Amber Enterprises India Ltd

NSE:AMBER

Earnings Call Transcript 2024-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to Amber Enterprises India Limited Q4 and 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 are not guarantees of future future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded.

[Audio Gap]

[Jasbir Singh, executive]

[Audio Gap] Managing Director; Mr. Sudhir Goyal, our CFO; Mr. Sanjay Arora, Whole-Time Director of ILJIN Electronics; and our Investor Relations advisers, SGA. We have uploaded our results presentation on the exchanges, and I hope everybody had an opportunity to go through the same.

FY '23-'24 has been a year of resilience and growth for Amber. And in this 1 year, we have strengthened our portfolio and market offerings with strategic diversifications to new growth segments. From a core RAC player, we have transitioned towards a diversified manufacturing company, supported with multiple acquisitions and MoUs that we did during the year, further fortifying our position in markets.

Amber, with the DNA of manufacturing, is completely aligned with this transformative journey and is scripting its role through localization and backward integration of consumer durables and its components, EMS and railway subsystem and mobility.

I'll now take you through some highlights on the consumer table division. Our journey, as you all know, began from room air conditioner sector initially focusing on window ACs then expanding into split units, then inverters, later branching out into conditioners, and higher-tonnage package units.

As the industry landscape evolved with majority of the customers looking to shift assembly businesses in-house, we quickly recognized the need to adapt our strategies accordingly and diversify our portfolio. Initially, this involved transitioning towards applying components to RAC customers with the aim of maintaining our market share in this segment at around 27% in value terms.

I am pleased to report that we have successfully upheld this share and are optimistic about sustaining it moving forward. Additionally, we expanded into supplying components of nonroom AC applications, such as telecom components, smart meter components, automobile components, refrigerator, washing machine, microwave components and more.

As a result of the strategic shift, our contribution from room ACs has decreased from 72% in FY '18 to just 40% in FY '24. As guided during previous calls, our RAC top line was hit due to brands taking RAC assembly in-house, and the reflection of the same is evident in our top line of FY '24.

This was a well-known transition, and hence, we diversified our offerings in the component space, which are more margin accretive. Further, 2 more customers will begin their plant by next quarter and post that, the business model will move towards stability and growth will move in tandem with the industry trend.

Glad to share that due to high temperatures and good secondary sales in the month of April and May, we are moving with a run rate of 20% growth and expect the same growth by year-end for this division. Also, our operating EBITDA margins in Consumer Durable division have increased by 100 basis points, to 7% now, which is reflective of our component strategy with better margins.

I'm also glad to share that Amber received a PLI grant of INR 15 crores for manufacturing of AC components. On the JV with continuing with the same thought process of strengthening our position in the consumer durables space, we have entered into a 50-50 JV with Resojet Private Limited, part of the Radian Group company for manufacturing of fully automatic top- and front-load washing machines.

This joint venture will propel Amber's diversification beyond air conditioners in finished goods into the washing machine and its component segment, thereby, further solidifying our position within the consumer durable market.

Mass production for -- from the new plant will commence from H2 second half this year, where we expect around 40,000 washing machines to be produced in this year, which will further take it to 1,25,000 in next financial year. We have already onboarded a couple of customers and the trials are currently going on.

Through this JV, we gained access to manufacturing washing machine, thereby allowing us to offer a wider range of high-quality products to our customers.

Now I will take you through highlights on Electronics division. In the past 5 years, our strength, which started from providing PCBA solution for inverter AC, has now diversified into providing solutions for home appliances, consumer electronics, hearable and wearable telecom, smart meters and automobile segments.

We have further amplified our offerings by making an entry into manufacturing of PCBs which, going forward, will open new avenues for us as a sector of aerospace, defense, medical, electronics, EV, mobile and energy solutions, amongst others.

We acquired 60% stake in Ascent Circuits for manufacturing of printed circuit boards, single-sided, double-sided multilayer and RFPCB. The company has been catering to marquee customers such as ISRO, Bell, BHEL automotive component customers, telecom, consumer electronic clients, both multinational and domestic who have been driving India's growth journey.

This acquisition will enable us to offer solutions to applications such as aerospace and defense, medical, energy solutions, et cetera. This acquisition strengthens our AMS portfolio by enhancing our presence in passive components of PCB assemblies. This uniquely positioned number as a leading player in the electronic EMS space.

Further, our MoU with South Korea, Korea Circuit, through our recent venture Ascent Circuits for manufacturing of flex HDI and semiconductor substrates, which we in India will bolster numbers electronics, EMS play. This MoU will enhance the capability of Ascent Circuits for providing solutions to the mobile and semiconductor industry, which has been a focus of the government recently.

This association between Amber and Korea Circuit will envelop the entire portfolio of PCBs required for various applications in India electronic manufacturing growth story that is HBI, Flex semiconductor substrate, multilayer, double layer, single-sided, et cetera.

Also, the recent decision by government to impose antidumping duty on imported printed circuit boards will settle the dust of import and make the road clear for localization of boards in the country. In this electronic EMS division, we have traveled the journey from 3% EBITDA in 2018 to 5.6% in FY '24.

Now going forward, we are confident to touch EBITDA range in the range of 7.5% to 8% for the division in the current year. On the railway subsystem and Mobility division. As you all are aware that last year, we expanded our portfolio from HVAC to doors and through with ultimate group and also added pantry systems in Sidwal. We are glad to share that during the year of FY '24, we received our first orders for doors and gangways from 3 new customers.

In Phase 1, we shall assemble these new products. And in Phase 2, complete manufacturing will begin from quarter 1 FY '26 onwards. During the year, we did a strategic alliance with Titagarh by investing in Firema in Italy and also did a JV with ILJIN of South Korea for a couple of years and pantographs.

We are also glad to inform that our defense portfolio in Sidwal is gaining momentum. The order book for the defense has moved double digit during this year, and we are expanding our product portfolios for specialized terrain vehicles, slip-on air conditioners, et cetera.

For expanding our capacities we have done a groundbreaking ceremony for our upcoming greenfield facility in Faridabad and construction is in full swing. This new facility shall have state-of-art manufacturing facility for energy-efficient air conditioners, doors and gangways for railways and metros and pantry systems, we expect commencement of production from this facility in Q1 in next financial year. Another brownfield expansion will be done for using products in the country -- in current financial year.

We expect to receive all clearances and approvals from customers in FY '26 and expect to commence production of ILJIN products that is couplers, pantographs and gearbox, by quarter 4 of FY '26.

With all the above-mentioned initiatives, Sidwal can now give solutions up to approximately [indiscernible] which expands our addressable market multifold. FY '25 shall be the year of execution and customer approvals for these new products and the real ramp-up in revenue for all new product categories shall start from second half of FY '26 onwards, which is in line to the rolling plan of new Vande Bharat Express trains.

I shall now request Sudhir Goyal, our CFO, to take you through the consolidated financial highlights.

[Sudhir Goyal, executive]

Hi. Good morning, everyone. So now I will take you to the consolidated highlights of the financials. So on the revenue front for financial year '24, revenue stood at INR 6,729 crores compared to INR 6,927 crores in financial year '23. We have reported revenue of INR 2,806 crores in quarter 4 financial year '24 versus revenue of INR 3,003 crores in quarter 4 financial year '23. .

Operating EBITDA for financial year '24 stood at INR 519 crores versus INR 475 crores in financial year '23, a growth of 9% for quarter 4 financial year '24. Operating EBITDA stood at INR 234 crores compared to INR 204 crores in corresponding quarter last year.

Operating EBITDA is before impact of ESOP expenses and other nonoperating income and expenses. Operating EBITDA margin for financial year '24 stood at 7.7% versus 6.9% in the financial year '23. PAT for the financial year '24 stood at INR 139 crores versus INR 164 crores in financial year '23.

For quarter 4 financial year '24, PAT stood at INR 99 crores versus INR 108 crores in quarter 4 financial year '23. Net debt for March '24 stood at INR 615 crores from INR 588 crores in the March 2023. Working capital days for March '24 stood at 13 days as compared to 29 days in March '23. Overall CapEx for financial year '24 stood at INR 373 crores compared to INR 698 crores in financial year '23. We plan to incur CapEx of INR 350 crores to INR 375 crores for financial year '25.

Due to the anti-damping duty imposition on the printed circuit boards, new venues or opportunities are opening up and expect marquee customer addition in auto and IT-related products category and consumer durables. We are evaluating our expansion plan for the printed circuit board for Make in India and shall inform once the decision of total capacity expansion has been taken considering all the government incentives in place.

Coming to the divisional highlights. We shall now take you through all the 3 divisional highlights, which are as follows: the Consumer Durables division has reported total revenue of INR 5,009 crores for financial year '24 compared to INR 5,380 crores in financial year '23.

For quarter 4 financial year '24, revenue stood at INR 2,199 crores compared to INR 2,475 crores in quarter 4 financial year '23. The operating EBITDA stood at INR 352 crores in financial year '24 versus INR 325 crores in financial year '23. The operating EBITDA in quarter 4 stood at INR 179 crores compared to INR 156 crores in quarter 4 financial year '23.

We expect margin expansion in this division due to our shift of strategy towards components and further diversifying into manufacturing of fully automatic top load and front load washing machines and its components. We expect to maintain our share of business of around 27% of manufacturing footprint in value terms in our RAC division.

The Electronic division has reported total revenue of INR 1,241 crores for financial year '24 compared to INR 1,125 crores in financial year '23. For quarter 4 financial year '24, revenue stood at INR 484 crores compared to INR 415 crores in quarter 4 financial year '23.

The operating EBITDA stood at INR 69 crores in financial year '24 versus INR 51 crores in financial year '23. The operating EBITDA in quarter 4 financial year '24 stood at INR 33 crores compared to INR 21 crores in quarter 4 financial year '23.

With marquee development during the year such as customer addition in telecom, autumn wheel and hearable space, onboarding large smart metering business and customers in automotive segments.

ILJIN Elgin entering JV with next phase for manufacturing part variables, acquisition of Ascent Circuits for spending portfolio into PCB boards for various applications and Ascent signing MoU with Korea Circuit manufacturer Flex, HBI, semiconductor substrate PCBs. With that development, we expect this division to increase its margin going forward.

We are targeting an EBITDA margin in the range of 7.5% to 8% and expect this division to grow by about 35% in the current financial year '25. The Railway Subsystem and Mobility division has reported total revenue of INR 480 crores for financial year '24 compared to INR 420 crores -- INR 422 crores in financial year '23.

For quarter 4 financial year '24, revenue stood at INR 123 crores compared to INR 113 crores in quarter 4 financial year '23. The operating EBITDA stood at INR 98 crores in financial year '24 versus INR 99 crores in financial year '24. The operating EBITDA in quarter 4 financial year '24 stood at INR 22 crores compared to INR 28 crores in quarter 4 financial year '23.

Just to reiterate for the benefit of all, our railway subsystem and Mobility division has witnessed remarkable developments during the year, manufacturing air conditioner system for the Namo Bharat trains, Sidwal strategic partnership with Titagarh Rail Systems and now with with rail subsystems, JV with Ugin machinery. These developments places Amber group in a sweet spot to increase its wallet share and bond per passenger coach, which is in line with our strategy.

Further, we have received our first order for new category added in financial year '24, that is doors and gangway. Glad to share that new orders for doors and gangways received from 3 customers amounting to INR 515 crores. This makes total order book of Sidwal at approximately INR 2,000 crores.

With good order book in place, increasing product offering per percentage coach and Sidwal getting a preferred supplier status, we expect Railway Subsystem and Mobility division to double its revenue in the next 2 to 3 financial years.

With all the initiatives in respective divisions, we have established a robust foundation for strong growth over the next decade. We expect further margin improvement in this current financial year at a consol level, by at least 50 basis points to 75 basis points, and hence, ROC level to bounce back above 15% in financial year '25.

With this, I would now open the floor for question-and-answer. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Ravi Swaminathan from Avendus Spark.

[Ravi Swaminathan, analyst]

My first question is with respect to the railway business. There seems to be a lot of exciting opportunity over there, and you are also increasing your capability in that. Just wanted to get your sense with respect to Sidwal, how is the opportunity that we need to think of with respect to the traditional railways, the Vande Bharat trains, defense also you had mentioned there's a bit of opportunity and there has been a lot of work going on in data centers also.

What can be the addressable market over the next 2, 3 years that you can talk about? And with respect to the Titagarh joint venture, would we be addressing the opportunity of Vande Bharat only from the Titagarh angle? Or we'll be in a position to supply to other Vande Bharat manufacturers also -- train manufacturers also? If you can give your broad thought process?

[Jasbir Singh, executive]

Yes, Ravi, basically, this modernization program, which was picked in by Government of India for complete railway ecosystem, which includes new Vande Bharat Express and also urban mobility, where new cities are getting new metro lines and the existing metro lines are also getting expanded. This opens up a wide multifold business opportunity for a company like Sidwal.

I'll give you just a brief data number. As for the recent media reports published by Ministry of Railway, they are now coming up with a grand plan of almost about 3,000 new when the Vande Bharat Express is to be rolled on in next 5 to 6 years.

Now new Vande Bharat Express will have 24 coaches. These are sleeper coaches in 1 Vande Bharat Express. So that means almost about 722,000 coaches cars will be required to be delivered in the next 5 to 6 years. And as a Sidwal on a comprehensive solution provider at what level we have become supplying almost several components what goes into passenger cars, addressing almost INR 1.1 crore per car.

So that is only opportunity of Vande Bharat I'm talking to you currently, which is going to come in the next 5 to 6 years. And also to clear, there are almost close to about 550 to 600 coaches which are required in the metro space also. Every day -- every year, metro lines are expanding. That business is also expanding.

And we have clearances from all customers who are giving rolling stock to metro divisions like Alstom, they're all our customer is our customer. Titagarh, of course, has become our customer and new customers like and Siemens and all, they have also been onboarded.

So we are not -- yes, with Titagarh, we have a preferred supplier status for -- as a partner with them. But we are free to deliver the solutions to everybody, and we are receiving the order book from other companies also. So that is what -- so we are very excited with this capability enhancement, which we have done. This has been a very strategic move. I think post the current year of FY '25, where all the new factory will be put up plus the new customer approval will be coming in. Order book has already started flowing in for the new product categories. And we are excited for this journey going forward.

[Ravi Swaminathan, analyst]

Understood. And all these products will be manufacturing here, pantries, doors, gangways, couplers or will there be a sourcing strategy for this?

[Jasbir Singh, executive]

No, all these will be manufactured here only in India. We have 1 factory in Faridabad. Second factory groundbreaking ceremony has been done. We are -- the construction is in pulsing. The using products, which are gears, couplers and pantographs, that team is yet to come from Korea. And once they come, we will finalize the locations. And once the location is finalized, then we'll go ahead with the -- creating the factory for those products also.

[Ravi Swaminathan, analyst]

Understood. And with respect to...

[Operator]

Sorry to interrupt sir. I just request you to rejoin the queue for the follow-up questions, please. The next question is from the line of Natasha Jain from Nirmal Bang.

[Natasha Jain, analyst]

So first off, it's encouraging to see that our RAC component story has started paying out. So congratulations on that. sir, my question first is on the reported numbers so your segmental number, in the PPT versus what you've published, especially at EBIT level for electronics, there's a very stark difference. On your published number, I think there is a degrowth of almost 470 basis points and on the PPT, there is an increase of 170 basis points.

So sir, if you can tell us what's the difference here? Because then if I take full impact of ESOP, there is still a decline. So if you could call out what are these nonoperating income and expenses? And secondly, on that segment, again, we see tepid growth in FY '24. Now our guidance has been that we want to clock in 50% top line CAGR. So like how you explained for Sidwal, if you could tell us the strategy here also going forward? How can we get back on that growth part?

[Jasbir Singh, executive]

So basically, on the growth part, like PCBAs, we have already expanded our applications. We are no more consumer durable application company. We are now giving application solutions for telecom industry for hearable variables for smart meters for auto players also. And plus, we have by acquisition of Ascent Circuits, which is largely into defense, aerospace and predominantly into auto space.

This expands our portfolio of offerings, both into PCB as well as PCBA world. And that's how we are very confident of achieving because our PCB margin as compared to our PCBA business. But on a blended basis, now we will be -- we are targeting to touch 7.5% to 8% in this current financial year.

As far as on the other is concerned, I would request Sudhir to answer that question.

[Sudhir Goyal, executive]

So [indiscernible] which you mentioned that there's a difference in unit division by performance versus the control. So if you see that control level, operating EBITDA margin is 7.7% and on the divisional front, like Consumer Durable division is having 7%, Electronics is having 5.6% operating EBITDA margin and the Railway Subsystem is having 20.4%. So weighted average is coming to 7.7%. If there is some more differences coming, we can have a separate call and I'll discuss with you and give you the proper explanation.

On the operating EBITDA adjustments. So one is the ESOPs, which is totaling to around INR 17.7 crores. Then we have 1 fixed assets written-off because fixed assets -- gain on the sale of fixed assets comes in the other income, but loss is coming in the other expenses so that we have netted off amounting around INR 8.5 crores, which is including put-call option adjustment on the acquisition. And these are the major differences, which will make it to the operating EBITDA level from the normal EBITDA.

[Operator]

The next question is from the line of Dhruv Jain from AMBIT Capital.

[Dhruv Jain, analyst]

So sir, first question was on the working capital side, right? So we've seen a very sharp improvement in working capital. So I just wanted to understand the sustainability of the same, you expect that the working capital is now [indiscernible] 13 days, 15 days kind of number?

[Jasbir Singh, executive]

Yes. So -- this is not a normalized level of 13 days. Those are normalized level in the year-end level. We are expecting it should be in the range of 20 to 25 days. But this year, because of the some new customers we onboarded, we have a better terms, and we got the payment on time. So that helped us to reduce the payment terms, plus increasing the payment term of the creditors.

[Dhruv Jain, analyst]

Okay. My second question was on the industry side, so in the last 1, 1.5 years, we have seen that there has been a lot of capacities put up by brands and partners. So there was that risk of resourcing for partners. However, we've seen this summer being very strong. So where are we in terms of the demand and supply in terms of the capacities or the capacity utilization of the AC industry as such. Do you expect that the risk that was thought to be, say, for 2 years or 3 years in terms of lower RAC sales could actually play out earlier?

[Jasbir Singh, executive]

Well, Dhruv, basically, these are all recent units, manufacturing plants which have been put up by various brands. And whenever a brand puts up a factory, they plan longer for the capacities. And I think, yes, this season has been in a very positive season.

So capacity utilization will increase much beyond -- I mean, we were not expecting this, but -- if we see from a long-term perspective, you may be right that in case these kind of trend of good season continues, then maybe the capacity utilization gets over in the next 2 to 3 years only. But we have mitigated 2 large risks in our business model. One is since we are applying to the entire industry, so brand exchanging market shares do not impact us.

And second, basically on the in-sourcing and outsourcing function, which is not -- which is beyond our control, which is there -- which is decided by the brands themselves. They keep on calculating between make versus buy. But good part is that we, as a solution provider, we are also enjoying good seasons, and we have seen a good uptake, both in finished goods as well as in our component division.

I think we are already -- in April and May month, we are 20%-plus at run rate of that. And if the quarter 4 also have a good season, probably industry will see in 20% to 25% range improvement in the whole industry level.

[Operator]

The next question is from the line of Sonali Salgaonkar from Jefferies.

[Sonali Salgaonkar, analyst]

Congratulations on this continued diversification into niche components. Sir, my first question is regarding the multiple new product that you have recently entered. So any -- the opportunity of each of these components is different and each of these will accrue to your top line in FY '25. So any kind of bulk up guidance in terms of revenue you would like to this? And also in Sidwal, what percentage of your overall top line do you expect Sidwal to come through in the next 3 to 4 years?

[Jasbir Singh, executive]

On our guidance, I mean, since all these 3 divisions are on a growth path, I think it's very difficult to predict how -- which division will contribute how much in the full financial year. But yes, we are seeing positive uptake in each division. I think electronics is on a growth path of delivering about 30%, 35% range on the top line basis and also margin expansion, we expect it to touch to 7.5% to 8% this year.

On Sidwal level, as Sidwal business is actually linked with the rolling off new Vande Bharat Express, so if you see all the order book, which Indian Railways has given for Vande Bharat Express. So this financial year, there are very less trains which are rolling out. But next year, the number of trains are exponentially increasing.

And FY '27 is the peak year where it's an exponential increase in the number of trains, which will be rolled out from all the customers, all the rolling stock companies. So our business is also -- we expect Sidwal to grow in that range only. As far as right now is concerned, we have got good order book our defense order book, which used to be earlier at generally about INR 20 crores, INR 25 crores as all of a sudden, we have shifted to INR 70 crores, and we are expecting that in line. And the more we are adding some more products also for the defense offering.

In metro space, also the same kind of about 10% to 15% growth is coming. And on the consumer durable side, as I explained, we are running with a run rate of 20% right now. So on a blended basis, it's very difficult to guide right now on the top line. But yes, you should expect a good growth on the -- and good bottom line growth on a consol level.

[Sonali Salgaonkar, analyst]

Got it, sir. Sir, secondly, on your Resojet, you did mention 40,000 washing machines in F '25. Any customer names you would like to give at this point in time in terms of onboarding of perspective on boarding? And secondly, it's a JV. So what kind of numbers do you expect to accrue to Amber in FY '25 or going ahead?

[Jasbir Singh, executive]

So it's basically a PAT which will be consolidated. The top line will not be consolidated in the control balance sheet because it's a 50-50 JV. On the 40,000 numbers, have been -- that's what we are aiming to deliver with the clients which have been already onboarded for which the approvals are right now going on. I cannot name all the clients because we have NDA signed with them. But these are mix of multinationals, domestic and online players. And I think this will start contributing significantly after 2 years in the PAT level also.

But it's a good growth story. The assembly line has been put up. Already, the products have started rolling out. We have started giving samples to customers, customers have visited our facilities. We have now onboarded almost about 4 customers and we expect to add 3 more customers going in this year.

[Sonali Salgaonkar, analyst]

Got it. Sir, last question from my side, any pricing actions you have taken in Q1, especially in your RAC business or expected to take?

[Jasbir Singh, executive]

Price increases. I mean since there is hardly any movement fluctuations of commodity sites. But only the copper is a commodity which is skyrocketing right now. The LME is shot up to that, which is definitely on a quarterly basis as we have done in past, it will be done.

[Operator]

The next question is from the line of Bhoomika Nair from DAM Capital.

[Bhoomika Nair, analyst]

A couple of questions. One on the electronics side. For the quarter, have we included Ascent as well for fourth quarter given that...

[Jasbir Singh, executive]

Yes, so it's only 2 months of revenue which has been added, which is INR 43 crores, which has been added in this financial year FY '24.

[Bhoomika Nair, analyst]

INR 43 crores of revenues and how much would be the corresponding EBITDA?

[Jasbir Singh, executive]

EBITDA will be INR 5.8 crores.

[Bhoomika Nair, analyst]

Okay. Okay. Got it. Got it. Sir, now if you can just talk about how you did speak about a lot of demand and favorable import duty, which will help us and grow. How do you expect this business to really pan out into FY '25-'26? And how should we pencil in the growth? When you're talking about 35% growth for this segment, I'm assuming this is excluding the SME business, would that be a fair statement to make?

[Jasbir Singh, executive]

No. Bhoomika, this will be including the Ascent business, but Ascent on its own as a company is witnessing a huge flow of customers and inquiries because of the anti-dumping duties. And anti-dumping duty is imposed is still 6 layer of PCB, which is generally applications are basically automobile, IT and consumer arable and already very big auto companies, large 4-wheeler companies have started visiting they're auditing. Their process is to audit and then approve is about 6 to 8 months' time, which they take. That process has started with almost 5 customers.

And if I consolidate their demand of customers, this company has a potential to grow by 100% next year. But it will all depend because we want to expand the capacities in line to the government incentives. There are a spec scheme which is available, and there is state incentives. So almost about 45% we will get back.

So right now, we are taking inputs from everybody. We are also meeting government Ministry of Electronics and IT officials for clarifying us on the spec scheme. And once the clarification comes and the customers' commitments are onboarded, then definitely we will roll on.

But yes, we have a plan to bring up India's largest PCB manufacturing plant in the Ascent. Timing is very difficult to predict right now because it will all depend on the government incentives. So we will move in line to that.

[Sudhir Goyal, executive]

And 1 correction here that like sir has said, operating EBITDA percent for 2 months is INR 7.1 crores instead of INR 5.8 crores.

[Bhoomika Nair, analyst]

Okay. Got it. Got it. Sir, you're in the Electronics segment itself, right, I mean, 70% is really the consumer durable segment. Within that, is it possible to understand how is RAC as a percentage of this Electronics segment?

[Jasbir Singh, executive]

Out of that, 70%, almost 30% will be RAC, 25% to 30% will be RAC.

[Operator]

The next question is from the line of Rahul Gajare from Haitong Securities.

[Rahul Gajare, analyst]

Sir, I've got 2 questions. One is on financial and one is on a slightly longer time frame. Now last year, in FY '24, we had an EBITDA of almost INR 500 crores. And we landed up booking almost 70% of that cost or expense under depreciation and interest. And this number has actually increased in the last couple of years.

I think that number was holding around 50%, 55%, and that has gone to almost 70%. And with newer venture and with more CapEx that is lined up, this number is, I would think, will increase, at least on the depreciation side. Now you understand this is certainly not good from a long-term perspective. How do you intend to manage your financials over the next, say, 3 to 5 years? So that's the first question.

[Sudhir Goyal, executive]

Yes. So on the EBITDA front, like you said in the last year, it was INR 470 crores including the other income and not the INR 500 crores, and operating EBITDA was INR 475 crores, which is excluding the other income and the nonoperating expenses, plus ESOP we have not included in the operating EBITDA.

And this year, our -- that INR 470 crores has become INR 547 crores, percentage has improved from 6.79% to 8.13%. And the operating EBITDA at apple-to-apple comparison from INR 475 crores, it has come to INR 519 crores.

Yes, on the depreciation front and the interest, there is a big jump in the expenditure because of the growth prospects, which we are looking into all the 3 divisions that is contributing big in the current financial in the last financial year.

It is going at the same level because of the -- it definitely will not get reduced in the near future. But in trust, we are targeting that it will not increase substantially in the current financial year. And we'll be moving to much more profitability in the coming -- current financial year and the future financial years. And margins are improving because of our component strategy. And PAT will also improve substantially in the current year as well as in the future years.

[Rahul Gajare, analyst]

Okay. So that is likely to remain high is what you are saying?

[Sudhir Goyal, executive]

Appreciation, yes. But interest will -- this year...

[Rahul Gajare, analyst]

I'm making that these number as a percentage of EBITDA because whatever operating profit, you may include ESOP or other things. It's just a very high number basically. I just wanted to understand your thought process over the next 3 to 5 years is what I was asking. Fair enough. So it's going to be slightly higher for the next couple of years.

Sir, my second question is this company has diversified significantly over the last couple of years from electronics to train subsystems, including several MoUs stakes in companies. How do you intend to manage all these activities? Do you have business head for this? And what are the parameters you as an MD would be looking for as far as performance of these JVs, MoU, entities is concerned? That's my last question.

[Jasbir Singh, executive]

So it's all led by professionals. At each level, we have a division CEO, who is heading the RAC division, then we have Components division CEO, Electronics division CEO is right now sitting with us, Mr. Sanjay Arora; and Mobility is headed by [indiscernible] who is not on the call today, but yes.

So everybody, they are doing the product portfolio, they are adding customers profile. They are increasing the wallet share within the existing customers and also increasing the geographic profile of each division. And all these JVs and MoUs have been triggered by them only. I mean I was just the catalyst of going and signing the agreement largely.

But it's all come from them because every division is excited for their own grass growth path. So it's a 3 teams recur we are working on. Consumption team is what consumer durable business is, electronics team is what we all know about EMS and the infra team, which is led by the government initiatives on the infra spending for railways and defense sector.

[Rahul Gajare, analyst]

Okay. Okay. And this CapEx that you've done last year, that was some INR 370-odd crores...

[Operator]

Sorry to interrupt, sir. The next question is from the line of Anupam Goswami from SUD Life.

[Anupam Goswami, analyst]

Sir, my first question on the Sidwal. When you're saying that you're going to expand Sidwal's portfolio and venturing into new railways and segments. Do you intend to keep the margins also -- I mean do the margin will stay the same, how Sidwal has produced a little higher on the 20%, 23% margins? Because we have seen some margin dilution coming in this quarter as well as the ROCE.

[Jasbir Singh, executive]

No, margins actually for HVAC will continue to remain in that space. But as we add new product categories like doors and gangways, they are slightly little margins of 18% kind of thing and couplers and gears and pantograph are also in the range of 18% to 19%. So we expect a blended basis, I think, about 18% to 20% margin for the Sidwal

[Anupam Goswami, analyst]

Okay, sir. And sir, you told about consumer or RACs or consumer durables growing at 15%, 20%. Do we say this even at when our brands are putting up their own factories, how do we -- if you can share some light on this, how do we expect to grow such a rate?

[Jasbir Singh, executive]

So brands have already put up their factories, capacities have been created, and we shifted our strategies for supplying more components to brand rather than finished goods. And that's why there was a structural shift in our business model, which is now getting settled because most of the plants are -- have started at the brand level and 2 more plants are yet to start, which I expect in next quarter or so, those plants will also start.

Post that, we will be supplying both, finished goods and the components. So we have given this flexibility to brands. And as of now, we are maintaining our 27% market share on the manufacturing footprint of complete room AC sector. So it doesn't matter to us whether we supply full air conditioner or a semi knockdown air conditioner or just the components out of it. What we as a B2B company focus on is how deeply penetrated we are in each of the brands. And are we having a substantial share of business on the whole industry assets. And we expect this industry to keep on growing in double-digit growth at least for next 10 years.

[Anupam Goswami, analyst]

Just related to this, what explains the Y-o-Y degrown in consumer durables this quarter?

[Jasbir Singh, executive]

So we answered that in our commentary, but I'll reiterate that. It was largely -- we told that in last call that next 4 quarters will be a little above shaky for the top line kind of growth because the brands have taken in-house. So on the top line, brands have -- because of finished goods going less, the top line has got impacted. And we were also impacted by quarter 1 unseasonal rains. So these are the 2 factors why the top line has come down, but margin improvement has come because of the component strategy and other product mix of the other divisions.

[Operator]

The next question is from the line of Pulkit Patni from Goldman.

[Pulkit Patni, analyst]

Sir, the first one is in continuation of what the previous participant asked. Because while you haven't grown the top line much on the consumer durables side, you're seeing 27% market share in AC components is maintained. So it should have reflected in our Electronics division, right, because part of electronics is also AC-related, I'm not sure why that 27% is not reflecting in the growth for the segment? Or have we actually, on an overall basis, lost market share in the AC segment? That's the first question.

[Jasbir Singh, executive]

No. If you see the total addressable market of air conditioners last year, earlier quarter 1 was a dampener because of this unseasonal rains. And that's when we had predicted that industry will grow by 7% to 8%, but it has grown more than that in about 10% range. And the numbers of the coal finished goods have come to about 9.3 million or 9.5 million numbers.

And if you convert them into numbers and versus what Amber has delivered in the RAC and RAC components, we are maintaining the share of 27%. So that's -- nothing has changed on that. But yes, the reflective -- it is not getting reflected because we are not selling more air conditioners. So we are selling components. And in air conditioners, we have passed through with us because compressors and refrigerant other things gets passed through, which we are not producing, which were supplied largely by the brands to us.

So that's not happening right now. That's the reason why it is not getting reflected. And -- but the right way to look at the reflection is from the margin perspective. If we were not maintaining our 27%, we wouldn't have delivered this kind of margin in the -- and the percentage of EBITDA wouldn't have improved.

[Pulkit Patni, analyst]

Sir, probably I'll have to understand that better because I think top line is where the market share should reflect. So anyways, I'll move to the next question. Sir, you have been talking about a 30%, 35% EBITDA growth for the company over 2 to 3 years, and it hasn't come through. So now that you have given some guidance in some of the sectors, is -- are those numbers more like aspirational numbers? Or we have clear visibility, for example, in the Electronics division, 35% growth and 7.5% margin, is that something that is part of our order book or is that part of our aspiration that we'd want to get there?

[Jasbir Singh, executive]

No. We've never told our aspirations mean aspirations are, of course, to do 100% growth every year. But yes, I mean this 7.5% is because of the blend of our strategy of PCB and PCBA business. Our PCBA business today stands 5%-odd, and our PCB business stands at its about 18% to 20% range. So that is a blend why we are confident of achieving 7.5% to 8% range of the consol electronics division bottom line number.

And that's what if you see all the electronic EMS who are delivering to defense aerospace or industrials, they have better margins, and that's what we have done. So we have shifted our strategy towards a better margin businesses.

[Operator]

The next question is from the line of Keyur Pandya from ICIC Life Insurance.

[Keyur Pandya, analyst]

Sir, just 1 clarification. The 35,000 kind of guidance that you have given for the Electronics segment, now INR 1,240 crores of revenue for FY '24 organically probably around INR 1,200 crores, excluding asset. So we are guiding for 35% growth on this INR 1,240 crores revenue, which will include around INR 250 crores or INR 300 crores of revenue from the consolidation of Ascent as well, and which gives us organic growth of 10% to 15%. Is that a correct understanding?

[Jasbir Singh, executive]

Yes, that's a correct understanding. Our PCBA business and the Ascent Circuits put together will deliver us 35%. So we expect this to come in the range of close to about INR 1,800 crores this year.

[Keyur Pandya, analyst]

Okay. And just 1 follow-up. So with all the diversification away from AC, I mean is there any macro reason why organic growth we expect to be lower than what we used to be in say last 2 or 3 years. Is it days or is it some macro challenge? If you can just do some light?

[Jasbir Singh, executive]

No, no, no. Since our B2B segment on the contract manufacturing space has undergone a structural shift because of brands taking assembly in-house. So that assembly, the top line is not coming. And that's the reason we have not -- we are not guiding any number. All what we are saying is that April and May because of good season is delivering -- we are moving at a run rate of 20%.

And if this continues, trend continues, the industry grows by 20%, we will definitely grow by 20%.

[Keyur Pandya, analyst]

Sir, just I was just talking about Electronic segment. The organic growth of 10% to 12%, excluding Ascent consolidation, is there any company specific reason or there is a macro challenge?

[Jasbir Singh, executive]

Organic, there is a little slight understanding here because we were earlier manufacturing NOISE products in ILJIN. Now those products were worth of about INR 400 crores will shift to the new JV. So we are not including that. If we totally talk about the electronics part, it will be close to about 35% growth for ILJIN and NOISE, and this is without NOISE. If we add the NOISE JV, that will be another INR 450-odd crores-plus. So it will be a total of INR 2,200 crores.

[Keyur Pandya, analyst]

Okay. Understood. Point taken. The second and last question, the kind of diversification that we are doing and adding capabilities and the size that we are increasing from the OpEx perspective or expectation from the employee cost perspective, should we see just normal increase that we see say, 10%, 12% kind of growth or because of the talent equation that growth should remain higher for the next couple of years?

[Jasbir Singh, executive]

No, it should remain normal because we've already done the JVs and all the new factories, which are getting -- which we have planned, basically will bring that new revenue also. So it should be in the range, I mean, not exponentially high.

[Operator]

The next question is from the line of Natasha Jain from Nirmal Bang.

[Natasha Jain, analyst]

My question is on your cash flow. So if I see your cash flow in FY '24, there is a very big jump in loans to related parties. Can you just give a little color as to what these related parties are and why has it increased so substantially?

[Sudhir Goyal, executive]

So we have given a loan to related parties, especially 1 is INR 310 crores of OCD, which we have given to ILJIN from Amber to acquire Ascent. That is a larger jump if you have seen. And it is now on 30th of April, it is been -- it has been converted into equity shares. And earlier, we used to have 70% of ILJIN Holdings. Now after that conversion, we are holding 85.6% in ILJIN.

[Operator]

As that was the last question, I now hand the conference over to Mr. Jasbir Singh for closing comments. Over to you, sir.

[Jasbir Singh, executive]

Thank you, everyone, for joining on the call. I hope we have been able to address all your queries. For any further information, please get in touch with Rohit, our Strategic Advisors, our Investor Relations advisers. And have a good day ahead. Thank you very much.

[Operator]

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. Thank you.