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KDDL Ltd
Earnings Call Analysis
Summary
Q4-2024
KDDL Limited reported strong financial performance for FY24, with total income rising by 15% to INR 360 crores and EBITDA growing by 29% to INR 102 crores. The company’s profit after tax surged to INR 220 crores from INR 69 crores the previous year. KDDL introduced a new state-of-the-art bracelet factory in Bangalore and expanded its precision engineering segment by 25%. Despite geopolitical challenges affecting the watch component segment, KDDL remains optimistic about its growth, targeting a 25% CAGR over the next 3-5 years. Additionally, the company announced an interim dividend of INR 58 per share and has plans for a final dividend of INR 4 per share.
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Ladies and gentlemen, good day, and welcome to the KDDL 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, opinion and expectation of the company as on date of this call. These statements are not a guarantee 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. Yashovardhan Saboo, Chairman and Managing Director from KDDL Limited. Thank you, and over to you, sir.
Thank you, and good morning, everyone. Thank you for joining us on the KDDL Limited Quarter 4 and FY '24 Earnings Conference Call. I hope everyone has had a chance to review our financial results and the investor presentation recently posted on the company's website and the stock exchanges. I am accompanied by our CFO and Executive Director, Mr. Sanjeev Kumar Masown; and SGA, our Investor Relations Adviser.
I will start with a short introduction to the diverse businesses that KDDL encompasses. KDDL, it shows originally Kamla Dials and Device Limited, founded in 1981 and headquartered in Chandigarh is a leading manufacturer of components or global watch brands and of high-quality precision stamped components on marking international clients in the electronics, energy, aerospace and automotive and electrical vehicle segments. KDDL's well-known subsidiary Ethos is India's largest and fast-growing -- fastest-growing retailer of luxury watches and other luxury accessories.
In discussing our segment-wide performance, we start with the Engineering segment. And within that, with the watch component segment, which includes dial hands indexes and bracelets. Revenue from the Watch Components segment grew by 10% from INR 224 crores in FY '23 to INR 247 crores in FY '24. The growth would have been higher, but we are witnessing a slowing down in the last quarter on the back of a market correction and watch sales in important markets like China, Europe and Middle East.
The geopolitical strains in Europe and Middle East, the uncertainty in U.S.A. and sluggish Chinese demand predicts a subdued consumer sentiment for all discretionary products, including watches over the next few months in these important global markets. Our export business in watch components is sealing this impact too.
On the other hand, we are pleased to inform you that we have inaugurated our new plant in Bangalore, which manufactures high-quality steel bracelets for watches. This is the first steel bracelet factory in India, which is set up to serve international Swiss customers. This plant will only serve the mid- and high-end Swiss and European watch markets. We have spent approximately INR 35 crores to establish this plant with a capacity of 75,000 in bracelets per year. Tire production and supplies have been made and received very well and commercial production will start very soon. The additional revenue from the bracelet division will compensate the slowdown in the export market for both other watch components, as mentioned already.
The Precision Engineering segment, also known as Eigen Engineering, has shown stellar results and will continue to grow in a very, very ambitious and a very exciting fashion. Revenue for FY '24 stood at INR 95 crores, up 25% from INR 75 crores in the previous year. The revenue growth is attributable to the higher share of export, which is more than 70% of the total revenue.
All segments -- all business segments in our precision engineering business are witnessing good growth and the order position is strong. We continue to get inquiries and new RFQs of very encouraging dimensions for further expansion in the business. We will continue to focus on the export market, primarily from Eigen.
Our ornamental packaging segment, which caters mainly to the domestic market, has also witnessed a strong improvement in demand. Revenue in FY '24 improved by 18% to INR 15 crores from 12.7% in FY '23. We continue seeking high-value premium quality customers in domestic and export markets. For this segment, we are establishing a new facility near Chandigarh with a capacity of 1 million boxes at an estimated cost of INR 8 crores.
With this new facility and the opening up of some new market segments that we are working on, we believe that the Packaging segment will continue to show very handsome growth and develop into a INR 80 crores to INR 100 crores business over the next 5 to 7 years.
Estima AG, this is our watch hands and dials factory in Switzerland. We are happy to announce that Mr. Michel Pauli, a very experienced technology and business leader has joined as the new Managing Director of Estima. In addition, we have made several changes in the operating and leadership team at Estima.
Revenue growth during the last year has been good and the loss has decreased, but we are still not profitable. With the many steps already initiated and in progress for improved capacity utilization and improved technical capabilities, we are confident that we will achieve profitability soon. But because of the unexpected slowing down in the Swiss watch business, this turnaround will probably be delayed by about a year.
Silvercity brand, they are Swiss subsidiary, it became our subsidiary -- a subsidiary of KDDL earlier this year. Its equity capital was increased from INR 2.1 -- sorry, CHF 2.1 million to [ CHF 6.6 ] million. This company will be primarily engaged in the design, development, assembly and marketing of watches.
You know that the company has already acquired the iconic [indiscernible] Swiss made watch brand and plans to launch the revamped watches completely new collections during this year. The launch will be a global launch. Recently, KDDL sold a stake in Ethos Limited. We received approximately INR 193 crores from this stake sale, which includes about INR 122 crores from the stake sale in KDDL -- from KDDL and INR 72 crores as dividend income from Mahen Distribution Limited, which sold some shares of Ethos as well.
This cash will be used for rewarding shareholders and for expansion and growth of the country. We expect our company to grow and continue to grow strongly as economic conditions improve and the consumption rises. I will now invite our CFO, Mr. Sanjeev Masown, an Executive Director, to take you through the company's financial performance. Sanjeev?
Thank you, Mr. Saboo. Good morning, everyone. Initially, I'll take you through the stand-alone financial performance of the company for the quarter 4. During this quarter, the total income rose by 2% to INR 89 crores from INR 87 crores, which were supported in the similar quarter last year. EBITDA for the quarter is 30.4% and value is INR 27.1 crores as compared to INR 22.9 crores reported in the previous year.
EBITDA for the quarter improved by 4.3% on a year-on-year basis. Profit before tax, before exceptional items during the quarter is up by 27% on a year-on-year basis to INR 21.6 crores. Now as we look into the full year financial performance, the total income is up by 15% to INR 360 crores from INR 314 crores reported in the previous year.
EBITDA for the year grew by 29% year-on-year to INR 102 crores in FY '24 and the EBITDA margin stood at 28.5%. Profit before tax before the exceptional items during the year for the FY '24 stood at INR 79.8 crores as compared to INR 58.5 crores in the previous year and witnessing a growth of 36%.
Profit after tax, after considering shares -- sales stake, the shares of the [indiscernible] was sold by the company as well as some exceptional impairment loss. For the financial year '24, the PAT was INR 220 crores as compared to INR 69 crores in FY '23.
Moving to the consolidated performance of the company. During the quarter 4, the total income is up by 16% to INR 357 crores from INR 307 crores in the previous year. EBITDA for the quarter grew by almost 42% year-on-year to INR 70 crores in quarter 4 FY '24. For the quarterly EBITDA stood at 19.6%. These EBITDA numbers are with the Ind AS impact. And the PAT for the quarter, stood at INR 34.8 crores as compared to INR 21.7 crores reported in the previous year, witnessing a season growth of 64%.
Now I move to the full year FY '24 financial performance at a consolidated level. The total income of the company is higher by 25% and recorded revenue of INR 1,420 crores compared to INR 1,139 crores in FY '23. EBITDA for the year grew by 53% year-on-year to INR 270 crores and EBITDA margin stood at 19.5%. PAT for FY '24 was INR 137 crore as compared to INR 77 crores in FY '23 and recording a growth of 79% on a year-on-year basis.
During the year, KDDL manufacturing units spent almost INR 39 crores on the capital expenditure. This excludes the capital expenditure by depots for the growth of the business. And during the current running year, the KDDL CapEx around INR 45 crores for all our businesses.
During the year, the last Board meeting yesterday, the KDDL has announced a final dividend of INR 4 per equity share. This is subject to the approval of the shareholders at the Interim Annual General Meeting. And this is in addition to the interim dividend of INR 58 per share paid in January '24.
Post this dividend, we have an investable surplus of around INR 100 crores and which is planned to be utilized for the growth and development of the company, including finding ways for rewarding shareholders up. With this, I open the floor for question and answer, and I request all the participants to restrict the questions mainly to the KDDL manufacturing business.
Thank you very much. Now the floor is open.
[Operator Instructions] The first question is from the line of Rohit from SK Securities.
I have a couple of questions and especially congratulate on a good set of numbers. Sir my first question is, you have recently started in the bracelet division. Can you please throw some light on this division and how we will do arrays and also this is regulated by [indiscernible] regulations?
Sorry, you said the bracelet division?
Yes. Yes. Bracelet division.
Okay. Okay. What are your other questions Rohit?
I thought my second question is apart from bracelet, what else can be continued as a new segment. So what are our endeavors for other new segments, if there are any?
Okay. Anything else?
No, no.
So where bracelet refers to the what is sometimes called as the metal band. And there are various types of metal bands at the highest quality level, which is what we are making. These are made from solid steel and the steel blocks are machined out of the profiled rod. And then they are polished. It's a very highly specialized nickel-free steel, which is used. And the bracelets that we are manufacturing now in our bracelet division are -- they're trained for the high to the very high-quality brand in Switzerland.
100% of the production will be exported. We have a capacity of 75,000 bracelets per year. It will take some time to reach this production level and sales because there are 2 reasons for that. A, there is a very high level of skill involved in the final finishing of the bracelets, and that takes time to acquire. And second, every design of a bracelet requires a large number of tools were [ used ] to be prepared. So there's a learning curve that is involved in setting up this bracelet and it's coming to the production of 75,000.
This also means that it's a business is a very large more. As I mentioned in my speech, it's the first time that steel bracelet factory is being set up in India for the Swiss market, and we certainly expect it to be very, very successful. More softer Swiss brands the largest production and purchase is from China. And this structure is one of the consequences of the wish of many brands to establish a production base outside China, there is the so-called China Plus One policy. And we have obviously benefited from this, and we will continue to have more business coming our way.
As far as your second question about what else can we do, there is a whole bunch of components in the watch field, which we could produce in the future. The watch case is a very obvious one. Watch case is the housing of the case that contains the movement and the watch. Again, for the export quality -- at high quality levels, there's more manufacturer in India. Most of the manufacturers are either in Switzerland or in China and a few of them in Thailand. So I think there is a pretty significant scope in the watch case business as well.
And then there are other smaller components, which could be movement parts, which could be case parts, like the glass on the top, the crown on the side. So there is a large scope for watch component manufacturing in India. And as brands want to shift a bit of their dependence away from China, there will be a large scope for expansion of this.
Understood. So the China Plus One strategy will play out well. Okay. That's it from my side.
[Operator Instructions] The next question is from the line of [ Jain ] from Jane Capital.
So a couple of questions from my side.
Sorry to interrupt you, sir. May I request you to please use your handset.
Is this audible now?
We can hear you.
Okay. Sure. So we have a couple of questions from my side. So firstly, just wanted some color on the Eigen division recent update. So where are we on the order book? Any particular amount of orders in pipeline? And what is the plan on expansion in this segment?
Okay. Any other questions?
Yes. So second question would be what would be the current capacity utilization of dials and hands segment and any expansion on that front as well? Yes, that would be all from me.
Okay. So let me answer the Eigen question first. Eigen, order book, as I mentioned in my speech, is very strong. We have diverse clients, market clients, especially in the export or within the export segment. And the order book for existing products as well as new products. And RFQs for new products is strong, and we expect to continue to grow in a similar fashion as we do last year, as you know, we grew by about 25%. And we believe that it should be possible to maintain this kind of growth late in the 20% to 25% range on a CAGR basis for several years to come.
So we have a strong order position, and of course, then to serve this, we will need to expand capacity. This year, already, there is a planned expansion of space. This is planned in the same premises that we already have, but we will be expanding the factory space with some new construction and some new machines. And this expansion program is actually we have planned something over the next couple of years because it will have to be a continuous expansion as the demand increases. We foresee demand in the Precision Stamping segments to grow pretty steadily both in the export and in the beamed export segments in India.
As far as the dial hands is concerned, we have -- it's a little difficult to give a clear figure of a capacity over here because a lot depends on the type of dials and hands that we're talking about. There is a huge diversity in the type of hand and can go from a price which could be as low as INR 50 to INR 60 for a dial up to as high as INR 5,000 per dial or even higher in some cases.
Depending on the complexity and the quality level and the quantities [indiscernible]. So in this situation, it's difficult to give you a plain number of the capacity. However, I can say that for the highest quality levels, we are currently have been operating at close-to-full capacity. In fact, in the previous year because in the beginning, it was higher. There has been a slowing down now. So some square capacity is emerging.
There is not -- there is no expansion planned as such, but in modernization and inclusion of some new technologies, it's definitely planned. New technologies will include technologies in bottling lasers, including new methods of surface treatment, so that we remain ahead of the curve. We remain at the cutting edge of technology and design in dials and hands. That is the ambition.
The next question is from the line of Ankush Agarwal from Surge Capital.
So KDDL has recently bought a majority of stake in Silvercity brands, wherein the sentence KDDL will bring the manufacturing excellence for the [ Parwanoo ] brand. So I wanted to understand, would we be looking to set up a separate manufacturing infrastructure for the [ Parwanoo ] Silvercity or KDDL be using it -- or using manufacturing infrastructure about, say, components in India and the setup that we have in Switzerland? And then would be giving it to Silvercity. And the CapEx that we have guided about to INR 45 crores for the coming year. Does that include the CapEx that we require for this brand?
Ankush, that's a very good question. But if you have any other questions, can you please ask that...
No. That's the only question that I have.
So Silvercity brands is where the development, manufacture and launch and spread of our robust [indiscernible]. Silvercity brand is with a Swiss company. It has a Swiss management under the chairmanship of Patrick Hohmann, a veteran and a very, very experienced player. We are very fortunate to have him.
It is the goal of KDDL to be involved in the manufacture of the watches. And most of it, but not all of it will happen in Switzerland because [indiscernible] as a brand is a Swiss-made brand and we will do our absolute utmost. There's no question that we will get away from the -- yes, or get away from the Swiss-made heritage and lineage of this brand.
The manufacturing itself is a complex process, which will happen in stages. At the initial stage, dial, hand and some other components are already for the launch have been supplied dial hands are partly done in India, partly in Switzerland. And as we go along and we add more components and eventually the final assembly of the watch -- the final assembly of the watch will be done in Switzerland. It has to be done in Switzerland for [indiscernible] and the movement has to be produced in...
Eventually, the goal is to take up all or most of the manufacturing under it should be Silvercity brands. And the CapEx will be required for it. This current increase still that is in the capital of Silvercity brand is essentially for the requirements of working capital and to be able to launch the brand globally, which is scheduled to be done in the last quarter of this year.
So just to get the understanding right, to start with, KDDL support Silvercity in terms of the component and manufacturing. But increasingly Silvercity itself would look to create its own manufacturing component and assembly infrastructure is what is the right understanding, right?
The assembly and finishing of the watch will certainly be done in Switzerland. Now whether it will be done within SCB or it will be done with the collaboration of SCB, those are many, many formats that are open. To what extent will our manufacturing factory in Switzerland Estima to what extent that will be involved, these are all things that are open with the structure that has been created.
What we do know is -- or increasingly, the manufacturer will be in Switzerland, and it will remain a Swiss made watch. But we can't determine right now that this watch will be produced in SCB, this part will be produced Estima or this part will be produced -- there could be the possibility of a joint venture. Technical -- but we are not close to the idea of entering into a joint venture with a Swiss company that has a know-how of that traditional part, right?
The next question is from the line of Ajay Kumar Surya from Niveshaay.
Congratulations on good set of numbers. Sir, my question is, sir, on the Eigen side. Sir, in the end industry side, which are the end industries which I mean, eagerly focusing lane as in the aerospace and auto side? And can you throw some more light on what will be the focus area going forward? And we have already reached and in the previous con calls during 2018 and in times, we did mention that we want to scale it up to a INR 500 crore kind of number and we've already reached around INR 100 crores this year. So what is the pathway that we are taking to make this reach in the guidance of the past?
Right. Ajay, do you have any other questions?
Sir, also one bookkeepings and question, sir, we have made an impairment loss in Kamla international holding and filing in the ISA. So sir, we just wanted a clarification on that.
Sure. Let me answer the Eigen question, and then I will let Sanjeev, our CFO, answer the question regarding the impairment loss. So Eigen, our segments for the precision stamping company that we make, electronics, aerospace, alternative energy and electrical vehicles. These are the segments that comprise 80% of our business that are growing fast and we will continue to focus on these businesses.
Within these businesses, we believe that segments like alternative energy, electrical vehicles will grow the fastest. And therefore, obviously, they have are always focused. We also believe that aerospace is summary that's going to take off after a gap. Aerospace, we expected it to take off in the last 7, 8 years. It has not taken off, but we believe the time is coming now. So we are anticipating high growth over there as well.
Our specialization in Eigen is to produce tools and stamp pots of a very high precision. Together with other value additions on to that, which could be machining, which could be overhauling, inside interior holdings, [ electro trading ] surface finishing of a high technical specification. And these are all skills and technologies that are either already part of the business or we are now moving to expand technical capabilities to improve some of these adjacent technologies within our capability.
So with these, we will continue to strengthen our capabilities in our core segment, which is high precision toolings and stampings for the businesses that I mentioned. You're right, we have had a turnover of about INR 100 crores, and our ambition remains. And it's not only an ambition, we see a very clear runway and a path to grow to a INR 500 crores business over the next couple of years.
And frankly, the potential is quite large. And to grow from INR 500 crores to a still larger size, I think, is very much possible. But as we continue to grow, we will see further horizons, and we would see a clear growth path. For now from INR 100 crores to INR 500 crores is a very clear trend going forward.
Sir, just a follow-up on this. Sir, we had received one global order from an automobile company. So are we currently also supplying? Or are we seeing any slowdown in that order? Or we have that order size increased. If you can throw some light on that?
I think the order book at Eigen is very strong, and we are not really seeing any slowdown there.
Can you put in any number like what is the current order size?
I don't think for competitive reasons, we don't want to give current order sizes and so on. I will say that our order book is strong, and we are not seeing any signs of the slowdown there. Sanjeev, would you like to answer the question about impairment.
Ajay, regarding your question of the impairment, I think if you would have seen our financials, the impairment is mainly on account of the Estima where the KDDL holds the indirect rolling through the compliant as well as [indiscernible] and Estima. Due to continuous losses, we have taken a provision of that in our financials.
The next question is from the line of Bharat Sheth from Quest Shipments.
Sir, am I audible?
Yes, Bharat you are.
Sir, now turning on, one is -- first is on the precision manufacturing, what do you say it on the bracelet side . Say, here I mean, a key thing will be the -- yield will be because when you are I mean, doing machining on the hard road, I mean, or solid road and preparing the bracelet or any other kind of increases and manufacturing on the -- so yield is very, very important for the sustainability of the profitable make it more profitable. Is that a fair understanding?
I don't know where your question is, but in every business yield is important.
No. I do understand, sir. What I understand that from the -- when you carve out, I mean your bracelet or anything from the solid road, so normally yield is 10% to 20% and for which we need a specialized, I mean, in-house designing on the tool fixture and everything to improve. So what is our capability that we have developed when we are talking of going on a various segment rather than focusing on taking our core to one and expand like either aerospace or EV. So I wanted to get some sense on the whole business perspective.
Do you have any other question, Bharat?
Then I will come back, please, sir. If I can understand this.
So I don't know. I mean this requires a very, very long discussion. And my suggestion is that -- from time to time, we organize visits to our factories. And it's difficult to explain this on the strategy of manufacturing. These are different businesses, right? So just like to, the watch component business using steel has enhanced as a watch component business using brass. The technologies are different.
Eigen is again a stamping business using different metals. So it's not easy to compare these. As far as the bracelet is concerned, yes, we are using solid material and the links are created by machining. Yield is very important. And obviously, therefore, the designing of Jigs, Fixtures is very, very important. We are serving a global -- a collection of global brands, who buy from all over the world, including Switzerland, Thailand, Germany, we are competing with them. So that's not possible to compete unless we have all the requisite skills of designing of manufacturing and the requisite technology.
But my question is when we are in these different, different fields. So how we are developing this technology in-house, R&D, fixture, engineering capability. If you can give how many R&D engineer we have and how they will take up for the zero space?
Even if I gave you a number, how is that ging to help you? I think we have to judge the business by the results, and we are competing with global companies. These are different businesses and they have different teams. There are different teams are capable, they are competent. That's why we are able to compete internationally. So more than 70% of our business is export to market clients. So obviously, we have the necessary skills and capabilities and which are developed that -- I mean, that is good government and management. That's all I can say.
If you can run through that we want to take it. I mean our INR 100 crore precision manufacturing business to INR 500 crores in the next 2, 3 years' time. So how do we see that whole pie, which segment will contribute how much? And if you can give some color on road map on that?
Bharat, as I already said, we have a road map to go to INR 100 crores to INR 500 crores. It's not going to happen in 2 to 3 years. It will take longer. These businesses with the customers we have is the B2B businesses. We need to build relationships with the customers. They start with products. Gradually, it builds up.
So the time line is not 2 to 3 years, it will be longer. I have said that we believe that a growth of 20% to 25% CAGR is something that is possible, and the road map for that is very clear. It's difficult at this time to say exactly which segment, I told you that the segments of alternate energy, electrical vehicles, aerospace, these are the priority sectors, and we believe these will grow faster than the others.
Sorry to interrupt you, sir, request you to rejoin the queue for your follow-up questions. The next question is from the line of Dhruv Shah from Ambika Fincap.
Congratulations for the good set of numbers. Sir, I have 3, 4 questions. One -- should I tell you all the questions in one go.
Yes, that's better, Dhruv.
So one is the opportunity you see in Silvercity and what kind of margins -- manufacturing margins can we do? Because on Ethos call, Pranav mentioned that they are going to call for around 1,800 to 2,000 watches of [indiscernible] this year. So I'm just assuming that he mentioned that he will be selling it -- selling the watch for around INR 2 lakh in India. So what kind of manufacturing margins are we looking in that brand? That's question #1.
Second question is the kind of margins we did this year. Is it sustainable? And if you can just give us what kind of margins you do in the precision engineering? That's the question #2. My third question is on your CapEx this year and next year because we have sold some stake in Ethos and we have a good amount of cash on the balance sheet. And my fourth question is, are we planning to sell any further stake in Ethos?
Okay. Let me go quickly through. So Silvercity, again, we are not directly involved in the management of the [ past ]. I just want to make that very clear. Silvercity is a Swiss company, which has -- right now, it has 100% Swiss employees and they determine the strategy. We are involved in the strategy and we know it's going to be a profitable business. But establishing a brand is a long haul. Establishing a brand globally requires a lot of effort, not a lot of connections.
And I believe the margins in the business are similar to the margin enjoyed by Swiss watch businesses all over. It's easy to see that. We can check the publicly released results of groups like LVMH or [indiscernible] Swatch Group, and you can see the kind of margins in the watch business for successful global brand. It's going to be a profitable business. But if you want to establish a global business, it's not going to happen overnight.
It's going to be a 3- to 5-year period to establish a brand globally and then to grow the brand. So -- but I believe the margins are going to be nice what we hear. Once the brand is established. We can't expect the same margin for the first 2,000 watches as will happen for the next 5,000 or 10,000.
Secondly, again, the roadmap is clear. Ethos is involved in the selling of the watches in India. KDDL as a company is involved to support Silver City and manufacturing with our connections with our expertise on components, this is a very important part of developing any watch. And of course, with our ability to take up further manufacturing, whether at a stream of any other place for supporting the Silvercity.
Your second question was regarding margins, overall, is it sustainable or not? We believe the margins are sustainable. This year, as I mentioned, we will witness a slowdown in the watch component segment due to the global situation there. And you also asked the comparison of margins in watch component and other components, precision engineering components.
The margins in Precision engineering components are also very good, but lower than the watch component for the moment. For the time being, that is the case. So we may have a slight decrease in overall margin because the shift of the -- the precision engineering business will grow faster than the watch components business in this year. And therefore, the fact that it has slightly lower margin is on, in fact, the mix weighted average margin over there. But I think still -- it will remain a very, very good way to [indiscernible] margin.
The third point was regarding cash on the balance sheet, yes, we do have cash on the balance sheet. There are CapEx plans both in Eigen and modernization, new projects are on the anvil. But we used cash that we got from mine also to reward shareholders, and that is also planned for the cash, which is on the books. These are discussions that are ongoing right now, and we want to make sure that it's a judicious combination of the [indiscernible] shareholders as well as having enough money to be able to invest in the future.
And your last question was about the Ethos, [indiscernible], KDDL and my input together, we currently have about [ 54% ] of Ethos. It is articulated thing that our position that KDDL will continue to maintain a majority stake in Ethos. There's no question, whether there will be some more stakes there we cannot say right now, but we will continue to maintain majority.
The next question is from the line of [ Niraj ] from Dama Capital.
I had 2 sets of questions. Like you laid out your ambitions around the precision engineering segment and you see a clear path over the next maybe 5, 6 years to like INR 500 crores. I had a question that we are already at a very small base of INR 100 crores, our balance sheet in a very ample scope we can lever the balance sheet as well. 20% to 25% is still a very healthy number, but can we aspire to grow a bit at a higher pace given that we are here at a very smaller base currently? Your thoughts on that?
Okay. What else?
And the second question was around, again, margins. So as you outlined that we plan to grow 20%, 25% on the precision engineering side. And I understand our watch components business might grow a bit slower over the next couple of years. So do you see the blended margin coming down over the next -- I'm not asking about next financial year, but over the course of 2, 3, 4 years, as the precision engineering business gains more scale, do we see our blended margins to taper down a bit over the course of 3, 4, 5 years. Those were my questions.
It was an excellent question, both of them. Growth, I think we have the financial method and the foundation to grow faster. But the -- not the problem, the reality of the Precision business is that it's not that we install a couple of machines and you -- and you switch on the machine and increase the speed of production. It's not by a continuous process. There are several steps that are required. First of all, there is no [ beneath ] of a standard products. Every new product requires a development and a research cycle.
Secondly, every new customer that we get comes with new products, which require a lot of understanding of the customer relationship pending with the customer, let us say we get a new global customer. That customer is not going to start with an order of INR 100 crores. He will start with an order INR 5 crore. Then after that INR 5 crores is developed on supply, the next order may be INR 7 crores, INR 8 crores. Each order for the product to be developed will take 6, 7, 8 months. So that learning curve, that takeoff period is a slow period and then it grow incrementally. So it requires a lot of care and attention.
We believe that the growth rate of 25% CAGR is a scorching hot rate. You have to see it in the context of -- you were to project it over 10 years to see what it really means. And I don't have to tell every financial expert knows the power of this compounded growth, right? The important point is that because growing this business, requires such a dedicated takeoff period. It also built a very strong moat. So once we have established ourselves with a customer, it is very difficult for someone else to take it.
So therefore, our goal is really not just to increase and throw money at the problem. And instead of investing INR 50 crores let's going in the INR 100 crores, and we will grow at 50% instead of 25%. We have a realistic view on what is the capable growth. We don't want to grow for the sake of growth. We want to grow in the segments, which we are growing, in the segments where we have the strength, high-quality, high-value, high market [indiscernible] because this is what we'll ensure our growth, longevity, prosperity and value over the next 25 years.
Prime Minister Modi spoke about a vision for the country in 2047. We are developing our vision for KDDL in 2047. What are we want to look at. And we believe it's an extremely exciting thing. So to answer your question -- sorry, I got a little bit diverted. Yes, we would love to grow faster. And when the opportunity comes, we will grow faster. But to say that we will target a 30% or 40% rate of growth, that is not KDDL.
We target excellence. We target quality. And as a result of that quality, we get growth. We don't target growth first. We target the excellence and quality. We believe that if we are excellent in what we do, if we are clear about what we want to do, the growth will come automatically. I don't know, if that answers your question.
I know it's about the question on blended margin. I think it's an excellent question. Margins also changed. Right now, we are seeing that the margin in the engineering business is slightly lower. But we also know that when we go to more and more specialized products, in the Engineering division. The more specialize the product, the higher is the margin. That's the fundamental formula? You make a mass me too product, you will get a very small margin.
You get pennies for the dollar. You make specialty project's further a special materials, special engineering skills is at high. But [ where we ] are doing. We believe our margins, the [indiscernible] should also increase. If they will not increase and the engineering business grows faster than the other businesses, we have then the blended margin and club down.
If -- as we would like, the engineering margins will go up, the blended margins will not come down. However, we believe that margin of -- we have an ROCE, we have a very good ROCE. And any ROCE in the range of 25% or more is an excellent ROCE. So our goal is not to continuously increase the margin. Our goal is to maintain a good ROCE to maintain robust investments and to achieve excellence at a global level. We believe that if we can get these 3 things right, there is nobody, who can stop the growth of KDDL like nobody can stop the growth of India.
Very well articulated. Just one last because can we have this regular quarterly call or a 6 monthly call going forward as well?
We've got the request. In our view, our business does not change quarterly. So with -- anywhere the quarter the results are out, the analysis is there. So business doesn't change quarterly. This strategy is something which changes, could be doesn't even change annually. But of course, annually, we must have an update. But what we are suggesting is for serious analysts and observers of our business and our company.
What we would like to do is organize at least twice a year, maybe more visits to our factories, where we have a full day of discussion analysis after you have seen the factory, you've got a feel for what is our business. It is important for all financial people also to understand the DMA of the company and the basic capabilities and challenges of our business and how we are overcoming the business. How we have a group of ordinary people delivering extraordinary results.
We would like you to see this understand this. And in that context, have a full day of discussion than just on a call like this, so we would like to invite you and other serious analysts and observers to our factories. And there, we will have these interaction. And these will be done not only annually, but at least 2 or 3 times every year. And we hope you will join us.
[Operator Instructions].
I think Prateek has joined the queue.
The next question is from the line of Prateek Poddar, who is an individual investor.
I just have 2 questions. One is a bookkeeping question. And the second question is on the strategy. The first question is that you called out INR 45 crores of CapEx for the full year -- I mean quote-on-quote '25, is it only for KDDL or it's for the entire consolidated group? That's question #1. And the second question is...
That's a quick answer, it's only for KDDL.
Got it. Got it. And just a confirmation on this, sir, when I look at your CWIP, there is a INR 34 crores kind of CWIP, the bracelet plant or that has already been capitalized?
That's mainly the Bracelet plants.
Okay. Got it. So INR 45 crores is over and above this CWIP amount, right?
The others are already capitalized.
No, no. The INR 45 crores, which you point out, is over and above the CWIP which we see, right? It's the price CapEx.
Yes.
Okay. And sir, sir, just last question is on China Plus One and supply chain reorganization. What kind of discussions are you having with the [indiscernible]? And can that be a material sales and for your growth ambition over and above the precision engineering, which has been [ missed ] just about over the medium term?
Over the medium term, yes, definitely. The China Plus One discussion is a very real discussion. And it's not something that -- it's not like that suddenly there is a rush of people coming, if you see the mind -- something has changed in the minds of people. Okay -- now it's better. Sorry. In the minds of people, it has changed that we have to find alternatives to China, which will reduce dependence. And -- but the fact is that the Chinese manufacturing infrastructure is extremely strong.
So it's not easy for everybody to find alternatives. However, India is emerging as an alternative, KDDL is emerging as an -- we can claim as an alternative for China for watch component. So yes, we see large opportunities in this segment in the medium and long term.
Another question, sir. Is there a big pipeline for shifting of supply chains, which we are seeing in other industries or the discussions are quite slowly given that the entire ecosystem [ in content ] established in India?
There is a pipeline. There is a discussion going on. We -- by nature, we are a little bit cautious. So we know that we need to go at a certain pace. We've got 2 challenges on our hand right now. They're not challenging, but 2 tasks defined for us. One is establishing and fully onboarding the bracelet project and the bracelet project has enough scope for expansion.
I can tell you that. We will probably soon be discussing an expansion plan for the bracelet project. And of course, turning around Estima, which, as you know, is still not profitable, but it has a huge potential ahead. So for the moment, I'm saying that at least for the next 12 to 16 months, 15 months, we want to focus very much on this. That said, I'm saying that there is discussion going on for other projects also. But I think that's really going to be coming in after 12 to 15 months.
The next question is from the line of Vikram Suryavanshi from PhillipCapital India.
And I think what we are seeing is a good growth coming in a challenging market to some extent. But -- just pardon me in case some questions are repeating because I was not able to hear in between. So our dial and hands revenue was around INR 247 crore for full year. Is that the right number?
INR 247 crore.
INR 247 crore. That's right.
Right. And would it be possible to give a breakup between domestic and export?
I think about 70% to 75% is export.
Okay. And in case of precision, what was the revenue for this quarter and full year?
For the year, it is INR 95 crores. And for the quarter, it's around INR 26 crores.
And what we have target to reach to INR 500 crores and since this business typically takes literally a longer time in initial phase to really get it to the customer's wallet share. Will that growth will be largely kick start from, say, 2026, '27 onward? Or how do we see that will need to be like consistently growth at higher level? And do we need to have a CapEx for that additional revenue target?
So Vikram, I don't think there's going to be kick start aspect. I think it's going to be a steady growth. I had mentioned the CAGR of 25%. Now it's not going to be exactly 25% every year, some year, maybe 20%, some year, maybe 30%. But I think an average of 25% CAGR is something that we would aim for over the next 3 to 5 years definitely. But as far as we can see currently. There will be CapEx required. We need to expand factory space, we need to add some new capabilities. And as the company keeps growing, I think our internal funds will more or less be sufficient for that.
And existing infrastructure would have how much revenue potential?
Vikram, I would like to answer that. I think in the overall sense, we have to understand first of all not stick to the 500 as a number. We have given a directional thing that we are targeting for a decent growth and looking for a growth that consistently on a longer period, 20% to 25% growth is possible and which will be achieved. Similarly, as we have said for the watch component business, the capacity utilization is difficult to answer. Similarly, here in Eigen, you're asking me this capacity can give me what revenue that's not the right way of looking into that. It depends upon the components and the type of business samples. The component may be INR 0.02 or a company may be INR 2,000.
So it depends upon the type of business, I'm trying to focus the segments which I'm trying to focus. But the overall number from the capacity, which we have and the modular investments, which we have to do in the coming years, it is possible to witness a growth of 25%.
Understood. Understood. So I was just trying to get some sense on possible will the -- Bangalore will be the continued place for this precision engineering or we can expand into other locations or existing facility has surplus land with incremental CapEx we can go. So I just wanted to -- trying to get a sense on that front to [indiscernible].
We will continue -- we will -- we are not in favor of expanding to too many locations. We are happy with the infrastructure that has been set up in Bangalore, and we believe that the expansion is in the precision engineering segment will happen in or around Bangalore. Maybe make this the last question, please, in the interest of time.
The next question is from the line of Manish Poddar from Invesco Asset Management.
Just one question. So what is the plan to get me the cases given just, if you could probably let me understand that.
Manish, watch case is a very important component for a watch as you know and again, in India, there is no workplace factory, specialized in steel cases, which is what is used in the best brands globally. So we believe there is a large potential -- and now we're getting a sense of working with steel to the bracelet projects. So I think the building blocks are coming into place. And we believe definitely not in FY '25. But probably in FY '26, we will move towards setting up -- getting into the watch case business. It's definitely part of our strategy.
Ladies and gentlemen, due to time constraint, we will take that as a last question. I now hand the conference over to the management for closing comments.
Thank you, everyone. It's nice to answer all the questions satisfactorily. I'm aware that there were a few questions in the question queue, which we've not been able to take up. I apologize for that. But please feel free to write in, and we'll try to answer whatever questions might have remained unanswered. You can write to us or to our SGA team or Investment Relations advisers. Thank you very much, everyone, for joining this call, and I wish you a great day.
On behalf of KDDL Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.