Ladies and gentlemen, on behalf of Capify Consulting Investor Relations team, I welcome you all to the call of Aimtron Electronics Limited, to discuss about the acquisition of International Control Services, Inc., Decatur, Illinois, U.S.A. Based on the call from the management we have with us Mukesh Vasani, Chairman and Managing Director, Nirmal Vasani, Chief Operating Officer, Sneh Shah, Whole-Time Director, Pinkesh Parekh, Finance Director, and Chris Espinoza, Vice President, Sales. As a disclaimer, I would like to inform all of you that this call may contain forward-looking statements which may involve risks and uncertainties. Also, a reminder that this call is being recorded. I would now request the management to brief us about the recent acquisition with further details about the acquisition, post which we will open the floor for Q&A. Over to the management team.
Good morning, everyone. Thank you to all our investors and well-wishers. I'm Mukesh Vasani. Today, we are excited to share a quick update on our acquisition of ICS, International Control Services, which is located in the heartland U.S.A., nearby capital of Illinois, Springfield. What it means for our Aimtron journey. Aimtron's vision is very simple, to be a trusted ESDM and ODM partner for our global OEM customers. For that, we did this acquisition. In the next few minutes, we will cover where ICS stands today, key highlights about their strategies, how the order books and other key criteria. With that, I would like to again thank you and take Nirmal Vasani to the next slide.
Thank you. ICS was an opportunity that we have been looking at for months now. It's one where as soon as I saw it, I was initially very excited. What really excited me about this particular opportunity was the people that I had seen there. It was very clear to me that the ownership there had spent time cultivating a very strong culture in really ruggedizing their product. A very strong culture that is centered around customer service, and a very strong culture that is centered around internal growth and making sure that the team there has internal ownership on what it is that they are building and what it is that they are producing. This was a great opportunity for us operationally as well as financially, as you will see in later slides as well.
Thank you, Nirmal. At this time, I would like to also introduce Mr. Pinkesh Parekh, who is looking after our finance in a state site. We have a Texas facility now, and we have a Decatur facility. Pinkesh is looking globally in a finance matter. Pinkesh, you want to share a little bit about ICS or reason behind this acquisition? Let's say that one question from investors.
Yeah, definitely. Thank you, Mukesh. Just wanted to say a couple of things on that. Yeah, I'll be happy to tell investors about this M&A. Just a little background about myself. Originally I'm from Bombay, India. I've been in U.S. for about 25 years. I do have my bachelor's in finance.
Yes. We can hear you.
Okay. Can you hear me fine or no?
Yes.
Yeah, it's audible.
Okay, perfect. I'm just making sure. Just a little bit background about myself.
Your voice is not coming out.
Oh, it's not.
Mukesh, his voice is clear. I think just check your audio. Mukesh. Pinkesh, you can continue.
I can continue. Okay, perfect. Just making sure. All right. Yeah, so just a little background about myself. Originally, I'm from Bombay, India. I've been in U.S. for about 25 years. I have my bachelor's in finance and MBA in finance as well. My expertise are in financial planning and analysis, cost optimization, and more of a strategy, like industry support and talking to the senior management to make sure that their goals are accomplished. More than that, I know Mukesh said that. I would like to tell a couple of things to investors about this M&A. From a finance perspective, I believe that this has been a fantastic deal for AEL as this acquisition is strategically aligned with our long-term growth objectives.
It also expands our capabilities, strengths, our customer base, and also enhances in the key markets. We clearly see synergy across operations, procurement, and also customer cross-selling, where it pushes us for a sustainable margin and revenue growth. That's what we are looking for, basically to make sure that the company goes up to the next level. We are very confident that we will definitely do great with this company. Also, that question is expected to have an immediate impact on the revenue and good margins as well once the synergies are realized. As I mentioned earlier, we definitely expect to have the cost synergies through procurement leverage, operational efficiency, and SG&A desk realization over the next six to 12 months, would definitely bring it up to your expectations, which you have. Thank you, Mukesh.
Thank you.
Thank you.
Next, Nirmal.
Yeah. One of the things that is always something that we want to consider when looking at an acquisition like this is, what is the opportunity cost, especially if we look at building this out organically. When looking at the organic timeframe that we're looking at, it would take us some time to reach out to the local customers. It would take us some time to build the team. It would take us some time to train them into a quality-minded culture. It would take us some time to build the specializations that they have. Especially the processes and culture that they have developed, and that trust that they have earned in the industry, all of that would take us a couple of years, at the very least, to be able to build from scratch.
What we're looking at is an acceleration to market, saving us about two to three years over trying to do this organically.
Before we go further, next slide, I would like to, Nirmal, have Chris. Can you introduce Chris?
I was just about to do that. Chris Espinoza is one of the people that I have quickly become to respect very, very fast as someone who is extremely level-headed, someone who has very creative solutions, and someone who finds the right balance between the technical solutions and the financial solutions. He is always cost-oriented but still quality-minded, and that's a very rare combination to see. As VP of Sales, he has been primarily the frontline in going out and reaching all of the major customers that ICS had built before they converted into AIC. With that, Chris, I'd very much like if you could share a couple of words about yourself, maybe give them some of your background and anything that you are excited about this merger, if you would like to share that, now is a great opportunity to do so.
Fantastic. Thank you very much, Nirmal. Good morning, everybody. My background, I've been in electronics for over 25 years. During that time, I started my career and my journey with developing my own engineering firm, where we did all the hardware, firmware, mechanical design work, as a company. Some of the highlights of that was developing camera systems, developing airbag deployment, and developing products with Cummins Engine Company for bunk stats. When I left that company and sold it, I joined my father's company, which was a small EMS company that just began their journey in manufacturing electronics. I grew the company from scratch, basically, to roughly $15 million to $20 million over the course of the 10 to 15 years that I've been here.
One of the things I found very interesting about the opportunity with Aimtron was the values that they carry, the integrity of the folks that I've met, and just in general, how delightful it was to walk around the factories and talk with all the people that work for Aimtron. It really just kind of struck me as it aligned very well with my core values. I see the opportunity with the different types of products that they build today, the factories, the certifications, to where I believe, over the course of the next three years, that we'll be able to strongly increase the revenue between all companies at Aimtron. I'm super excited to take the journey with Nirmal and Mukesh and Sneh. It's going to be a lot of fun.
Thank you.
Thank you. Nirmal, continue.
One of the other things that we wanted to share a little bit about is what exactly are the assets that we're acquiring. It's a rather sizable manufacturing facility, with still about four acres available for future expansion. They have four solid SMT lines. It's Korean robotics, high-end. They also have the rest of the production lines at post SMT that has also been kept up to date for their ruggedized product lines. For the commercial momentum, I'd like to invite Sneh to speak to us.
Thanks, Nirmal. I believe before we go ahead, Chris, any other views on post this affiliation with Aimtron, what do you feel your views can be on what the opportunity can be leveraged, with Aimtron together and jointly when we work together? Especially in hardware electronics, especially in rugged electronics, a heavy industries. See, one thing about this,
For our team here, our investor group here. This company located in a surrounding backyard of five, six gigantic company like Caterpillar, Burns, CNH, John Deere. Those are the surrounding about a billion-dollar business around this area. Maybe, Chris, you want to share a little bit about just for ICS now, how we can take it AIC, ICS to AIC next level.
Yeah, absolutely. In the core of the Heartland where we are located, there is, like Mukesh said, you have CNH, you have John Deere, you have Caterpillar. You have a tremendous amount of companies that outsource hundreds of millions of USD in revenue every year. With the added certifications and the powerhouse that we consider India is with the lines and the low-cost region, this is going to mold very well because most of these companies, most of these OEMs, want to regionalize their business, whether that be in India to cover some of Asia or Europe, or whether it's in the U.S. to cover Canada as well as in Mexico.
There's going to be a lot of ability with the certifications, the technology, the footprint that Aimtron possesses to allow us to put a good blend of electronics with these companies to where not only can you get their high volume products, but you can also get the medium to low volume products as well, box builds and everything else to go along with it. That, to me, is a key criteria in some of the marketing and sales plans that we're moving forward with. As we talk about the hardened electronics side of the business, where you're talking more like potted assemblies, conformally coated assemblies, things of that nature, that's kind of the core of who we are and what we do in the ag industry and the construction industry and things of that nature. Today, we do more medium to low volume business.
With the added infrastructure that Aimtron provides, now we'll be able to get into more of the larger volumes of higher mix type product that you might be able to see out there that before, by our company size, we weren't able to play in those markets. We have customer relationships with a lot of those companies, Fortune 100, Fortune 500 type companies. Now it's going to open the door for India to be certified, as well as the financial fortitude to be able to walk into those companies and say, "We're ready to take the next level with you." Super excited about it. I think that that is going to be a game changer.
Thank you. Thank you, Chris. Yes, Sneh, over to you.
Thanks, Chris. Let's make it together. On the open order book, our most interesting part. As of now, we are around INR 100 crore kind of an open order book. Here in U.S., typically, the sales cycle are much more quicker to what we have it in Asia Pacific. Just an example, like prototype in the U.S. can be within three to five days as well because all the major OEMs and ODMs, they have stock inventory availability right there because of the inventory within the premises or within the region itself. A strong pipeline is there for INR 155 crore, approximately INR 150 to 155 crore. That typically conversion cycle is less than three months of time frame to whatever the conversion would be.
There are around INR 300 crore kind of an opportunities which are already in pipeline, which are typically in initial phase of discussion, where one customer itself opportunities around $20 million. Just a rough example I'm giving. They are into oil and gas industry and more of in kind of rugged electronics, where this potential of $20 million can get converted into the RFQ phase after around 90 days of time frame, and probably post that we can start prototyping quotations and all that stuff.
Thank you. Continue, sir.
Approximately top five customers, they contribute around 40% or less than 40% of the revenue. Major category-wise, hardened or rugged electronics is something that is contributing on a higher side. There is a diversification in portfolio in terms of sectors as well to what Aimtron is not into this space or Agritech. Even last week when I had a chance to visit AIC, the couple of products that we do now, it's somewhat just an example for Agritech. They make one device. In that device, based on humidity of soil and kind of different apprehensions that goes into that.
Seeds are of different types, and it gets bifurcated. They make a complete automated module of it with IoT device and all, which gets into the different modes and different style of that. Based on the moisture and based on the different parameters, that products automatically dispenses the seeds into the land. There, if you see the land, they are into hundreds and hundreds of acre, like 500 acres, 700 acres, 800 acres kind of an single farm. That's the kind of product that they are into. When it talks about rugged electronics, it's more of a longevity kind of a product where a single product runs for 10 years, 15 years kind of a time frame.
This is where hardened or rugged electronics is something that we see probably. Because initially, if you see when we started Texas, we were thinking to start greenfield project there and w ith same kind of an opportunity we had in this brownfield project, where from scratch we had four SMT lines, INR 18 million, INR 17 million kind of an revenue, four SMT lines, and the complete asset structure with this kind of a customer base and new sectors.
Thank you, Sneh. Continue.
If you see, probably to ICS, it's almost a three-decade-old company, and they are more into low mix, high volume, and completely from design-led engineering and ODM capabilities to what we are doing it since almost quite some time now. With that INR 1 million kind of an opportunity based off U.S. They are doing almost somewhat similar for the complete sales cycle. That is where we have the same synergy. Thinking often to what these different tariff scenarios are going on. This makes us in a sweet spot, making in U.S. locally as well as making in India locally. Down the line, if you see, we already had a plan for this kind of an opportunity where we're exploring since quite some time.
That was a prime reason, like during the fundraise, we even mentioned it during the objectives, that M&A is going to be one of the objectives. Partially, if you see, approximately around $4.3 million, we have raised the debt in Texas. Again, that's through a local bank itself with local rate of interest. Then other, whatever the amount would be, will be carried out through these funds that have been raised. As of now, if you see, it's going to be a stellar performance in terms of scalable base for future growth. Now with Aimtron coming up, probably it is going to more often. Because if you see, as of now, 85% is a PCBA business and approximately around 10% to 15% is their box build. Down the line, we'll be focusing more on a complete box build solution, including design.
From concept to design to prototype, till complete system integration kind of an opportunity. That is where we see a complete scalability. As of now, to what complete new projects are forecasted, that is including the engineering efforts and complete one-stop shop that we bring on table.
I think we don't want to waste too much time on this, we have a lot of questions to answer. Just to go back to this, Aimtron plus ICS is equal to Aimtron International Controls. That's we are talking here. The deal is about $17 million, and you see the numbers already. It's currently at about 54% capacity right now, which within two to three years, we can take it to the 90% capacity. It's very strong opportunities on this. How it's structured, we missed one slide, but it's under Aimtron Electronics Ltd., through its Aimtron Electronics LLC, and through Aimtron Electronics LLC, through Aimtron International Controls. That's what we have set up at this time right now. Let's go back to the next slide and go and jump on to the question and answer right away.
Sneh, maybe just see what the future looks like.
Sure, definitely. If you see one thing, revenue is around $17 million, we are trying to scale that to $25 million to $30 million as of now, in next two to three years of timeframe. It's, yes, it's going to be EPS accretive with the ROCE and ROE on the Aimtron kind of a benchmark. Initially, it's kind of a low profitability, mid-level profitability with initial two double-digit, nearby to double-digit EBITDA. Two to three years down the line, we are trying to scale that to Aimtron level margins for both EBITDA as well as PAT level. This is going to be kind of a tariff impact, whatever is going to be there, probably it's helping us to be competitive for both the geographies and kind of first step towards our INR 1,000 crore kind of a journey that we are eyeing on.
In America, we call brick-and-mortar facilities. Brick-and-mortar facility means we have our own land and building for Aimtron Electronics in other soil, like international soil. That is the proud moment for us. That's why now local bank is ready to support also, "Hey guys, we are here to support you." Anyway, continue next slide and then we go question and answer. I think, Sneh, we covered a lot of things, but you want to just go very quickly on these two slides?
Certainly. In just ensuring that how are we going to make it to Aimtron's level margin, probably this is going to help us for global procurement. Consolidation on global level for all three sites, like Vadodara, Bangalore, as well as Decatur. This will help us to get better pricing in terms of procurement. If you talk about estimation, sourcing side, probably is governance on both the sides with our system, like whatever we have with expertise that we are going to bring on table in terms of operations, in terms of system, in terms of whatever scheduling and other disciplines that we have. That is going to help us out in terms of operation and improvement for design that we bring on table. Hardware, firmware, electronics, the mechanical design, and complete box build solution.
What we are trying to accomplish is kind of Aimtron plus U.S.A. Combining two forces together is really with major risk. I think that's what we are trying to accomplish. Yeah. This slide, again, we already have some repetition, so we can cover in the question and answer. We can move on to the next slide. This is Sneh's favorite Bania slide.
Probably, I think we'll go more on Q&A on this. Typically, as we stated, ROCE, ROE, and EPS, probably it's going to help us to improve a lot on this front.
Yep. Okay. I think let's pause here. This is kind of how our current infrastructure with ICS, but let's go to the next picture and then we pause there and start question and answer. Here is Dennis, on the right side you see Chris and Nirmal, Sneh. Sneh came specifically for this deal signing ceremony. All right. Let's, Vineet, open the question answer, please.
Sure. All those who wish to ask a question may use the option of raise hand. We've already got quite a few hands raised over here. We'll take the first question from Priyanshu Jain. Priyanshu, you can go ahead. Please restrict your questions to two in the first round, please.
Hello, am I audible?
Yes.
Yes.
Hi. Congratulations for this acquisition, first of all, to whole Aimtron team. We are looking ahead, can we get successful as well over there. I have a few questions. First is on the CapEx side. Right now, as the management said that 54%, 55% is the current utilization for the capacity.
Yeah.
are we expecting, because there is so much opportunity in this particular area. Two to three years down the line, are we also planning for any CapEx right now? Because 90% utilization will take around two to three years, as you mentioned. First question is on this side.
Sure. Right now I don't see a major CapEx requirement, but normal maintenance routine. Because once we merge the culture, we need to have a digitization, AI-based ERP, MRP system. INR 5-6 crore, we put it on that and another INR 5-6 crore may need some of the tool sets enhancements. We are thinking about INR 10-12 crore worth of additional investment can take us to INR 280 crore.
Okay. My second question is on the product mix side. Can you share, right now what are the EBITDA and the profit margins we are having at the recent acquisition?
I think, Priyanshu, Aimtron's culture is a little different. Aimtron is focusing the product by margin first. That's our culture. Is that correct?
Yeah.
We don't see too much difference here, unless we have a high volume project and then we have a lower margin. This is kind of a facility. We are seeing double-digit EBITDA on this one. We want to, as Sneh said, we want to increase from there and take it to the next level.
Sorry, can I ask last question on this side?
Keep it for two, as Vineet said, we can come back.
Okay, sir.
Thank you.
Thank you, sir.
Appreciate, Priyanshu.
Yeah. We'll take the next question from Akash Srivastava. Akash, please go ahead. We'll move forward to the next participant. Vivek Chadha, please go ahead.
Hi, Mukesh. Hi, Sneh. I have one question here. Looking at the global conditions right now. There are tariffs, right? We are hearing the news, the tariffs are being pushed to India and all those things globally happening up. I have a question, how are we going forward, how we are going to manage all these things? Because there's global instability which is there in the world, and we have a very vast business, right? How the things will happen, going forward?
It was a very important thought. This means we had this thought in our mind before we even start the acquisition journey. Is that correct? Because this is like a global policy change, global tariff uncertainty. That's the reason we choose North America. We had some other chances in other areas also, but we choose North America because right now this is a dire need. For that, the reason is, Aimtron is winner because a lot of OEMs, they want to bring business back home, that's number one, and also local proximity. Those are the reason, right now for India, if something change, let's say tomorrow tariff removed or lowered, then India still is there. If tariff is there a little higher or whatever the current situation, then we have already a brick-and-mortar facility with four assembly line right there. It's win-win for Aimtron.
Yeah, got it.
To add on to that, Vivek, if you see at some level, we have observed that almost all industry cycles are cyclical in nature. With benefit with ICS is that customers and sectors have different cycles from each other. As one falls, another picks. This will allow us to forecast with stability.
Correct.
Understood. Makes sense. I mean, overall, this acquisition will help us to grab the business in U.S. also. In all those tariff conditions and all those uncertainty which is there in the world right now, and specifically, the relations which we have it with the U.S. currently. In this scenario also, this acquisition will help us to grow in the faster rate, right? Is that the correct understanding?
Correct. You have observed correct.
If I could jump in here. The United States is a very consumption-led entity, and that's both true on the consumer side and on the business side. The tariffs, what they have done is they haven't stopped the buying tendencies of America. It's shifted the buying tendencies of America. What this acquisition allows us to do is to cater to that shift. What a lot of our customers are adopting is a strategy called BABA. Buy America, Build America. In having AIC with presence in Heartland America, we can actually both buy American and build in America with complex labor assemblies, such as the ruggedized electronics that you're seeing. This is actually in line with what the administration was hoping. The tariff sort of challenges that we were facing from India, we can neatly sidestep with this acquisition here.
Understood. It's great to hear you, Nirmal sir. I have one follow-up question. In FY 2027 and FY 2028 guidance. With this acquisition, are we going to revise those guidances which are given earlier?
Probably, I would say we'll keep you intact with that, because if you see in this financial year also, before we started, we have projected 225 as kind of an odd number. From that, we revised it to 270, 280 or 280, kind of an odd number. Probably with time, definitely, once we end this year and by starting of new year, definitely we'll keep you posted with that. Ultimate goal is to reach INR 1,000 crore in next three years of timeframe. That's the ultimate target.
Thanks. Great to hear. Thank you. All the best. Wish you all the best.
Thank you.
Thank you, sir.
Akash Srivastava, you want to go ahead? Your line was unmuted in between.
Hello, sir. Thank you. Thanks for the opportunity. Sir, just want to know that, actually, as you are saying that INR 1,000 crore of the revenues in the next three years, so whether we can expect similar type of OPM and PAT margin, which we have witnessed in the H1, or we will see the dilution of the margin with this acquisition?
I think Sneh can answer a little better, but let me just give you a glimpse. As I said also, Aimtron is taking the business with consideration that we should achieve our margin requirement. That is the first condition to sales team that you need to focus on those businesses. Yes, in a startup, it will not be dilute, but it will take some time and efficiency that Sneh also share on one of the screen that we have a resource optimization, we have a digitization, we have a optimization on manufacturing side, and we'll bring it back to the Aimtron level margin. I am not too worried about this until INR 1,000 crore journey. We don't see any major impact on our margin or EBITDA.
Thank you very much, sir. One last question, sir. At what enterprise value we have acquired this ICS company? Whether we have acquired a majority stake or it has become our wholly-owned subsidiary?
It's acquired by our wholly-owned subsidiary. There is no partnership, there is no other involvement. It's 100% acquired by our Texas facility. We created Texas facility to a local, easy-to-manage local acquisition. Texas is the main company will stay as an acquisition holder over there. I think, Sneh, you want to add the overall cost of the deal? Maybe you want to share a little bit on this.
Sure, definitely. If you see, probably we are nearby to double-digit EBITDA level, with AIC as of now. Probably if you see the acquisition cost is approximately 5x to 6x the EBITDA level. That is what the acquisition turnaround is. Coming to your first question, probably a standalone level will be in line with whatever the expected numbers are for PAT. Initially for consolidation, because AIC as of now is nearby to single-digit, and probably next two to three years will be at Aimtron level kind of a margin. Consolidation, there might be some impact, but probably with three years down the line, we'll be in line with our numbers to what we have projected b ut standalone, definitely we are in line with what we are expecting.
Yeah. Thank you, sir. If I want to conclude that, our acquisition cost is around $10 million. If our total revenue is $17 odd million and double-digit, something like EBITDA, and you are saying that the 5x to 6x of the EBITDA. 1.7x into 5x to 6x, that is $110 million acquisition?
You are good in math, I believe. Investors, everyone good in math. Probably you can just see to it on what will be the real size, but approximately it's around $5 to $6 million of hardly double-digit EBITDA level.
Okay. Thank you. Thank you very much, sir.
Thank you.
We'll move to the next participant. Shashank Jha, please go ahead.
Hello.
Yeah, Shashank, please go ahead.
Yeah. First of all, sir, thank you for communication, actually. Your communication part is very good. Even if you didn't have this call, it would be okay, but you did the call, so thank you for it, first of all. Second thing is that I have two questions here. One is, with this acquisition, it will be easier for you to reach INR 100,000 crore by FY 2028, right? Second thing is that your expectation that you have shared with the company that you have acquired seems to be around 30% CAGR that you gave like INR 225 crore something in next three, four years. It seems bit low expectation.
Sneh, go ahead .
Two things I would say. In case of FY 2028, again, just a rough number I am giving you. Let's assume this year will be somewhere around INR 250 crore-INR 270 crore to what we have projected. If you see from day one, we have been stating 40%-50% CAGR growth since we got listed. If you consider that 40%, 50% CAGR growth by FY 2029 will be around an INR 1,000 crore kind of an opportunity.
Okay.
That is what we are in line with our numbers. FY 2028, FY 2029 will be in the range of around INR 1,000 crore.
Okay. Second question was regarding the company that you have acquired. You said in three years you will reach around INR 225 crore. I have converted it in Indian crore and I am saying on that. It is something around 30% CAGR. Conservative.
Shashank, U.S. business is not 60%, 50% CAGR. U.S. business is normally North American business is little lower on the percentage wise. The growth is steady, but growth is in the range of 20% to 30%, maybe less. That is what we are seeing in U.S. and this is kind of an overall picture. Organic and inorganic, you have to look at both ways. Whatever Indian organic business we have is 50% CAGR, 60% CAGR, even 40%-50%, that is what we call it. Anything on this new business, we need to do a 90 days transition. We already took the control now, but it takes transition, new ERP system, Aimtron's process, Aimtron's feet. It will take some time. Again, let's hope to get this 2028, 2029 business to an INR 1,000 crore.
For that, if we need to do anything else, we'll do it, but we'll take it that level. That's part of our resolution that we would like to get INR 1,000 crore. Either organic, either inorganic, either vertical or the horizontal, but we will do whatever need to be done. Thank you, Shashank, for, we believe in transparency, so always we love to communicate first, either good time or bad time. I don't think so there is a bad time, but market up or down, but we definitely would like to support our investor friends and all our well-wisher that have a clear communication.
Yes, sir. Thank you, sir. Thank you a lot for it. Thank you.
Thank you, Shashank. We'll take the next question from Rohit Ahuja. Please go ahead.
Hello. Thank you for the opportunity and very congratulations on the great acquisitions. As my question has been already asked by the various participant about the impact of this acquisition on our revenue and the PAT level number, and you have guided currently, we are increasing our capacity utilization next three year and it has a potential of adding the INR 280 crore to INR 300 crore of revenue per year. That's a very good thing. My question is on the, recently we have got a small order in the railway signaling and the communication segment from, I think, in the Indian railways. How big you are seeing a possibility? Because if we see Kavach, which is an indigenously developed train protection system in our country, it is growing at a great pace as government is completely focusing on that.
How we are seeing this as an opportunity, because there are hardly few companies who have a fully development vendor of Kavach. Can you brief if we have any more plans to get into this segment?
Thank you, Rohit. Today our call is more focused on ICS and acquisition. We will have another call for our third quarter result. Let's focus and let's take this call at a time. Really appreciate.
Okay. Thank you.
Thank you. We'll take the next question from Surendra Reddy. Surendra, please go ahead. Surendra, do you want to ask a question? We'll move to the next participant, Darshit Shah. Darshit, please go ahead.
Hi. My question is on the acquisition cost. I need some clarity. I mean, you briefly highlighted what the company does and how are you going to integrate it and benefit it through combining both the companies together. Can you just clearly mention, what percentage are we acquiring in this company through our wholly-owned subsidiary? How much are we paying for this? Is the existing promoter kind of holding back some stake as well? I need a little more clarity on this front, if that's possible.
Sure, Darshit. As also Sneh mentioned that we are acquiring 100%, 100. There is no fractional, there is no other thing. 100% acquisition through Aimtron Electronics, a step subsidiary, a fully-owned subsidiary. That's what we are acquiring. That's the first number. Second thing regarding the deal size, in America, there is a lot of confidentiality and privacy things. At this point, we will not be clearly disclosing the number. We did a very carefully, we did an investment risk calculation and we did good for everybody. As Sneh said, it is 6x to 7 x EBITDA and our EBITDA is lower double digit. You can do your math. Once we have a consolidated result and audited books, you will see everything.
Also, Darshit, to add on, it's, trust me, one of the best deal, if you see in any other group of peer companies have done it. It's one of the best deal that we have encountered, and this is possible only because of our presence in the U.S. Else might not have been possible to get this lucrative deal.
Also the presence in the U.S., we have a strong team. They look at in all angle. Time to market, the industry, the segment, the EBITDA, the margin, everything they look at it. Maybe this company have a network maybe equal to the cost, or less than even. Those are the things we can see. Again, sorry, we don't want to stop you here, we cannot be part of the confidentiality rule and disclose that.
Sure. Basically what I understand is you have acquired 100% stake in this company.
Correct.
What briefly you said you got it, the acquisition is roughly 6x to 7x of the EBITDA they're doing? Yeah. The deal, Sneh, what you're saying is, kind of looks unlucrative now. It's probably less than 1x sales, probably a little lower than that. None of the peers or Indian companies kind of trade at these kind of valuations. Yeah, thank you for that and best of luck for this thing. Just to add on, Mukesh, are we kind of looking at further acquisition or we are done with this?
See, our vision and our goal is to be a global OEM partner, that's number one. Number two, INR 1,000 crore journey. That's our very transparent communication. For that, whatever we need to do, we'll do it.
Sure. Just to kind of get little more, so is there any other global acquisition still on the cards or not, at least in the near term, to say?
Again, as I said, we need to see the investment risk and calculation also. If the opportunity is right, we'll jump on it. We will not rush also to make it happen and make everybody happy. We will look at first. Right now, there is another. Aimtron Electronics, it has already good setup and good growth going on, 40%-50% CAGR. Aimtron Mechatronics is already in a phase I right now, started when acquisition is done now. In addition to we have Aimtron International Control now, AIC. Everything is going very smoothly. Maybe we'll regroup in another call next six months, and at that time we'll announce something comes up.
Sure.
Darshit, if I could jump in here.
Sure
Clarify just one minor thing. What you're probably noticing is a small difference in philosophy that is a little subtle with the way that Aimtron does things. Most of my competition, their boardroom meetings consist of something along the lines of, "We need X amount of acquisitions in X amount of time, at X amount of cost, and if that doesn't work, then at any cost." The way that Aimtron works is we look at our end goals in terms of our growth, we look at our end goals in terms of our financial security, and we look at the opportunities that we have available through references, through contract, through contacts, and through the network that we have built in the U.S. We don't just approach what is on the market, but we also approach maybe companies that are not on the market as well.
Because of that, it's not as if this will lead us to a strategy where we can say, "In X number of months, we'll have an additional X number of acquisitions." Our methodology is very opportunistic because it's very goal-oriented.
As long as things align with that INR 1,000 crore journey, we'll make sure that we take the right decision accordingly.
Sure, Nirmal. Thank you so much.
Thanks, Darshit. We'll take the next question from Adarsh Pinchha. A request for participants to quickly run through the questions since we are cutting short on time.
Sir, am I audible?
Yes.
First of all, congratulations regarding the acquisition. Actually, your voice got cut off when you were mentioning the margins of ICS. Could you just mention, was it lower single-digit EBITDA or lower double-digit EBITDA?
Double digit.
Okay. My second question was regarding the total capacity now at the console level for Aimtron. Is it, because we were expanding, I think about six SMT lines, right? We were having a plan. Now including this, I think it has four SMT lines. I also remember that you mentioned something like a 100 crore revenue possibility with each SMT line. Now it comes up to, I think, nine SMT lines and more in the pipeline. How is it looking like in the future?
I think it's a good calculation. Again, we see per SMT line depends on what kind of mix you have. If you are more mechanical, more only SMT, but your mathematics is correct. On an average, INR 70 crore to INR 80 crore to INR 100 crore per SMT line you can produce. We said about INR 25 million to INR 30 million, so we don't need any other additional SMT line over there. Over there means in ICS. Your mathematics is perfect. Adarsh, you have your answer. Thank you.
No, actually, my question was, are we changing our plans regarding the six SMT line expansion that you give?
Adarsh, for mechatronics is a totally different project. There is nothing to change. Just I said I just cut short, that's it. Mechatronics, whatever we have planned, it's just going to be continued. They have nothing related to this. That might be additional bonus, let's put that way.
Okay. Thank you, sir. Congratulations again.
Thank you.
We'll take the next question from Sachin Gulati. Sachin, please go ahead.
My heartiest congratulations and best wishes. I have two questions. One, are we going to cater any end user industry from U.S. facility which we are not catering from India? Second is, apart from infra, are we also getting some additional capabilities like know-how or something else? Thank you.
Nirmal, or Sneh?
Yeah. Actually, this is a very exciting aspect of this acquisition that I personally took a lot of interest in. AIC, what was previously ICS, they hyper-specialize in ruggedized electronics at a level which Aimtron currently does not have the capability to do so. They're able to take electronics and develop protections for them that allows them to survive in extremely harsh temperature ranges, extremely harsh outdoor conditions, extremely harsh shock and vibration conditions, and their protections that they have built in for testing these capabilities and for building these capabilities. It's truly remarkable what they have done over the years. This is primarily the additional capabilities that I at first took very strong, keen personal interest in.
In terms of industries, the fact that they have these capabilities opens up some new industries for them, primarily in the agricultural sector, so the Agritech that you saw, and then other sectors that heavily require ruggedized electronics, such as more specialized aerospace. We do more aerospace on the control side, but they're able to do much more structurally unsound products that will fit in because of the ruggedization that they're doing. It allows us to open up a multitude of new opportunities. Thank you. Thank you. Thanks a lot.
Thank you, Sachin. Thank you. We'll take the next question from Pakshal Jain. Pakshal, please go ahead.
Hi, Mukesh. Congratulations on the acquisition, and thank you so much for the call. I had a very general question regarding the costs rising, which are for some storage devices or optical disks and the usual infrastructure that is used in a lot of AI, maybe data centers or just in general, maybe your customers are using those hardwares. How do you see this panning out? Those, I think a normal SSD is now doubled in the cost, which is, I think, the most basic component which is used in a lot of these processes. How do you perceive that maybe your customers are looking at it and maybe in Aimtron also, if we are seeing any margin dip regarding that?
If I could field this question. Ever since Micron and OpenAI and all of these companies started making their announcements regarding the memory shortages, regarding their intents to buy large portions of the market, Aimtron has had very regular communication with its customers. Quite typically, in these types of cases, those costs would be borne by customers. It's baked into the cost of the product. When we assemble the product, those material cost increases are passed on to the customers as well, as Aimtron's business model is very cost-plus in that nature. What this normally we'll see is a shrinkage in the number of opportunities, but an increase in the value of opportunities because the material size and therefore the material margin that we make is increased as well. Overall, because we're passing on the cost to the customers, the impact is going to be minimal.
We have actually worked with many customers to devise custom strategies, working with manufacturers, securing allocation on part numbers that are not currently on the target list for OpenAI, for Micron Technology, for NXP Semiconductors or Nexperia. All of these alternatives that we have seen, we are also allowing our customers to sort of work creatively with Aimtron system. AIC, in fact, Chris Espinoza specifically, has also demonstrated a very strong capability of being able to engineer these types of solutions as well. It's a multi-tiered plan. I hope the information I've given you gives you a satisfactory answer.
Yes, sir. Thank you so much.
Thanks, Pakshal.
Thank you.
We'll take questions from participants who have not asked questions. Aryan Bhatia, please go ahead.
Hello, am I audible?
Yes.
My question is regarding the margin again. If I look at some of your peers who have business in U.S., their gross margin is the best in the U.S. business, but overall margins are impacted, particularly due to the employee cost in the U.S. If I look at Aimtron, we have the best margin in the industry. One of the reason that drives the margin is the lower employee cost as compared to our peers. If we know due to this acquisition, the overall margin is, I guess, is going to be depressed due to the higher employee cost. If I look at, you said that it is currently a low double-digit margin business.
On the longer run basis, if I look at your peers as well as your recent acquisition, is it possible to reach the Aimtron margin that is like 20% EBITDA margin? The employee cost, it won't be possible to have the same employee cost as a percentage in the Indian business if we compare with our U.S. business.
Maybe let Nirmal answer this question because it's.
Yeah.
Resources.
First of all, I really appreciate the question. It's actually a very astute observation.
Thank you.
Aimtron has always had a very high standard for what we consider to be a good margin in business. AIC philosophically actually shares that same vision that Aimtron has. If you ask Chris what he considers to be good margin business and what I consider to be good margin business, it's actually remarkably similar. Where ICS has struggled to achieve this, and the reason that they're in the low double digits right now, is actually because they're working with an outdated MES system, an outdated ERP and MRP system.
Some of their processes have not kept up with industrial standards and the way that they have operationally been managed, it was very clear that previous ownership was stretched very thin, and they were trying to do very many things at once, which means that they couldn't really put their focus in, they couldn't really justify giving the operational improvements that led to the efficiency that was required. You are absolutely correct that the labor costs in the U.S. are considerably higher than what you'll find outside of the U.S.A., especially in eastern regions.
What we can see is the majority of the cost is still going to lie in materials and the labor costs that are there, I feel very confident that I can increase the efficiency by quite a bit just by having some additional focus in supporting ICS in their endeavors that they've been doing so far. I have a long list of them. I don't want to bore you right now with the details, we do feel very confident that we can significantly increase the margins that we've been seeing.
Actually, you read our mind also, because the selection process was there also, that's why we selected this location. The Decatur location is about 15% to 20% lowest from the main metro city in resource cost also. We have a Vadodara and we have, let's see, versus Bangalore. If you look at our checklist and the selection process, maybe 100 checklist you can see. Next time we can make another call for that. Continue, Vineet.
I would say, give us some time, probably just like we proved it in India as a benchmark, probably same will be replicated there. We would set our own benchmark in the industry and let others follow that.
Thank you.
Due to shortage of time, we'll take the last question for the day from Nilesh Jain. Nilesh, please go ahead.
Hi, thank you for the opportunity and great congratulations to the team for the acquisition. I have two small questions. Firstly, wanted to understand how the acquired business has scaled over time, given currently it's operating at close to 50% utilization. What gives you confidence that you can scale it much more faster as to what it has been historically being as grown? Second is on the working capital. Comparatively, what I understand that U.S., the availability of raw material is much more faster as compared to what we get it in India, because we are importing it. These two questions.
Let me answer the first one before I hand it over to Sneh to answer your second. Specifically regarding the machine efficiency and the additional capacity that you'll see on their SMT lines. ICS struggled historically from a challenge of not being able to balance its manual processes to its automated processes. Aimtron has a very strong history and expertise in being able to do so. We have a lot of improvements on the systems, the processes, integration with AI-level Industry 4.0 standards that we'll be introducing to ICS. Because of their capacity on the post SMT processes, that was always bottlenecked. By eliminating them, we can actually unlock the full availability of what is there in the plant and make full use of their SMT equipment. That is my answer to your first question.
If that is a clear answer, I would like to hand it over to Sneh to answer your second.
Thank you for that.
Nilesh, in terms of working capital, yes, as you stated, probably it's on a faster note because turnaround time and all that is quite faster because here we are importing, we have the stock there because of storage over there locally itself, part one. Second thing, if you see even customer payment terms and all are much more favorable to what we have it in India. It's going to be better capital turnaround days, inventory turnaround days, and creditors-debtors ratio would be comparatively better as compared to what we have it is going to be in India.
Thank you. I wish you all the best.
Thank you.
Thank you. We come to the end of the call now. Management, would you like to give any closing comments?
Nirmal, you want to conclude?
I just wanted to share something that is extremely exciting for me personally. This is going to be my first real contribution to the journey that you have been seeing. Up until now, you've seen the contributions that Sneh has made, you've seen the contributions that Mukesh has made. The unique situation that ICS is in, I hope and I understand that you have extremely high expectations of what ICS can do. I'm going to be taking a very personal interest in ensuring that those expectations are met, that it is going to come to fruition. I humbly ask for your blessings and for your support in seeing us grow both ICS and Aimtron further. Thank you, everyone.
Thank you, everyone. Really appreciate your time.
Thank you to the management team for giving us their valuable time, thank you to all the participants for joining in. This brings us to the end of today's call. Thank you.
Thank you.
Thank you.