Welcome, Ajit Sir, in Bharat Connect Orient Rising Stars Summit conference. Ajit Sir, he is a chairman of Suprajit Engineering.
Okay, Sir.
Yeah. Hi, good morning.
Good morning, Sir.
Yeah. I think I can't start my audio, video.
Okay.
If it is okay, I am without video.
Yeah, that is fine, Sir. That is fine. Thank you all the participants to join Orient Capital. Sir, we can start.
Good morning, everybody. Thank you for the interest in Suprajit and having me on this call. I see this is a group interaction, so I do not really know how much everybody knows about us or what generally everybody wants to-
Yeah.
Know about.
Sorry to interrupt you.
Yeah.
Initially, 10 minutes, 15 minutes about the company current business development. That will work.
Okay.
Then come to the Q&A part.
Okay. Thanks. As you all know, Suprajit is in auto component space. Our core product range is cables and halogen lamps. Of late, we have diversified into electronics. Even further later, recently, we also launched our braking products division. Suprajit is headquartered in Bangalore. More than 50% of our business is outside of India. We have not just offices there overseas, we have manufacturing footprint, we have tech centers, and we have got business development centers as well. Broadly, we are categorized into, let's say, four divisions. Domestic cable division is the one with which we originally started way back in 1985, and it basically deals with cables. Although we have, of late, started to go a little beyond cables as well within the division. We have multiple plants across eight states, very close to customers. Again, the main product there is cables.
This division is doing exceptionally well. That has been our backbone all through our journey. Good business growth, good margins in that division. Then we have domestically, we also have another three plants under Phoenix Lamps division, where we do halogen lamps. Of course, now we also graduated into making LED lighting systems. We also have a small specialized automation division within this, so that is also being exploited for future growth. Phoenix Lamps division is majorly into halogen lamps. That business has been doing pretty well. It has grown over the years, and it is also, of late, those who have been tracking Suprajit would see that the margins have been improving continuously in the last couple of quarters.
Although halogen lamp business is sort of considered as a business which is not growing, we have been able to grow with margin improvement, with solid operational improvements, as well as acquiring new businesses globally, not just in India. Suprajit Controls division is all our business outside of India in the cables and cable-related products, including actuators. This is a sort of agglomeration of multiple acquisitions that we have done in cables, right from Gill Cables in the U.K. to Wescon, and a couple of years ago, the Light Duty Cables of Kongsberg. That division is now clubbed under one global president who is now in the process of integrating all these operations for better performance.
Last year has been a bit of a challenge, I mean, the current year as well, largely due to geopolitical reasons, issues relating to, of course, there has been a UAW strike, there is Red Sea crisis, there has been, of course, Ukraine war, now more wars around the world. All these do have an effect. Particularly impacted is the non-automotive business, and that business has actually de-grown in the last year due to high interest rates and economic scenario across the world. That has dragged down the. Also, there was an issue relating to China relocation. We have a Chinese plant. Just to give a quick brief, there is a plant in China, there is a plant in Hungary, there is two plants in Mexico, and one plant in the U.S. in a place called Wichita in Kansas. We have tech centers out of Detroit.
We have also a tech center out of near Birmingham called Tamworth, and of course, we have Suprajit Technology Center sitting out of India. Under SCD, business growth has been stagnant last year. I am talking about the current year. Margins have been under pressure. It is about 5%-6% EBITDA margin. The aim is over the next year or so to graduate to double-digit margins. That is about Controls division. Then the last division is the latest division of ours, is the Suprajit Electronics Division. It is more like a startup. It is the new products that has been developed under Suprajit Technology Center, have been commercialized in this division. It is now four or five quarters into its production. Has done very well. The business has grown quite well, and margins have also started improving very well. In fact, last quarter we had a double-digit margin in that business.
To support all these things is we have our technology center, which is doing lots of good work in terms of new product development relating to electronics and electromechanical systems, as well as braking products. This is largely what I would call as the overall company's perspective. Overall company has been doing well. Business has been stable this year. Margins have been about around 12%, 13%, and we expect that to improve going forward with the controls division, hopefully in the next few quarters, starting to turn around in terms of margin profile. Business wins in the group has been quite good. Domestic business has been growing more or less in line with the business. Global business having a strong traction because we have been winning a lot of new contracts, new businesses. They will all be implemented over the next two, three, four years' time.
The outlook is that there will be good growth. Controls divisions will require some more time to complete all the restructuring and planned activities. But we feel that as the second-largest cable maker in the world today, we will have our ability to attract new customers, more business from existing customers, and continue to do well and improve the margins of controls division. The other divisions will continue to do the way it has been doing in the past. With that, I think it's 10 minutes since I started speaking, so I would probably open the floor for questions, and I am happy to answer.
Yeah. Thank you, Sir, for the brief introduction. Now all the participants requesting, please raise hand to ask question instead of putting in a chat box. That will be much better. Further question will line up. We can take a few question in the chat box. In general, acquisition have a low base rate of success given that. Why Suprajit is such an acquisitive company? Does it add unnecessary complexity to the organization? So little bit.
Yeah, of course. Global operations is complex. There is geo diversity involved, the local cultures are involved. Managing global business is certainly not the same as managing a domestic business. But I think if you look at companies which are wanting to grow, we could have remained a purely domestic-intensive company. Just to give a kind of an equation, the domestic, let's say, car business is four million, whereas the global business is 80 million cars. It needs to be that if you really want to grow the business and continue to be leading the business, we need to be in multiple geographies and close to the customer. I think that is the reason why some of these acquisitions have been envisaged.
We have been generally able to manage these acquisitions well, and I think most of the places, the operations have been reasonably stable, I would say.
Thank you, Sir. Moving to next question, just requesting all the participants to raise hand to ask question. Sir, domestic business has grown less than the two-wheeler industry growth this year. Just wanted to know whether we have lost market share or not.
Not at all. Actually, if you look at our last quarter, I think our standalone business has grown by 10%, which is in line with the industry. The overall industry has grown at about, I think, 5%, 6%, 5% or so, whereas we have grown at about 3% or 4%. I think the gap is basically because this year has been a fairly tepid year for our aftermarket. It has nothing to do with the OEM. Aftermarket has been not up to our expectation. It has not grown. I think that is the reason why there is probably 1% or 2% of drop. I think that's all the difference. There's no loss of market share anywhere with the customers.
Okay. Thank you, Sir. Sir, we have question from Hardik Doshi. Hardik, Sir, you can go ahead. Hardik, Sir, your line is unmuted. You can go ahead please.
I can't hear.
Okay. Now we have question from Shans. Shans, Sir, you can go ahead, please.
Hello. Yeah. Thank you for the opportunity. Just wanted to understand what was the rationale for us venturing into the braking side. Could you spell out more in terms of what is the opportunity that we see? Or was it more because we see that the cable division might go through a little bit of stagnation going forward, or what was the rationale overall for venturing into this?
No, I think basic rationale is that, as you know, we have set up this Suprajit Technology Center four, five years ago. That has been working on, I would say, largely into three areas in terms of the future of Suprajit. One is, as you know, one of the things that we have always said is Suprajit can grow profitably. As you know, we have completely done that in a very significant way in terms of customers, regions, segments, et cetera. But in terms of our core business, it's still been cables. One of the major, let us say, work that the technology center has been doing is how to go beyond cables. It's got nothing to do with the cables. I think we continue to see significant requirement of cables globally, and I think our position in the global market is still not very significant.
There's a lot more work to be done. Although domestically, we're probably the leading player. We are the leading player. I think globally we aren't yet. There's still a lot of work to be done. There's nothing to say that it's because of cables. But we are seeing that as an organization, we need to sort of de-risk a single product as well. That is the basic reasoning, and I think what we have done at STC is focus on three areas. One is the braking products division, one is the actuator and actuator-related products, and third one is the electronics, which is basically digital clusters, throttle position sensors, et cetera. The idea is to be a diversified automotive component company. I think that's in short the answer.
Fair enough. Understood. Anything you can talk about in terms of-
Can you speak little louder, Sir, because you're not audible to us?
Is it better now?
Yes.
Yeah. Good. Thank you.
Yeah. So anything you can talk about in terms of opportunity size or anything, like when can we expect a meaningful contribution from this segment?
See, one thing is these are all homegrown product developments, and you have seen it in Suprajit Electronics Division, how the business has grown because there was a significant interesting opportunities we were able to get and execute. I think braking product division is another division where we feel that on a longer term, I mean, this is just a start for us, where we are currently doing brake shoes or let us say CBS, et cetera. But there are other products are in the pipeline which we need to be launched, things like an MDBS, et cetera. I don't think there is any big numbers you have to allocate to that at this moment. I think the next one year is a year where we will establish the division, get the customer approvals, get few orders. We already have few orders, by the way. And execute them well.
I think that's when the numbers will start showing in a next level. I think this is, let us say, a seed that we have sown, and I think given a year's time, we will be in a clear position that what is the traction that we will have. I think that is the time we would be able to say more about it. But there's a lot of interest. Some of the products that we are developing has been well accepted by customers. They're all in advanced stage of testing at customer's end. So we have won some contracts, and I'm sure in the next couple of quarters, we'll continue to do more in this.
Okay. Thank you for the clarification. Who are these customers, Sir, whom we have won the orders from?
At the moment, I am not able to liberty to tell. We are on an NDA with some of them. But these businesses are both from EV and ICE customers.
Okay, sure. I think that is helpful. Thank you. Thank you for the opportunity.
Thank you.
Thank you, Sir. Next question we have Ranak, Sir. Ranak, Sir, please go ahead.
Yeah. Hi, Sir, am I audible?
Yes.
Hi, Sir. Good afternoon. Thanks for this opportunity to talk to us. Sir, just on the new divisions, when we talk about braking systems or the digital clusters, when we look at the industry, this is largely a duopoly market in both the segments, where you have large incumbents who have a very high market share. Sir, how do we think of winning business? It will be like one customer, one model, and then you test the product and you win products, and it will be all incremental or from a stock basis also we can demonstrate and it's easy for the customer to shift? Just wanted to get your sense on how do we win the business in the new segments of braking and digital clusters.
Good point. I think it's the same thing. I mean, automotive component business is always a very competitive business. It is a strong players or incumbents exist in any business in automotive. That doesn't mean that there aren't opportunities for the new players. The idea is that what is it that we offer to them in terms of value for money, right? Its value for money is not necessarily just the price. It's the ability to give what they want, when they want, and how they want. Some of the incumbents may not be able to provide it, and that's where we find certain vacuums in these areas. I think the classic example that we have been able to break the ice is in electronics division. In fact, we have been declaring, I think, three or four quarters numbers very clearly.
It shows that there is a very good traction that we are able to get despite entering a. For example, braking division is a mechanical product, whereas electronics is totally new for us. But the kind of tractions we have been able to get and the kind of margins we have been able to generate, I think that shows that as long as the product has the right USP and the need of the customer has been met to their satisfaction, there is always a new business and more business for new entrants. That is why we got also that confidence that we will be able to do the other products, which were all under development or under STC, can also be launched.
I think the success of electronics division within the four quarters of operation is a clear signal that Suprajit has been accepted as a viable, capable, technologically adept supplier who can meet the customer requirement. I think that is what needs to be addressed, and we have been addressing that.
Thank you. Thank you for your answer. The way to think of these segments scaling up would be over the next two to three years. That is how we should think of these segments, right?
Absolutely. Yes.
And Sir, my second question is, we know how global macros have hurt the overseas business. Is there now a clear path of growth for LDC, Wescon, and the export business from India, or the uncertainty still persists?
I think the question is at a larger level at the Suprajit Controls division, as I mentioned-
Yes.
In my introduction.
Correct.
That is the division which will undergo some more, what I would call consolidation and testing phase in terms of what's happening in the global geopolitical scene and global business itself, I think. Yes, it's a large business. I talked about $4 million and $80 million in the global business. But that business is undergoing a lot of turmoil, and it is necessary to stay patient in that business. And I think what we have been able to prove to our customers has been that we are a viable, capable, deep-pocketed supplier who will stand by the customers. Some of the recent wins, which we have also made some announcements in the past, clear statement that Suprajit has been accepted as a global capable supplier. So we have to go through that global Samudra Manthan, if I may use that word, and have to wait for our time.
The business is solid. Business will continue to grow. There is tremendous pressure on prices because of whether it is some duty-related issues, whether it has become freight-related issues, whether it is becoming some inflation-related issues, which is not always possible to pass on to customers. The hard times are there, I am sure, for another two, three quarters or so. But as we pass through and continue our consolidation process and continue to win new businesses and go to next level of operation, I think that is when we will see margins significantly improve.
That is all from my side. Thank you so much, Sir.
Thank you, Ranak Sir. Next question we have from Avdhut Sir. Avdhut Sir, your line is unmuted, you can go ahead.
Hi. Thank you for the opportunity. Just continuation to the last question on the Controls division. We have acquired company and now we are looking to localize the production. As you mentioned in the initial remarks that you have got new group director on the board who will look after this whole segment. I just wanted to know how we look at this space, the growth for this space, like this segment. We mentioned about actuators, what is the opportunity size over there, and how we are going to get market share or entry into this business for the local. Whether we have plans to enter into the local market for the four-wheelers and other, how we look at it on the broader perspective that I would like to know.
Plus, if we want to do it, what would be the timelines for this, like product development to the PSW part, how long it will take? Just if you can elaborate on that part, that would be helpful.
You are talking about actuators or all the controls division products?
Yes. If you can elaborate on both the parts, that would be very helpful, Sir.
On the Controls Division, I think couple of quarters ago, we also have made a list of winnings that we have had. Which is very clear that we have been winning significant new businesses, which will all go into production in the next 2024, 2025, 2026. That gives us a clear roadmap as to how the business is likely to grow. Whereas, I can say this, the global four-wheeler business or the numbers are not growing. But despite that, I think we expect the Suprajit Controls division will grow its business. That is because of these new business wins. Now, actuators is not a new product for us. In terms of India, it is a new product, but in terms of Suprajit Controls, it is not a new product. We have been supplying actuators to quite a few of the seat manufacturers for many years.
They continue to win new contracts in the global market and introduce to some of these tier one customers. It's a continuing business. What we have done in India is to adopt some of those products and tailor-make it to India through our Suprajit Technology Center. Through that, we have first entered into the two-wheeler side of it, things like seat actuators or lock actuators. I think they are the initial product that we have launched as an actuator in India. We are, of course, in discussion with the other non-two-wheelers as well. It's a new business for us in India, so obviously it will take its own time. There has been interesting developments. Two customers have already accepted. I mean, we have started deliveries itself. I am sure that it will gather strength with time.
Okay. What would be our competitive advantage in these actuators as compared to others? The major part, if I understand correctly, would be one is battery or the motor and the mechanical part. Whether we have cost advantage over here, and as we have scaled in other part like cables, we have achieved a humongous scale. Do we plan to have accordingly, we have plans to scale it when we approach to multiple customers?
Yeah, obviously, I think as we get more and more customers, scale will automatically increase. All I can say is that I don't know about the competition. Whatever the actuators that we have won, we have our good double-digit margins. Whether it has been our ability to source the components well, or whether it's our ability to operationalize it better in terms of the cost of operations. I don't know the answer to it, but we have no issues on the contract that we have won in terms of margin. Customer always wants a customer-friendly supplier in terms of quality, in terms of cost, in terms of ability to develop and deliver.
That's what we have been proving time and again in the last 35 years, and that's one of the things why customer is happy to discuss with us for some of these new products.
Understood. Thank you so much.
Thank you, Sir. Next question we have from Hardik Sir. Hardik Sir, you have any question? Your line is open.
We are this side, actually.
Sorry.
We are using a different link.
Okay.
I had a question on the EV side. Let's say there have been talks just looking at the content per vehicle, the number of cables would reduce as in an EV versus an ICE. I just wanted the color, how will it impact our cables division?
I think it is not because of EV, the content is reducing, it is because of some of the change technologies. For example, today, hydraulic braking system is becoming more prevalent in India. Some of the brake cable that we use though is not required. It's not because of EV actually, it is because of some of the changing technologies. We typically had four to six cables in the past. It's probably now two, three, or four in an EV. That's how we see it. We have already stated a couple of years ago that our intent is to have more content per two-wheeler, despite whatever is the cable content. More content per two-wheeler going forward, whether it is EV or ICE. That's why these new products are being launched and are commercialized, the digital clusters, actuators, throttle position sensors, and et cetera.
They're all part of the braking products that we have just launched. They're all in that direction where we are all working with the two-wheeler, both ICE as well as EV customers to ensure that our content per two-wheeler will only increase going forward and not decrease. That's what we have been successful so far.
Got it. Just one follow-up question on this. Let's say, for an example, we are supplying throttle and a customer needs to make a decision. Is it possible, since we have a good penetration in the mechanical cables side, he would choose us for the throttle supply versus going to our competitor? Do the synergies play out across cables and the electronics division?
Yes and no. I think I will take the example of TPS. That is a throttle position sensor. There are two types of them. I am not an electronics engineer, but basically there are two types. One with cable and one without cable. If a customer want a system supplier, then they will come to us because we will give them the cable and also the throttle position sensor together as a system supplier. So that is the advantage we have. As an integrated supplier, we probably have a certain. I presume that we will have certain pricing advantage. The customer has to only approach one supplier, not two suppliers. Is it possible to go to two separate supplier? The answer is yes. But for us, throttle position sensor is a new business and whoever comes to us is fine.
If somebody wants a cable along with that, we are happy to supply that also. For us, both ways work. So there is no real issues on that.
Okay, cool. That is it from my side.
Okay. Thank you, ma'am. Sir, we have certain question in the Q&A box, so we can take that. What is the impact of EVs on core cable business? If you can clearly break out the content per vehicle in ICE versus in the EV. So I think you-
I just, I think, answered just now, no?
Yes.
I just answered that same question.
Yes.
Somebody else has asked. Mm.
How much of the portfolio at EV risk and how are we mitigating it?
Sorry, I did not get that.
How much of the portfolio at EV risk and how are you mitigating it?
That is, again, the same point.
The same point.
As I said, four to six cables are in a regular ICE engine. Actually, I explained that it is not because of EV.
That is fine, Sir.
The cable has come down.
We can.
It's actually the same answer.
Yeah. In the LDC business, how has business progressed with global large EV players since the takeover, example, Tesla?
Yes. I think I'll give a generalize. I'm not expected to talk a specific customer due to NDA. I think we have a very good portfolio of business with this particular customer actually. But generally, the product developments today happening particularly on the cable side is both for ICE and EV passenger vehicles globally. Typically, a vehicle is launched in a similar platform, both in the EV version and in an ICE version. So we have done some internal work recently. I think by next year, I think our own portfolio of probably In the passenger vehicles, our exports probably would be something like 20% for EVs and probably 80% for ICE. But when you look at a five-year time period, it increases much more. That is where we are. But I must also generally talk about the changing thinking in the world about EV as well.
A lot of hybrids are talked about. Hydrogen is being talked about. One major European passenger vehicle manufacturer is talking about stopping EV developments itself. I think there's lots of newer things happening. So we are very mindful of what's happening in the business. Having said that, I think as far as we are concerned, none of those newer developments have any impact on our product range, particularly cables have no, what I would say, obsolescence threat. So while we are watching carefully, we are also seeing opportunities where we could present ourselves to customers in some of these newer technologies of products, with our products as well.
Thank you, Sir. Has the company set up a goal for the next four to five years in terms of revenue margin and product mix? If we can guide.
We actually don't give guidance for the future years. All we would like to say is that the endeavor of Suprajit is to grow faster than, let's say All these days we were talking about benchmarking ourselves with the domestic business and domestic business growth. Now that more than 50% of the business is not in India, I think benchmarking against that is probably not the fair way of doing it. All I would like to say is that our growth is expected to be faster than what the world's automotive business will do, which obviously hardly going to be anything in this year or next year. But we'll certainly outperform it because the kind of visibility we have on our order book is such that we expect to continue to grow the business, despite underlying businesses are not really growing.
I don't want to give a margin, excepting to say that we have work to do on the controls division, Suprajit Controls division, which is at mid-single digit number. The endeavor is to certainly go towards the double digit, which is what we are aiming and working towards too. That's a kind of a process and a journey. It will take some time, but that certainly is what we are all working together. Rest of the parts of the business are doing well. They're already in double-digit businesses, so that will continue to be where it is.
Thank you, Sir. Also a similar question on the margin side. Can we reach back to 16%-17% level and what could be the timeline for this thing?
I think our domestic business is still doing that. All I can say is that there is probably, it would be not correct to say nobody, but excepting some completely monopolistic auto component industry, very few have that kind of margin. Global businesses are all mid-single, late single digit businesses because that is how the global business model works. You must realize that the global business costs are completely different than what it is in India. The employee costs and the other overheads are much, much higher. So expecting that kind of a margin in an international business is, I think, not realistic. But, as I said, the international business is Suprajit Controls Division. The aim is to go towards double digit and hopefully be there sooner than later.
Okay. Thank you, Sir. They have asked, what is the current revenue split among the four divisions? We can answer later.
That is all available in our quarterly results.
Yeah.
I think somebody can get it from there.
Yes, Sir. On Wescon, this is a higher margin business. What is the outlook for FY 2025?
Wescon is not really high. It is a part of Suprajit Controls division. It has the same ups and downs of Suprajit Controls division. In fact, Wescon had a kind of a setback in this year because it caters exclusively to non-automotive business. The non-auto business, as we have been saying in the last three quarterly con calls, that had its setback in U.S. because the discretionary spends have come down significantly. The industry business itself has come down by about 30+% , which has also affected our business in the last two, three quarters at Wescon. It will take another at least couple of two, three quarters to recover from that because customers are still not buying, let us say, a powersport vehicle or a lawnmower or things like that. That is where our customer profile is. That will continue to have one or two tough quarters there.
Sir, next question we have from Senthil. Senthil, you can go ahead, please.
Hi. Good afternoon, Sir. Thanks for taking the question. First question is with respect to the domestic two-wheeler motorcycle market. Earlier in quarterly calls, you mentioned about there has been a lag in growth in the entry-level two-wheeler motorcycles. How is the demand scenario now, Sir? Has it been the similar levels or are we seeing any pickup in the entry-level motorcycle segment?
I'm not really an expert, but to me, the entry-level segment growth would continue to be a challenge, because the aspiration of people are to go for the mid-range, high range and the more expensive bikes. There are also a lot of varieties in the market. Market dynamics have changed completely in the last five years with all customers launching 150, 200, 250, 300, even higher cc motorcycles. The entry level has been sort of not been growing. One of the explanations given is that the monsoon was bad and whatever reasons the rural economy is not very good, so people are not buying motorcycles. I'm not so sure how true that is. I think generally it's the tendency of people to move to be more aspirational in terms of purchases, and I think that's probably also one of the reasons for sure.
The entry-level bike growth, if you look at India's, I think this year's number, I don't have it in front of me, but I'm pretty sure you will see that the entry level growth has been very muted, if at all. It is the other segment that have grown. That's going to be the trend, I think, going forward also.
Thanks, Sir. Sir, second question is with respect to the current new EV policy which the government has announced. With the new global OEMs who are expected to put up CapEx in India. How does our product portfolio will fit into this new passenger vehicles here on the electric powertrain domains?
We won't have any effect whatsoever, whoever comes in terms of the requirement of cable, they'll remain the same and we don't see any issues at all. At least the one that has been talked about or in the print, they're already our customers. If they come here, they will also buy from here itself. We don't see any issues in that, but we have to see how it really pans out as to who actually will come to put infrastructural thing. We haven't really seen beyond the policy statements. I've not really seen much anybody really committing money into putting greenfield projects yet. The existing ones are launching new ones, that is for sure. They'll continue to do so, I think.
The last question is on the actuators.
Sorry?
Sir, last question is with respect to the actuators.
Okay.
Also with new passenger vehicles on the SUV side. How is our product positioned to address this market?
Yeah, good point. As you know, we are supplying to global passenger vehicle or SUVs, for multiple actuator solutions. We have not been in the Indian market because we didn't have that product range. When we first got into this relationship with LDC and started working on it, we first thought of the opportunities in certain EV two-wheeler segment, for example, lock actuators and seat actuators, et cetera, which is what we first grabbed in the last one year, and that's what is being now commercialized. We have also made the pitch to other Indian passenger vehicle manufacturers. We had certain road shows done in the last few months. For the first one month or, sorry, first one year or 18 months of acquisition, we are more concerned about making sure operationally everything falls into place.
But in the of late, we have been showcasing our actuators to our customers in the Indian passenger vehicles. It's a process, so it will probably take some more time. A couple of them have shown interest. There are further discussions on, but as I said, the initial success have been with the two-wheelers.
Okay. Sir, just one bit on the hydraulic braking. So I think the cost-wise, in the last call you mentioned, I think it's quite lower than the current disc brakes, but efficiency-wise it's better than the existing drum brakes. So who will be the competitors or is it a particular innovation from our company?
Yeah. I think you're talking about MDBS, I think, mechanical disc braking systems.
Yes, Sir.
That is an innovation by us. It is a patented product of Suprajit. That is what we are doing, pitching as one between a drum brake and a hydraulic braking system. This gives, I do not want to mention the number, only customer have to say eventually, but it comes very close to the hydraulic braking systems, but at a much, much lower price. That is what the USP of the product is, and that is what we are pitching in, and we hopefully will commercialize at least with one customer pretty soon.
Okay, Sir. Yeah. Thanks. Thanks for the answer.
Thank you.
Thank you. Sir, we have a few more question. What development will lead to our control division to upgrade from currently 5%-6% margin to double digit margin, if you can guide us?
I think I have answered this already. The idea is to. This year has been a year where we had certain exceptionally high costs added onto our SCD thing. One is, of course, relocation in China. Second one is an ongoing issue on the duties, on some of the products that we import from China into Mexico and then supply to U.S., which is under appeal with us. We presume that that would be in our favor. That will take another three, four months' time . That will be an ongoing unexpected cost, which has been pretty significant. The other important point is the issues relating to wage increase in Mexico. I think we have mentioned it some of our business updates as well, which has been pretty significant. It is not 5%, 10%, it is like 25%, 30% in the last two years, and every year.
That had its impact and what is happening is that the newer business that we are winning is coming at a more reasonable margin, whereas the existing business, these costs cannot be passed on. As the current existing business, typically in an automotive business, it is a five-to-seven-year contract. As some of the older contracts drop down from the production and the newer contracts add on, as we do it in the next couple of years, the margin profile will also increase. In addition to that, we are doing certain restructuring where we are relocating manufacturing from high cost to places like India, and we are also looking at some consolidation of things like an injection molding facilities, et cetera, within the group. All those things will add some tailwinds into it, but it is a process.
As I said, internationally, a single-digit margin in an auto component business is decent, but our aim is to go to double digit. We are at 4%, 5%, 6%. I think over the next year or so, we are hoping to improve it further. But exact roadmap to go to a double digit, I am not able to give today. Maybe by the time we do our entire budget exercise in the next couple of weeks, and then we are coming out with our annual results sometime in May. We will be able to give a clear guidance in terms of how the businesses are going to be panning out in each division and the timeline. I think that is probably the more ideal time to discuss this.
Okay. Thank you, Sir. Sir, we have to end this call in five minutes, so I will be taking two more question.
Sure.
Now, what is our competitive advantage against other players to win business?
In which business you are talking?
I think-
Generally?
Generally, yeah. Overall business.
Okay. Again, it's a very generalized answer. I think, in cable business, I can easily say Suprajit is as efficient as anybody else in the world. Today, our margin profiles, particularly in the domestic business, is unsurpassed by probably anybody else in the world. That means to say that with the scale that we have, we have been able to optimize not just the operations, but also things like our overall overhead expenses. We are also able to optimize our supplier base. We are able to buy more economically cheaper because the volumes are significant. I think the ability to service customers, because we are also being close to customers in most places, helps us in getting better understanding of customer requirements and help them better. That's as far as that is concerned.
I think today, with our current footprint globally, what we are able to offer to the customer is an option which they can choose themselves. Today, let's say a U.S. customer wants to have a production made out of U.S., we can give that option. If they want shorter lead time but lower cost, they can come to our Mexican plant. If they only were looking at the price and compete with China, we can also compete with them in India with our manufacturing base. What's happening here is that we are able to offer this multiple solution to customers, and they can be doing offshoring, they can do close-shoring, they can do inshoring. These are the kind of options we are able to offer in some of these regions. That helps in making some of these decisions easier for customers to award us business.
Those are some of the USPs that we have, I think. There's a lot more, but I think considering the time, I would stop there.
Yes, Sir. Thank you so much, Sir. Sir, now we can end the call here, and thank you giving us the time. Thank you so much.
Yeah, no problem. Thank you very much for having me. I appreciate your continued interest in Suprajit, and if there is any more inquiries or interest, please connect with us, either with our CFO or in my office. We will be able to see what we can do in terms of responding to your queries. Thank you so much, and I appreciate Arihant and their team for hosting us for this call. Thank you so much.
Thank you, Sir, and thank you all the participants who joined us. Thank you.