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Amber Enterprises India Ltd
Earnings Call Analysis
Q2-2024 Analysis
Amber Enterprises India Ltd
Over the years, Amber has transformed into a comprehensive B2B solutions provider, venturing beyond its original specialty in room air conditioners to a variety of other HVAC applications and sectors. The company's manufacturing footprint now commands a significant 29.4% share of India's room air conditioner industry. This growth has largely been fueled by the strategic diversification into electronics with the acquisition of ILJIN and Ever in 2018, positioning Amber as a leader in the inverter air conditioner segment. Its recent joint venture with NOISE, a major smart wearables brand, underscores its commitment to the Make in India initiative and positions Amber to capitalize on the growing demand for smart electronic products, wearables, and hearables.
Amber's first half of FY '24 has seen a revenue growth of 2.1% year over year, reaching INR 2,629 crores, although the second quarter's performance reflected a slight PAT loss chiefly due to increased depreciation and finance costs. Operating EBITDA grew by 11.5% to INR 203 crores. The company's net debt situation showed an increase over the past year but is projected to settle at INR 650-675 crores by the end of the fiscal year. Improvements are also anticipated in net working capital days, which are expected to normalize by the fourth quarter.
Breaking down Amber's portfolio, revenue in the Electronics division showed a robust increase, rising for H1 FY '24 to INR 515 crores from INR 449 crores in H1 FY '23, with EBITDA also reflecting this positive trend. The joint venture with NOISE is slated to contribute substantially to revenues in the future, and the addition of clients in telecom, automobile, and hearables is expected to drive a growth rate of 35% for FY '24. The Railway Subsystem and Mobility division also reported revenue and operating EBITDA growth, benefiting from the introduction of new product categories and expansion in metro coach equipment. The order book for Sidwal, a strategic acquisition, now stands at an impressive INR 1,140 crores.
The Electronics division is poised for growth despite recent tepid top-line figures. This is attributed to muted growth in the AC controller segment due to a premature AC season. However, new ventures in telecom, wearables, and the automotive EV space are expected to bolster performance, with management confident in a 35% growth target for this division. In Consumer Durables, there has been no price discounting to OEMs; any impact from commodities is adjusted on a quarterly basis. New customers and products across various segments, including the refrigerator and washing machine sectors, are contributing to growth.
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Ladies and gentlemen, good day, and welcome to Amber Enterprises India Limited Q2 and H1 FY '24 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.
[Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Jasbir Singh, Executive Chairman and CEO and Whole-Time Director of Amber Enterprises India Limited. Thank you, and over to you, sir.
Hello and [Technical Difficulty] on the call, I'm joined by Mr. Daljit Singh, Managing Director; Mr. Sudhir Goyal, CFO; Mr. Sanjay Arora, Director ILJIN Electronics; Mr. Sachin Gupta, CEO of RAC Division; and our IR Advisors, SGA.
We have uploaded our results presentation on the exchanges, and I hope everybody had an opportunity to go through the same.
Amber over the years has evolved as a comprehensive backward integrated and diversified B2B solution provider. As you all must be aware that we started our journey from room sectors comprising of window AC and then split and inverters and further diversified into cassette air conditioners, ductables and package units of higher tonnages.
Being backward integrated over periods, we spread our wings in RAC and RAC components spreading into different geographies of India. Today, we command 29.4% of manufacturing footprint of Indian room air conditioner industry.
To gain an edge over the changing market patterns from fixed speed ACs to inverter ACs, Amber in the year 2018 ventured into the world of electronics by acquiring ILJIN and Ever and became a market leader in inverter air conditioner segment. As we graduated in our skills and know-how of electronics, we learned that electronics is an ocean, which needs to be explored.
In the past 5 years, [ a thing ] which started from inverter AC, has now diversified into providing solutions for home appliances, consumer electronics, hearables and wearables, telecom and automobile segments.
Recently, we entered in a joint venture with Nexxbase Marketing Private Limited, having its brand name NOISE to undertake the manufacturing, assembling and designing of wearables and other smart electronic products, thus contributing strongly towards Make in India initiatives, which will help producing import dependency, promoting top-tier manufacturing and positioning India as a global hub for industry-leading wearable technologies across various categories.
Being #1 smart wearable brand in India. And third, globally NOISE in-depth understanding of the category, combined with ILJIN's expertise and manufacturing resources and innovative capabilities will help build a world-class manufacturing ecosystem in India while contributing significantly to the [indiscernible] growth of the entire category.
Going forward, we clearly see our Electronics division becoming number 2.0 strategy, having exponential growth opportunities in the year to come.
Furthermore, to expand our addressable market in heating, ventilation, air conditioning segment, we acquired Sidwal during the year 2019 to cater the mobility infrastructure of country which includes railways, metro, bus and defense.
Sidwal being the pioneer in all indigenous roof-mounted air conditioners for rail coaches carved out a niche for itself by developing top of the line products over the decades. Post acquisition we ramped up Sidwal facilities, expanded R&D capabilities and enabled Sidwal to create a different application of metro, railways, HVAC solutions for new age application trains like Vande Bharat Express, Metro [ ACs ] and trains like RRTS, Namo Bharat.
Today, Sidwal is the leader in mobility air conditioning space and is further turning its deals by expanding its footprint into railway subsystem space, while introducing products like doors, gangways, and pantry systems and enabling Sidwal to increase its wallet share in the bill of material of passenger coaches.
With Indian government launching its plan of modernization of Indian railways by launching new Vande Bharat Express and Urban Development Ministry to have new lines in the new cities and existing metro lines to expanded this network, exponential growth opportunities are unfolding for Sidwal.
We are currently inching towards finalization of our first global order for Sidwal products, and this division is also set to become Amber 3.0 strategy going forward. We also feel pride in sharing that Sidwal has also been a part of recently inaugurated new RRTS, Delhi-Ghaziabad-Meerut corridor journey to be known as Namo Bharat, where it manufactures air conditioner systems for the trains.
Looking into the current business and manufacturing landscape change in last couple of months, we have witnessed the customer demand getting fragmented in various forms like individual components, modular kits, finish products subassemblies and we at Amber now onwards shall be doing our reporting in 3 divisional formats.
For the sake of simplicity and for our own focused approach, we shall be looking towards 3 divisional contracts hereon. As explained above, all the 3 divisions Consumer Durables, which comprise of room AC, finish goods, room AC and non-room AC components. This is 1 divison.
Second reason is Electronics division; and third is Railway Subsystem and Mobility. All have multi-fold growth opportunities going forward. I will now take you through the consolidated financial highlights. On the revenue front, for H1 FY '24, revenue increased by 2.1% to INR 2,629 crores versus INR 2,576 stores in H1 FY '23.
We have reported revenue of INR 927 crores in Q2 FY '24 versus revenue of INR 750 crores in Q2 FY '23. On operating EBITDA, on H1 FY '24, operating EBITDA stood at INR 203 crores versus INR 182 crores in H1 FY '23, a growth of 11.5%.
For Q2 FY '24, operating EBITDA increased to INR 65 crores compared to INR 52 crores in corresponding quarter last year. Operating EBITDA is before impact of ESOP expense and other nonoperating income and expenses. Operating EBITDA margins for H1 FY '24 stood at 8% versus 7% in H1 FY '23.
PAT of H1 FY '24 stood at INR 41 crores versus INR 41 crores in H1 FY '23. For Q2 FY '24, PAT loss stood at INR 6 crores versus loss of INR 2 crores in Q2 FY '23. Increase in depreciation on account of CapEx incurred and finance costs increase due to increase in debt and higher cost of finance, which led to increase in PAT loss.
Net debt as of September '23 stood at INR 956 crores from INR 662 crores in September '22. We expect this debt number to come down to in the range of INR 650 crores to INR 675 crores by the financial year-end.
Working capital days for September '23 stood at 52 days -- sorry, September '24, compared to 39 days in September '22. And we also expect the net working capital days to normalize by the quarter 4.
Overall, CapEx for H1 FY '24 stood at INR 149 crores, and we plan to incur a total CapEx in the range of INR 350 crores to INR 380 crores during this current financial year.
Coming to the divisional highlights, we can now take you through all 3 divisional...
[Technical Difficulty]
Sorry to interrupt, Mr. Jasbir Singh.
Yes, hello?
Yes, sir. Now we can hear you, sir. Please go ahead.
Coming to divisional highlights, we can now take you through all 3 divisional highlights, which are as follows: Consumer Durable division. In Consumer Durable division, the room AC and the component segment.
For H1 FY '24, revenue for this division increased to INR 1,744 crores versus revenue of INR 1,797 crores in H1 FY '23. Operating EBITDA stood at INR 114 crores versus INR 99 crores in FY '23.
For Pravartaka, we have set up a new facility in Chennai, which is in process of scaling up. For AmberPR cross-flow division we have expanded in Pune, which is also in the process of scaling up.
We have witnessed a mix trend for the first half of this financial year 2024. Quarter 1, which is usually a strong quarter, was impacted by unseasonal weather patterns, resulting in increased inventory levels. However, rising temperatures and festivities on the anvil got the demand back and has helped in liquidation of inventory, thereby leading to almost normalized levels of channel inventory.
We anticipate a year-on-year growth in the single digits for the room AC industry in the fiscal year '24, which bodes positively for Amber. In this Consumer Durables division, we have a motor segment. On the motor segment for H1 FY '24, revenue stood at INR 135 crores versus INR 150 crores.
Operating EBITDA stood at INR 13 crores versus INR 15 crores in FY '23. Our profitability was slightly impacted a bit here due to increase of employee cost owing to inflation. However, for motor division, we expect exports to increase in the coming quarters and further expect the industry to grow in the range of 25% to 30%.
Coming to Electronics division. On the Electronics division, which includes ILJIN and Ever, we have performed phenomenally well. Revenue for H1 FY '24 increased to INR 515 crores from INR 449 crores in H1 FY '23. EBITDA increased to INR 24 crores versus INR 17 crores in H1 FY '23.
The division has witnessed growth in revenue, operating EBITDA as well as PAT due to product mix and growth of existing customers. During the quarter done by ILJIN entered into a JV with NOISE. This JV will be 50% owned by ILJIN and 50% owned by Nexxbase and we'll have a new plant setup in Noida.
To begin with, ILJIN will develop local comprehensive integrated solutions in the wearable space and further intend to move into other electronic products. This is an exclusive tie-up with NOISE and going forward, this JV will be catering to other brands as well.
In FY '23, ILJIN with a revenue of close to INR 1,100 crores, which included INR 350 crores of wearable segments. With this JV going forward, we expect additional INR 1,000 crores top line by next fiscal year in this JV and a CapEx of about INR 10 crores to INR 15 crores and expect margins to be in the line with CapEx.
Further, we have also added customers in telecom, automobile and hearable space in this segment. As mentioned during our prior discussion, a significant portion of the PCBA is required for non-smartphone applications are currently met through imports.
The government's commitment to promoting domestic electronic manufacturing offers a significant potential for the substantial growth, and we anticipate a growth rate of 35% in FY '24 for this segment. We also expect this division to increase its margin going forward. We are targeting an EBITDA margin in the range of 6.75% to 7% range and doubling its revenue over the date of FY '24 in the next 2 years' time.
Coming to the third division, Railway Subsystem and Mobility. On the mobility applications, the H1 FY '24 revenue stood at INR 235 crores versus INR 200 crores in H1 FY '23.
For H1 FY '24, operating EBITDA stood at INR 52 crores versus INR 51 crores in H1 FY '23. The division has witnessed growth in revenue, operating EBITDA as well as PAT due to growth in the current operating segments. We are adding new product categories for metro coaches, which includes gangway, doors, pantry system, HVAC system.
Due to our recently announced technology transfer agreements, we have started receiving orders for the new product categories, and we are glad to share that the order book of Sidwal has significantly jumped and now stands at INR 1,140 crores.
We expect mobility applications division to grow to in the range of 25% in FY '24 and double its revenue in the next 2 financial years.
With this, I will now open the floor for Q&A.
[Operator Instructions] The first question is from the line of Natasha Jain from Nirmal Bang.
Congratulations on a good set of numbers. My first question is on Electronic side. While we have a robust commentary for this division and have also delivered good growth in terms of margins. Our top line for this quarter has been quite tepid at 3%. And on a Q-o-Q basis, it has been a decline. Since this is a nonseasonal segment and our historical trend has been quite good, so why only a 3% growth? So that's my first question.
Sanjay, would you like to answer this question?
Hello? Can you hear me?
Yes, sir, we can hear you. Please go ahead, sir.
So this growth was [indiscernible] mainly due to the muted growth in the AC segment, like the Electronic division we supply a lot of controllers and the AC season was advance this time and it also reflected in the growth. So that was the main reason of the less growth in the Electronics.
So sir, it -- would it be possible to give a breakdown for electronics in terms of telecom, hearables and wearables, automobile and PCBA, that will help?
I think Sudhirji, [indiscernible] will have to do.
Sir, can you please repeat? We can't hear you.
Sudhir Goyalji, do you have the break up or can we give that later [indiscernible] Sudhir Goyalji?
Sir, Mr. Sudhir Goyal is not connected, sir.
Anyway Sanjay we can send it to Natasha later on, the breakup of 3,4 segments within the Electronic division.
All right, sir. Sir, my next question is on the Consumer Durables segment. Sir, first of all, has there been price discounting, which you have taken as an ODM for the brand?
Price discounting?
Yes. Has there been any price discounting or any discounts that were passed on to the OEM players?
No, there is no price discounting, which we have passed on to any customers. The commodity now has [indiscernible] so that is a quarterly lag basis. I mean whatever the impact is that will automatically get transferred.
All right. And sir, lastly...
Sorry to interrupt, Ms. Natasha Jain, may we request you to rejoin the queue?
Sure.
Our next question is from the line of Dhruv from Ambit.
I had a couple of questions. So first was on the Electronics side, just to build on the last participant's question. So we see a tepid growth and why you've given a guidance of, say, close to 35%, 40% growth in the full year, right? So you think you can continue the momentum. In the second half, you'll see a better number there also?
Yes, we have added new applications in the sector. We have added auto EV space. We have also added hearable and wearable customers and telecom business, which we just onboarded in quarter 1 has started. So we expect that we should be able to match in the range of 35% growth for this quarter -- for this division.
Okay. And sir, on the stand-alone side, we've seen a strong growth. However, I think Sanjayji made a comment that the AC season was tepid so that growth that we are seeing was it on account of newer customers just trying to connect, I think, just a little bit of disconnecting in that sense?
So multiple reasons Dhruv, new customers, new applications, new products.
Sorry. Hello?
Hello?
Yes. And sir, on the -- I mean, can you just elaborate a little bit on these new applications per se?
So the new application, which I spoke like we've added telecom sector components. We also have telecom products in the Electronics division. Then we awarded the auto EV space. We have added some customers in the hearable/wearable space. So all these put together, plus there are some customers which have been added in the refrigerator and washing machine space. So all put together is giving us this growth.
[Operator Instructions] Our next question is from the line of Sonali Salgaonkar from Jefferies.
Thank you for the very detailed earlier commentary during the call. Sir, just 2 questions. Firstly, any update on PLIs, the 2 that we have received for AC components. And secondly, for Nexxbase, you did mention that about INR 1,000 crores additional revenue. So just to clarify, this INR 1,000 crores will be for the JV as a whole so we'll be taking about 50% of that or 50% is equal to INR 1,000 crores for us?
No, the JV Sonali, will have total INR 1,000 crores and since it's a 50-50 JV, we will not be able to consolidate between revenue. It will be a separate revenue which we will be booked in new company. And we will be able to consolidate the PAT in our ILJIN -- on the 50% part of it.
As far as your first question is concerned regarding the PLI. We -- the PLI approach -- I mean we are eligible in the PLI, PLI audits have started. A couple of factories have been visited and we expect that by -- maybe by quarter 4, we should be receiving our PLI benefits -- start receiving the PLI benefits.
Sir, how much incentive we are expecting in FY '22 (sic) [ FY '24 ] and '25, if we can -- share that?
So for the first year, it was about INR 16 crores. And this financial year, we expect the incentive to be in the range of about INR 28 crores to INR 30 crores.
Our next question is from the line of Aditya Bhartia from Investec.
Sir, my first question is on the Electronic side. How do you -- clearly looking at this vertical, would it be an extension of what we have been doing uptil now or can it be completely different foray into even industrial applications, defense, aerospace, are all options open? Or are we looking to be specializing in certain fields within the electronic, sir?
No, since we have now launched the electronics space, and we are expanding our knowledge base, so we are very open. We have taken 2-pronged strategy. One is to increase our margins because we started with our lowest margin businesses available in the PCBA which is the consumer durable part, whereas the defense and aerospace and the railways and industrial is higher margin businesses.
So we are inching towards that. So as you see, we started with Consumer Durables, then we entered into telecom then we added hearable/wearable and now we've added auto EV space. So we'll continue to grow in the space of PCBA applications while increasing our margins. And we also intend to backward integrate in the component space moving forward, which will strengthen our mode in this division.
So that -- so we are seeing this as a Amber 2.0 story like what we did in air conditioners, we started with manufacturing just the sheet metal a box of air conditioners and then started producing air conditioners and then backward integrated. And today, we can deliver 70% of bill material of air conditioners, including the full boxes.
So a similar strategy will be followed over the years in this division, and we are very excited. I think this division has a potential to surpass room AC division in 3 to 4 years' time.
Understood, sir. And sir, you spoke about, I think, 6.5%, 6.75% kind of margins. Given the kind of mix that we are having today, how are those margins going to be attained? Because I understand that room ac or consumer durables is slightly on the lower side in terms of margins, even possibly wearables and hearables could also be a similar margin or if I understand it correct -- incorrect?
No, you are correct. The consumer durable space will continue to be lower margin space. But since we are adding new applications, which are at a higher margin that will grow this division's performance to a better margin. And we are intending to backward integrate into some components, which are at a higher margin space. So consolidated basis, you will see this division going to almost about 6.75% to 7% range. When we acquired this company, it was this 2.8% EBITDA company, and it's already inching towards 5% now, and we'll continue to grow the margins.
[Operator Instructions] Our next question is from the line of [ Onkar Ghudargare ] from Shree Investments.
Yes. Am I audible, sir?
Yes. Very audible.
My question was regarding -- you mentioned about doubling of revenue from FY '24 for Electronics division and -- in 2 years and doubling of revenue in 2 years for railway systems and mobility division as well. Just wanted to know what's your long-term strategy on both these since you are mentioning 2.0 for Electronics and railway subsystems 3.0 for Amber? Just wanted a broad long term view on this [indiscernible].
The broader long-term view is that these division will be heading for a very independent growth and have the potential of becoming as big as Amber is today going forward. So it is a very simple strategy which we have opted. We actually acquired into adjacencies and then we have grown those divisions into various applications. in Electronics, like I have explained that we have already entered into 4 applications.
Now we have -- we are adding some more applications in that, plus we are going to backward integrate into component space of the electronic PCBA part, which will help us both top line growth as well as the bottom line growth.
In the Sidwal, the mobility division, when we acquired, this company was a small company and the EBITDA margins were also less. So we've already traveled journey in last 3 years from 16% EBITDA to almost 22% EBITDA and grown the top line by almost 3x in the last 3.5, 4 years.
What we are going to do next is that today, we are contributing only 4% to 5% of the bill of material of the passenger car. Now if you can imagine the kind of orders which have been floated by the Indian Railways for new Vande Bharat Express train and also by the Urban Development Ministry, which has already shortlisted 25 new cities to have new metro lines and the existing cities having metro lines are going to expand its network, there is an opportunity, huge opportunity which has come for the complete railway application passenger coaches, which is called rolling stock.
So in rolling stock, if you see, we currently are giving a solution of only 4% to 5% of our bill of materials. So we -- to become a meaningful supplier in the whole railway subsystem, we've now started our growth story for getting deep dive into the bill of material for increasing our wallet share with the existing customers.
Now how do we do that? We started forging our alliances by signing technology transfer agreements. We have done 2 TOTs, one with Taiwanese company and another one with Canadian company for doors and gangways and we've developed pantry systems.
So today, we can offer 10% of bill of materials in a passenger car to a customer. So from 4%, we have reached to 10%. And moving forward, we are going to further do some more alliances and we wish to reach to 25% to 30% of offering, becoming a multiproduct company in the railway subsystem part.
So within India, there's a huge growth opportunity. There is a growth opportunity in the global space as well. So we are excited with this complete growth opportunities coming for these divisions. And by forming alliances by TOT for [ JVs ] we will reach to a 30% offering of a bill of material in the next 2 to 3 years' time. And that's how we are very confident that we can double the revenues from current levels and also increase some margins.
Just 1 number I wanted. For FY '23, what's the revenue -- what was the revenue of Electronics division and what was the revenue of Railway Subsystem, if you can provide that.
So FY '23 revenue of Electronics division was INR 1,100 crore plus. And for Sidwal, it was INR 422 crores.
[Operator Instructions] Our next question is from the line of Arafat from InCred Capital.
Sir, my first question is on CapEx. So sir, last year, you invested almost INR 180-odd crores. And this year also you guided INR 380-odd crores investment. So I just want to know which are these areas you will be investing? Of course, it will be a non-AC more about a hearable/wearable. But I mean if you can guide on that? And again, what [ effect time ] you're expecting or a longer-term [indiscernible] investment?
So we will be investing in all the 3 divisions, largely investments are happening in Electronics division and the Mobility division, plus this complete INR 380 crores includes the maintenance CapEx of all 27 plants. It also includes the R&D CapEx and some new products which we are developing for the room air conditioner division.
So in total, we will be reaching currently. We -- on the return side as guided the market earlier also, we will repeat. Last year, we have done -- last financial year, we've done about 15% ROCE, and we expect ROCE to jump to about 16%-plus this year. And as guided earlier, we will able maintain that guidance that we should see number on a control basis, delivering a 19% to 21% ROCE in the next 2 to 3 years' time.
Okay. Okay. And my next question on, again, on the PCBA side, let's say you are now -- had a AC -- PCBA after just a television and all. Have you any plan to enter, like you said, high growing like aerospace and defense and medical in that matter, so any plan to enter that segment heavily, sir?
Certainly there is a plan to enter into various applications of PCBA -- if you actually strip down the availability of the PCBA application, almost about 8 to 9 sectors are prevailing. So first of all, on the bottom line point of view, the top -- bottom line contribution is aerospace and defense and then comes the railway, then industrial, then telecom sector, then automobile sector, then health care sector is there, then hearable/wearable and consumer durable.
So we started our were from consumer durable appliances side. We are inching into adding some new customers, new applications. We'll continue to do more applications in this division. It will take time, defense and aerospace is a little longer time division because they're testing periods time, validation assessments takes a long time. Similarly, case in industrial and railways, but yes, we have initiated our processes.
[Operator Instructions] Our next question is from the line of Aniruddha Joshi from ISEC.
[Technical Difficulty]
Sorry to interrupt, sir. May I request you to mute your line after you're done asking your question please.
Sure. Is it okay now?
Yes sir. Please go ahead.
It is okay. Yes.
Yes. Sir, now we are seeing most of the brands are setting up their own facilities. So do you see any impact on the industry and on us considering there will be likely excess capacity in entire air conditioner as well as components manufacturing.
Also, what is current industry capacity versus what is it likely to be, let's say, after 1, 1.5 year when most of the new plants will come on stream? And what is Amber strategy to tackle the steep increase in industry capacity as well as the likely competitive pressures that may emerge post this capacity? That's it from my side.
So the brand basically started investing in their own capacity from 1.5 years back, and most of them have started their facilities. Only 2 customers are pending to start their facilities. Probably, I think, in Q4 and 1 customer will start and by FY '25, one Japanese customer will start.
So the dust has already been settled with this landscape change of complete in-sourcing versus outsourcing by some of the brands. And we have already aligned in tandem to their strategy towards moving into more component supplies rather than finished good supplies. And we are seeing some benefits out of our strategy, which we focused on. Moving forward, I think there is no more announcement coming up from any brands for putting up new facilities.
Yes, you are right, the industry will sit on a little bit overcapacity for maybe 2 to 3 years' time because recently, anybody who puts up a factory, they don't put up a factory only just considering a year or 2 years' time, it's a good horizon which they take.
So for coming 2 to 3 years' time, we will have -- we will be seeing overcapacity in the industry. But our category is to supply some components to whichever brands have started. So whichever companies started their factories, we are giving them components from various geographies, whether in north, west or south, we have plants all over place, and we can deliver 70% of the components which goes into air conditioners.
Our wishlist is that everybody buys all those 70%. But had that been improved, we would be sitting at 70% of our market share. But today, we are at 29.4% of the manufacturing footprint of AC. I think we are excited by the growth of this whole success. In the last 5 years, the room AC volumes have jumped from 4.2 million to 8.5 million. It has doubled. And the next 5 years also, there is expectation of more than doubling than this.
So we expect 8.5 million number to go to 20 million number. And exports are also starting from -- happening from India. So for Amber, it is a manufacturing footprint, which we see as an addressable market, where we think that there's a lot of growth even maintaining the market share which we have, we should see a decent growth coming out of this division.
Our next question is from the line of Aadesh from Motilal AMC. As there's no response, may we move to the next question, please. Our next question is from the line of Renu Baid from IIFL Securities.
My first question is to understand that while we have embarked on pretty aggressive growth in both mobility as well as electronics business. As a company, what are we doing to build capabilities with respect to these people? And what kind of capacity expansion in your -- is required to double these revenues in the next 2 years? That's the first question.
Renu, the divisions are already headed by professional CEOs and they have a complete team in place. As we are expanding our applications, we are enhancing our steel trends at the senior level as well as at the bottom level and to increase -- this is happening at both the divisions.
And also -- and we are taking proactive approaches because we know which division -- which applications we are entering into. So there is a proactive approach on the team spend which is happening and few of the members have already joined in.
On the CapEx side, Sidwal is bringing up -- will be bringing up a new plant moving forward to since already we have entered from single product category to multiproduct category. Now we are giving solutions not only in air conditioner space, but for the doors and gangways and pantry systems. And moving forward, we are also entering into further components in the railway subsystems. So there will be definitely greenfield expansion and brownfield expansion both happening and -- in both the divisions moving forward.
So any CapEx that you have broadly outlined at this point in time, even if it is slightly rough in terms of broad estimates, next 2 years CapEx?
Even if I talk about, I think the CapEx outline is already there because we are a PLI participant. So we are doing CapEx in that. We will be doing about INR 75 crores to INR 80 crores CapEx in ILJIN and Ever and we expect small -- slightly lesser CapEx this year in Sidwal, but since the applications are getting addressed by next financial year, maybe next financial year, we'll come up with 1 greenfield facility, which will include about a CapEx of close to INR 80 crores to INR 100 crores next year.
[Operator Instructions] Our next question is from the line of Nirav Vasa from Anand Rathi.
My question pertains to the debt part. Sir, as I look at in Q2 FY '24, the gross debt of the company is close to INR 1,450 crores. I wanted to understand what can be our peak working capital requirement as we get in the peak summer season? And how do we -- because this gross debt to equity ratio quite close to our networth of now almost INR 1,956 crores. And since we have aggressive plans going forward as well, how do we intend to fund them?
So one is that you are seeing from the gross debt side, we have close to about INR 400-odd crores sitting in investments in fixed deposits and bonds. So net debt is a little less than INR 1,000 crores. And as explained during my commentary, that we expect this debt to be in the range of INR 650 crores to INR 675 crores by the March end.
This is a general trend in our industry. And this year because this was a very poor season for air conditioners, a lot of inventory was piled up, which was supposed to be paid on time and hence the debt got increase.
But as the inventories are getting liquidated, it will come down. But -- so internal cash accruals are very strong if you see from next 2 years perspective, as we have guided that there is a likelihood of doubling our revenue in 2 divisions. And the percentages are also getting increased. So internal accrual is good enough for the catering to the needs of the CapEx requirements of the company.
Sir, based on the current scenario and the growth rate that you're expecting for the domestic room air conditioner industry, would it be possible for you to share any kind of volume number that you are targeting for domestic air conditioners? And how and what can be the number for exports that we can look in terms of volumes in the forthcoming part of the year?
See, I can talk about the industry as such because our landscape has shifted because we are largely now supplying components, subassemblies, [indiscernible] kits and room air conditioner as such. I think the industry did about 8.5 million last year.
So we expect the industry to be in the range of 8 million, 9 million this year. If all goes good by quarter 4, it all depends on how the summer season pans out to be. So we expect a single-digit growth in the room air conditioner sector at least in this financial year.
I mean Q1 was a negative by 20%, 25%. But we are seeing some makeup being done in Q3 and Q4. So I think industry should be largely flattish or maybe a single-digit growth kind of category of air conditioner part, but we've added some customers on the component side, and we expect the [indiscernible] the industry by a few above percentage points, as we've always done. That's our view on the industry of room air conditioner part.
On export front, there's a big -- there is a shift which is happening. We are seeing some multinational companies shifting their geographies to India, and they have started testing the waters right now. And we are seeing the export number, which was happening only 1 lakh air conditioners were getting exported has come to almost about 5.5 lakhs.
So this number is also going to go up as the multinational companies will shift these geographies to India to cater to Middle East and South African markets. As the scene has been -- in the mobile case, I think this number will also add up to the manufacturing footprint of India. And because we -- for us the addressable market is what is getting manufactured in India, whether for domestic market or global market doesn't impact us.
Plus, overall, Amber is also endeavoring on its own for export opportunities. We are we are very hopeful to receive orders for our first finished goods category in the quarter 1 of the next financial year. So we've already crossed some customer validation assessments, and now the Bureau of Energy applications are going on. Once we clear that, we see first orders coming in from next Q1 of the next financial year.
[Operator Instructions] Our next question is from the line of Abhishek from DSP.
Sir, just a couple of questions. First is you called out this consumer durable top line to almost double in a couple of years in FY '24. How should we look at the mix in terms of the PCBAs in terms of the new areas which you spoke about, industrial, railways, defense, what can be the contribution from that or is it largely from the current segment that you're doing?
No, Abhishek, we guided that the Electronics division and the mobility application division, which is railway subsystem division, Sidwal, both are likely to double its revenue in the next 2 years' time. And the reasoning is very simple. We are adding new applications, new product categories, new customers, and we are also deep diving into the bill of material of more passenger cars.
So earlier, as explained, we were just giving 4% of the bill of material of a passenger car, which was only air conditioner as a product category. But now we are -- we have entered into multiple product categories, which orders have also started flowing in. And that's why we are very confident of achieving the doubling of revenues.
Sir, my question was that this new product which you're adding, what can be the contribution of top line when you double it in the next 2 years? Will it be like 5%, 10% or can it be meaningfully higher, is what I was trying to understand?
No, it will start with smaller number normally because these are very technical oriented products. So customers will not give you 100% of share of business on day 1. So we started receiving orders. Our supplies will start going for next financial year.
So next year, I would say the contribution should be about 10% to 15%, but 2 years from now, the contribution will be almost as big as 35% to 40%.
Got it. So major portion of growth will come in from newer products [indiscernible]...
That's right, yes.
And just 1 other thing in terms of the gross margins. We see some improvement there both on stand-alone and consol. So how are you looking at the overall competitive scenario of quality inflation? Just some comments that will be helpful sir, in terms of the gross margin.
As far as right now, if you see the scenario, the commodities have more or less settled and [indiscernible], so we don't see any big spikes coming in from commodity cycle. If it does to happen, we've demonstrated in past also that we are able to pass on to our customers on a quarterly lag basis. So because we are entering into better profile of products category moving forward in Electronics and in mobility applications. So on a consol level, there should be seeing some -- some margin improvement should be seen.
[Operator Instructions] Our next question is from the line of Madhav from FIL. May I request the management, we move to the next question as there is no response. Our next question is from the line of Deepak Krishnan from Kotak Institutional Equities.
Sir just wanted to sort of [indiscernible] margin will be for the [Technical Difficulty]
Mr. Deepak Krishnan may we request you to use your handset, please?
Yes, I'm on handset mode. Can you hear me fine?
Yes. Now we can hear you, sir. Please go ahead.
Yes, I just wanted to sort of understand the weakness in motor segment margin this particular quarter. What was the factor that we back to single digit after sustaining at double digits for a long time?
In the motors division, it was particularly because we sold more of a BLDC motors, which have a lesser margin businesses and our export shipments did not happen the way we anticipated. So that's the reason was a small dip, but I think the double-digit numbers are maintainable for this division.
For the full year, we should be back to double digit is...
That's right. Yes.
And in terms of overall inventory given how Q2 was and maybe early part of festive season, how do you see the AC market evolving, just Q2 and Q3, any sense of how the market trends have been so far?
Market trend, as I explained earlier again, I'll repeat it again. It's basically what we are seeing is big signals from various customers. Some of them are sitting with inventories, some of them have been able to liquidate them and some of them have some liquidated some models, but some models are stuck.
So overall, if I talk about the industry level, industry is heading towards a normalized inventory level by -- I think Q3 we should be able to -- by end of Q3, we should be able to see a completely normalized inventory levels. So we should start Q4 at a good note.
[Operator Instructions] Our next question is from the line of Alok Deshpande from Nuvama Institutional Equities.
Two questions. First on the Electronics division, you mentioned about the growth and the margins. If you could give some sense on what can be the typical working capital dynamics going forward? What would be the asset turns on this? That is question number one. And secondly, any outlook that you can give on the motors part, I mean strategy there -- beyond this year?
Alok, can you just repeat your second question? The first one was the Electronics division. Second one was?
On motors, sir, motors. The strategy going forward on motors beyond this year?
Okay. So on the Electronics side, the net working capital days, they are not much. I mean the asset turns are pretty good in that division. The asset turns are as good as about 11 to 12 and ROCE is in that the division is in the range of 26% to 27%.
Net working capital days will be in the range of about 20, 25 days. So we expect the -- it should be in the same range moving forward as well. And on the motors front, what we are doing is we are opening our global doors as well as we have entered into industry and commercial application of air conditioners.
We have started giving motors for VRV applications for ductable, package units, for fan coil units, et cetera. That's also moving positive for us. And plus, of course, in the room air conditioner division, we did not had BLDC motor, which we have now been able to successfully launch.
So this is one part of the strategy. Second part of the strategy is we are entering into washing machine motors and chimney motors. Probably next year, we could see some orders coming from washing machine sectors also.
So only a chance that growth will accelerate in motors?
Yes, we expect decent growth in next year. I think if all goes positive, we could see a growth rate of about 30% to 35% in the motor space over this year next year.
Our next question is from the line of Aadesh from Motilal AMC.
Sir, in Sidwal we are seeing that your current order book is around INR 1,100-odd crores. Sir, any sense on where can this number settle over the next 2 to 3 years?
I mean a lot of activities are going on in that division. So very difficult to give you a number, but if our global doors open, which we are likely to open, it can be a substantial number to add up to this number. But we can't give that number right now. I think that's why we have guided that we are confident of doubling the revenue in next 2 years. But yes, that division is heading towards the very growth -- robust growth moving forward.
Right. So sir, doubling of revenues will be from FY '24 base or FY '23 base?
'24 base, current year base.
Our next question is from the line of Shah from JM Financial Asset Management.
Sir, my question is with respect to the expansion that you are making that is into the EV auto space, can you please describe or just speak 2 lines on it as to whether it is a 2-wheeler, 4-wheeler, where exactly, what domain exactly are you planning in that space? And what is the right to win versus that of the other peers?
We have cracked 4-wheeler EV costs, and we have not become the Tier 1, we have become Tier 2 supplier right now. And we are adding 2-wheelers EV also very soon. I think probably by quarter 4, we should be able to add 2-wheeler also because that's a very focused segment for us.
What we are offering uniquely is the geographical spread as well as our R&D capabilities, which we have built over the last 5 years. So that's the uniqueness which we are offering. And we have plants in North India, west part of India and in the southern part of India. So that's helping us in this strategy.
Understood. Are we in a position to name any clients?
No, that's NDA has signed. That's a company-sensitive information.
Our next question is from the line of Dhananjai Bagrodia from ASK.
Congratulations on decent number. Just wanted to ask you, between your room AC and motors, what would have been the split this quarter?
So room AC has been on a consol level, it has come down to 40%. And motors...
This -- number-wise, what would have been, let's say, last quarter was [ 1,242 ] what would have been this quarter?
Sorry?
Last quarter, it was 1,242 room AC what would have been this quarter?
I don't have the number right now. Sachin, do you have the number with you? So Dhananjai what we'll do is, we'll send you the numbers later on.
Okay, sure. And so just to clarify, what would be your CapEx for this quarter and -- for this year and what is your [indiscernible] CapEx this year?
So this year, we guided that we will be in the range of INR 350 crores to INR 380 crores.
Ladies and gentlemen, due to time constraints, that was the last question of our question-and-answer session. I would now like to hand the conference over to Mr. Jasbir Singh for closing comments.
Thank you, everyone, for joining on the call. And I hope we have been able to address all your queries. I think 2 queries have not been addressed, which we will be sending separately to Dhananjai and to Natasha. For any further information, kindly get in touch with Rohit or SGA, our Investor Relations advisers. Thank you very much, and have a good day ahead.
Thank you. On behalf of Amber Enterprises India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.