go into a higher top line and sacrifice some margin kind of opportunities as well. So the two things complement each other.
Got it. Got it. So what I hear you saying is it's not so much about the margin percentage, but the absolute rupees crores of profit that you all are really trying to optimize for, which might come from higher top line, lower margin, or decent top line, higher margin. It could be a combination of.
It could be a combination as long as we follow this one methodology wherein we don't want to do something which gives us a profitability, whether it's a smaller percentage or a larger percentage. That's not sustainable. I mean, we don't want to get into something where we see a three-year horizon of making money and then thereafter becoming a we want to be able to do something which consistently we can further improve, in fact, in processes. And so our aim is to develop something like that because only then can we remain within our ethos of this technical barrier and less competition. So we want to continue to do that.
Got it. Got it. Yeah. As long as it makes strategic sense as well.
Sustainable profit, I would say. Sorry, sorry, Kanav. Just finish it.
Yeah, yeah.
Sustainable profit for us is the biggest priority rather than a target percentage or value.
Gotcha. Gotcha. Second question was on the backward integration. Assuming you all are at 50%, do you have some sort of indication on what kind of working capital savings and gross profit margin boost you guys can expect?
See, when it comes to indigenized raw materials, an absolute saving in the very beginning may not be possible because, obviously, with new developments, the overall cost will actually probably remain either the same. We will start seeing an improvement in cost over a period of time because we also understand that the suppliers that we are working closely with for this have also invested, and their costs are high at this point. For us, at this moment, our main priority is to indigenize it so that we first stop relying on import because of all these trade barriers, etc. We need to have. We know that we have to have an Indian source for these materials.
As far as the working capital cycle goes, I think, Rajeev, what would be the right way to maybe a year's time of next year onwards, even if we start 50% local supply?
50% would be great. But even if we are achieving a reduction in working capital cycle or inventory days by 30 odd days, it would be a great impact on the financial cost. And even the circulation of cash would be easy for us to accumulate more cash, and we can earn a hefty interest on the accumulated cash. So it is very hard to put a number or fraction saving as far as the raw material cost is concerned. But yes, due to saving in working capital days, it will have an impact on fractional saving in interest cycle.
Got it. And just to reclarify, you're talking about net working capital days overall company level as a percentage of sales, basically, this 30 days. Got it.
Yeah. Yes.
Got it. Okay. Great. Thanks for answering the questions.
Thanks for your questions, Aniruddh. Our next line of questions will be from the line of Nirali Gopani. Nirali, you can unmute yourself and go ahead and ask your question.
Yeah. Hi. Thanks for the opportunity. So again, my set of questions are on the growth side. So for the last many quarters, we see that some segment or geography is constantly hammering our growth. Is it fair to understand that EV has not picked up the way it was expected to, and hence, a shunt is not performing the way we would have expected it to? And that is one big reason for the overall growth rate to come down?
Nirali, I'll answer that question in two steps. Of course, I think sometimes a well-diverse portfolio can have its advantages as well as disadvantages as well. So as you know, in the last year and a half, the global turmoil has been such that in some region, some area of the world is already always impacted, which, of course, has a direct impact on businesses. However, being diversified also enables us to kind of, as you can see, still kind of successfully, reasonably, decently pass through these difficult times. That's what we've shown in the last few quarters.
Of course, EVs, I would say, when it comes to shunts, as we've also mentioned in the past, shunts are kind of, we expect demand for our shunts, not just limited for EV requirements, but as well as in general for even the ICE engines or even if the alternate hybrids come in, we see demand coming in. What we basically recently seen is that there is a lot of stop-start kind of an activity, especially you see in the western part of the world where the industry is still trying to figure out what would be the right way forward. That's where a lot of acquisitions and new projects are kind of put on hold or kind of delayed.
You'll see that on the shunt side, we've been doing pretty well on the Asian side of the geographies because that's where the majority of acquisitions and majority of new project implementations are happening. Yes, of course, the industry is still kind of figuring out the right way forward, which definitely has slowed down the overall growth that we were anticipating. It's not just specifically restricted to EVs.
I know. Right. Fair enough. So I see no doubt on your technical capabilities or product. But historically, we have seen some kind of performance, either revenue, EBITDA, profit, whatever you want to see. Is that a distant dream for a few years at the moment? Because last two years have been flattish. This year also, we are not going to see that kind of growth. So if we want to focus on when do we see it picking up? Because new products will also take time, the forward, backward integration, whatever we are trying to do. When do we see that coming into the numbers and repeating our historic performance?
I think a lot of new activities that we are already taking or have taken in the past year, year and a half. We've always said that it takes time when it comes to our kind of products. But I think a lot of them are now already starting to take shape. We are in prototype stage. We are in the pilot production stages, which is now going to get ramped up. So we feel that we'll definitely have a stronger Q4 and, of course, a much stronger financial year 2027.
I will also add something very interesting over here. You see, our anticipation of a lot of our growth coming was from markets such as developed markets, such as the U.S., even Europe. What we are seeing interestingly now that our biggest growth market for automotive shunts, whether it's EVs or hybrids or whatever it may be, but specifically for two-wheeler EVs, is coming from India. The kind of forecasts and the kind of developments that we have for some mainstream models from the large two-wheeler players of India, that is one thing which in a very, very short term could bring about that level of growth. Now, percentage-wise, that growth numbers, if everything goes well, could repeat those things that happened a few years ago.
The moment you supplement that with the fast growth that we are facing from or we are already experiencing from the smart meter growth, and irrespective of whether smart meter installation goes up or not, for us, the growth is still there because of the relays being manufactured here, as we've mentioned several times. We are very optimistic of the next two quarters and the next financial year. You are looking at this thing as a flat growth, but what we are looking at, it is slightly different. Our growth is looking flat or this 8%, 7%, 10% kind of growth in certain quarters. Why it's looking like that?
Even after a decline of over 20% year on year for almost two and a half years now from a large customer like Vishay, even then with that 20%, which used to be an exposure of 30%-35% of our total revenue, even then we are registering a growth of 8%-10%. So your question is very valid, and it could be a cause of concern for a lot of people. But when you look at it from the other point of view, that with your major customer registering or with a customer reducing their buying by 20%-25% year on year, you are still registering a growth of 10%. Where is that coming from? That is coming from exactly what Kanav was just mentioning of all of those developments that we have done in the last two or three years.
And those are now materializing one after the other into business. Now, whether something takes one year to do, whether something takes two years to do, it can greatly vary. And it can vary straight away by two quarters. It can vary straight away by three quarters, as we have been seeing. But because those developments are converting into business now, we feel we are optimistic. For our kind of business, when you look at it from actually from the product point of view, you'll realize that one or two quarters here and there is extremely normal for it to happen. So although what we are trying to give as a, I would say maybe what we are trying to talk about are developments for the future, we have to give some kind of a timeline. Of course, we can't talk about it without that. But those numbers can vary.
What we are happy and what we are optimistic about is the fact that those developments have taken place. They are approved. They are moving ahead. They are going ahead. Now, as it converts into business, we will see growth happening. So when it comes to shunts and EVs and automotive components, there's a lot to be very, very optimistic about for us as the management of the company.
Great to know. Hoping for a better future. That's it. Thank you.
Thanks for your questions, Nirali. Our next line of questions will be from Deepak. Deepak, your line is unmuted. You can go ahead and ask your question.
Yeah. Thank you for the opportunity. Am I audible?
Yes. Please go ahead.
Yeah. Hi. So, Sumer, so earlier in the call, you nicely pointed out that looking at shunt resistor volume, it might be misleading because there is an inverse relationship between, let's say, the value addition and the volume growth. That's why you see a higher realization, but the volume is kind of subdued. Right. But my particular question is regarding bimetal front. So in the last call, we sounded relatively confident that for year-end FY 2026, we'll achieve a volume growth of around 7%-8% in the bimetal front. Now, but looking at the current quarter at, let's say, flattish kind of growth YOY, it appears very difficult because in H2, that implies a growth rate of almost 10%. Right. So firstly, what is our volume target for 26 and 27 from the bimetal front?
Why is it that the Indian revenue continues to see a decline on a YOY basis? Means, is it something that we are losing market share or that the product in which we are supplying, that is not doing well? Could you please elaborate on that?
I think we'll start with the second part of your question, and I think Kanav, you'd be able to, with the domestic market, if we can start with that part first, and then we'll get to the import.
Yeah. Yeah, we can do that. Actually, just to let you guys know that, yes, we see muted, in fact, relatively subdued demand in the domestic market. And the reason is clearly that we have not lost any market share. But we also have to understand that a lot of our Indian manufacturers to whom we supply components and parts and bimetals too, they also export. So they are also kind of facing a similar issue that we are seeing in terms of these tariffs and the global geopolitical situations that we are seeing around the world. So even if for us, the supplies are within the domestic region, a lot of the end product goes to international borders or international economies, which kind of have an impact on our overall sales.
So yes, the domestic market has been very subdued, and we had anticipated that maybe this would get better, which was the feedback that we had from the customers. However, what we are seeing from most of our customers now is that Q1 next year or Q4 of this financial year is where they're projecting very strong numbers again. Because again, in anticipation of the India-U.S. figuring out their trade deal, which we're hoping that it should kind of get settled because a lot of the end customers have kind of reduced, as what Sumer mentioned earlier, also their forecasts in anticipation of a reduction in demand in those parts of the world. So those things have an impact. But we are now hoping, and we are seeing some positivity coming from the customers in anticipation of the trade agreement that's happening between India and the U.S.
So these things, even if we supply in the domestic market, do have a global impact, which is what we are seeing at the moment.
Yeah. But the Indian revenue would be related to the domestic market, right? It is not as if, let's say, if you're supplying to an Indian company and then it exports outside. So those would be captured in your Americas, Europe, and other Asia, correct?
No, it's impossible for us to kind of.
No, if we supply to an Indian customer, for us, it's domestic sale. Now, what they produce in export, what percentage of that they produce in export is something that we, in some cases, wouldn't know.
Okay. Got it. It's like that. Okay.
It does have an impact, although it's difficult to point out how much. And also, it's cyclical. Sometimes it can be a larger percentage. For example, sometimes our supplies to Havells, for example, just to name a customer, goes up in a particular quarter or a particular month because their export orders are up. And sometimes they say that our export orders have completely gone down now for whatever reason.
Okay. So at best, I would presume that a 4%-5% growth is what would happen in FY 2026 in bimetal in volume terms.
That's realistic. I think it should be more than that, hopefully. But that's something which we do expect that will happen.
Okay. Now, my second question is with respect to, let's say, shunt resistor. So there is some issue which is going on with European automobile companies with respect to chip sourcing from one of the Dutch companies, which is Nexperia. Right. And because of this ongoing tussle between Europe and Chinese government, a lot of auto companies have flagged this off that they are not able to source the chip. So just wanted to understand, are we seeing any slowdown further in the European geography for shunt resistor? I mean, to say in terms of order book visibility.
Okay. I think we were anticipating growth, which has not happened. So it's basically subdued, and which is basically because of the current issues that are already there. And it is already reflecting in our numbers. And we don't really foresee further reduction there.
Okay. And final question is with respect to, let's say, our growth visibility, right? Because now you highlighted about that PCBA arrangement. So just wanted a clarification that we had two projects. One was related to white label agreement with one of the clients, and another was PCBA. And white label agreement revenue was supposed to flow through in FY 2026 with PCBA coming in FY 2027, correct? So just wanted to clarify that which project is getting translated into revenue for us, let's say, in which year or which quarter, and how you will ramp that up.
The white label agreement, the business has already begun as we had anticipated for or as we had a clear forecast from our customer for Q3 and Q4. For Q3, our orders are already in place. For Q4, we already have a forecast. So the white label agreement part of it is all as per plan. Our forecasts are also as per what our original idea was. Now, because of the tariffs, etc., things change in the future. Not that we have any information of at this point, but in case they do, that's a separate matter. But as of now, that is absolutely in order. PCB, as Kanav had mentioned for another question earlier, was for quarter four. We will have some revenue. So those developments, those testings are already taking place at customers' end.
There are two or three developments that have reached advanced stages. So Q4 onwards, we will have certain revenue from that business this year, and we will have regular revenue all throughout next year. So I would say, to simply answer your question, both are absolutely on track, both the developments.
Thanks for your answers, Sumer, and thanks for your questions, Deepak. Our next line of questions will be from Jayesh Rao. Jayesh, you can go ahead and ask your question. You can unmute yourself.
Hello.
Yes, Jayesh, please go ahead.
Yeah. Thanks for giving me this opportunity and congrats for resilient numbers. I have a couple of questions. One is, I think maybe you've answered this in terms of your gross margin. This quarter are like 2.5% higher than the trend that we've seen. So do you think this is sustainable, or this is one of kind where maybe?
It's as I had mentioned earlier, it's sustainable. I'll give you a very simple and a real-life kind of example as to what's causing this, and then you'll know whether it's sustainable or not. Yeah. So for example, we were earlier talking about a major customer of ours, Vishay, who used to buy very large volumes of continuous strip form of welded shunt material from us. So they used to manufacture the shunts or the resistors, and we used to supply that strip. Now, when we do that kind of business, the value add in that sort of business, as you can imagine, is much lower because making parts out of that strip is a very long-drawn process. It involves a lot of steps, and it's a lot of high-precision things happening there. So there's a lot of value add involved.
So when we supply strip, our value add is low. Now, that business has consistently gone down as a total percentage of our revenue and even overall as volume. And during that same time, and as I had earlier mentioned, that we have faced from Vishay about a nearly 20% reduction for the third year in a row. So it's come down to almost 20%. So it's come down to almost half of what it used to be at one point. Even then, we have for overall our resistors and shunts business, we are registering about an 8%-10% growth. So where is that other part of growth coming from? That's all coming from components and many of them being high-value add components. And that is exactly the reason why you are seeing a growth in margins. Now, all of those businesses are not temporary businesses.
In fact, if anything, the complicated small components business, a lot of which have been added, and that is what is causing this, are actually definitely a longer-term business than a strip business, for example. Right. So a strip business has lesser production processes happening. So let's say that tomorrow, maybe a Vishay can buy that strip from us, and then maybe they can buy it from somebody else if all these tariffs happen and all of that. But when we are making a high-precision small components, which has for which years of development, extra years of development have gone in, tooling investments have been done. So even a 50% kind of tariff cannot immediately push a customer to start buying from an alternate source. So I don't need to get into why that happens. I think it's very obvious why.
Our developments have moved more and more towards that, and that is evident, and that is what is causing this. If anything, I would say that that additional improvement in margin is actually more sustainable than it ever has been. Because why are we going more into those kind of businesses? And we are following a very similar strategy even in thermostatic bimetal, wherein we want to supply more and more high-value add components. Eventually, at some point in the future, maybe a year or two years down the line, we will start seeing this trend also showing up in numbers that the bimetal gross margins will also we will see going up. And by then, if our raw material is indigenized, we will see maybe a further improvement in gross margin.
So that's why this is one part of our multiple areas of strategy where we are working top line, bottom line. So definitely a sustainable thing. And with this example, I'm sure you would have probably understood.
Yeah, 100%. But I'm just saying that so this is visible primarily since last two quarters because I mean, in Q1 2026, we improved our gross margin by, let's say, about 1.5%. And this quarter is again, it's actually almost 2.5% QOQ improvement. So it's a big improvement in just two quarters from close to 57% to 53%. It's about 400 basis points improvement in a very short span of time. So I was just asking you in that context because the Vishay business has been reducing, as you said, over the last couple of years. But this improvement in particular has been happening mainly in the last two quarters.
Right, and because a lot of the business that we have developed prior to that, let's say something that may have started in 2022 or 2023, those developments are showing business or a substantial amount of business now, so what happens is in a, let's say, a small-sized resistor, and even if it's not an automotive application, let's say that there's some development that starts in 2023, it usually takes somewhere between an 18-24-month period for the entire process development as well as approvals, etc., to start, and then usually, typically, we see somewhere between a 10%-20% volume of what the original forecast was to happen in year one. That goes up to 30%-40%, and so if you total up everything, it becomes a four, five-year process.
And for whatever reason, and that also happens, for whatever reason, there is a delay at some point. There is a rejection. There is some kind of the results are not being met, and the R&D has to be done all over again. So that can drive it up to sometimes even upwards of five years. And that is exactly what that barrier is. So maybe a little bit of patience at this point, but when it adds business, then it adds it straight away. And we have seen that happen in the past. And again, why we feel optimistic is because in the last two years, the total number of developments that we have done, even when it comes to total number of developments with customers, part numbers, as well as the value of potential business has been more than what we have done 10 years combined.
So whether it happens in a two-quarter period or a four-quarter period, that is obviously a variable thing, but it will happen. Those investments have been made by both Shivalik as well as the customer who has paid for certain tooling and development. So it's in a good situation. Now, if those developments were not taking place and had not been as successful, we would have a big problem. We would be worried at this point of time. But we are not worried at this point of time because of that. It is only a matter of, of course, being investors, we totally understand that you look at the length of one quarter in a very different way, which is what we look at. And it's totally understandable because if I was also in your position at the time, I would also feel that way.
Yeah. No. So I fully appreciate that. And again, I am also a very early investor and a very happy investor. So I'm not complaining in any case. I just wanted to know whether this is sustainable, and I really appreciate the efforts that you guys are doing in product development and diversification. Just one more question. We have been incurring some amount of CapEx. So if you see for quarter end date September '25, we have about INR 32 crores in capital work in progress. So what is it, and primarily, when do you think that we're going to maybe come to an end of this CapEx program?
So, what's been happening? We had major CapEx had come to an end other than maintenance CapEx had come to an end about two years ago, but we have slightly changed our strategy a little bit. What has been happening, we have seen that the cost of manpower has been consistently increasing in the area that we are in and also, we have been facing certain issues related to getting the right manpower. I think it is probably because of whatever reasons we feel that sometimes it's difficult to find the right technical people for certain processes, so with these two factors in mind, we have been focusing a lot of our CapEx as well as focusing a lot of our development activity towards automation.
What we are doing, we have seen that in the long run, even in the medium term to a long run development, it makes a lot more sense for us to continue to focus on automation. That strategy has obviously caused us to incur more CapEx. I think we should be able to see benefits of that in the medium term rather than any issues.
Yes, and I'd like to add one more thing. Since it's a consolidated number and our subsidiary is in expansion mode, so out of INR 32 crore, almost INR 20 crore pertains to SEPPL, which is underway for capitalization. That's what looks like that it's too high comparative to our previous quarterly results.
That CapEx is now already done.
Yes.
Rajeev, even in that CapEx towards the finishing stages of the wholly owned subsidiary for the contact business, our strategy, again, we applied this strategy towards that as well, that why not go for more automated processes rather than putting together a new facility with more manual operations rather than. Of course, what we had originally planned versus what we actually ended up incurring as CapEx was different, the number was higher substantially.
Yeah. We changed our policy, and even we got an opportunity to expand more so that we acquired more land and accordingly go right. It is related to the long-term vision of SEBPL itself. So that's why the original got extended by 20%-25% additional CapEx. And these are putting under CWIP, which will be capitalized by end of December. So that's why it is going under CWIP.
Thanks for your answers, Rajeev and Sumer. And thanks for your questions, Jayesh. We'll take a few more questions. I know we've crossed 5:00 P.M., but since we have the management here, we'll take advantage of it. Our next question will be from the line of Naushad. Naushad, your line is unmuted. You can go ahead and ask your question.
Hi. Thanks. Hope I'm audible.
Yes, go ahead.
So congrats, team, for a decent set of numbers in a tough time. A couple of clarifications. Firstly, on the growth side, given the consolidation we have experienced in the last two years, and assuming if cycle revives, especially in the pocket where we are facing the problem, and if we have not lost the market share or the client, should we experience at least first year of revival, should we experience exponential growth versus our historical rate, and then it should normalize? How should the first year of recovery look like from a growth point of view?
I think you're absolutely right. We were also internally calibrating this. Once the recovery really starts happening with the existing activities that we have initiated and already working on and are in progress with, we would actually see a very high recovery rate. And just what Sumer was saying, that even if our customers come back to their base level without any growth, we would see a substantial increase in our top line as well as on the bottom line.
Does this imply that whatever negative experience we are currently having with Vishay is all because of the demand issue and their inventory adjustment, or is it because they are shifting their sourcing force to someone?
No, no, no. So it's a combination of both. What has happened is that a lot of business from Vishay has shifted to some of its competitors also, which we have also received indirectly. That's why we have substantial growth in shunts in general, even after such a downfall of Vishay. So what we see now, though, is interestingly that there are certain developments at Vishay, which could bring Vishay back to its original or back to its former kind of volumes. This is what we have because they have developed some new types of resistors using these welded, which the kind of welding they need for that, they can only source from Shivalik. So we are in the part of this white label agreement that we are in with them.
We are foreseeing that that development is moving very, very fast, which means that if those numbers were to materialize, then it would come back to similar levels of our total revenue with Vishay in the next year itself. This is a possibility. I would say 50% of it is still on the more optimistic side, but it is a very, very, it's right there in front of us. It is not something that needs to be developed yet. So there is optimism provided that this whole US thing, a quick resolution is found. Because even a company like Vishay, which values and has faith in Shivalik's products, at some point, we'll have to look at alternate strategies if this 50% were to remain.
Assuming that some kind of resolution comes in because that American development for us, not just for shunt, but for bimetal also, becomes very, very important. When that recovery happens, as Kanav mentioned, we expect it to happen in a very sharp way.
Clarification on this: what I've understood. So we are not losing a market from a Vishay point of view, but Vishay itself is losing in the market, and that's why it is impacting you. Have I understood it correctly?
Yes. That is part of the problem. You see, the biggest reason what happened was I think Vishay was very over-optimistic of its volumes and they over-ordered. And they over-ordered to a point wherein they were stuck with inventory, which took them more than a year and a half to normalize. And some of it came because of that, which we've been talking about earlier as well, that inventory over-inventorization because of whatever errors took place at their end. So some part of it is that, and some part of it is that there are competitors of Vishay, which have taken some part of the business, but then there are customers as well. But if, let's say, that that customer was buying 20% of their volume from Shivalik, Vishay would have been buying maybe 60%.
And if that business goes to them, that means indirectly some of that business we have lost as well. So such cases have happened. But with these new developments in Vishay, we should see numbers going back to what they were. Because they have a clear technical advantage there. So even if Vishay may be more expensive, with that technical advantage, a customer buying from Vishay is still justified.
Sure. Next, on the client addition side, earlier we have talked about, I think we have touched on the BYD and HELLA China, all these new clients which we were talking with.
HELLA China is already a customer. We are already supplying certain components to them. The new development with HELLA was related with the Indian market, which is on track at this point of time. It's under development in various stages of development. BYD is a development that we are doing through Vishay. And at this point of time, that is also on track. And that is not just some of those, some of that is for BYD, but it's also for other designs as well. So we are doing a lot of developments with Vishay for some new customers, not directly at this point of time.
Last question from a domestic point of view, if you look at last five years, EMS industry was for the assembly guys, and it has done quite well for the assembly players now, given the different policies are coming to support the component side of this EMS industry. Any thought on that? How are we planning to participate in this journey of growth for the EMS component, which is emerging?
Yeah. So we are now at advanced stages. In earlier calls, we have mentioned that in earlier interactions, we have mentioned even during the AGM that we are working towards entering some new product verticals, which are related only to mainly with electronic applications. And so we are also making use of this ecosystem wherein we are getting certain advantages. We have finalized what components we are looking at. We have done the financial working on it. We are at the stage of finalizing where, and in fact, those things have also been done. So I think that very soon in the near future, we will be making certain formal announcements as to what we are doing and what kind of products we are entering. It's just a little bit before that stage right now, so I won't be able to talk much more about it.
But yes, we are at advanced stages of participating in electronics components manufacturing. Wherever we see that there is something in line with what we already do or some kind of connection, whether it is at the customer base level or is it at some kind of a metalworking process, which we may not be doing at this point of time, but we do something similar. So we have a technical advantage there. So we have chosen those products on the basis of that. None of them are an absolute something that's completely new to us. So we've stayed away, steered clear from those kind of developments. But yes, to answer your question, we are at advanced stages of this kind of a project.
Thanks, Sumer, and thanks for your questions, Naushad. We'll take the last question for the day from Bhavya Nahar. Bhavya, your line is unmuted. You can go ahead and ask your question.
Hi, hi. So until last call, I think we spoke of INR 150 crores coming in FY 2027 from PCB assemblies and other forward-integrated products. So do we still think it is achievable? Because I think one of the earlier questions you mentioned a number of INR 50-70 crores.
But that was just specific to the PCBA.
No, no. So that was in relation to what Kanav had mentioned with the developments that we already have in hand. So what we may have mentioned earlier as a potential of 150 is what we identified. Some of those opportunities may not be in our hand as of today when it comes to the development part of it, but can be accessed, and we are targeting them. But that was the potential. But these are the ones that obviously can be a part of top line only if it's once crossed that level of certain discussions and certain developments or certain proposals at the customer end. So what Kanav was talking about was more related to the ones that we are already developing.
Understood. And just as a last question, could you please share an update on the progress with busbars?
Because I understand they enable faster production, but how are they in terms of cost competitiveness?
In terms of cost competitiveness? You mean to say in terms of.
Busbars. Because I think there are new developments that EVs are looking at, right?
No, they, of course, are also. In fact, we are developing certain specific designs, which would also be a kind of an IP-protected technology, which will bring a reasonably good level of valuation.
In fact, Kanav, our biggest advantage in these busbar developments is the cost competitiveness.
Absolutely. And that's where it is.
It is one of the strongest points.
Am I audible?
Yeah. Sumer, I think we lost Bhavya, actually.
Okay.
Bhavya, are you able to speak?
Yes, now. Sorry, I think.
Yeah, go ahead.
No, I think so. So I mean, can you maybe just finally give us the guidance? How do you see FY 2027 panning out? What sort of growth do you see?
See, again, it's assuming that these trade-related issues that we are facing. See, we have to understand that a lot of our existing business as a percentage was based on the U.S. Okay, it had been consistently going down, which we had been our exposure had come down from a near 40% to about 17%-18% recently. But that 17%-18% still has an impact. And then where these trade-related issues take this business and how much impact it has in the overall market, assuming that all of those things are corrected, and let's hope we all hope that that is, and keeping in mind our new developments and new projects and then Vishay's numbers and forecasts on their existing business, we feel that double-digit growth definitely for next year is doable, achievable.
Probably, if it all goes well, probably on the higher side of double digits, somewhere in the range of 13%-14% to 17%-18% kind of a level. At least that is what we have in mind. It is possible with the developments in hand. But there are many variable factors out there, as you can obviously imagine.
Understood. Thank you so much.
Thanks, Bhavya, and thanks, Sumer, for your answer. We'll conclude the Q&A session on that note. As soon as this call finishes, you'll receive a survey for your feedback. Kindly take a few short moments to participate in this quick survey. I'll now hand over to Sumer for closing comments. Over to you, Sumer. Sumer, would you like to proceed with the closing comments?
Yeah, let me conclude.
Sure.
Thank you for participating in today's call and being part of Shivalik's growth journey. As we head into the rest of the financial year, wishing you all a very pleasant evening ahead. Thank you.
Thanks, Rajeev, and thanks to Sumer and Kanav as well for your answers today and for everyone for participating. If you have any more questions, please write to us at the email ID at the end of the Investor Deck at the conference, and we'll be happy to get your questions answered. Thank you for joining us today, and you may now disconnect your lines.