Ladies and gentlemen, good day, and welcome to Suprajit Engineering investor conference call for acquisition of the business of Stahlschmidt Cable Systems, that is SCS. As a reminder, all participant lines will be in the 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 call, 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 Share and Stock Brokers. Thank you, and over to you.
Thanks, Yashaswini. On behalf of Anand Rathi Shares and Stock Brokers, I welcome all you to the Suprajit Engineering Investor Conference Call for acquisition of the business of Stahlschmidt Cable Systems, SCS. I thank the management for taking time out for this call. From the management side, we have Mr. Ajith Kumar Rai, the Founder and Chairman, Mr. N. S. Mohan, MD and Group CEO, Mr. Akhilesh Rai, Director and Chief Strategy Officer, and Mr. Medappa Gowda, Joint CFO and Company Secretary. Request Ajith, sir and team to give an opening comments, and then we can follow up with the Q&A session. Over to you, sir.
Thank you, Mumuksh, and thank you, Anand Rathi, for hosting this call. Good morning, everybody, and welcome to this investor call to brief you about the acquisition of SCS. I will give certain basic background of this transaction, followed by Mohan, who will talk about the transaction perimeter, and Akhilesh will talk about the strategy side of this particular transaction. SCS has a long history. They are a century-old company in Bad Berleburg, where they are headquartered since 1924. This happens to be their 100th year. They were basically cable makers in Germany, and they had a phenomenal customer reputation for many, many years now with marquee customers like BMW, Audi, Daimler, and many tier one customers. We always had an interest in SCS, and I had met the family way back, maybe 10 years ago.
Of course, at the time, they were not interested, and subsequently, they sold to a family office called Peter Möhrle Holding in 2015. Even at the time, we had met Peter Möhrle to see whether they are interested in doing a transaction with us. That was just before the COVID hit. Then eventually, of course, they sold to another private equity called Lafayette in 2023. What had happened in SCS was that to be competitive in the business, their product has been excellent, their customer profiles have been very good. But they were not as price competitive out of Germany. So they started moving around in their journey from Germany to Hungary to bring the cost down, then Hungary to Poland to bring the cost down further, then expanded in China to again bring the cost down, and eventually to Morocco now in the last one year.
So what has happened was despite wonderful production localities and customer profiles, these multiple moves put them in significant cash crunch situation, and they were not able to manage the cash flows, and that's what ended up they having to file for insolvency in Germany. That's when again we got involved. So that's how the whole transaction has happened. It is a very good fit for us, which is what we'll discuss a little while ago. They have their sales and engineering in Germany. We are shutting down, of course, the Poland plant. Morocco move is now completed, so of course, it has to stabilize in Morocco, and that has to be ramped up. The Canada and China part of it operates independently of Europe. So that's why there are two transactions within this transaction, which I think Mohan will explain.
With this brief background, I'll hand over to Mohan to give a little bit about the transaction and acquisition details. Mohan.
Yeah. Thank you very much. Very good afternoon, everybody. Like what Mr. Rai said, this had been kind of cooking for quite some time. Finally, when it went into a state of insolvency, and the insolvency administrator was announced, we approached the insolvency administrator. Just to give you a color till now, of all the transactions that we have done in terms of acquisition, either it has been an asset deal or it has been a share purchase deal. This is the first time we would be doing a combination of share purchase deal and asset deal. Some of them would go as asset deal, some of them would come as a share purchase deal. The areas involved are Germany, Canada, China, Poland, and Morocco.
One of the key things that we had to do was, because this was in a state of liquidation, was to understand the interest of the customers, because at the end of the day, the customers want a continuity. We just wanted to know whether the customers are ready to back us up if we are going to put in our bid. Therefore, we literally had a smart start of a campaign where we just approached informally the customers, asked them whether it makes sense for Suprajit to kind of step in as a white knight to save the damsel in distress. With this, then we got a thumbs up and also we got a very good, positive vibes about the company itself. All these customers told, "This is a very good company. It's got good technical capabilities, manufacturing facility is very good." We also visited.
With this, we felt that, yes, it is time to go ahead and move on this. Having said that, one of the key things that we had to do was because the company goes into liquidation, we had to novate all the contracts. When we had to novate all the contracts, we thought it was a good occasion for us to look at these fresh contracts by seeking some sort of a favorable terms so that we have a sustained economic sustainability in this company. We approached these customers and I am very happy to note that after extensive discussions, negotiations with the customers have agreed for price increases and benign terms of payment, et cetera, which has been pretty much favorable to make this successful. We also had to do a similar kind of things with the vendors and also with the employees.
Employees, of course, we could not do it directly. We had to go through the insolvency estate and the liquidator had to do it. What we are doing then for is a workforce reduction in Germany, which is the headquarters. The smaller team, which is going to be left behind, will be integrating with Suprajit. The Poland relocation is almost complete. It is at the tail end. There will be some key employees who will be supporting Morocco because it has all moved to Morocco right now. We think this is going to be a one-year comprehensive restructuring plan. One of the key things to do this was to have the management support.
Because while we do have the managerial bandwidth within Suprajit and we are confident, it is always better to rely upon the local management and take them into consideration and confidence, and with our firepower, add to that and make this happen. There, the management also supported us. Therefore, the top management is also supporting this entire buyout. To explain it further, this is going to be done in two stages of closure. One would be on 1st of July, and that would be Germany, Poland and Morocco, which is basically, I would say, European part of it. The other one is the Canada, China part of it, which would be done in stage two. Obviously, these two have got certain condition precedents attached to it.
Therefore, the duration that is needed by both the parties to fulfill those CPs have been taken into consideration to make it into two tranche. We have already incorporated new companies in certain areas, starting from Suprajit Germany GmbH, which has already been established. In terms of what it brings to the table, it is about EUR 50 million revenue, and it is going to enhance our global supply chain. I am sure that Akhilesh will talk more about it. We have valued the whole thing at EUR 13.5 million enterprise value, and obviously, the equity value is less the profit takes. In terms of how we are going to fund it is also completely through internal accruals and cash on balance sheet. We are not going to increase our debt stock. We are not going to leverage here.
One rider that I want to say here is when the Q&A starts, please understand that we have certain SPA confidentiality. Therefore, our disclosure at this moment would be very limited. Thank you.
Akhilesh.
Thank you, Chairman. Regarding the strategy, I first will just give you a brief overview of what our customers expect. When you look at our customers, they have multiple requirements. One is onshore requirement, next is a nearshore requirement, and third is what we call a farshore requirement. This all depends on the type of part and the type of complexity of those parts, the type of demand for that customer's product, and the kind of volume that that customer has. Finally, also is very important, different customers have different risk profiles. Some customers don't want to take supply chain risk of the Red Sea, long supply chain. For many of these reasons, there are multiple customers of different strategies of onshoring, nearshoring, and farshoring. If you look at Suprajit today, especially our U.S. business now has all the three elements covered.
We have onshore operations at Wescon in Kansas. We have two plants in Mexico, which is a nearshore operation. Finally, currently the two India plants which export from India, which is a farshore location. However, in Europe, till today, we only had the Siofok Hungary location, which was an onshore location, and India, which is an offshore, farshore location. When this acquisition came out, the key location of Morocco, which is very much a nearshore location, was a very key reasoning behind this transaction. If you look at Morocco, they are only two hours away from the European mainland. This plant that we are acquiring is also part of a reduced tariff trade zone between Europe and with better terms and conditions between trading with the European mainland. Also this location in Morocco is just six, seven days from the U.S.
So it's a very good strategic location, and it also has people costs which are lower than China, although still higher than India. So this is a good kind of middle location for Suprajit as a nearshore location. We also get with this transaction, a key team in Germany of sales and engineering. This is something that still today we've had a good, strong Detroit office in sales and engineering. We didn't have an equivalent German team and even though we had significant sales with German customers, this brings that strong German team, which will help grow Suprajit to within these current products and in future products. Lastly, when it comes to the China side of the project, I think we have, till today, Shanghai Lone Star, our current China operation, it only supplies domestically in China. There was no exports, no other source of revenue.
The current SCS China plant, which is quite close by about two, three hours from our current China plant, completely exports all their products to Canada. From Canada with some value add is brought into the U.S. So it's a very complimentary supply chain. Another very important thing that SCS comes with is, like Chairman and Mohan said, very strong customer support. It was very difficult for us to win business in the past from SCS. In fact, SCS itself has not sent a lot of the business from Europe to China. Most of the business in Europe still stays within mainland Europe. This whole kind of customer stickiness to have a European location. So SCS, with the significant business in Europe, also brings a lot of scale of purchasing within Europe. Hungary till today was a very small operation.
With the support of the purchasing power of SCS in Morocco from European suppliers, there's a lot more scope in the future to consolidate. SCS Morocco also has in-house injection molding, which will allow us a lot more flexibility in the future, which we didn't have at Hungary till today. In fact, in a parallel situation, when we took over the Matamoros plant from Kongsberg, we shifted a significant amount of injection molding from our U.S. suppliers to our own in-house injection molding team. That had significant savings. I'm sure similar things can happen as we go forward with Morocco. From our side, of course, we bring a lot of global focus on cable. We're also going to be working with these similar customers on a lot of the actuators that we're already selling in the U.S.
This gives us a good team to sell those higher value products and good relationships with those customers close by. Finally, we give the flexibility to our customers, regardless of whether they want onshore, nearshore, farshoring, whether their platforms are in different continents, wherever they are, we can support them, and we become one of the key global suppliers and probably one of those few suppliers that have this kind of global footprint. With that, I'll hand it back to Chairman for any further questions.
Thank you, Akhilesh and Mohan. Just to sum it up, I think this transaction has happened with the customer's blessing. As Akhilesh said, we get in a way perfect footprint on onshoring, nearshoring, and low cost farshoring. One of the success of Suprajit has been that you have the front end in the respective area of operation and a good manufacturing base elsewhere. Here, we do have a good team at Tamworth in U.K., but in Germany to have a good sales and engineering team will add significant strength to our front-ending that will support to get larger businesses for any of these plants within the group. Tangier, where it's a very, I think the sixth largest port in the world, is just two hours from Europe and six hours from U.S.
Our plant is in Tangier, so very strategic positioning, and it is a low cost destination in terms of manufacturing. Last but not the least, is the consolidation of suppliers in cable business. I think one of the strengths that we will achieve with this is getting that much needed strength as the leading cable manufacturer and have some strength in terms of giving value for money at a reasonable price for the customer. I think that is what is evolving in this process, which will help us in the long term to get larger businesses at reasonable prices. We believe it is a strong win-win situation for us. This, of course, there is a year or two's work is there. One would ask, of course, why now, and things like that, but such things happen when it happens.
We did not expect it to go into insolvency, and we have been looking at this asset for a while, so we had to get in and get this. It has been a good transaction. There is some more work to be done, as we have just said. With that, I will give it back to the moderator and just to say that we are restricting to maybe under 15, 20 minutes of questions, being just focused on this transaction. As Mohan said, we have certain confidentiality issues due to SPA, so there may be certain questions we may not be able to answer at this moment, but we will certainly answer in due course. With that, I will give it back to moderator to make a list of questions. Thank you.
Thank you, sir. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to only use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We will take our first question from the line of Amit Hiranandani from SMIFS Limited. Please go ahead.
Many congratulations to the team for this attractively priced acquisition. Sir, my first question is basically when this acquisition is going to complete and by when financials will get merged with Suprajit's consolidated statements. Secondly, just for the clarification purpose, that in the press release it is written that Suprajit will pay the debt of SCS. So want to understand the actual cash outflow from Suprajit's book to acquire this entity.
See, in terms of financial closure, I think the first tranche will be closed on the 1st of July, subject to certain condition precedents that needs to be completed. Second tranche will be a couple of two, three months post that to make sure that the other part of the transaction, that is Canada and China, is finalized and all the condition precedents are met. It's a two-tranche transaction. In terms of consolidation, from the moment we consolidated, start operating the first tranche, that is from 1st of July, that part will be consolidated. The idea is that at least for this year, for the first three quarters where we'll report, we'll report about this data at least three to four quarters separately so that the investors will understand what's happening in the new acquisition.
End of the year, we'll take a call whether we'll continue for another year of separate disclosure or we'll consolidate with Suprajit Controls Division . In terms of the other point that you raised, I think EUR 13.5 million is the enterprise value. The equity value will be less, not more. There is no separate debt additions. So total enterprise value is EUR 13.5 million. And of course, it will be fully funded internally. We are not borrowing anything.
Great. And sir, can you help with the SCS financials, like the revenue?
As I say, we have certain confidentiality at this moment. All I can talk about is the historic. The fact that we are interested in this transaction for almost 10 years simply means that they had fairly decent financials in the past. They had, of course, gone through a difficult time during COVID. And then again, they started moving around to Poland, in China, and into Morocco. So last couple of years have been not exciting, but the asset has been good. Now that everything is fallen into place, I think given next, say, three or four quarters of consolidation and some investments, I think it will be back to reasonable health. So only when we're in the full saddle, I think we'll be able to say more. Maybe during the call on the first quarter results, we'll have more updates.
I think till such time, due to certain confidentiality, I am not able to reveal the actual working numbers at this moment.
Sir, at least you can tell if this is EBITDA positive, SCS.
Please understand, last two years, they have been moving around. The fact that they have gone into insolvency means that they had trouble, right? That is the answer. That is because of the multiple costs they had. You move around from Morocco to, say, sorry, from Poland to Morocco. You are running operation in Poland, also running operation in Morocco. Obviously, you are running two operation at the same time. These kinds of costs are all one-off. It is very difficult to talk about operational numbers at this moment. All we know is that we know what is their operational costs going to be in Morocco, what is going to be the, let us say, material costs in Morocco. We have an intern working, but at this moment, we do not want to talk about it.
All I would say is that given a couple of years' time, it will have a global auto components kind of number with it. That is all I can say.
Understood. But sir, what will be the approximate one-off cost for this restructuring for the next one year? Presently, was it-
Again, Amit, these are things we will know. This has been bought from an insolvency, so quite a few things are known, quite a few things are unknown. I would say there will be additional investment that we may have to do, maybe say up to $5 million to make sure it turns around. We do not see anything beyond that at this moment. But I may be off by a million here and there.
Okay, sir. I will come back in the queue, sir. Thank you.
Thank you. We have our next question from the line of Mr. Viraj from SiMPL. Please go ahead.
Yeah. Am I audible? Hello.
Yeah, you are.
Sir, please-
Yeah. Hi, sir. Sir, just couple of questions. First is what is the current debt level of the entity, and what are the condition precedents, both say Hello.
Mr. Viraj, give me a moment, sir.
Hello.
Viraj? Yes, we can hear you.
Yeah. Can you hear me now?
Yeah, I can hear.
Yeah. Just two, three questions. One is, on the entity SCS, what is the current debt levels, and what are the condition precedents when you talk about phase one and phase two for the acquisition to go through? Second is, are there any other statutory dues or social security related contributions or payouts which will need to be addressed? And third is, if you can just give the sales number for CY 2020, and the number of employees and the employee cost in 2020.
See, there is a significant restructuring in people. The employee cost of the past has got no relation to us. There is going to be a reduction in people. In terms of the debt, that is why they went into insolvency. It is up to the insolvency administrator to negotiate. We are giving them an enterprise value. That is it. Whatever comes to us will be reduced from the enterprise value, right? The IA, insolvency administrator, will deal with the creditors and settle them. We have nothing to worry about that part of it. What we will inherit is, it will be a known debt. To that extent, the equity value will be reduced. That is the condition. In terms of numbers, I think last year, I think they did about EUR 50+ million actually in sales. What was the other question?
So there are two questions. One is on the employee. I understand in the future it will change. But as we speak today, what will be the employee?
It is not relevant to us, no.
Yeah, I am just saying that as far as the question is
No relevance.
What is the number of employees or the employee cost?
Number of employees, okay, yes. Yeah. I think together when we have it will be 1,000 +. When everything is done between Morocco, in Germany, China and Canada, we will have 1,000 + employees.
This is pre-restructuring, right? Which means under-
Even post-restructuring, that number will be there, yes.
Okay. On the social security contributions or payouts or any other disputes or dues which are pending other than, you know.
We do not see any challenges there. If it is there, it will be all the part of the transaction. It will be all the part of the enterprise value.
Understood. Okay. Can I ask one more question? I think in the website they talk about also having a presence in industrial business for cables.
In what?
On the website, they also talk about the industrial cables. So they cater to a lot of industrial applications.
Okay.
Is it sizable enough or-
Some idea on their industrial side of it?
They do have, let's say, industrial and consumer goods related customers, but I think that is not a material part of their business. Less than 5%.
They are mostly into Light Duty Cables for the automotive.
Okay, fine. Sure. That is all I had. Thanks so much. Thank you.
Thank you. We have our next question from the line of Nikhil Kale from Invesco. Please go ahead.
Yeah. Thank you for taking my question. Congrats. I think the deal seems to be quite attractive. I had just one question, in terms of, the customers. The customers for this company, are there any new customers that you are adding or is it predominantly existing customers that these guys are also supplying to? Similarly, in terms of the products also. Are there any new additional products that they are getting into or getting access to? I just wanted to understand on that.
Akhilesh, sorry, Mohan, will you answer the general customer profile and the product profile maybe?
Sure. If I analyze it from a top five customers or top six customers that I have met there, except for one customer, all other customers have been our customers. Therefore, we were able to get a kind of a good cooperation from them. Out of the five customers, one of the customers we acquired actually very recently. So I would say out of the six customers, very easily four customers are common customers. One is a customer that we acquired recently, and one customer is a completely new customer, which is coming on our customer base. Moving on to the product profile. Product profile, by and large, I would say 95%-98% matches what we are doing. There are some unique cables that they are doing that we aren't, but it is not very significant.
Tell me what happened, please. Okay, go ahead, Akhilesh. You were saying.
I would just add that even though the customers were very often, like Mohan said, very common, the amount of business that Suprajit had with these customers varies very significantly. So, for example, their top German OEM customer is our top German OEM customer. But then if you go down the line, their second biggest customer has almost no business with Suprajit. It is some small amount of business that we do with them globally. But it is their second largest customer. So I think from that perspective, there is quite a bit of difference where we will be gaining a lot of market share and customers that we did not have earlier. And of course, a few completely new customers.
Go ahead.
On the product side, again, I think like Mohan said, the product is the same. We are selling cables, control cables, Bowden cables.
But if you look at what SCS ends up winning business in, it is usually cables which have a lot more content that, in terms of volume content, which needs to be done nearshore or onshore. So that you can also see the slight difference in the type of products that they have. But overall, it is finally the same product as us.
I think what's a key issue here is that between Suprajit and SCS, we will emerge as certainly the leader in Europe with an option to customer for onshoring. I am talking about a long-term strategy in Hungary, nearshoring in Morocco, or low cost either in India or in China. I think that's the key in this transaction. So that's up to the customer to decide what they want.
So we are giving that flexibility to customers, and customers like that idea, and that's why some of these key customers, I think the largest customer has wholeheartedly welcomed us to take these assets over with their full support as well through this negotiation with the insolvency administrator.
Great. That was really helpful. Congratulations and all the very best.
Thank you.
Thank you. We have our next question from the line of Mumuksh Mandlesha from Anand Rathi Share and Stock Brokers. Please go ahead. Mumuksh, you can go ahead with your question.
Yeah. Hi, thank you. Just want to understand how the revenue breakup between the Europe and U.S. as we are doing two separate parts transitions are.
I think this is a rough guide. I think out of EUR 50 million, I think about EUR 35 million is out of Europe operations and about EUR 15 million from China, Canada, I think.
Okay. And sir, when you say Light Duty Cable, it will be mainly the car segment, right, four-wheeler segment?
Yeah. It's mostly in the passenger wheel.
Got it. Is it possible to share any data on the net worth gross block for this business, sir?
At this moment, no, Mumuksh, because again, we are in the process of finally closing the deal. I am sure during the first quarterly result, we will have a little more data and color on such numbers, actually.
Okay.
We know it, but we are not allowed to disclose at this moment.
Okay. Understood, sir. Just lastly, sir, we were expecting a growing double digit across the divisions. Post this acquisition, over medium to long term, how do you see our prospects change, sir? Will the pace of the growth increase with the stronger hold on the business globally, sir?
I think, in principle, I would like to say that the consolidation helps the supplier and also the customer to have these smaller suppliers not being able to survive the system. Obviously those businesses will come to the more stronger hands and value for money suppliers like us. That's exactly why we said we are growing. We will grow at 10% is simply because we think we are a stronger player in the business today. Although the market is not growing at 10%. Once this comes and consolidates, that will further strengthen. Our outlook is for this year. Once we assimilate this and does quite a bit of the initial integration part in a year's time, I think we'll be able to get a clearer picture what could be the traction that would exclusively come from this transaction.
The amount of enthusiasm shown by the customer clearly states that would be positive. But the exact numbers probably in a year's number down the line, we will get to know.
Right. Just lastly, sir, in the first year, it would be some, sir, case, I mean, it would negative impact-
Sorry, I am missing you on the question. Can you repeat?
Yeah. In the first year operation, because restructuring that will go, at least first year it would be negative, sir, in terms of profit-wise, sir?
I don't want to give a prediction on this. Yes, initially, they are going through a lot of process of consolidation from Poland to Morocco. That's still ongoing. I think another three months we'll be there just to complete that completely and at least start having a foot on the ground in Morocco. So obviously that quarter maybe will be very tough quarter. Then we'll see how the numbers is. As I said, probably in the first quarter we'll have a slightly better understanding of it. That's why we also said that there will be about maybe $4 million or $5 million of additional expenditure that we may have to do to complete this transaction. So, that is something that short-term for us is not really the issue. We look at it, how it brings value to us over the medium term in a year or two.
I think that is very exciting.
Thank you so much.
Thank you. We have our next question from the line of Jinal Sheth from Awriga Capital Advisors. Please go ahead.
Good afternoon, and congratulations to the team. As Mr. Rai mentioned that you guys have been looking at this asset for the last ten years, and you managed to get it, so kudos to that. Coming to the question, post-SCS and LDC acquisitions, how much would our exposure to the Chinese OEMs be from our China plants?
You are talking about between the two, what will be our exposure to China, is it?
Yes.
Akhilesh, you have your microphone open up.
Are you talking about Chinese OEMs or what exactly?
Yes, Chinese OEMs.
I would say, of course, the Shanghai Lone Star plant of LDC was supplying completely to OEMs in China, either directly or indirectly. That full revenue goes to Chinese OEMs. But then, the question is, do you consider BMW and VW in China Chinese OEM? Or you're specifically looking at BYD and all the other kind of local OEM.
Yes.
Local OEMs, probably, the exposure is not as high as we would like to be, but I think now, through our Lone Star team, we have been getting a lot more inquiries and interest. I think there are a few OEMs we are already supplying to in China, but definitely not a large number of OEMs. I think companies like Great Wall and NIO and stuff are current customers, but we are working on some of the bigger ones as we speak.
Just to add, basically, the SCS plant is basically exporting out of China to U.S. via Canada. Whereas Lone Star is basically supplying domestic. Eventually, we will have two operations where one will be focused on domestic. Domestic OEM, by that I mean whether it is MNCs in China or otherwise. One will be for exports. So it will not be a conflicting operations, to say the least.
Okay, great. My second question is, post SCS, does our capability to provide solutions go up, that is supplying cables plus actuators versus cable only?
Certainly. I think one of the things that SCS is not doing is actuator. We have that strength within our FTD and also the India team now. Obviously they will be able to offer to their customers, and we together can present to customers not only the actuation capability, but also the STC products to their customers. I think the fact that we have a strong engineering and development team out of Germany, they together with our Detroit team and also our STC here, can not only work on larger contracts of cables, but also actuation and some of the newer technologies which we can present to customers.
Okay, great. Thank you so much, and good luck to you all.
Thank you.
Thank you. We have our next question from the line of Gokul Maheshwari from Awriga Capital Advisors. Please go ahead.
Yeah, thank you for the opportunity. Just one question. During the LDC acquisition, we had certain onerous contracts, price contracts, et cetera. Anything which comes along in this or I think so in the opening comments you said that they have been sort of renegotiated with the existing customers.
Yeah, I think what we have done with the customers is that first we asked them, whether they have their blessings. Not every customer, we cannot go to all of them. But as Mohan said, top five customers we did approach and say that we have an interest. Do they have an interest in Suprajit to go through with this? And they have accepted wholeheartedly and supported us. And as Mohan said, we have been able to do certain renegotiations on prices as well as payment terms, which is favorable. So unlike LDC transaction which came as a black box, here we are going clearly with what kind of pricing and what kind of payment terms with the customer. So that would be a positive in this transaction.
Great. From a scale of plants per se, Matamoros plant would be perhaps the largest plant. Where would the China plants and the Morocco plants of SCS fit in terms of their scalability or in terms of their ability to scale up over the next few years, or are they adequately utilized? I understand the Morocco is still a new plant, but in terms of their capabilities size-wise, are they underutilized or adequately utilized?
As I know, I think just to give a general color to everybody, I think once this confirmation of this entire transaction happens, Matamoros, Morocco, India Suprajit Automotive, and China's SCS plant would be the largest plants of the group in terms of size. As I know, both Morocco and China are underutilized at the moment, so we should be able to scale up if required. And certainly in the Matamoros, we have got significantly more capacity that we can increase as and when we receive more orders. Of course, in Bangalore or in FAL, we are getting significant new contracts. The thing is filling up for the next couple of years, we are fine. But, as we said, we are already looking at opportunities as to how we should expand the capacity of Suprajit Automotive in Bangalore.
Great, sir. Thank you, and all the best.
Thank you. We'll take one last question. We'll like to close it by, or if there's more than one on the line now, we'll take both the questions. Two questions more, please.
Okay, sir. We'll take the next question from the line of [Satish Karan], an individual investor. Please go ahead.
Hello. Am I audible?
Yes, you are.
Yeah. First of all, congratulations for your acquisition. I have been seeing the Suprajit growth since many years. Almost every year there is an acquisition and commensurate growth. Now, top line, you mentioned about EUR 50 million. Going forward, once all the processes complete, will it be EPS accretive, this acquisition?
Yes. Thank you, [Satish], for the kind words. Certainly, we would not be doing an acquisition unless there is an EPS accretive nature and the value for money for us. It is the value of the asset and also how it creates shareholder value in terms of EPS. Over the period of two years, I think it would be a pretty good asset for us, where it would generate cash and certainly will be EPS accretive.
Thank you. Good luck to you.
Thank you. We will take a last question from the line of Ravi Purohit from Securities Investment Management. Please go ahead.
Yeah, hi. Thanks for the opportunity. Most of my questions have been answered. Just one question, Mr. Rai. When we look at the acquisition that we did with Kongsberg, right? The LDC acquisition of Kongsberg. There we were really acquiring technology, new products, and new platforms in terms of actuation systems, right? Which we lacked in the past as Suprajit, as an organization. But this time, it's purely a cable manufacturing. Would it be fair to say that last time the acquisition was actually on technology and capabilities, but this time it's more acquiring market share?
In a sense, yes. But in LDC, please understand, we also didn't have a China operation. The China operation came into picture with the LDC, along with the actuation technology, which we didn't have. There were both sides to it that it helped us to increase our supply chain footprint, the LDC did. Whereas what this did is certainly increased the wallet share of customers has happened through this transaction. It actually fitted us very well with the nearshoring opportunity at Morocco. Whereas so far we had Mexico for U.S. and India was doing farshoring and low cost. Hungary was onshore and obviously it's more expensive. Now Morocco fits that gap very well, too. Tangier Port is a very dynamic port with, as I said, two hours to Europe and six to eight hours to U.S.
We are getting away from all these Red Sea, Suez Canal issues, right?
Okay.
There are multiple dimensions to the whole thing. In a sense, you are right, but there's more to it, actually.
Okay. Got it, sir. Thanks a lot, and all the best for this.
Thank you, Ravi, and thank you all for your continued interest in Suprajit. We appreciate your patient hearing. I am sure during the first quarterly number, we will have more updates on this transaction. I would like to thank Anand Rathi for hosting this, the Mumuksh and team, and thank you all for participating in this call. Thank you and goodbye.
Thank you, members of the management team. On behalf of Anand Rathi Shares and Stock Brokers, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you.