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Suprajit Engineering Ltd
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Ladies and gentlemen, good day and welcome to the Suprajit Engineering Limited Q1 FY24 Earnings Call, hosted by Anand Rathi Share and Stock Brokers.As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Mumuksh Mandlesha from Anand Rathi Share and Stock Brokers. Thank you, and over to you.
Thanks, Aman. On behalf of Anand Rathi Shares and Stock Brokers, I welcome you all to the Suprajit Engineering Q1 FY24 conference call, I thank the management for taking time out for this call.From the management side, we have Mr. Ajith Kumar Rai, the Founder and Chairman; Mr. Akhilesh Rai, Director and Chief Strategy Officer; Mr. Ashutosh Rai, Chief Technology Officer; and Mr. Medappa Gowda J, CFO and Company Secretary.I request Ajith sir to give an introduction review about the results and then we can follow up with a Q&A. Over to you, sir.
Thank you, Mumuksh, and thank you for hosting this quarterly call all these years. Thank you very much to you as well as to Anand Rathi. Good morning, everybody. I welcome you all for the quarterly results update call from Suprajit. Thank you for joining this call.Initially, I think I would like to mention that Mohan has been traveling overseas and the timings have not matched, so he has not been able to join this call. Instead, we have just this time added Ashutosh as well to give you some idea about what's happening at our Technology Center. So we will have a detailed brief from Akhilesh on the various business divisions, followed by Ashutosh on the STC and then by Medappa, and then I'll just do wrapping comments before we let the questions to come in.With that, I will start with Akhilesh. Go ahead.
Thank you, Chairman. Ladies and gentlemen, I'll just give a quick overview of the business updates that were detailed in the press release on 12th August.In Q1, the Indian automotive segment experienced marginal growth of 2.8%. And similarly, the global economy continues to face challenges of high interest rates, inflation and recessionary signs. And this particularly affected the non-automotive and recreational sector that Suprajit is also involved in. Against this, Suprajit's consolidated operational income increased 5.35% with both consolidated and standalone margins improving considerably compared to Q1 of last year. This reflects the hard work our teams have put into operational and purchase efficiencies.I'll now update on the 4 divisions of Suprajit. So starting with Suprajit Controls Division, SCD achieved significant growth and operational EBITDA improvement. Global macro factors have significantly affected the non-automotive and off-highway side, which resulted in drops in schedules for Wescon, Unit 9 and Shanghai plants. However, the global automotive plants of Suprajit and business of Suprajit grew very well with Matamoros, Siofok, SAL and SEU showing double-digit growth and better margin performance. Our idea of one Suprajit global platform has been received very well at customers and we've provided a list of new wins in cables and electromechanical actuators for your reference in the disclosure.In the Domestic Cable Division, we were faced with India 2-wheeler segment that remained largely subdued. The EV market took a major hit due to the same subsidy issues that we're all well aware of. And the aftermarket segment also witnessed some seasonal softness. This led to a somewhat subdued performance, but this is anticipated to recover. On a positive note, the passenger vehicle product lines exhibited strong growth in line with the India PV industry and DCD's diversification into non-cable businesses should yield favorable results in the coming quarters and it's well positioned on EV platforms.Next, the Phoenix Lamps Division reported commendable growth, even amidst the restructuring of Trifa and Luxlite. The new order acquisitions continue to drive this growth, and that's a very positive sign. The performance of our LED retrofit solutions both domestically and international has further contributed to our success in this quarter and going forward.Suprajit Electronic Division, established recently and this is the first quarter that we're reporting on it, has gained excellent traction with India and global customer visits and audits going very well. Multiple businesses have been secured promising strong CAGR growth for the division. I'm also happy to announce the key business wins with India's top top-selling EV 2-wheeler, making the content per vehicle at this customer larger than any other mass market 2-wheeler customer of Suprajit. Some other key wins are also publicized in the report.Finally, for the Technology Center, I'll hand it over to Ashutosh Rai for his update. Ashutosh, go ahead.
Thanks, Akhilesh, and good morning to everyone on this call. I'll be giving a brief update on the Technology Center as well as the engineering capabilities of the company.Our focus has always been on introducing new products into our portfolio, products that will become the next product vertical of Suprajit and to facilitate the next phase of growth. First real success story of this endeavor was the Suprajit Electronics Division, which Akhilesh mentioned, which now serve as a blueprint for us going forward. To showcase our new capabilities to our customers, we have conducted multiple technology days with the theme Beyond Cables to all our major OEMs and this endeavor continues. We will be meeting many more OEMs in the coming quarters. This has led to a significant change in the perception of our customers who value the groundwork that we have laid over the last few years and now looking at Suprajit as a solutions provider.We are now one of the very few suppliers who are capable of supporting our customers from the conceptualization stage, all the way through to commercialization in a very short lead time. The pipeline of product development is also very strong with multiple products in the launch phase, developing phase, on circuit phase. These include innovative and patented technologies that we can [indiscernible] are indigenously designed and developed by Suprajit engineers right here in India.That's all from me. Thank you.
Thank you, Ashutosh. Medappa?
Thank you, sir. Good morning, everyone.The consolidated revenue for the quarter ended the 30th June '23 was INR 680 crores as against INR 645 crores for the corresponding previous year, recording a growth of 5%. The consolidated operational EBITDA for the quarter ended 30th June 2023 was INR 74 crores as against INR 57 crores for the corresponding period previous year, recording a growth of 31%. Standalone revenue for the quarter ended 30th June '23 was INR 333 crores against INR 337 crores for the corresponding previous year, the growth of 1%. Standalone operational EBITDA for the quarter ended 30th June 2023 was INR 9 crores as against INR 51 crores for the previous year, recording a growth of 15%. The total debt level was INR 613 crores as on 30th June '23. Surplus cash balance was INR 487 crores as on 30th June '23 invested in mutual funds.For further queries, if any, you can contact me again after the call also, as usual. Thank you very much.
Thank you, Medappa, and thank you all. From my side, I think the only point that I have -- couple of points that I would like to raise is about the non-automotive business that we do overseas, both at Controls Division as well as the entire group. That has been quite slow this year. The discretionary spend of the consumers have been cut down significantly because of the higher interest rates as well as the cost of living index being going up due to the inflationary trends. So this has led to cut down on these segments. So that has affected the non-automotive part of it. Except that, I think we have done pretty well. In fact, we expect that in the next half of the year, that means second half of the year we expect even stronger growth and improved margins.Just to give you a flare, because Electronics Division is a new division for us as well as Controls Division is a new re-group division of Suprajit with multiple units under that particular division, that sort of serves our global business. We thought that we should give a flare of how our business seems to be performing in terms of the new wins. So for the first time, I think in Suprajit we have done the disclosure of the business wins. This is a one-off kind of disclosure. Just to give a flare of the businesses that we are winning and the significance of that for Suprajit in the coming years. I remain quite positive about the outlook for the year as well as for the coming years because of these new wins and also because of the way Electronics Division seem to have been shaping up based on the initial businesses that we have won.With this, I'll now let questions to come from all of you and we'll answer specific questions either by me or I'll direct it to the respective team members at Suprajit. So thank you, and over to you, moderator.
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Aashin Modi from Equirus.
Sir, my first question is regarding the consol margin. So I believe this -- sequentially, there has been a decline because of margin impact in the SCD division. Could you give us more color on whether it was due to operating deleverage at the Wescon business or whether it was more because of the China plant facing issues in LDC. And also going forward, what would be the growth -- levers for margin to improve in the SCD division. Would it be operating leverage or there is some pricing improvement which is left as well?
First of all, I think if you really look at our margins on the Controls division, it's actually rising from around 4% to about 7%. It's actually increased. It would have been even better just for the reason that you have mentioned, the non-automotive business didn't grow. In fact, Wescon actually had a degrowth for the quarter and we also do non-automotive business out of our Shanghai plant as well as a little bit above from Matamoros as well. All of them got significantly impacted. In fact, some of the customers have cut down the business by 50%. So obviously when the volumes drop, it will have its pressure on the margins. Although, on a quarter-to-quarter, on a year-on-year basis, our margins have improved, it would have been even better if non-automotive business had grown. So, that is basically what has happened. That will continue.I think the non-automotive weakness will continue. I think for at least for another -- this quarter for sure and hopefully, it will start improving when the economy starts turning around. So when that happens, what's happening now is, for example, somebody want to buy a snow thrower or a tractor or a lawnmower, he has postponed the decision. He still has to buy at some point. So when that buying comes back, I think the division will do -- like it's like a double whammy. The regular requirement as well as the pent up demand, all that will come back together. But I think that will happen next year. But this year, in the second half, we expect that weakness will sort of taper off into start growing. And then I think that's where we will see the margins improvement. From that division, that particular segment of the division for Suprajit.
And sir, my second question is regarding this growth in the Suprajit Control Division. Given that even your talk with non-auto dealers and given the new order book, new orders which you have won in the automotive segment, overall, on a blended basis, what sort of a growth do we see in the SCD division for the next 1 or 2 years?
Yeah. I think we have done a business update when the year-end happened. I think that was detailed business outlook for each division. We have very clearly said that this would be a double-digit growth for Controls Division for this year and going forward as well. Of course the quarter it is not double-digit, its 8% is only because of the non-automotive business, but I think that will get caught up within a quarter or so. Going forward, if you look at our business wins, which we have actually sort of announced for the first time, you would see the traction that we have. Of course, these businesses are won for different, different timelines and SOPs will get different times. And also I must say that some of the existing business also will drop off the table as they meet the end-of-life cycle. But overall, on a blended basis, we easily see a double-digit growth at the Controls Division.
And sir, 1 last question is regarding the Suprajit Electronics Division. So we almost have INR 150 crore sort of a per annum order book. So could you help us understand what could be the SOP of these businesses and also we have got good traction, almost INR 100 crores from instrument clusters. So are we adding customers over there and what would be other products that would be scaling up like instrument clusters from Suprajit Electronics Division? That's my last question.
Yeah. I think what's happening at the Controls Division is -- I mean, Electronics Division is very clearly a case where our Electronics Division, which was actually inaugurated only in November, subsequently been visited by multiple customers, they found it really good, up to their expectation and that we will be able to deliver them through our STC team, technology team that what they wanted. So, yes, at the moment, the businesses are more on digital clusters if you look at the numbers, but what is interesting is that most of these customers are EV customers. In fact we have made a statement about we are having a significant business with 1 of the top EV customers, 2-wheeler customers indeed. So it is a work of that getting commercialized in November, customers coming for audit, getting the plants approved, and giving new businesses. This is what has happened in the last 6 to 8 months time. And I think it is continuing and we are very excited about the division. The order wins in the first 6 or 7 months of the starting up of this place I think has been truly exciting for us because we started this as a purely as a startup and the response we have is pretty good. And I think we will see a typical so-called startup hockey stick kind of a growth in this division going forward.
I would also add that as a global actuator supplier, actuators also come with lot of electronics and PCBs and a lot of our global customers are very impressed by the electronics capabilities of Suprajit because the control PCBs on actuators are far, far simpler than the kind of PCB that we do for a cluster. So it's been a really eye-opening for lot of our global customers as well.
In fact, recently 1 of the global actually marquee customer, 1 of the luxury brand passenger vehicle out of Europe visited us and they didn't believe that we could do such electronics products, and actually plant has been approved. So we are waiting for the next order, I mean, next progress from them. So what I'm saying that it is not just in 2-wheeler, the traction is also in the 4-wheeler.
The next question is from the line of Mumuksh Mandlesha for Anand Rathi.
Sir, congrats on a good order book and particularly seeing the Electronic Division order book increasing to INR 150 crore annually from INR 100 crore earlier you have indicated. Sir, just, Ashutosh, continuing to the previous questions, can you talk about the EMA opportunity, the electromechanical actuator opportunity in India market. How are you seeing the traction for that product?
I think I'll let Akhilesh answer it. Couple of them we have already won. So maybe, Akhilesh, you can give a brief.
Yeah. I mean, it's a very interesting area that we are focused on in India. I think there are not many competitors with this kind of expertise that we have developed globally. We supply more than 1.5 million actuators globally to all the major passenger vehicles and we brought that technology now to India. So I think in our disclosure in Customer A, 1 of the leading EVs in India, they are using 2 of our actuators, 1 for steering lock and another for a seat opening actuators on the 2-wheeler. And I think over time, we're seeing a lot of our ICE competitor, I mean, the ICE customers also taking up those kind of actuators.So on the 2-wheeler side, we've got these new actuators that we're introducing for the first time in the market for India and that will also be picked up by other ICE OEMs and in the passenger vehicle side, a lot of those actuators were not being done in India. So we're seeing a lot of traction also from the Tier 1 seating manufacturers, et cetera, who are coming to us and saying can we start developing those actuators that we're already doing globally, locally in India for local supplies. So we're seeing lot of traction in India, both in the 2-wheeler and passenger vehicle segment.
I would just add 1 thing here. These systems typically have a cable, which obviously we have the capability. It has the PCB board again which we have in our capability. It generally has gearboxes, which again we do many in millions and it has a plastic, again something that we have in our capability and as a value per part it of course maybe 8 times to 10 times what a normal cable would be. So that's why we are seeing it as a perfect product for us going forward.
Sir, coming to the Lamps margin, sir, we had talked about the price increases being taken in this segment and we are talking about double-digit EBITDA margin, which we had shown in the Q3 quarter. So, can you indicate by when we could see back those double-digit margins for the Lamps business?
I think on the Lamps division, as you know, there has been a restructuring that is on the way in Europe where we are winding down Trifa. So obviously, there are some costs connected with that. There's also an issue that the Trifa customers will have to be onboarded onto Luxlite and some of those customers either have some issues. So we're convincing. So it's going to take a little time for us. But once that consolidation completes by end of this year, in terms of Trifa winding down completely and Luxlite will also tighten its belt by some amount of reduction of people. I think once that happens and then the new contracts that we are currently starting to win with the restructuring is on already and we're already approaching customers with the new Luxlite as our phase out of Europe.It's starting to come. I mean, some of those costs are hitting the P&L and I would say that it is the question of time. We have something like 8% or 8.5% now. I think hitting 10% is certainly a possibility for us as the business grows little more, which is what we are expecting. In fact, we recently won a very interesting new business also at Phoenix Lamps Division. Those things will add on as we go forward. So I would still say that the PLD is a double-digit business for us, 10% is what we expect to do. Maybe in the next couple of quarters I think, after a couple of quarters, it should be possible to reach once the winding down of Trifa gets completed expect it to happen by end of this year.
The next question is from the line of Viraj from SiMPL.
Yeah. So just couple of questions. First just continuing with the Phoenix Lamps question, so earlier we used to face a significant pricing pressure because of the overcapacity which was there in the market. Now I understand we are working on the cost part, trying to rationalize it and have a more streamlined operation, but in terms of the market dynamics, if you can just provide some perspective, has the capacity normalized now, has the pricing started to recover or stabilize compared to what it was couple of quarters back or a year back? And in that sense, how should one look at margin in the long-term in this business?
Okay. I think a good point. The way we see it is that when there is excess capacity, it takes a while for that capacity to start either dwindling or getting wiped out either by closure of plants or by bankruptcies, whatever, et cetera, et cetera. So it has been happening. We have mentioned about couple of European suppliers going out of business, et cetera. 1 of them as a matter of interest to say that they continue to market their products and they're starting to buy from us, because they have shut down their plant. So that's positive for us.So in terms of the pricing, still the competition is there. The margins have improved because the pricing has improved. Now the question is, it takes a little more time to improve further. And the volumes to pick up because still some of those people who are marginally on the survival position, they still are trying to push the product in the market at lower prices. So I think it's a process rather than an end itself. It's ongoing. We are seeing that we are able to get prices that close to the prices that you would like to have. So that's why the margin you see that has been slowly improving. So it will take little more time. As I said, in a couple of quarters, when we say that we will be double-digit, I think it will be through because that people are considering as a last man standing best bulk supplier. And also some of these people will -- another 1 or 2 will go out of business. So I think it's going to be that much of time before we get into that position of pricing capabilities I think.
Okay. And just extending this, in terms of the B2B play in Lamps, I think we had a success with OSRAM India supply agreement, but in other state or strong global business, or Philips or other major players, has there been any traction in terms of winning order books or --
We continue to supply to them. Some of the newer ones are -- I mean, they're not really newer ones, we all know them. We've done some business with them. Some of them have probably gone to a lower cost one with pricing part of it or whatever. That's why I mentioned that recently we won a new business from 1 of the big distributor in Europe who went away from us saying that our price was high and they're getting a cheaper price from China wherever it is, they come back. Actually, we are starting to do business. We are getting some good interesting new businesses from Russia actually. We are getting some more businesses in European, 1 of the leading player as a more business. They have been a supplier. I mean, they have been a buyer from us, but they have not been buying as much as we would like to, because again they always said that your price is high, but now they're realizing there is also a value proposition in us beyond just the price and that our quality is much better. So as I said, it is taking its time. But all I can say with confidently that we are taking measured positive steps to go forward. And that is only adding the volume. You're seeing still in this market with Trifa being shut down. Also, we are growing the business. I think given a little time, that growth would be better. Then obviously it will also improve the margins.
What are was the one-off restructuring costs in the current quarter?
See, the point is that when you're winding down, you have to pay for all the employees and there's some basic -- as per the German laws, we need to pay certain things. Also, there is also these legal expenses. Winding down is easier said than done. And the amount of process involved, the lawyers involved, the government costs, and also we have got ongoing licenses or whatever, we have to keep the data for example for 15 years. And for that you need to pay upfront now. This is an ongoing. Winding down, there are lot of little, little expenses which get added on. So that continues to hit P&L. From a Group's point of it is not material, but as that particular piece of our business, it has got some impact.
Okay. Second question is on the order book, which you shared. So if I specifically talk about the electronic facility order book, we talked about INR 150 crore annual peak potential volume from the orders which we have got. But when I look at the lifetime value, it's around INR 350 crores. Typically a program lasts for, say, 4 years, 5 years to 7 years. So just was not able to understand the disconnect between the 2.
I get your point. I think we are quite aware of it. First of all, I think we wanted to be pretty conservative in what we say. As you know, we have always been conservative. That can be the first point, the first one with about INR 660 plus crore of business. We are winning a Phase 1, which will change over to a Phase 2, which will be a different product. That also we are in the race, but we have not won it. So it's just a 1 year business we have mentioned there. Once it starts into production, hopefully in the next 2, 3 months' time.So again, let me also say this, I think we have to be frank in saying that this is the projected volume of customers. You know how it is in Indian markets. I mean, we project so many things, but it doesn't happen. So we need to take it with a pinch of salt that these volumes are based on customer indicated volumes and the actual volumes will depend upon what the markets will actually take. And the start of point also keeps changing. We are expecting some of these products to go into production actually in the next 3 to 6 months' time. But whether it will actually go into production and they will push the SOPs later on is something only time will tell.
But are you, from your communication with customers, seeing any -- because the impact of FAME, change in the AI standards, FAME, everything is out there and it's been there for the last couple of months. So are you still seeing any signs of delay, not just in SEL, but even when I talk about, say, X, the non-auto business? A lot of these order books you already have in hand since last 1 year. So are you seeing any signs of deferment or any spillover of the weakness you see in non-auto in each of these segments?
The FAME is going to be reintroduced as I see. And we have to see how many will really be able to take full advantage of it. Again, who is the winner is difficult to say. Some of these EV guys have also have issues because of the earlier FAME issues and they are asked to pay back the government the monies. Now some of them will be able to pay, some of them will not have the money to pay. So we need to actually closely watch this area. That's why we are not really talking about each product being -- the lifecycle being 3 year, 5 year and all that. So there is going to be a churn in the EV space. So we are watching closely and some of these launches can get delayed for sure. What I am saying is that there is enough business. Today, I think the most happening place and the busy place and everybody under tremendous stress to gear up and grow the business is in the electronics division along with the STC.
I would just add that the same subsidy issues is driving all the EV players to localize and reduce cost and Suprajit in multiple products, not just the digital clusters and actuators, but also in other braking-related products and systems, we are actually in a great place to take advantage of that localization trend. And I think we have great relationships with all the top EV producers to start finding actual business value coming out. And I think this year, we will see a lot of those changes both in the DCD and the SCD plants. I think that's 1 key trend forward. The other thing I would point out is that the EV customers that we are pursuing also the ones that are decently well-funded and shouldn't have any issues to support themselves during these issues at FAME.
And in terms of breakeven or the margin structure, say, in cables we have a very fairly defined structure. But say, if we were to reach INR 150 crores in year 1 or year 2, is that good enough to have a double-digital margin structure or you will need much higher scale for you to --
Let me say we are just starting to stand up and walk in the Electronics Division. So I suppose the time will actually answer the question. But let me make it clear that we have set up this division with a clear mandate that we will be a double-digit business in this particular division itself. Now within the double-digit, is it going to be 10% or 15%? It is too early to talk about it. But all I can say is that some of these businesses that we have won, they have been won with the decent margins and that would lead us to say that if we were to do INR 100 crore or INR 150 crore in a year's time in this division, I would expect it to be in the double-digit.
The next question is from the line of Amit Hiranandani from SMIFS Limited.
Sir, as the segments are newly regrouped, so for the benefit of all the analysts and investors on the call, we request you to provide the segment break-up for Q4 and as well as for FY23, please.
For the each division, is it?
Yes. Segment-wise, yes
I think Medappa can do that. Yes. I don't have it immediately. For the Q1 we can do it. In fact Q1 because SED, I mean Electronics Division was very small, we thought that we will wait for the next quarter to give that information out, but that segment breakup can be given by Medappa. Medappa you can do that. Go ahead, Amit. Yeah. We will do that.
Yeah. Okay. Sir, secondly on the Suprajit Control Division, so what step basically e are taking to improve the margin to double-digit level?
I think it's all I would say that if our non-automotive had done 10% or 15% growth in this quarter, we would have been probably there already in this quarter, that has actually dragged it down because Wescon which is mostly all of it is a non-automotive business had a negative growth. So that is what dragged the margins down. So I would expect, hopefully this quarter, of course, the second quarter is also a kind of a weak quarter in Europe and US because August is mostly a holiday season in all these places. So Q2 also because of the non-automotive thing will be somewhere there where we are today. But from Q3, Q4, I think we would see that definite changes and improvements I think towards the double-digit.
And sir, what was the actual one-off in the Trifa liquidation in the Q1? Also, last time you have mentioned that China plant relocation is happening. So is there any additional one-off over there?
Yeah, let me answer the Trifa one. It's an ongoing one as I mentioned. For example, we let go all the employees. So the employees have to be paid certain as per the country rules, certain expenses. We are forced to pay, let's say, upfront all the balance lease amounts to be paid to the place where we were operating from although we have closed it because you can't get out of those contracts. And then there is an ongoing contract which needs to be cleared up in terms of IT services, all those multiple services. So all that costs money. As we terminate them, we have to pay. And if you have to set up, as I said earlier, if you have to have the data available for the governmental agencies for the next 10, 15 years, then we have to go to another vendor to upload those data so that we can download when we want. It should be available for us. Like this. And also, of course, legal expenses at various places to close various issues that is connected with the company's operation. So they're all ongoing. The total cost, I don't have a number with me. I think maybe you can check with Medappa later on. But as I said, for the group, it is not material. If you say, is it $1 million, it is not $1 million. But for the division, it has affected the margin. That's what we are trying to say.So what are the other questions? Sorry, I missed. On China, of course. Yeah, the China relocation, we have identified a new location in China and the new general manager for China also has joined. We also mentioned about the manager, earlier manager resigning and moving on to another job. A new person is in charge. We are expecting the relocation to happen by first -- sometime in January of this year. So, obviously, there is relocation expenses. It has not started. I think probably there's some initial cost. But from now on, there will be some cost. Again, for that Shanghai Lonestar, it may have some impact, but as a group, again, it will not materialize. Is it $1 million to relocate? No, it isn't. But again, what happened, that we have to pay the advances to all these lease period and other things. So there will be some cost, but that's again -- will be done. We will probably disclose as we go around if it is of any substance, I think. Yeah.
The next question is from the line of Ravi Purohit from Securities Investment Management.
Most of the questions have been answered, Mr. Rai. Just 1 broad strategy question, right? So when I look at the presentation that we had put out a month back, right, where we had given different kind of price points for the newer products that we have been working on, either through LDC or through STC, or the products that we've developed in-house, right? Now, when I look at the average same price of those, right, they run from 500 to 15,000 in certain categories and to 5,000 in certain categories.Now, if one has to kind of look ahead 5 years from today, right, historically, our 2-wheelers and 4-wheelers gave us INR 250, INR 500, INR 600 per vehicle, now, assuming what we mentioned in that PPT and the prices that we are talking about, is it plausible that our addressable market or we could hit like $1 billion revenue in the next many years, given the expansion -- without actually looking for newer clients, just on the existing client base itself by merely providing these additional new value-add products that we've been able to kind of develop and the price range that we mentioned, if I just multiply them existing client base, I mean, it kind of gives you a very, very large number. So, is it something that the company is kind of looking at, think it's plausible? So, if you could just a peep into what the future looks like for the company.
I'll give a, I would say, a general color to you, Ravi. It's a very, what I would call as a deep question where the answers are very subjective, honestly. Now, if you look at 4 or 5 cables in a regular IC engine, it may be something like INR 150 max kind of a thing. Whereas today, the same cables also in a 350cc vehicle, the costs are at a different level because the performance expectations are high. That's at the base level. Now, what is Suprajit is doing, whether it is in the Electronics Division or in the Controls Division, and even within the Domestic Cable Division, we are entering into products whose pricing per vehicle is significantly higher.Now, the point is, it's easy to say that, okay, this, let's say, digital cluster is, let's say, INR 1,500 average price or INR 2,000 or whatever INR 1,000, then you can say that, oh, we are making 20 million vehicles. So multiply, the number looks phenomenal. But you must keep in mind that there is also competition and we are winning good contracts. So the point is, how much market share we will have. I think it will be a challenge for us going forward as to see how we can continue to improve market share.So the content per vehicle, which is a statement that I have made a year ago, despite some of the cables in the 2-wheeler is going away, content per vehicle in the Indian business, in the 2-wheeler, will be increasing for Suprajit and we are already seeing it very clearly. I think we will stand by that statement that our content per vehicle will increase and with the new actuation, which Akhilesh just elaborated a while ago, that will add another feather in the cap for us because it's a new product for us. And along with our tech center in the US as well as our own here, we are working on some really new exciting actuation strategy. So that will also add.So it's actually, we are moving from a low content per vehicle company, slowly but steadily, into a higher content. Now what is that amount is a little difficult question to answer, but the products we are doing every one of them, each one of the new products are something like 10 times of a cable, at least, if not more. So within cables, there are also again products which are of that type. I mean, there is a metro for which we did a parking brake cable. I think each one is something like 25 times of a normal cable or maybe 50 times of a normal cable. So within the cable, there are such divisions, but they're all very niche products. But the other products that is getting a clear traction today, they're all in that higher 10 times price per vehicle compared to what we are today. I think that is what is exciting for us also.
I'll just add that just taking on your example of seat actuators that we're doing now for 1 of these leading EVs, that seat actuator, if that becomes a standard product for all ICE and EV products because maybe you want to automatically open your seat through your cluster or through your phone or whatever it is, right, that might become a standard. We are already doing seat lock cables for all the domestic OEMs. So we have great relationships in that specific type of product to say we are already doing the mechanical cable which is INR 50, why don't you give us the actuator which is 4 or 5 times that amount. So we already have great relationships with all these OEMs to supply these products.
So, a related question to this is like, so historically we've done a lot of value engineering on our cables business and therefore we've been able to consistently deliver certain range of margin over a 5, 10, 15, 20 year period, right? Now with this acquisition of LDC and STC center, we've been able to kind of develop, but lot of these products are in-house manufactured or let's say electronic components will be in-house manufactured or they will be like traded goods and therefore how should we kind of look at our margin profile going forward with these 5 times kind of products?
Yeah. I think let me answer the part in a sense that, for example, in the Electronic Division somebody else asked the same question. So I was saying that in a year's down the line, if let's say we are doing these estimated annual value INR 100 crore or INR 150 crore in a year or 2, whatever number of time, we certainly expect it to be in double digits. Now will it go to 15% is a difficult question for me to answer, but the projects that we have won today seem to give us a comfort that we can do a double-digit business in the electronic division. So that's basic question.On Controls Division globally, I think we have acquired a business which has been in the doldrums and we have said that over a 2-year period we will also in the double digits. So for the Controls Division also by end of the year, I would expect it to be in the double digit only. But whether it will ever meet something like the best of our Domestic Cable Division, I think we have a very strong positioning within Indian market. Coming to those kind of margins in auto component business, Ravi, it's not easy. And I think investors should not expect that every division will reach those margins, certainly not in the near future.
Okay. And sir, last question on the LDC integration, right, so if you could just share how far have we -- is there possibility of, let's say, bringing some of the manufacturing to India or some -- so if you could just kind of provide some status update on that integration part of LDC and when we see us hit like 10%, 12% margin that we were looking for.
Sure. Akhilesh, will you answer that?
Yeah. So we've taken the integration project of LDC with a lot of seriousness because unlike previous acquisitions, we've set up specific integration teams, which we call Max teams, which are across all the departments, finding synergies and finding ways to work together. There are a lot of projects that are in the process of being implemented to reduce costs. Of course, on the purchasing side, a lot of global contracts with our suppliers are consolidating the kind of part numbers we are buying. And that has actually been a great driver of the improvement of margins at LDC. And I think apart from certain other headwinds that we face in these waters with the slowness of the economy, I think we would have seen a fantastic turnaround of LDC. And I think going forward, we see more of those projects coming filtering into the bottom line. And hopefully with some tailwinds from the economy, we will start seeing better margins. So I think on the purchasing side, we've done a lot of good projects already.In terms of the other departments, we have a lot of even engineering things that we're starting to outsource from our US and Europe plants, doing engineering back office in India. Even our China plant uses now some back office engineering from India. So that means in the long run when we're competing against our competitors, we will have a big advantage of having low-cost engineering quick turnarounds also in India.Finally, in terms of production, we've already had 1 project that is going into production now in India, which was a project that was initially in Hungary. So similarly, we are identifying more and more projects, and we are approaching our customers with this approach that we will start -- give them an option of going to a lower cost base of India, which also releases base in our global operations for more much higher level products, whether it's actuators or levers, which can bring more profitability to that location. So it's a win-win for our global plants and our India plants and our customer as well. And we're doing quite a bit of traction in that space. And I think there's also traction from the China Plus One strategy now really going into the ground where customers are specifically wanting supply chains with minimum China content. So this is also something that's being added to bring more and more business into India.
I think, to just wrap it up what Akhilesh saying is that, we are now presenting a one-Suprajit to the global customers. It's for the customer to decide where they want us to manufacture, where they want us to warehouse, where they want us to relocate those businesses. It's up to them. There are costs, various issues, and customer want. Sometimes they want on-shoring, sometimes they want off-shorting. Sometimes they want China Plus One strategy. But Suprajit is able to offer all those answers to those strategies of customers. In fact, today, other than probably HI-LEX, there's no other cable maker in the world who has that diverse capability to offer solutions from where they want and when they want in terms of engineering service, in terms of quality support, in terms of warehousing. I think that's why when we have made those one-off disclosure of our businesses won and how we look at it in the next 5 years, I think customer loves it and that's what they want. I think that's why, despite in this market where businesses are shrinking in terms of the volumes of global passenger vehicles, we are winning which is significant businesses. In fact, we are right now working on, just as Akhilesh said, 1 particular customer, a China Plus One strategy where -- sorry, no China strategy where they say that no parts should be imported from China for this project. It's a significant business for an North American customer. So, I mean, we are there for every automotive guys and also the non-automotive guys in the world that they know about Suprajit now and I think that is where we are getting our strength. And I think with one -- another given another 2, 3 quarters of integration completion, I think we will be in a much better wicket than what we are today.
[Operator Instructions] The next question is from the line of Harsh from Marcellus. Please go ahead. We will move to the next question, that is from the line of [indiscernible].
I am a shareholder from 2005, a market capitalization of INR 18 crores. The company has done excellently well and today is the first time I am into the investor call. I am really worried, quarter-on-quarter EPS is missing the estimate and I believe the elephant is falling on its own weight. But I am ready to hold on for some more quarters. I am also asking 1 more question. Sir, this financial year will we cross INR 3,000 crores on an annual revenue basis?
First of all, thank you for being a patient shareholder with us. Since you are first time into this call, let me say that we don't really give a futuristic number in terms of what we will do for the year. But I think if you have seen and read our last quarter's business update, you would note that we have talked about a double digit growth for most of the businesses. And we have also done an historic statement which is still quite valid to us today that our business will grow at least 5% to 10% better than the Indian automotive industry. As you know, Indian automotive industry currently is at about 2% and I don't know what it will be end of the year. By end of the year, we are pretty sure we will outperform that in the same measure and we've also given EBITDA margin guidance over the period. So we all stand by that and I think that's the way Suprajit has been. If you add that expected percentage of Indian automotive with 5% to 10% and add that to the last year's sales, I'm pretty sure you will get to know that it will touch your expectations I think.
But the last quarter in the paper I saw that Indian automobile this section had 5.26 lakh crores, that's increased by 30%. Still we are not able to maintain our leadership share in that share.
I think, Karthik, sorry to interrupt. I don't think Indian automotive has grown anywhere near 30%. I think if you give a little bit of deep dive you will know what number we have said as an automotive growth is very authentic. It is from SIAM, which is the authorized agency to release such numbers and Indian automotive, thanks to of course 2-wheeler sluggishness has not been growing even at the historic pace in this quarter as well as last couple of quarters actually.
The next question is from the line of Gokul Maheshwari from Awriga Capital.
Sir, my question is on the global cable industry which has been consolidating for a while. The current downturn and the challenges which is being faced by the industry, is the pace of consolidation accelerating further? Any comments on that would be very helpful.
Yeah. I mean, we have always said that in the past also Gokul that Indian I mean globally there are one too many suppliers for quite a large range of components that goes into automotive or 2-wheeler. I think certainly cables is one such one and as you see, we ourselves have taken 4 or 5 cable assets in the past shows that the consolidation is going on. Similarly, there have been somebody else who has also bought in 1 or 2 private equities, they have bought a group of cable companies and consolidating and trying to make it bigger to again eventually sell it. So this consolidation is on.And I think even the problem why it is on is because for the smaller cable companies like, let's say, somebody who is a 25 million or a 50 million cable company today, he is not able to deliver customers' expectation globally. He may have a local person, let's say, cable guy out of Europe can survive just in Europe with a 50 million business, but he cannot survive and he cannot be able to have the wherewithal to serve, let's say, China or Europe or the US and South America at the same time. I think that's where we are on the table for most of the customers. So these smaller guys are finding it harder to get the new business. How Suprajit -- we have given the disclosure of our businesses won. That if we look as a percentage of the growth that we are talking is significant. When the market is not growing and if we are growing significantly, that means obviously these smaller guys are suffering and that suffering leads to bleeding of their balance sheets. And that's when I think there will be further consolidation happening. Today, as we speak, I know at least 3, 4 of the cable guys are having really hard time to sustain their operations.
In that case, when you speak to your customers, when they are actually developing their models of products, does that mean that they are having less choices with respect to whom they can work with and how would customer discussions go on in the changing industry scenario?
See, still some of these what I would say Tier 2 cable suppliers like -- as I said, in the 50 million range, they still have some great customer relationship in certain select pockets. They will continue to push their presence. So today when let us say somebody launch -- sends out an RFQ or whatever to a new platform, certainly they will send it to at least 2, 3, 4 cable suppliers. I would say 10 years ago, it would be something like 10 suppliers. Today it is probably 3 or 4. So it has come down already, but will it further consolidate? I think it will, but it will probably take another 2, 3 years.
The next question is from the line of Senthil Manikandan from ithoughtpms.
My first question is on the digital cluster product side. So you can share some key drivers which enables the company to win business versus the existing major players in the particular segment. That's my first question, sir.
Okay. Ashutosh, will you chip in with your view why we are getting some business in digital clusters compared to maybe against some of our much bigger, larger other competition?
Yeah, sure. So I think I did touch up on this before. We would be 1 of the few players in this particular field. See, electronic forms a portion of the, let's say, the BOM of the products. But then there is also the mechanical portion that Supra brings a lot of value into. And then I think why we are really winning a lot of businesses is because of how quickly we are able to develop the product. Just, for example, 1 of the products in the digital cluster, we were able to develop within 2 months. And this is a kind of that is unheard of in this. Usually it's around 8 to 12 months. And it's because of the way we have set up our technology side as well as our manufacturing side. And that gives us a lot of strength. In the same facility, we are doing the electronic portion, the molding portion, and the assembly within our clean room. So I think that is where the customers are really impressed by us.
Yeah, I think just to add up, 1 of our focus have always been on customer. Some of the EV customers, for example, they probably didn't get the attention that they wanted. Even if he's making 5,000 EVs or whatever, 10,000 EVs, they still want the full attention from the supplier. Maybe some of the bigger guys didn't give those kind of attention. And I think we have been very proactive with some of these customers to get their development done to the level of expectations they have had. Somebody else would have given a standard product and so they will take it or leave it, whereas we said, okay, what is it that you want. And we were able to convince them that we are able to deliver those products. And our in-house facilities that is things like molding and other mechanical related within the cluster, we are already very strong because we have that part of the business anyway. That also helps us in getting and convincing some of these customers, I think. But it's a long journey. I mean, there's a lot more businesses to be won. I think our hit rate so far has been excellent, but there's certainly a lot more businesses to be won.
Sir, second question is also with respect to the Electronics Division. In terms of investments over the next 3 to 5 years, what could be the quantum of investments to be planned?
You see, we are playing it by the year, I would say. We have given an estimate for this year's at INR 140 crores for entire company. Part of it is also going to Electronics Division. Now, we are again, as I said, playing it by the year to see what kind of traction is there for the business of doing INR 100 crore, okay, whatever, INR 150 crore, we are very clear, we are ready, we can do it. But when you go to the next level, we need to add on. I think that will happen as and when required. So we'll take the call soon. But, yes, Electronics Division is something where we will be doing a good part of our investments. But it will sort of evolve as and when it is needed. And that's what is happening as we speak now as well. But there's no number we would like to say at this moment. It's part of that INR 140 crores that we announced in the last quarter.
The next question is from the line of Amit Hiranandani from SMIFS Limited.
Sir, on the EBITDA margin side, so 10.5% in Q1 is one of the lowest. So, do you still maintain the margin guidance of 12% to 4% range for FY24, and if yes, then in which segment do you see higher improvement in margins and the reason for the same?
Yes, I think at the moment we don't see any reason for us to revise our guidance. We still think that what is happening, but even non-automotive will be made up partly by automotive growth, partly by electronics probably turning the corner and also partly by non-automotive itself coming back to a decent level of volume in the second half. So we don't feel that there is any need for us to revise any of our guidance at this moment.
Lastly, sir, can you please give the reason for higher effective tax rate and what would be the sustainable tax rate one can assume for the next 2 years? Also, outlook on the CapEx.
Yeah, I think there is some issue. Medappa, will you answer that question?
The ETR is generally 27%. This looks to be one-off for some time with the deferred tax in US as well as different locations.
So on the consolidation of the deferred tax, there has been some numbers given by our US auditors to our E&Y. This number is based on that. I think it will get probably normalized as we go forward. And what Medappa said as a number probably is more authentic.
Thank you, sir. Sir, we have the last question, that is a follow-up from the line of Harsh from Marcellus.
Okay. Sorry, Harsh. I think we missed you in the beginning. So please go ahead with your question.
Harsh, please unmute yourself and proceed. Sir, there is no response. That was the last question.
Okay. Is there any more questions?
No, that was the last question.
Okay, then fine. I think we have answered and there's no unanswered questions. So I would like to say thank you all for your continued interest in Suprajit. We appreciate your interest. We appreciate your investment. I think I also like to thank Anand Rathi and Mumuksh and his team for hosting every quarter our quarterly calls. And thank you all. And wish you all the best and look forward to again interacting with you sometime soon. Thank you very much.
Thank you very much, sir. Ladies and gentlemen, on behalf of Anand Rathi Shares and Stock Brokers, that concludes today's call. Thank you all for joining us. And you may now disconnect your lines. Thank you.