Ladies and gentlemen, good day and welcome to the Suprajit Engineering Limited Q1 FY 2024 earnings call, hosted by Anand Rathi Shares and Stock Brokers. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Mumuksh Mandlesha from Anand Rathi Shares and Stock Brokers. Thank you, and over to you.
Thanks, Aman. On behalf of Anand Rathi Shares and Stock Brokers, I welcome you all to the Suprajit Engineering Q1 FY 2024 conference call. I thank the management for taking time out for this call. From the management side, we have Mr. K. Ajith Kumar Rai, the Founder and Chairman, Mr. Akhilesh Rai, Director and Chief Strategy Officer, Mr. Ashutosh Rai, Chief Technology Officer, and Mr. Medappa Gowda J., CFO and Company Secretary. Request Ajith, sir, to give an introduction review about the results, and then we can follow with the Q&A. Over to you, sir.
Thank you, Mumuksh, and thank you for hosting this quarterly call all this year. Thank you very much to you as well as to Anand Rathi. Good morning, everybody. I welcome you all for the quarterly results update call from Suprajit. Thank you for joining this call. Initially, I think I would like to mention that Mohan has been traveling overseas and the timings have not matched, so he has not been able to join this call. Instead, we have this time added Ashutosh as well to give some idea about what is happening at our technology center. So we will have a detailed brief from Akhilesh on the various business divisions, followed by Ashutosh on the STC, and then by Medappa, and then I will just do a wrapping comments before we let the questions to come in. With that, I will start with Akhilesh. Go ahead.
Thank you, Chairman. Very well. I will just give a quick overview of the business updates that were detailed in the press release on 12th August. In Q1, the Indian automotive segment experienced marginal growth of 2.8%, and similarly, the global economy continues to face challenges of high interest rates, inflation, and recessionary trends. This particularly affected the non-automotive and recreational sector that Suprajit is also involved in. Against this, Suprajit's consolidated operation income increased 5.35%, with both consolidated and standalone margins improving considerably compared to Q1 of last year. This reflects the hard work our teams have put into operational and purchase efficiencies. I will now update on the four divisions of Suprajit. So starting with Suprajit Controls Division, SCD achieved significant growth and operational EBITDA improvement.
Global macro factors have significantly affected the non-automotive and off-highway side, which resulted in drops in schedules for Wescon, Unit 9, and Shanghai plants. However, the global automotive plants of Suprajit and business of Suprajit grew very well, with Matamoros, Siófok, SAL, and SEU showing double-digit growth and better margin performance. Our idea of one Suprajit global platform has been received very well at customers, and we provided a list of new wins in cables and electromechanical actuators for your reference in the disclosure. In the Domestic Cable Division, we were faced with the India two-wheeler segment that remained largely subdued. The EV market took a major hit due to the same subsidy issues that we are all well aware of, and the aftermarket segment also witnessed some seasonal softness. This led to a somewhat subdued performance, but this is anticipated to recover.
On a positive note, the passenger vehicle product lines exhibited strong growth in line with the India PV industry, and DCD's diversification into non-cable businesses should yield favorable results in the coming quarters, and it is well positioned on EV platforms. Next, the Phoenix Lamps Division reported commendable growth, even amidst the restructuring of Trifa and Luxlite. The new order acquisitions continue to drive this growth, and that is a very positive sign. The performance of our LED retrofit solutions, both domestically and international, has further contributed to our success in this quarter and going forward. Suprajit's Electronic Division, established recently, and this is the first quarter that we are reporting on it, has gained excellent traction with India and global customer visits and audits going very well. Multiple businesses have been secured, promising strong CAGR growth for the division.
I am also happy to announce the key business wins with India's top-selling EV two-wheeler, making the content per vehicle at this customer larger than any other mass-market two-wheeler customer of Suprajit. Some of the key wins are also publicized in the report. Finally, for the Technology Centre, I will hand it over to Ashutosh Rai for his update. Ashutosh, go ahead.
Thanks, Akhilesh, and good morning to everyone on this call. I will give you a brief update on the Technology Centre as well as the engineering capabilities of the company.
Our focus has always been on introducing new products into our portfolio, products that will become the next product vertical of Suprajit and facilitate the next phase of growth. First, the successful story of this endeavor was the Electronics Division, which Akhilesh mentioned, which will now serve as a blueprint for us going forward. To showcase our new capabilities to our customers, we have conducted multiple technology days with the theme "Beyond Cables" to all our major OEMs. This endeavor continues. We will be meeting many more OEMs in the coming quarters. This has led to a significant change in the perception of our customers, who have valued the groundwork that we have laid over the last few years and are now looking at Suprajit as a solutions provider.
We are now one of the very few suppliers who are capable of supporting our customers from the conceptualization stage all the way through to commercialization in a very short lead time. The pipeline of product development is also very strong, with multiple products in the launch phase, development phase, and pursuit phase. These include innovative and patented technologies that we can proudly say are indigenously designed and developed by Suprajit engineers right here in India. That's all from me. Thank you.
Thank you, Ashutosh. Medappa?
Thank you, sir. Good morning, everyone. The consolidated revenue for the quarter ended 30th June 2023 was INR 680 crore as against INR 645 crore for the corresponding previous year, recording a growth of 5%. The consolidated operational EBITDA for the quarter ended 30th June 2023 was INR 74 crore as against INR 57 crore for the corresponding previous year, recording a growth of 31%. Standalone revenue for the quarter ended 30th June 2023 was INR 333 crore against INR 337 crore for the corresponding previous year, with a growth of 1%. Standalone operational EBITDA for the quarter ended 30th June 2023 was INR 49 crore as against INR 51 crore for the previous year, recording growth of 15%. The total debt level was INR 613 crore as on 30th June 2023. Surplus cash balance was INR 487 crore as on 30th June 2023, invested in mutual funds.
For further queries, you can contact me during, after the call also as usual. Thank you very much.
Thank you, Medappa, and thank you all. From my side, I think the only couple of points that I would like to raise is about the non-automotive business that we do overseas, both the Controls Division as well as the entire group. That has been quite slow this year. The discretionary spend of the consumers have been cut down significantly because of the higher interest rates as well as the cost of living index going up due to the inflationary trends. This has led to cut down on these segments, so that has affected the non-automotive part of it. Except that, I think we have done pretty well. In fact, we expect that in the next half of the year, that means the second half of the year, we expect even stronger growth and improved margins.
Just to give a flare, because the Electronics Division is a new division for us, as well as Controls Division is a new regrouped division of Suprajit with multiple units under that particular division that sort of serves our global business. We thought that we should give a flare of how our business seems to be performing in terms of the new wins. For the first time, I think, in Suprajit, we have done the disclosure of the business wins. This is one-off kind of a disclosure just to give a flare of the businesses that we are winning and the significance of that for Suprajit in the coming years.
I remain quite positive about the outlook for the year as well as for the coming years because of these new wins and also because of the way Electronics Division seem to have been shaping up based on the initial businesses that we have won. With this, I now let the questions to come from all of you, and we'll ask a few questions either by me or I will direct it to the respective team members at Suprajit. Thank you and over to you, moderator.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Aashin Modi from Equirus Securities. Please go ahead.
Yeah. Hi. Thanks for the opportunity, and thank you, sir, for the detailed explanation. My first question is regarding the control margin. I believe it's sequentially there has been a decline because of margin impacting the SCD division. Could you give us more color on whether it was due to operating leverage at the Wescon business or whether it was more because of the China plant certain issues and everything? Also going forward, what would be the levers for margin to improve in the SCD division? Would it be operating leverage or are there some pricing improvements that is left as well?
First of all, I think if you really look at our margins on the Controls Division, it's actually increased from, I think, around 4% to about 7%. It's actually increased. It would have been even better just for the reasons that you mentioned. The non-automotive business didn't grow. In fact, Wescon actually had a degrowth for the quarter. And we also do non-automotive business out of our Shanghai plant, as well as a little bit about from Matamoros as well. All of them got significantly impacted. In fact, some of the customers have cut down the business by 50%. So obviously, when the volumes drop, it will have its pressure on the margins. Although on a quarter-to-quarter, on a year-on-year basis, our margins have improved. It would have been even better if non-automotive business had grown. So that is basically what has happened. That will continue.
I think the non-automotive weakness will continue, I think for at least for another this quarter for sure. Hopefully it will start improving when the economy starts turning around. When that happens, what's happening now is that, for example, somebody wants to buy a snow thrower or a tractor or a lawnmower. He has postponed the decision. He still has to buy at some point. When that buying comes back, I think the division will do like a double whammy. The regular requirement as well as the pent-up demand, all that will come back together. I think that will happen next year. But this year, in the second half, we expect that weakness will sort of taper off into start growing. Then I think that's where we'll see the margins improvement from that division of that particular segment of the division for the future.
Okay, sure, sir. My second question is regarding the growth in the Suprajit Controls Division, given your talk with the non-auto dealer and given the new order which you won in the automotive segment. Overall, on a blended basis, what sort of a growth do we see in the SCD division for the next one or two years?
Yeah, I think we have done a business update when the year-end happened. I think that was detailed business outlook for each division. There we have very clearly said that this would be double-digit growth for Controls Division for this year and going forward as well. Of course, the quarter rate is not double-digit. It is 8%. It is only because of the non-automotive business. I think that will get covered up within a quarter or so. Going forward, if you look at our business wins, which we have actually sort of announced for the first time, you would see the traction that we have. Of course, these businesses are won for different timelines, and the SOPs will take different times. Also, I must say that some of the existing business also will drop off the table as they meet the end-of-life cycle.
But overall, on a blended basis, we easily see a double-digit growth at the Controls Division.
My last question is regarding the Suprajit Electronics Division. We almost have a INR 150 crore sort of per annum order book. Could you help us understand what would be the SOP of this business? Also, you got good traction, almost INR 100 crore from instrument clusters. Are you adding customers over there? What would be other products that would be scaling up like instrument clusters from Suprajit Electronics Division? That is my last question.
Yeah. I think what is happening at the Controls Division is, I mean, Electronics Division is very clearly a case where our Electronics Division, which was actually inaugurated only in November, subsequently been visited by multiple customers. They have found it really good, up to their expectations, and that we will be able to deliver them through our STC teams, technology teams. That is what they wanted. Yes, at the moment, the businesses are more on digital clusters, if you look at the numbers. What is interesting is that most of these customers are EV customers. In fact, the content for, in fact, we have made a statement about we are having a significant business with one of the top EV customers, two-wheeler customers indeed. It is the work of that getting commercialized in November, customers coming for audits, getting the plants approved and giving new businesses.
This is what has happened in the last six to eight months time. I think it is continuing, and we are very excited about the division. The order wins in the first six or seven months of the starting up of this place, I think it has been truly exciting for us because we started this as a purely as a startup, and the response we have is pretty good. I think we will see a typical so-called startup hockey stick kind of a growth in this division going forward.
Thanks a lot, sir. I will join them with you.
I will also add there that as a global actuator supplier, actuators also come with a lot of electronics and PCBs, and a lot of our global customers are very impressed by the electronics capabilities of Suprajit because the control PCBs on actuators are far, far simpler than the kind of PCBs that we do for a cluster. It has been really eye-opening for a lot of our global customers as well. In fact, recently, one of the global, actually marquee customers, one of the luxury brands, a passenger vehicle out of Europe, visited us, and they did not believe that we could do such electronics products. Actually, plant has been approved, so we are waiting for the next order from, I mean, next progress from them. What I am saying that it is not just in two-wheeler, but traction is also in the four-wheeler.
Thank you. I will join them with you. Thank you.
Thank you. The next question is from the line of Mumuksh Mandlesha from Anand Rathi. Please go ahead.
Thank you. Sir, congrats on a good order book, and particularly seeing the Electronics Division order book increasing to INR 150 crore annually from INR 100 crore annually you had indicated. Sir, I was just asking, just continuing to the previous questions, can you talk about the EMA opportunity or the electro-mechanical actuator opportunity in India market? How you see the traction for that product?
Thank you, Mumuksh. I think I will let Akhilesh answer it. Some couple of them you already won. Maybe, Akhilesh, you can give a brief.
Yeah. It's a very interesting area that we are focusing on in India. I think there are not many competitors with this kind of expertise that we have developed globally. We supply more than 1.5 million actuators globally to all the major passenger vehicles, and we've brought that technology now to India. So in the first, I think in our disclosure in customer A, one of the leading EVs in India, they are using two of our actuators, one for steering lock and another for seat opening actuator, and on the two-wheeler. Over time we're seeing a lot of our ICE customers also taking up those kind of actuators. So on the two-wheeler side, we've got these new actuators that we're introducing for the first time in the market for India, and that will also be picked up by other ICE OEMs.
In the passenger vehicle side, a lot of those actuators were not being done in India. So we're seeing a lot of traction also from the tier one seating manufacturers, et cetera, who are coming to us and saying, "Can we start developing those actuators that we're already doing globally, locally in India for local supplies?" So we're seeing a lot of traction in India, both in the two-wheeler and the passenger vehicle segment.
I would just add one thing here. These systems typically have a cable, which obviously we have the capability. It has a PCB, again, which we have enough capability. It generally has gearboxes, which again, we do in Milan, and it has a plastic housing, again, something that we have enough capability. As a value per part, it's of course, and usually 8x-10x what a normal cable would be. So that's why we are seeing it as a perfect product for us to empower.
Thank you so much for this. Sir, coming to the lamps margin, sir. We had talked about the price increases being taken in that segment, and we're talking of double-digit EBITDA margin, which we have shown in the Q3 quarter. So can you indicate by when we could see back those double-digit margins for the lamp business?
I think, on the Lamps Division, as you know, there has been a restructuring that is going to be on the way in Europe, where we are winding down Trifa. So obviously, there are some costs connected with that. There is also an issue that the Trifa customers will have to be onboarded onto Luxlite, and some of those customers either have some issues, so we are convincing. So it is going to take a little time for us. But once that consolidation completes by end of this year in terms of Trifa winding down completely and Luxlite will also tighten its belt by some amount of reduction of people. I think once that happens, and then the new contracts that we are currently starting to win with those. The restructuring is on already, and we are already approaching customers with the new Luxlite as our face out of Europe.
It is starting to come. Some of those costs are hitting the P&L, and I would say that it is a question of time. We are something like 8% or 8.5% now. I think hitting 10% is certainly a possibility for us as the business grows a little more, which is what we are expecting. In fact, we recently won a very interesting new business also at the Phoenix Lamps Division. Those things will add on as we go forward. So I would still say that the PLD is a double-digit business for us, 10% is what we expect to do. Maybe in the next couple of quarters, I think after a couple of quarters, it should be possible to reach once the winding down of Trifa gets completed, expected to happen by end of this year.
Thank you so much.
Thank you. The next question is from the line of Viraj from SiMPL. Please go ahead.
Yeah, hi. Thanks for the opportunity. Just a couple of questions. First, I think continuing on this
Can you answer your voice record?
Yeah, just one second. Am I audible now?
Yeah, better. Thank you.
Yeah. Just couple of questions. First, just continuing with the Phoenix Lamps question. Earlier we used to have a phase of significant pricing pressure because of the overcapacity which was there in the market. Now I understand you are working on the cost part, trying to rationalize it and have a more streamlined operation. But in terms of the market dynamics, if you can just throw yourself perspective, has the capacity normalized now? Has the pricing started to recover or stabilize compared to what it was a couple of quarters back or a year back? In that sense, how should one look at margin in the long term in this business?
Okay. I think, good point. The way we see it is that, when there is excess capacity, it takes a while for that capacity to start either dwindling or getting wiped out, either by closure of plants or by bankruptcies, whatever, et cetera. It has been happening. We have mentioned about a couple of European suppliers going out of business, et cetera. One of them, as a matter of interest to see, that they continue to market their product and they are starting to buy from us because they have shut down their plants.
That is positive for us. In terms of the pricings, there is still the competition is there. The margins have improved because the pricing has improved. Now, the question is, it takes a little more time to improve further and the volumes to pick up, because still some of those people who are marginally on the survival position, they still are trying to push the product in the market at a lower prices. I think it is a process rather than it is an end itself, it is ongoing. We are seeing that we are able to get close to the prices that we would like to have. That is why the margin you see that has been slowly improving.
It will take a little more time, as I said, in a couple of quarters, when we say that we will be double digits, I think it will be true because that people are considering that a last man standing best bulb supplier. Also, some of these people, another one or two will go out of business. I think it is going to be that much of time before we get into that position of pricing capabilities, I think.
Okay. Just extending this, in terms of the B2B play, I think we had a success with Osram India supply chain, but we never say the Osram global business or Philips or other major players. Has there been any traction in terms of winning order books?
We continue to supply to them. Some of the newer ones are. They are not really newer ones. We all know them. We have done some business with them. Some of them have probably gone to a lower cost one before the pricing part of it or whatever. That is why I mentioned that recently we won a new business from one of the big distributor in Europe, who went away from us saying that our price was high and they are getting a cheaper price from China, wherever it is. They have come back. Actually, we are starting to do business. We are getting some good, interesting new businesses from Russia, actually. We are getting some more businesses in European, one of the leading player, as a more business.
They have been a buyer from us, but they have not been buying as much as we would like to, because again, they always said that your price is high, but now they are realizing there is also value proposition in us beyond just the price, and that our quality is much better. So as I said, it is taking its time, but all I can say with confidence is that now we are taking measured positive steps to go forward, and that is only adding the volume. You are seeing still in this market with Trifa being shut down, also we are growing the business. In little time, that growth would be better, then obviously it will also improve the margins.
What is the one-off restructuring cost in the current quarter?
When you are winding down, you have to pay for all the employees, and there is some basic, as per the German laws, we need to pay certain things. There is also these legal expenses. Winding down is easier said than done in the amount of processes involved, the lawyers involved, the government costs. We also have ongoing licenses. Whatever, we have to keep the data, for example, for 15 years, and for that, we need to pay upfront now. This is an ongoing. Winding down, there are a lot of little expenses which get added on. That continues to hit P&L. From a group's point of view, it is not material, but as that particular piece of our business, it has got some impact.
Okay. Second question is on the order book, which you shared. If I specifically talk about the electronic capacity order book, we talked about INR 150 crore annual peak potential volume from the orders which you have got. But when I look at the lifetime value, it is around INR 350 crore. Typically, a program lasts for, say, four, five years to seven years. Just was not able to understand the disconnect from that all.
I get your point. I think we are quite aware of it. First of all, I think we wanted to be pretty conservative in what we say. As you know, we have always been conservative. That can be the first point, the first one with about INR 660+ crore of business. We are winning a phase one, which will change over to a phase two, which will be a different product. That also we are in the race, but we have not won it. It is just a one-year business we have mentioned there. Once it starts into production, hopefully in the next two, three months' time. Again, let me also say this, I think we have to be frank in saying that this is the projected volume of customers. You know how it is in Indian markets. We project so many things, but it does not happen.
We need to take it with a pinch of salt that these volumes are based on customer-indicated volumes, and the actual volumes will depend upon what the markets will actually take. The start-up point also keeps changing. We are expecting some of these products to go into production actually in the next three to six months' time. But whether it will actually go into production and they will push the SOPs later on is something only time will tell.
But are you, from your communication with customers, seeing any because the impact of FAME change in the AI standards, everything is out there and it has been there for last couple of months. So are you still seeing any signs of delay, not just in ACLs, but even when I talk about, say, ex the non-auto business. A lot of these order books you already have in hand since last one year. So are you seeing any signs of deferment or any spill-over of the weakness you see in non-auto in any of these segments?
The FAME is going to be re-introduced, as I see, and we have to see how many will really be able to take full advantage of it. Again, who is the winner is difficult to say. Some of these EV guys also have issues because of the earlier FAME issues, and they are asked to pay back the government the monies. Now, some of them will be able to pay, some of them will not have the money to pay. So, we need to actually closely watch this area. That is why we are not really talking about each product life cycle being three years, five years, and all that. So there is going to be a churn in the EV space. So we are watching closely and some of these launches can get delayed for sure.
Okay.
There is enough business. Today, I think the most happening place and the busy place and everybody under tremendous stress to gear up and grow the business is in the Electronics Division, along with SPV.
I would just add that the same subsidy issues is driving all the EV players to localize and reduce cost. Suprajit in multiple products, not just the digital clusters and actuators, but also in other braking-related products and systems. We are actually in a great place to take advantage of that localization trend. I think we have great relationships with all the top EV producers to start finding actual business value coming out. I think this year, we will see a lot of those changes both in the ECD and the DCD plants. I think that is one key trend going forward. The other thing I would point out is that the EV customers that we are pursuing are also the ones that are decently well-funded and shouldn't have any issues to support themselves during these issues with CM.
In terms of breakeven or the margin structure, say, in cables, we have a very clearly defined structure. But say if we were to reach INR 150 crore in year one or year two, sir, is that good enough to have a double-digit margin structure, or you need much higher scale for you to
Let me say, we are just starting to stand up and walk in the Electronics Division, so I suppose the time will actually answer the question, but let me make it clear that we have set up this division with a clear mandate that we will be a double-digit business in this particular division itself. Now within the double digit, is it going to be 10% or 15%? It is too early to talk about it. But all I can say is some of these businesses that we have won, they have been won with decent margins, and that would lead us to say that if you have to do INR 100 crore or INR 150 crore in a year's time in this division, I would expect it to be in the double digits.
Thank you. The next question is from the line of Amit Hiranandani from SMIFS Limited.. Please go ahead.
Thanks team for the opportunity. Sir, as the segments are newly regrouped, so for the benefit of all the analysts and investors on the call, we request you to provide the segment breakup for Q4 and as well as for FY 2023 please.
For each division, is it?
Yes, segment-wise. Yes.
I think Medappa Gowda can do that. Yes. I don't have it immediately. For the Q1 we can do it. In fact, Q1 because ECD, I mean, Electronic Division was very small. We thought that we'll wait for the next quarter to give that information out. But the segment breakup can be given by Medappa Gowda. Medappa Gowda, you can do that. Go ahead, Amit.
Yeah.
We will do that for them.
Yes. Okay. Sir, secondly, on the Suprajit Controls Division, what step basically we are taking to improve the margin to double-digit level?
I would say that if our non-automotive had done 10% or 15% growth in this quarter, we would have been probably there already in this quarter. That has actually dragged it down because Wescon, all of it is a non-automotive business, had a negative growth. That's what dragged the margins down. I would expect, hopefully, this quarter, of course, the second quarter is also a kind of a weak quarter in Europe and U.S. because August is mostly a holiday season in all these places. Q2 also because of the non-automotive thing will be somewhat, somewhere there where we are today. From Q3, Q4, I think we would see the definite changes and improvements I think towards the double digit.
Sir, what was the actual one-off in the Trifa liquidation in the Q1? Also, last time you mentioned that China plant relocation is happening. Is there any additional one-off over there?
Yeah. Let me answer the Trifa one. It's an ongoing one, as I mentioned. For example, we let go all the employees. The employees have to be paid certain, as per the country rules, certain expenses. We are forced to pay, let's say, upfront all the balance lease amounts to be paid to the place where we were operating from, although we have closed it, because you can't get out of those contracts. Then there's ongoing contracts which needs to be cleared up in terms of IT services, all those multiple services. All that costs money. As we terminate them, we have to pay that.
If you have to set up, as I said earlier, if you have to have the data available for the governmental agencies for the next 10, 15 years, then we have to go to another vendor to upload those data so that we can download when we want. It should be available for us. Like this, and also of course, legal expenses at various places to close various issues that is connected with the company for operation. They are all ongoing. The total cost, I do not have a number with me. I think maybe you can check with Medappa Gowda later on. As I said, for the group, it is not material. If you say is it a million dollar, it is not a million dollar. But for the division, it has affected the margin. That is what we are trying to say. What are the other questions? Sorry.
China, of course. The China relocation, we have identified a new location in China, and the new general manager for China also has joined. We also mentioned about the earlier manager resigning and moving on to another job. A new person is in charge. We are expecting the relocation to happen by sometime in January of this year. So obviously, there is a lease relocation expenses. It has not started. I think probably some initial cost, but from now on, there will be some cost. Again, for that Shanghai lone star, it may have some impact, but as a group, again, it will not be material. Is it a million dollar to relocate? No, it is not. But again, in order for me to have to pay the advances to all the lease period and other things. So there will be some cost, but that again, will be done.
We will probably disclose as we go around if it is of any substance, I think.
Thank you. The next question is from the line of Ravi Purohit from Securities Investment Management. Please go ahead.
Yeah. Hi, thanks for taking my question. Most of the questions have been answered, [inaudible]. Just one broad strategy question. When I look at the presentation that we had put out a month back, where we had given different kind of price points for the newer products that we have been working on, either through LDC or through STC, or the products that we have developed in-house. Now, when I look at the average sale price of those, they range from INR 500 to INR 15,000 in certain categories, INR 500 to INR 5,000 in certain categories. Now, if one had to kind of look ahead five years from today, historically, our two-wheelers and four-wheelers gave us INR 250, INR 500, INR 600 per vehicle.
Now, assuming what we mentioned in that PQP and the pricing that we were talking about, is it plausible that our addressable market or we could hit a billion-dollar revenue in the next many years, given the expansion, without actually looking for newer trends, just from the existing client base itself, by merely providing these additional new value-add products that we have been able to kind of develop and the price range that we mentioned. If I just multiply it on existing client base, it kind of gives me a very large number. Is this something that the company is kind of looking at, think it is plausible? If you could just share with people what the future looks like for the company.
I will give it, I would say, general color to you, Ravi. It is a very, what I would call as a deep question, where the answers are very subjective, honestly. Now, if you look at four or five cables in a regular ICE engine, it may be something like INR 150 max kind of a thing. Whereas today, the same cables also in a 350 cc vehicle, the costs are at a different level because the performance expectations are higher. That is at the base level. Now, what Suprajit is doing, whether it is in the Electronics Division or in the Controls Division, and even within the Domestic Cable Division, we are entering into products whose pricing per vehicle is significantly higher. Now, the point is, it is easy to say that, okay, this, let us say digital cluster is, let us say INR 1,500 average price or INR 2,000 or whatever, INR 1,000.
Then you can say that, "Oh, we are making 20 million vehicles," so multiply the number, looks phenomenal. But you must keep in mind that there is also competition, and we are winning good contracts. So the point is how much market share we will have. I think it is the challenge for us going forward as to see how we can continue to improve market share. So the content per vehicle, which is a statement that I have made a year ago, despite some of the cables in the two-wheeler is going away. Content per vehicle in the Indian business, in the two-wheeler, will be increasing for Suprajit, and we are already seeing it very clearly, that we will stand by that statement that our content per vehicle will increase.
And with the new actuation, which Akhilesh elaborated a while ago, that will add another feather in the cap for us because it's a new product for us. Along with our tech center in the U.S., in Novi, as well as our own here, we are working on some really new exciting actuation strategies. So that will also add. It's actually, we are moving from a low content per vehicle company slowly but steadily into a higher content. Now, what is that amount is a little difficult question to answer, but the product we are doing, every one of them, each one of the new products are something like 10x of a cable, at least, if not more. So within cables, there are also, again, products which are of that type, and there is a Metro for which we did a parking brake cable.
I think each one is something like 25x of a normal cable or maybe 50x of a normal cable. So within the cable, there are such divisions, but they are all very niche products. But the other products that we are getting a clear traction today, they're all in that higher 10x price per vehicle compared to what we are today. I think that is what is exciting for us also.
I'll just add that, just taking on your example of seat actuators that we're doing now for one of the premium EVs. That seat actuator, if that becomes a standard product for all ICE and EV products, because maybe you want to automatically open your seat through your cluster or through your phone or whatever it is, right? That might become a standard. We are already doing seat lock cables for all the domestic OEMs. So we have great relationships in that specific type of product to say we're already doing the mechanical cable, which is INR 60, why don't you give us the actuator, which is four or five times that amount? So we already have great relationships with all these OEMs to supply these products.
Sorry, may I just-
Yes. Actually use the handset, please? Your voice is echoing a lot.
Is this better?
Okay.
Yes.
Go ahead, Ravi.
Yeah, hi. A related question to this is, historically we have done a lot of value engineering on our cables business, and therefore, we have been able to consistently deliver a certain range of margin over a five, 10, 15, 20 year period, right? Now with this acquisition of LDC and STC Center, we have been able to kind of develop. But lot of these products are in-house manufactured, or let us say, electronic components will be in-house manufactured or they will be like traded goods, and therefore, how should we look at our margin profile going forward with these 5X, X kind of products?
Yeah. I think, let me answer the part in a sense that, for example, in the Electronic division, somebody else asked the same question. So I was saying that in a year down the line, if let us say we are doing the estimated annual value INR 100 crore, INR 150 crore in a year or two, whatever number of time, we certainly expect it to be in double digit. Now, will it go to 15% is a difficult question for me to answer, but the projects that we have won today seem to give us the comfort that we can do a double-digit business in the Electronic Division. So that is basic question. On Controls Division globally, I think, we have acquired a business which has been in the doldrums, and we have said that over a two-year period, we will also be in the double digit.
So for the controls division also by end of the year, I would expect it to be in the double digit only. But whether it will ever meet something like the best of our Domestic Cable Division, I think we have a very niche, very strong position within Indian market. Coming to those kind of margins in an auto component business, Ravi Purohit, it is not easy. And I think investors should not expect that every division will reach those margins, certainly not in the near future.
Okay. And sir, last question on LDC integration. If you could just share how far have we Is there a possibility of, let us say, bringing some of the manufacturing to India or if you could just provide some status update on that integration part of LDC and when we see us hit 10%, 20% margin that we were looking for?
Sure. Akhilesh, will you answer that?
Yeah. We've taken the integration project of Light Duty Cable with a lot of seriousness because unlike previous acquisitions, we've set up specific integration teams, which we call max teams, which are across all the departments, finding synergies and finding ways to work together. There are a lot of projects that are in the process of being implemented to reduce costs. Of course, on the purchasing side, there are a lot of global contracts with our suppliers, consolidating the kind of part numbers we are buying. That has actually been a great driver of the improvement of margins at Light Duty Cable. I think, apart from certain other headwind that we faced in these quarters with the slowness of the economy, I think we would've seen a fantastic turnaround of Light Duty Cable. I think, going forward, we see more of those projects filtering into the bottom line.
Hopefully, with some tailwind from the economy, we will start seeing better margins. I think on the purchasing side, we've done a lot of good projects already. In terms of the other departments, we have a lot of even engineering things that we're starting to outsource from our U.S. and Europe plants, doing engineering back office in India. Even our China plant uses now some back office engineering from India. That means in the long run, when we're competing against our competitors, we will have a big advantage of having low-cost engineering, quick turnarounds also in India. Finally, in terms of production, we've already had one project that is going into production now in India, which was a project that was initially in Hungary.
Similarly, we are identifying more and more projects, and we are approaching our customers with this approach that we will start giving them an option of going to a lower cost base of India, which also releases space in our global operations for much higher level products, whether it's actuators or levers, which can bring more profitability to that location. So it's a win-win for our global plants and our India plants and our customer as well, and we're doing quite a bit of traction in that space. I think there's also traction from the China Plus One strategy now really going into the ground where customers are specifically wanting supply chains with minimum China content. This is also something that's been added to bring more and more business into India.
I think, to just to wrap it up what Akhilesh Rai is saying is that we are now presenting a one Suprajit Engineering to the global customers. It is for the customer to decide where they want us to manufacture, where they want us to warehouse, where they want us to relocate those businesses. It is up to them. There are of course various issues and customer wants. Sometimes they want on-shoring, sometimes they want off-shoring, sometimes they want China Plus One strategy. Suprajit Engineering is able to offer all those answers to those strategies of customers. In fact, today, other than probably Hi-Lex, there is no other cable maker in the world who has that diverse capability to offer solutions from where they want and when they want in terms of engineering service, in terms of quality support, in terms of warehousing.
I think that is why, when we have made those one-off disclosure of our businesses one, and how we look at it in the next three, four years, I think customer loves it, and that is what they want. I think that is why, despite in this market where businesses are shrinking in terms of the volumes of global passenger vehicles, we are winning, which is a significant business. In fact, we are right now working on, just as Akhilesh Rai said, one particular customer, a no China strategy, where they say that no parts should be imported from China for this project. It is a significant business for a North American customer. We are there for every automotive guys and also the non-automotive guys in the world that they know about Suprajit Engineering now, and I think that is where we are getting our strength.
I think with one year under, given another two, three quarters of integration completion, I think we will be in a much better shape than what we are today.
Thank you. Mr. Purohit, may I request you to join the queue for any follow-ups as we have several participants waiting for their turn. Also, before moving to the next question, I would like to remind our participants to limit your question to two. If time permits, you may join the queue for any follow-ups. The next question is from the line of Harsh from Marcellus. Please go ahead. Harsh, your line is unmuted. Please proceed with the question. It seems there is no response from the line.
Take the next question.
We move to the next question. That is from the line of Kartik Raghupalam from Infosys. Please go ahead.
Yes, good morning to you. I am a shareholder from 2005, market capitalization of INR 18 crore. The company has done excellently well, and today is the first time I am into the investor call. I am really worried. Quarter- on- quarter, EPS is missing the estimates. I believe the elephant is falling on its own weight. I am ready to hold on for some more quarters. I am also asking one more question. Sir, this financial year, will we cross INR 3,000 crore on an annual revenue basis?
Thank you, Kartik. First of all, thank you for being a patient shareholder with us. Since you are first time into this call, let me say that we do not really give a futuristic number in terms of what we will do for the year. I think if you have seen and read our last quarter's business update, you would note that we have talked about a double-digit growth for the most of the businesses. We have also done an historic statement, which is still quite valid to us today, that our business will grow at least 5%-10% better than the Indian automotive industry. As you know, Indian automotive is currently at about 2%, and I do not know what it will be end of the year. By end of the year, we are pretty sure we will outperform that in the same measure.
We also given a bit of margin guidances over the period. We all stand by that, and I think that's the way Suprajit has been. If you add that expected percentage of Indian automotive with 5%-10% and add that to the last year's sales, I'm pretty sure you will get to know that it will touch your expectations, I think.
Thank you very much, sir. But the last quarter in the paper, I saw that Indian automobile section had INR 5.26 lakh crore. That's increased by 30%. Still, we are not able to maintain our leadership share in that space.
I think, Kartik, sorry to interrupt. I don't think Indian automotive has grown anywhere near 30%. I think if you do a little bit of deep dive, you will know what number we have said as an automotive growth is very authentic. It is from SIAM, which is the authorized agency to release such numbers. Indian Automotive, thanks to, of course, two-wheeler sluggishness, has not been growing even at the historic pace in this quarter, as well as last couple of quarters, actually.
Thank you, sir. Thank you very much.
Okay. Thank you.
Thank you. The next question is from the line of Gokul Maheshwari from Awriga Capital. Please go ahead.
Yeah. Thank you for the opportunity. My question is on the global cable industry, which has been consolidating for a while. The current downturn and the challenges which are being faced by the industry, is the pace of consolidation accelerating further? Any comments on that would be very helpful.
Yeah. We have always said that in the past also, Gokul, that globally, there are one too many suppliers for quite a large range of components that goes into automotive or two-wheeler. I think certainly cables is one such one. As you see, we ourselves have taken four or five cable assets in the past. It shows that the consolidation is going on. Similarly, there has been somebody else who has also bought in one or two private equities, have bought a group of cable companies and consolidating and trying to make it bigger to again eventually sell it. So the consolidation is on. I think even the problem why it is on is because for the smaller cable companies, let's say somebody who is a $25 million or a $50 million cable company today, he is not able to deliver customers' expectations globally.
He may have a local person, let's say, a decent cable guy out of Europe can survive just in Europe with a $50 million business, but he cannot survive and he cannot be able to have the wherewithal to serve, let's say, China or Europe or U.S. and South America at the same time. I think that's where we are on the table for most of the customers. These smaller guys are finding it harder to get the new business. How Suprajit gave you on the disclosure of our business is one. If you look at the percentage of the growth that we are talking, it's significant. When the market is not growing, and if we are growing significantly, that means obviously these smaller guys are suffering, and that suffering leads to bleeding of their balance sheet. That's when I think there'll be further consolidations happening.
Today, as we speak, I know at least three, four of the cable guys are having really hard time to sustain their operations.
In that case, when you speak to your customers, when they are actually developing their models or products, does that mean that they are having less choices with respect to whom they can work with and how will the customer discussions go on in the changing industry scenario?
Still some of these, what I would say tier two cable supplier, as I said, in the $50 million range, they still have some great customer relationships in certain select pockets. They'll continue to push their presence. Today when, let us say, somebody sends out an RFQ or whatever to a new platform, certainly they will send it to at least two, three, four cable suppliers. I would say 10 years ago, it would be something like 10 suppliers. Today it is probably three or four. So it has come down already, but will it further consolidate? I think it will, but it will probably take another two, three years.
Great. Thank you so much, and all the best.
Thank you.
Thank you. The next question is on the line of Senthil Manikandan from iThought PMS Please go ahead.
Good morning, sir, and thanks for the opportunity, and thanks for the detailed discussion on the business today. My first question is on the digital cluster product side. What enables, you can say some key drivers, which enables the company to win this, whether it is an existing major players in the particular segment? That is my first question, sir.
Okay. Ashutosh, will you chip in with your view why we are getting some business in digital clusters compared to maybe, again, some of our much bigger, larger other competition?
Yeah, sure. I think I did touch upon this before. We would be one of the few players in this particular field. See, electronic forms a portion of the, let's say, the BOM of the product. There is also the mechanical portion that simply brings a lot of value into. I think why we are really winning a lot of businesses is because of how quickly we are able to develop the product. Just for example, one of the products in digital cluster, we were able to develop within two months. This is a kind of, I'd say, very unheard of, and usually it is around eight to 12 months. It is because of the way we have set up our technology side as well as our manufacturing side, and that gives us a lot of strength.
In the same facility, we are doing the electronic portion, the molding portion, and the assembly within our unit. I think that is where the customers are really impressed by us.
I think just to add up, one of our focus has always been on customer. Some of the EV customers, for example, they probably didn't get the attention that they wanted. Even if he is making 5,000 EVs or whatever, 10,000 EVs, they still want the full attention from the supplier. Maybe some of the bigger guys didn't give those kind of attention. I think we have been very proactive with some of these customers to get their development done to the level of expectations they have had. Somebody else would have given a standard product, either they take it or leave it, whereas we said, "Okay, what is it that you want?" We were able to convince them that we are able to deliver those products.
Our in-house facilities that things like molding and other mechanical related within the cluster, we are already very strong because we have that part of the business anyway. That also helps us in getting and convincing some of the customers, I think. But it is a long journey. There is a lot more businesses to be won. I think our hit rate so far has been excellent, but there is certainly a lot more businesses to be won.
Thank you. Second question is with respect to the Electronics Division. So in terms of investments over the next-
Sorry, I did not get you.
The second question is also with respect to the-
Yeah.
Yeah. With respect to the Electronic Division, in terms of investments over the next three to five years, what would be the quantum of investments being planned?
We are playing it by the year, I would say. We have given an estimate for this year's at INR 140 crore for entire division, entire company. Part of it is also going to Electronics Division. Now we are, again, as I said, playing it by the year to see what kind of traction is there for the business of doing INR 100 crore, okay, whatever, INR 150 crore, we are very clear, we are ready, we can do it. But when you go to the next level, we need to add on. I think that will happen as and when required, so we will take the call soon. But yes, Electronics Division is something where we will be doing a good part of our investments. But it will sort of evolve as and when it is needed. That is what is happening as we speak now as well.
But there is no number we would like to say at this moment. It is part of that INR 140 crore that we announced in the last quarter.
Thank you. The next question is on the line of Amit Hiranandani from SMIFS Limited. Please go ahead.
Thanks for the
By the way, moderator, after this question, we will take one more question. It is already 12:05.
Sure.
We will take this call, and if there is any more call, we will take one more question.
Yes, sure.
Okay, thanks. Go ahead, Amit.
Sir, on the EBITDA margin side, 10.5% in Q1 is one of the lowest. Do you still maintain the margin guidance of 12%-14% range for FY 2024? If yes, then in which segment do you see higher improvement in EMIs and reason for the same?
Yes, at the moment, we don't see any reason for us to revise our guidance. We still think that what is happening, particularly in non-automotive, will be made up partly by automotive growth, partly by electronics probably turning the corner, and also partly by non-automotive itself coming back to a decent level of volume in the second half. We don't feel that there is any need for us to revise any of our guidance at this moment.
Lastly, sir, can you please give the reason for higher effective tax rate and what would be the sustainable tax rate one can assume for the next two years? Also the outlook on the CapEx, sir.
Medappa, will you answer that question?
The ETR is generally 27%. It seems to be one-off for some time with the deferred tax in the U.S. as well as in different locations.
On the consolidation of the deferred tax, there has been some numbers given by our U.S. auditors to our EY. This number is based on that. I think it will get probably normalized as we go forward. And what Medappa said, there is a number probably is more appropriate.
All right, sir. Thank you so much. All the best.
Thank you. One last question.
Thank you, sir. Sir, we have the last question. That is a follow-up from the line of Harsh from Marcellus. Please go ahead.
Okay. Sorry, Harsh, I think we missed you in the beginning, so please go ahead with your question.
Harsh, please unmute yourself and proceed. Sir, there is no response, so that's
Is there any more questions?
No, sir. That was the last question.
Okay. Then fine. I think we have answered and there's no unanswered question. I would like to say thank you all for your continued interest in Suprajit. We appreciate your interest. We appreciate your investment. I think I also like to thank Anand Rathi and Mumuksh Mandlesha and his team for hosting every quarter our quarterly calls, and thank you all and wish you all the best and look forward again interacting with you sometime soon. Thank you very much.
Thank you very much, sir. Ladies and gentlemen, on behalf of Anand Rathi Shares and Stock Brokers, that concludes today's call. Thank you all for joining us. You may now disconnect your lines. Thank you.