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Suprajit Engineering Ltd
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Ladies and gentlemen, good day. And welcome to the Suprajit Engineering Q3 FY '23 Investors Call hosted by Anand Rathi Share and Stock Brokers Limited. [Operator Instructions]
Please note that this conference is being recorded. I now hand the conference over to Mr. Vijay Salt from Anand Rathi Share and Stock Brokers Limited. Thank you. Over to you, sir.
Thanks, Damon. On behalf of Anand Rathi Brokers, I welcome you all to the Q3 FY '23 conference call Suprajit Engineering management for taking time out of this call. From the management side, we have Mr. Rajesh Kumar Rai, the Founder and Chairman; Mr. Ramesh Mohan, MD and Group CEO, Mr. Akhilesh Shah, Director and Chief Strategy Officer; and Mr. [indiscernible] CFO on company for [indiscernible]. Request Mr. Rajesh to give an introduction devout the results and then follow clear. Over to you, sir.
Good morning to you all. Thank you, Vijay. I appreciate all of you joining our Q3 results conference call, thanks to Anand Rathi and the team. have been able to interact with you over the years, and that continues. As usual, I would request our team to make a short presentation on the results of Q3 and 3 quarters.
And then I will give you a short few wrap-up points, and then we'll allow the questions to come in. With that, I will first hand over to Mohan, who will talk about all the businesses, except LDC and the FTC, which will be done by Akhilesh, Medappa will cover the financial side of the presentation before they hand over to be over to Mohan.
Thank you very much. Good morning, everybody. As usual, what I'll do is I'll start with an overall assessment of the market situation. And then I'll go on to each one of the divisions. Well, generally speaking, October, December quarter, we generally get hit by the year-end stock corrections by the OEMs because they are closing their accounts at the end of their calendar year. And this is also accompanied by Christmas and year-end closures.
So this is generally kind of a quarter, which is not there.
However, moving on specifically to Indian market, Indian market has shown some resilience. The urban market has picked up and is born by the fact that in their car vehicles really went up very smartly. However, the entry-level segment of 2-wheelers did not do well. But the nonentry-level segments of [indiscernible] have done very, very well. That's primarily because of some rural stress probably. And also we are also seeing some liquidity tightness in the market. Moving on to China. China has come out of the COVID core. Hello?
Yes. Go ahead, Mohan.
China came out of the COVID call, and it has started [indiscernible] . It's still plagued by supply chain issues. And particularly the Ukraine war fallout in China has also happened. This is particularly affecting the European OEMs in China, like BMW.
Europe is reeling under an inflationary pressure, coupled with high energy costs and overall general uncertainty due to that. So that's what we see in Europe. U.S. market is hit by we all now unprecedented levels of inflation in there some times and raising interest rates, which are trying to obtain the inflation that has deflating effect on the consumption. And we have seen that happening to announce in a our business in that market. Now I'll take you through each 1 of our business divisions.
At [indiscernible] of the domestic cable division, despite the muted 2-wheeler growth, which incidentally hasn't crossed the pre-COVID levels. Our growth has come, this is both on the revenue front and also on the margin front, they are pretty robust. We have been seeing some benign commodity prices but rather strangely in the last month, we have started seeing an upward [indiscernible] I hope this will not turn into a claim. Our aftermarket fulfillment center, which is a comprehensive table aftermarket operations in their housing, which we are going to start operations later this month.
Moving on to the cable exports, the clouds of [indiscernible] winter, energy, this has started affecting our overall business scenario. However, our consolidated sales and margin improvements is hardening. Doing primarily because we have been able to get from our customers to compensate for the increased material cost. And this is coupled with also lower shipping and container costs. So together with this, I would like to say that our business pipeline has been pretty robust here.
Moving on to [indiscernible] or the nonautomotive segment the impact of inflation in the U.S. market, high interest rates, tepid housing market, all these things have marked helped. This slowdown is expected to continue to another quarter the way being. At [ Felix ] Land division, the margins smartly bounced back. We clocked double-digit EBITDA margin. We, as you know, we were testing the pricing elasticity in the Indian aftermarket, which I had been talking out about it in the last few calls. And I think that has started yielding results.
We have been making a few in-flight corrections, which were both responsive and proactive in the marketplace. And I think we had to show this agility, which we have done. This has been coupled with a laser sharp focus cost reduction measures at the operations, and that has continued to yield that result. We focused our attention and actions on streamlining and making our overseas subsidiaries in PLD, more leaner and usable. As you all know that we have 2 warehouses on 3, 5 and 1 let flight and that we consolidated into 1 at Luxlite we pinned down the half at 35% in line with the business. Now we are in the process of voluntarily winding of 3.
And these, of course, are subject to statutory and other necessary approvals. So in effect, the restructuring at Europe for CLD has gathered momentum. These restructuring actions in my opinion, right size our business and also the infrastructure in Europe and, of course, bring the cost down on a long run. So this gives you an overview to what's happening in our traditional business, and I would want Akhilesh to fill in on the LDC and over to you Akhilesh.
Thank you, Mohan. In LDC update dated 21st July 2022 and 14 November 2020, we projected improvement in profitability despite significant headwinds in Europe, U.S. and China. Despite the unforeseeable headings of covets Mohan mentioned, and demated issues in China, we have still delivered our commitment of positive LDC EBITDA in Q3.
This improvement was based on operational improvements, integration synergies and share price adjustments from customers. On an operational level, LDC in Q1 was a negative 4.5% EBITDA. And in Q3, we showed a positive 3.7% EBITDA. This 8.2% improvement is significant in the automotive context and is very impressive from work from the team there. In Shanghai, China, we had considered disruptions in Q3 due to the China. The COVID resurgence there, which led to a challenging environment for our Shanghai [indiscernible] The team has done well to overcome these challenges, but we continue to see softer demand in China.
In for country, the team are doing well despite the continued slowdown in the automotive market there and inflationary trends in both labor and power costs. The operations are show an improvement, but select customer pricing discussions in the region are continuing we expect these ratios to be closed in this quarter. And Mr. Mohan had visited these customers in Q3 to help bring discussions to contrite.
In Matamoros, Mexico, the team has architected a market turnaround, both operational improvements, group synergies and more timely customer pricing closures in the U.S. supported the team a strong pipeline of business we've seen and the team are highly motivated to improve the business order. At our tech center, STC, the focus has been to commercialize some of the innovative products we have developed over the last few years. Our participation at the auto export showed sitting a very different light to our current customers and attracted many new customers as well.
The market got a clear message that while we continue to focus on our core competitive control cables, we have a strong appetite of growth beyond [indiscernible] as an R&D and innovation focused organizers, be it in the mechatronics mechanical systems, braking systems or electronics. Finally, our electronics facility is scaling up production with most of the products focused on the EV segment and with the majority of India's leading TV customers.
This facility is expected to be a material contributor and subsidies organic growth and profitability in years to come. Thank you. And with that, I hand it back over to Chairman.
Medappa?
Good morning, everyone. The consolidated revenue, including the NDC for the 9 months ended 31st December 2022 was INR 2,053 crores as against INR 1,335 crores previous year, recording a growth of 54%. The consolidated operational EBITDA for the 9 months ended December 31st 2022 was INR 223 crores against INR 190 crores for the corresponding in the previous year, with a growth of 17%.
The consolidated revenue excluding LTC for the 9 months ended 31st December 2022 was INR 1,345 crores against INR 1,335 crores last year, recording growth of 16%. The consolidated operational EBITDA for the 9 months ended the 30th of December 2020 was INR 225 crores against INR 190 crores for the corresponding previous year, recording a growth of 18%. The standard revenue for the 9 months ended December 31st 2022 was INR 1,092 crores against INR 915 crores previous year, recording growth of 19%.
The stand-alone operational EBITDA for the 9 months ended 31 December 2020 was INR 187 crores against INR 157 crores last year, recording growth of 19%. The total group debt level was INR 604 crores against -- as on December 31st 2022 and we have a surplus cash of INR 343 crores as on 31st December 2022 in standing mutual funds. [indiscernible] an interim driven of 105% for the year '22 and '23. Further you can approach any time as usual. Thank you very much.
Thank you, Medappa. I think overall, what I would like to conclude is to say that we had a solid and good of Q3 with solid improvements across our divisions within the group. For the first time in many quarters, PLD has done a double-digit EBITDA margin, which has been very heartening. Domestic cable division has done nearly 19%, again, one of the best in recent times. Suprajit automotive plus super Europe, our original export group have done a good improvement in margins and also improvement in sales.
Ciena has been steady. LDC, as Akhilesh has mentioned, it has become EBITDA positive in the third quarter. Overall, I would say we had a good growth and a very good improvement in margin in Q3. Despite Mohan and others are talking about the Bloom and do. Despite that, I think we have turned out an expected performance. The Q4 is also expected to be fairly steady and good. We have made the comments on -- in our business update.
With that, I will now let the questions to come so that we can specifically answer any of the questions that you may have. So I'll hand over to Dovin, the moderator to start the questions becoming. Dovin?
[Operator Instructions] The first question is from the line of Ashi Modi from Equirus.
[indiscernible] margin performance. So sir, my first question is regarding PLD margins. So sir, you've talked about the gross margin of error by high gas prices. So if you could help us understand where are the gas prices now? And secondly, if you could also understand margins of and luxury like SP84061794 In the last 2, 3 quarters and how.
I'm missing on the last slide. What is the question on that slide? Yes, Hello?
Sir, the participant in the queue currently has dropped from the queue, sir?
Okay. I will answer for the purpose of others. I didn't understand the second question on the last slide. The gas prices have come down, but it has not gone back to the historic levels. But what our operations team has done an excellent work was improve the efficiencies within the plant to get a better margin out of the entire operations.
And also, of course, we have been able to pass on some of the price increases. And that's the reason why the margin at PLT has improved. So we can go to the next question.
We have the next question from the line of Mumuksh Mandlesha from Emkay Global.
Conversations on our turndown in ADC [indiscernible] So we exited the Suprajit table in the auto company expo and where you showcase your wide range of new products such as mechanical [indiscernible] eletronic totals, actors, pedometers and ceded tail boxes. Can you highlight how has been the response to the new products and particularly on the mechanical disc systems, which make use of sensors as cheaper than a display system.
Well, I think you're right. We -- in our auto expo, we have displayed our FTC products. As I think Akhilesh was mentioning, there has been very good response from the OEMs. Both IC and the EV side of it. Specifically, whether it is MDS mechanical disc brake or the other products, there have been many discussions that have started now as well. Some discussions were going on. All I can say is with a couple of customers, our products are under testing at this moment.
So these new product development is totally a new concept and also it's a patented concept and it takes a little time. But all I'm saying is that there's been an excellent reception for the DBS as well as other products that you mentioned. And we are all discussing at this moment with various customers.
Sir, if possible, can you say what has been the revenues from these new products this year and what is the expectation for next year with the products such as SEDAR books export starting soon?
Stages book is under the final test with the customer in Brazil. So it goes through a seasonal testing. I think we'll have to wait for this season to be over. I don't really know when the season is ending, but our products are under the final round of tests in the field at the moment. That's ultimate decision maker. So we are expecting that certainly next financial year, the products to come into production.
The volumes will depend because there are existing supply also how the customer will share the business is something that we are able to negotiate so we are now in the final stage of product approval. In terms of commercialization and the value of it, I think we will wait for some time to comment on the Electronics division and our new division specific product revenue. All I can say is that things like digital clusters, accurate or electronic actuators and sensors are under production. There are certain levels of business. We are still scaling up more at the moment. So I think the next -- I mean, I would say this year will go in our commercial operations to stabilize.
I think then only we would like to give you a comment on the numbers probably in the next quarterly update. But the -- all I can say is that the response has been pretty good. And we -- as Akhilesh mentioned, it will be one of the good organic growth prospects within our group in terms of revenue growth for the coming years.
And sir, on the non-auto cable performance, as in weak this quarter. Can you guide the performance expected in coming quarters? And also, can you provide an update on the traction for new segments in the non-auto which the company was focusing on.
Sorry, what is the next set question?
On the new segments like the power sports medical marine.
Okay, within the nonautomotive. Yes, Q3 has been slightly weak. Again, this business is all for the North American business under SENA. There has been a slight degrowth as you would see for the quarter compared to last year's quarter. I mean U.S. market is going through a kind of a recession. The uptake from customers have come back. We've been able to have a flat -- more or less a flat business in the Q3. Thanks to some of the new business. Otherwise, it would have been a significant drop in volume, but that didn't happen. So in a sense, we are sort of managing that thing. So how will be the fourth quarter, as I said, I think also mentioned in our gives update. Q4 is likely to be slightly weak for SENA. So I think, hopefully, from Q1 of next year, things should start looking better.
Right, sir. Last question, interest costs, any reason for interest cost going up sequentially, sir.
Interest rates, my friend. I think it's affecting everybody. The interest rates have gone up almost by 200 basis points compared to last year and also on a sequential basis. So that's basically the reason.
We have the next question from the line of Ravi Purohit from Securities Investment Management Private Limited.
Congratulations on a good set of numbers. Sir, I think if you could just spend a little more time on some of the newer projects or products that we've been talking about. And I think you just mentioned that it will be difficult for us to kind of give what kind of revenue or how much contribution we can provide next year. But you could just kind of give us some color as to so for example, on the current businesses where we are doing our cables, right?
A typical 2-wheeler will fetch us like [ INR 250 cores, INR 300 ] per vehicle from a contribution from per vehicle point of view. Signing [indiscernible] level probably fetches like INR 700 per some cables contribution. But these newer products that we are working on what kind of change in realizations per vehicle can it kind of cure? So in a sense, does it expand our addressable market substantially from what it is today?
And how does NBC's product portfolio kind of switch into that? So if you could just elaborate a little bit, it would be very helpful for us to kind of understand some of these things.
Yes. Thank you, Ravi. I understood the point. I think one of the statements we have been making in the last couple of quarters is that the intent of FTC electronics precision, all the new products, not just electronics but also mechanical product is with a clear intent that in the next 3, 5 years' time, our content per vehicle, I'm talking about the 2-wheelers, whether it is EV or otherwise, will increase from the current position. The current as you rightly said, let's say, there are INR 2004 or 5 cables in a 2-wheeler.
Our intent is that in next 3 to 5 years, that content per vehicle should increase. That will only come from the new products. Now just to give you a comparative number, I mean just for the sake of give me some idea. Typical, let's say, digital platform will cost anywhere from INR 600 to INR 2,000 in AEV or in IC vehicles. So even if let's say 1 or 2 cables come down and we have an electronic cluster or, let's say, actuation lock actuator in a 2-wheeler, which is all required an EV, like every vehicle, we'll have it.
Each one of those just actuator will be INR 150, say, INR 200. So DBS is in a different league altogether. It's a much higher price. So these products that we are currently working on is commercialized, whether it is sensors come throttles, they're all anywhere from INR 250 crore to INR 600 crore, INR 800. So each one of those products. They are much more than the collective 4 or 5 cable costs. So I think that should give you the idea as to what these products will do to us in a longer term.
In terms of what LTC brings to the table is certainly on the electromechanical actuators, I think we have been working with them both ways, how we can make it, let's say, more economically in India for them and how we can bring those technologies to India. We have been also in discussions with 1 or 2 customers growth in EV space and the automotive space, how we can work with them to introduce them in the Indian ecosystem of automotive business. So that's an ongoing process. I think it probably will take some time, but those products are very exciting for Indian markets also.
Air Sir, other point was, I think [indiscernible] starting in your opening remarks mentioned about some of these products will be patented. So if you could just share some insights as to -- when you speak of patent, is it like patents that we have registered in India, but we have products work from LDC or we've actually developed them in-house and we are kind of -- so if you could just spend some time on explaining what has been like R&D progress? And what kind of patients are we working towards? And over a period of time, what kind of returns you would envisage these efforts to kind of bring.
On the patent scenario, I think I'll Akhilesh to answer. Akhilesh will give you some kind of a brief on the patent situation with the FPSC.
Yes, sure. So [indiscernible] is now plus engineers that are completely focused on R&D development. And in terms of patent most of the products developed by a investment.
I think also are breaking. We can't hear you. We are breaking. But I think still, you're taking your -- maybe Mohan can give some feedback. Hello, Mohan.
Yes, sure.
Please go ahead. I think Akhilesh on the STC and patent situation.
Okay. There are 2 questions to the question. One is on the current statements. Is it AD.C. or is it FTC based. Most of the patents that Akhilesh about has been completely developed in-house here in Banglore at STC. So these are the patents that we are talking about. That, I think, answers the first part of the question. Second part of the question was in terms of -- what was the second part? I think I missed it up. Can you repeat it?
Yes. Basically, how -- over what period of time can we see no benefits coming out of the -- some of these patented products or some of the things that we developed. What I'm trying to understand is how have we kind of gone about developing these products? Is it because the customer came to us with a problem will be solvent or we kind of developed an in-house by looking at products that we have already.
It's a mixture of both, to answer your question. There have been certain things, for example, let us say, the gearbox. Where we have taken a paced on the way it is mounted and the way it is connected, et cetera. Now this was an existing product, and there were some issues from what was posed for the customer. Therefore, we address those issues came out with solutions. And therefore, we took a take on those solutions that we have provided. So that's 1 category.
The second category is where that kind of a product does not exist at all. If the company pays ground of idea at STC, telling, okay, why don't we make something in this direction? And why don't we produce something a product or an application in this space. So in the first one, it is obvious because it's directed by the customer who throws a challenge at you and you come out with a solution, therefore, it becomes easy. Whereas in the second portion, taking it to the customer, involves selling the concept is, it is not selling a product.
There are such you need to demonstrate your concept, then proof of concept, then go in for showing the metro, et cetera. So I think we are upping the game here with an superset world. And I would say it's learning excise as we go forward, and it evolves. But we have been moderately successful in the second one already, I would say.
I think just to add on to what Mohan said, I think, for example, our mechanical district is in their second segment, where we thought the okay, why can't we come out with the mechanical displaces instead of hydraulic one. So that's entirely our thought processes, it has been done. It has been established. It has been presented. So it has been tried out by more than a few customers already. So we are both ways of looking it, yes.
Thanks,. I'll get back in the queue. Thank you.
The next question is from the line of Abhishek from Dolat Capital.
To set up numbers despite third quarter. First question is from cable division. So when margin was been despite slowdown in the 2-wheelers. So is it because of the price hike in European cable operation or fall in the RM prices? And is it sustainable as the [indiscernible], you need to pass on the benefit of the fall in iron prices to the clients?
We hope we can be able to maintain it. But you're right to say that these price increases and material cost increases and decreases are kind of a pass-through mechanism. So certainly, we had some tailwind on that in the last quarter, but there would be some amount of savings that we'll be able to continue to hold on and some will have to pass on having said that, one should not go by again, let's say one performance. But if you really -- even if you look at the 9-month performance, we are generally ahead of the previous year in terms of margin on the cable division. So we are hoping to maintain it. Let's see how it goes.
And sir, in automotive civil business, how was the need for the 2-wheeler versus 4-wheeler and how do you see improvement in the formula business in the coming quarters?
Yes. I think purely from an Indian perspective, the 4-wheeler business side of our business has improved quite a bit because obviously, [indiscernible] vehicles have done well. Whereas the 2-wheeler markets have -- the OEM market have not been doing all that greatly, which we all are aware of. That has been offset by our ability to push more in the aftermarket segment. So that's why the reason for growth is one is passenger vehicles and also secondly due to aftermarket as well, where we are a very good and robust business.
Globally, I think all our business is more or less is in the passenger vehicle. So that has -- as Mohan was saying, it has had its own challenges. Despite that, LDC has done a decent job. So the LDC business and SLS business also has grown, which all is because of the new businesses we have. But the current business on the existing platform, the volumes have come down, but the new businesses, which we have been able to commercialize is responsible for the increase in business volume and also improved margins.
So in global business, as the supply side issues easing off and the order backlog is very much strong in the passenger vehicle segment. So how do you see growth in the coming quarter because the most of the company has increased your guidelines for the production in the 4Q. So [indiscernible] some more light there.
India business passenger vehicle business is solid, -- there's no question everybody knows about it. Globally, I don't know if anybody has really said that they're going to increase their volumes. I think as we know, there has been probably a minor uptick, but it is nothing material as we see it. It is still the growth compared to, let's say, previous year in Europe and U.S. And also in China, for example, China has had not a very good quarter and also didn't have a good January. So the volumes are not really growing. I don't know whether anybody has said that it is otherwise.
Okay, sir. And my next question is the China division. So is the top line was impacted in the inventory correction in this quarter?
No. China division, as I just was explaining. I mean we had more or less a flat quarter compared to the previous year is largely because the volumes have come down with some of the nonautomotive customers. Because generally, these are all on not U.S. intensive businesses where when there is a down tick in, let's say, home sales or whatever, whether it is the lawnmower or whether it is the tractor sales in the business in agri, they all have had some hits in the quarter.
And even things like power sport vehicles, which is more like for fun people use it. Those offtakes have come down in U.S. And that is the reason the volumes have been more or less flat. And that the situation, as you said, will continue probably in this quarter. And hopefully, the -- is there a clear intent in a clear indication to the market that the interest rate cycles have now stabilized or not likely to go further. Hopefully, it will slowly recover for the next year. So that part of the business, there is some challenges. But we have also won some new contracts. So we are saying that we still will grow next year also.
So as you mentioned that China revenue will be reached in the quarter-on-quarter basis weak in the Q4 as well. Is it Y-o-Y or quarter-on-quarter? Because [indiscernible] revenue volume is strong in the fourth.
I think on a year on year so far in the SENA division, we had some 10%, 12% growth. End of the year also, there will be some growth, but on a quarter-to-quarter basis, there may be a flat quarter. But on a year-on-year, there will be growth and -- which is what we expect to continue in the next year also.
The next question is from the line of Disha Chu from MG Investment.
And infuse to see the turnaround in LDC as well. I -- so I have 2 questions. One is on the commodity prices uptake. I think that was mentioned in the opening comments that you've been now seeing some uptick there. So if you could elaborate on that one. Second is in terms of Sena, I think the way that sort of we were looking at it is that the opportunity size is very large. So because the revenue has come down, I think that is, if you could explain that one a little bit more there, like I said, that if opportunity size is so large, then the revenue should not have fallen as such.
On the commodity price, I think till December, I think there was a peak about 6 months ago or whatever a couple of quarters ago. That had come down a little bit, and it has sort of stabilized in January, February. But what we are seeing in -- sorry, in November, December, what we have been seeing in January is, there seem to be some uptick in the market, particularly on the steel side of the market and also some of the other commodities like zinc, copper, et cetera. Is it a trend? I don't know, honestly.
We are just thinking that it is one of things that we are seeing and that it will stabilize. So it's very difficult to predict the commodity prices. At the moment, we feel comfortable about it. There is a one monthly small uptick we have seen in some specific commodities, particularly steel in last month. But we don't know whether it will continue or whether it is a trend at.
With regard to SENA, I think, yes, the market segments are many, and we have had a running business of certain level and at least 3 or 4 of our customer offtakes have been significantly reduced in the last quarter despite some of the new businesses that we have won, which has come into the city, but the existing customers' businesses have been dropped in some cases, 20%, 30%, 40%.
So that's why the overall business volume has sort of stagnated or tapered off a little bit. It is -- the new businesses will get into -- not every quarter. I mean we had some input -- new business intake, but the drop in some of the existing business have been quite significant. I think. So overall, it has been a quarter where there has been some lower volumes compared to the previous year. I think, as I said, probably will continue for more quarter.
Sure, sir. And just a last question on the China is. I think so January, of course, the sales have faltered but until December, the data that we were tracking on the insurance that from China was showing that there has been an uptick seen in December to the COVID guidelines becoming softer there.
So which is what -- so are also tracking the European auto stocks, they have also sort of performed well because of China reopening expectations and then the fact that we could do more sales there. So it was interesting that you mentioned that China sales have been softer. Is it more of backward looking? Or is it more like a guidance that you're seeing that for at least next quarter if we got.
I think I need to give a little clarity on this. If you look at purely at China, China business, which has had reasonable numbers, I think, but there's also been exports out of China. So people make certain products in China using our products and then export to Europe. And one particular customer without going into the name is producing a significant volume of a nonautomotive product, which was actually exports to Europe and also to Ukraine and Russia.
So now that has been -- had a major shift in the last 3, 4 months. So that has had its own effect on us to be very more specific. And also, I think from January onwards, there has been some tempering of China volumes, whether it is a trend, I don't know. So having said all this, I think January has been a weak month because also in January, we have this Chinese New Year. So nearly 10 days everything gets shut down. So January per se was weak, but we feel that February March should recover reasonably well.
So it is not -- really, we're not giving guidance. It is just that the position we have in the red had some patches of this. But overall, China business has been actually one of our most margin-accretive businesses amongst the LDC entities.
The next question is from the line of Ashi Modi from Equirus.
So I called off. So sir, can you repeat, I mean, at first, I want you to understand a bit more on PLDs margins so was it because of gross RM prices, especially gas prices coming down and also if you can throw some light on losses in the prepaid into that business, how have they been? And what sort of a margin do we expect in this business?
On, will you answer the PLD part of where we have been able to make improvements and margins have improved.
Definitely on some of the commodities, the prices kind of stabilized. But as the stabilization was happening because it had become very expensive. We started running very focused cost reduction programs. So big stage reductions and those kind of stuff. Therefore, we tighten the belt to a great extent on the cost front. However, we did not keep quiet on that. We said that we should also tackle it from the price because the commodity prices have gone up. Therefore, we went to the market be it at the OEM level or be it at aftermarket or at the what we call as [indiscernible] label manufacturers, and we requested for a price increase, and we did get the price increase.
Therefore, it's as people talk about a double engine growth. So probably this is one of those double engines network.
And to talk about [indiscernible] and IFA, I think we need a presence in Europe, but not at the level we had in the past or we currently have. I think a lot of the packing and storing can be done out of India and shipped also. So there have been multiple internal discussion as to how to bring the cost down in the European operations. So what you have done, as Mohan was mentioning earlier, we cut down on warehouse and then we said, okay, let's look at the year and see how the cost work out. It did bring down the cost a fairly good way.
We shrunk for last year. And I think we now look at it as more like a front end that is required in the Europe and that most of the things can be done here and delivered from here and with a probably even a smaller warehouse than what we have. So with that thought process is what we have now initiated that just one entity is sufficient for us to deal with European requirements. And that's what we are trying to execute in the next 1 year or so, which will certainly will bring the cost down because -- it will also help in reducing the number of people there.
It will help in stocking and warehousing costs and things like that. So given a year's time, once this -- what I would call is probably a final round of restructuring is done. I think that will add additional margin improvements for the overall operations of refinish [indiscernible] division.
That's quite helpful. Sir, my next question is on the last call so we have offset the industry degrowth by winning new businesses. So are these new businesses, margins are at a similar level? And I mean, CCUS. Inflation, you can see that impacting. So is there a pressure of operating deleverage impacting margins in this call.
I sort of missed your question. Can I just.
One of my question is regarding risk on margins. So the new businesses, which we have won a [indiscernible] and also if this volume is impacted in Westcon going forward, do we see pressure on margins in this business?
No, no, no. One is, yes, new businesses are typically one at what we expect as the current decent margin for the [indiscernible] or Sena operations. Will the reduced volume will bring the margins down I don't really think so. I think it's not that there is going to be some 20% drop in the sales, something like that. We still will have a decent number. I can -- all I can say is that probably we still have a double-digit margin by end of the year. I don't see any problems in that.
Okay. And sir, my third question is regarding the order book so sir, what sort of delta do you expect apart from the industry, especially in the Europe and U.S. business of agility considering our current order book.
The order book is technically order book based on the original estimates given by the customer should have been very, very strong. But what is happening now is that either the projects are taking off later, like, for example, the launches are getting delayed, number one. So although we have won the business, but we have not really started the production, we should have started, let's say, 6 months ago. That is one side of it. And those existing businesses where the volumes have come down. Now going forward, we still -- if you remember in the beginning of the year when we got into the driving fleet of LDC.
We have given certain guidance saying that we will still do about [ 100 million ] or so of business next year. And hopefully, end of the year, we will do a double-digit margin by at least for the Q4 of next year. I think those guidelines still hold good. I don't think we are changing it. Although from the time when we made the comment and today, the scenario has been much worse. Thanks to COVID in China, thanks to Ukraine war and thanks to a slowdown in the U.S., which we didn't really expect.
But we still are holding that guidance is possible to achieve for the next year. And we have won some decent new orders, and we are hoping that we'll commercialize it soon enough. And some of the contracts, which should have been the pipe picture has probably started now or in the next few months. We'll go into the production at least next year. So we are still hopeful that next year would be a good year for NET in terms of sales as well as margin, of course.
Okay. And sir, lastly, on the LDC margins. So sir, LDC margin in general. So sir, so there were 2 levels, 1 was pricing correction and tease process improvement. So what sort of improvement can come going ahead because of pricing correction -- and what sort of the journey in adult margin do we see going forward, even that volumes could remain under pressure.
So I think in our first update, we said the first 2, 3 quarters will be a negative quarter, and that slowly will get into positive and go ahead and in the last quarter of next year, we will be -- that will be sort of -- will be double digit. This is the kind of guidance we have given. The first 3 quarters, we have been declaring quarterly numbers, as Akhilash was mentioning, from minus whatever 4.5%, we have gone to plus whatever 3.5%, a net gain of 8%, which is, I think, a commendable job by the team in terms of operational improvement, number one.
Number two, price increases as well. That has also been responsible. But some of the price increases, what has happened is that as I probably have said this 3 quarters ago, that the previous management never went to the customer for a price increase. We had to start fresh after we took over. It is a bit late because commodity prices have started tapering off. So there has been and continues to be some reluctance from customers to these price increase. So some of them are still outstanding. We are still impressing on them to do it.
And I think once that's all in place, and the further improvements in operational efficiencies happen. And of course, hopefully, the commodity prices are slowly either stay where it is or hopefully will stay a little better or lower. I think generally we are not on a print rate, I would say, we are on a marathon on the LDC's a 2-year marathon. I think so far, our journey has been good. We've seen despite worsening the economic condition, I think our progress has been quite Satisfactory.
The next question is from the line of Gokul Maheshwari from Auriga Capital.
My question is more on the medium term. Given the portfolio now we have of the number of facilities and also LDC coming into the fold. What are the kind of discussions and engagements you're having with the customers in order to get more business with them? And how are they responding given you have now a fairly good global presence.
So if you could just give some examples on how do you see these engagements going forward in the next couple of years?
Thank you, Gokul. I think very, very ask question, I would say, what has happened since the acquisition of LDC. Super stand-alone in the past, was a good cable maker but didn't have the, what I would call as a global war wider in terms of, let's say, geographic footprint.
I think with the LDC summing, we got both manufacturing, R&D engineering and business development wherewithal. Together, I think we are a strong force. I think Jim, our President has visited multiple customers. Mohan was there recently in Europe, ESG multiple customers and our, of course, Vice Presidents of our business divisions have visited customers to various states. What has been strength very strongly by us after all this interaction is very clear. Customer wants a supplier who is financially strong. We have got the right global footprint and who has got the capability to deliver both the right engineering solutions at the right prices at multiple locations.
I think when we look at that kind of a requirement from customers, and if it's been the view of some of the customers who are very openly expressed this, Today, LDC plus superset is much more than LDC separately and super separately. So they are much more comfortable with us. Of course, pricing is an issue that they will always benchmark with multiple people and try to get the best out of everybody. But having said that, I think our ability to today to convince customers to give more business is quite easy.
And I think we have been in that process now presenting customers multiple options of delivery, not just one plant, one customer, we have got multiple options that we can ask them to use based on their comfort or they want to derisk some country or they want to derisk a region, they want to go to a low cost. They want to get it closer at home. We have all the solutions for these customers. I think that has been our strength with the LDC subsidies. And I'm pretty sure that once the economic so-called uncertainties and the was and the weeks are behind us. I think we are very confident that the business momentum will pick up very significantly.
Great, sir. This is very elaborate,
Next question is from the line of Resham Jain from DSP Investment Managers.
Yes. So sir, my question is on Phoenix. We have seen margin improvement there. But on the growth part, how are we looking at this division going forward and what kind of utilizations we have currently? Is there a capacity constraint to go beyond a certain level? And how are we planning to do that?
There's no capacity concerned. I think we have got enough capacity. As you know, the OEM side of the algal land is coming down, whereas the aftermarket side of the Phoenix Lamps is improving. I don't know whether you're in the last call, but when we took over, we had 30% OEM and something like 70% -- sorry, 30% aftermarket and 70% or 65%, 70% as the OE business. That has almost flipped now. It is 70% aftermarket and 30% OEM.
So the aftermarket is still strong. But of course, there is competition. There are still a players from China, from Korea and of course, domestic 1 or 2 of them who are trying to get into this market. So overall, I would say it is now a gain where we have been able to establish ourselves as a strong player, quality conscious, capable of delivering to customers, not just the aftermarket but also the LM and direct exports.
So we expect the volume growth next year for sure. How it is -- it's a market where it's primarily dynamically changing. The OEMs are coming down, aftermarket is increasing. And the aftermarket has delivered a strong performance again. So I would say we have a situation where we are now considered a strong player, not just in India globally. The last man standing philosophy that we adopted a couple of years is now panning out well.
We are one of the last man standing strongly in this market. And that had, of course, had dented some of our margins because of the competition and excess capacities in the market. Some of them has gone away. Some of them are still there. Some of them will go away in the next year or so. So overall, it's a dynamic market. All I can say is that today, we are a lot more comfortable to say that PLD has gone through the worst times.
And I think we are in a fairly [indiscernible] going forward. with a decent margin and a reasonable growth. I mean growth may or may not be there or may not be great, but still, I think the margin will protect us for the next few years.
Okay. Understood, sir. Sir, the second question is on the point which you have discussed a while back on the overall organization level. So from a sales perspective, I think each salesperson or a business development guy can sell multiple products. So from a sales organization standpoint now, how are you -- is there any change?
And are you relooking at the overall sales because there can be a lot of cross-selling opportunities of the strength of each of the plants. Globally as well as within India. You highlighted that, but just from a sales perspective, I was just thinking, is there any reorganization there.
I think Mohan, would you like to answer? I'll also probably add on an end.
When we talk about sales, let's bifurcate it into 2 portions or rather, I would say, 3 portions. One portion is the aftermarket. The second portion is the OE things. And the third is the exports. So let me answer each one of them separately. When you talk about aftermarket when you talk about, let's say, cable division or electronics or Phoenix Lamps division, the addressable market and the players in these markets, by and large, are different.
Therefore, when you are talking to a dealer who is dealing with cables, it may be that we're also selling bulks, but the high probability is not doing so because it's a mechanical component electrical company. The so the kind of dealership distributorship that you are addressing is different. Therefore, to that extent, we have kept the sales organization separate for our market, and it will continue to do so.
Now I come to OEM. OEM when you talk about it at a gross level, what you say is right, there is a cross-selling opportunity at the gross level. But when it comes to the buyer level, the commodity buyers are separate. For each one of these areas would be separate. Therefore, we will not be able to really mix it up and talk about it. Export is a completely different ball game, and we have a separate way of handling. Now when you talk about cross-selling where it matters is a strategic relationship, where we particularly the OEM are talking for where we need to engage the top level management of the customer and then show them the book products that we have and also the potential that we have to come out with new products jointly working with them or on our own.
Now that has been addressed separately by the stock management director. Akhilesh, many a times, Akhilesh many of times, visits the customer, I visit the customer. And then we engage the customers at that level. And based on the requirements, we will channelize the division and the divisional sales people to go and start approaching. This is the way we are handling it. And I think going forward, we need to have that right balance of having the divisional focus and hence, the product focus at the but at the same time, addressing at a strategic level with the OEM customers. Aftermarket has already explained.
I think just to add to what Mohan has said, Resham, on a global level, again, we have these automotive customers and nonautomotive customers. We have also bifurcated that as a 2 separate segments. As there is a head of business development for automotive as Head of Business Development for nonautomotive. They drive under within their own managers that they have. into different segments of customers, maybe 1 business manager under automotive will deal with 2, 3 OE and similarly, 1 manager under nonautomotive guy will deal with 2, 3 customers. And then there will be an engineering support for them to present the case for each 1 of these divisions.
So it's a well-structured system. We have been able to pitch it well. And to add again to what Mohan has said, I think one of the things that we are starting to do now is to do some tech shows with some of our Indian OEMs after seeing our tech center and our experience center and seeing our products in auto expo. A lot of them have shown interest in us to have a tech day in their campus. So the one thing will happen in the next 3, 4 months is that we will go within for a day with their engineering center or R&D center with our tech shows to showcase our products and let all their engineers who are working on different may want different engineers working different products, even the customers.
They will come during the day and see our products what interest in and our 3 to get to explain to them. That is the other way we are trying to sell our products as well, for which a lot of customers have started giving dates, and we are in the process of doing these road shows also.
Great, sir. Sir, the last one is on cable business. How are you seeing growth for the next couple of years. From there, do you think growth possibilities are there. Two-wheeler, obviously, is that cyclical low today, but is there anything else other than a 2-wheeler, which will drive growth in the core cable business going forward?
Well, all I would say is that the cable has actually know now that our dependence on 2-wheelers is whatever, 25%, 27% from higher 90s, 10, 15 years ago. So the dependence itself has come down. So what we are driving now is how do we drive our growth in the non-2-wheeler side in terms of automotive, in terms of nonautomotive in terms of aftermarket. I think that is where the cable division will drive its business, not just in India globally. That is one side of it. And within OEM, as we have said, there could be -- my view is that I may be wrong, and I hope you I'm wrong that the number that we saw some 2018, '19, whatever, [ 20 million, 24 million, 25 million ] 2-wheeler may never be produced in India for a long time. So we have foreseen this 5 years, 7 years ago, and we have been derisking that our business from 2-wheelers. And we have done it successfully.
So now within the 2-wheeler, which is, let's say, 25% of our business, how do we further do derisk? That's where the FTC and our electronics division and our some of the new products are coming into picture. So overall, -- we are quite confident that the cable division will grow nicely, not just for 2, 3 years, much more than that because the kind of traction we see in the LDC or in the nonautomotive space or automotive space of our own super automotive and [indiscernible] is pretty, pretty strong.
So global customers, OEMs have accepted us through global supply chain partner. There is nobody else of that stage here in the past they didn't have the comfort and confidence. I think we have been able to deliver that to them. So I would see a good uptick in our volumes in cable business itself. And of course, the rest of it will follow as we go forward. And I think moderator, I think it's already velcro. We'll take maybe another 1 question.
Sure, sir. We have one participant in queue at the moment. We have Mr. Rakesh from Axis Capital.
Sir, just 1 or 2 in questions I had. So what is the reason for your other income declining this quarter? I know it was high in last 2 quarters but was there any one-off which you can highlight to?
Can you explain other income coming down?
Income for the quarter.
Other income has come down is saying, is it ForEx? Or is it something else?
It's a difficult for [indiscernible]
Yes. I think in the ForEx, we have mark-to-market what is the reason, I think.
Forward contract [indiscernible]
What would be the quantum of the. I mean, the ForEx?
Yes, [indiscernible] payer number or you can tell them off-line. Yes, you can contact me. I think that is basically on the forward contract number.
Okay. And just one more question, sir, if I look at your consol minus nor numbers, your other expenses have also moved up sharply so is this largely due to energy prices or anything -- any color over there?
Yes, power in Europe has gone up. So I have in the U.S. also, I think but there could be some other -- I won't be able to answer clearly. I think maybe Medappa can clarify later. But certainly, power is 1 of the costs.
Thank you all. I think from us, that would be our last question we'll take. I'll hand over. And then again, thank you for the interest in Suprajit. We appreciate. If there's any more questions that you may have, we can always contact Medappa our secretary department and we'll be able to happy to answer any of them. With that, I'll give it back to the moderator and thank Anand Rathi once again for hosting this con call. Thank you.
Thanks. On behalf of Anand Rathi Share and Stock Brokers Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you. Bye.