Syrma SGS Technology Earnings Call for Q4FY26 & Full Year

Añadido: 2026-05-12

[00:00:00]Q4 FY26 earnings conference call hosted by ICICI security. As a reminder, all participant lines will be in the listenon mode and there will be an opportunity for you to ask questions after the presentation concludes should you need assistance during the conference call. Please signal an operator by pressing star then zero on your touchstone. Please note that this conference is being recorded. I now hand the conference over to Mr. Aneruda Jooshi from ICICI Securities. Thank you and over to you Mr. Jooshi.

[00:00:35]>> Yeah, thanks uh Michelle. Uh ICICI securities is pleased to invite you all to Q4 FI26 and FI26 results conference call of Serma SGS technology. We have with us today senior management team uh to attend the call. Uh I congratulate the management for posting strong set of numbers and now I hand over the call to Mr. Nikil Gupta, head of investor relations to introduce the management and take the call forward. Thanks and over to you Nikil.

[00:01:05]>> Thank you Aner. Uh hi very good morning to you all. On behalf of Silma SGS family, we welcome you all to Silma SGS quarter 4 and fiscal year 2026 earnings call. We have with us today Mr. JS Gujaral managing director, Mr. Jesh Dhi, director, Mr. Satendra Singh, Chief Executive Officer and Mr. DJ Agraal, Chief Financial Officer, SIMA IGS to discuss the performance of the company during the fourth quarter and fiscal year 2026 followed by detailed question and answer sessions. Kindly note during this call certain statements that will be made are forward-looking which involves several risks, uncertaintities, assumptions and other factors that can cause results to differ materially from those in such forward-looking statements. All forward-looking statements made a based on the information presently available to the management and to the company and the company does not undertake to update any forward-looking statements that may be made during this call. In this regard, kindly review the disclaimer statements in the earnings release and all the other factors that can cause a difference. With this, I will now hand over the call to Mr. JS Gujar, managing director of Silma SGS. Thank you.

[00:02:15]A very warm welcome ladies and gentlemen to the FY26 earning call of Silma SGS Technology Limited.

[00:02:27]When we sit back and sort of uh reflect on what has happened in a year gone by, it gives us a great sense of satisfaction that we have achieved almost all the parameters or exceeded them uh what we had set for ourselves uh at the start of the year.

[00:02:47]Just to recolct we had started off the year with a guidance of about 400 plus crores of AITA margin uh a bit figures a revenue growth of about 30 to 35% and a positive cash flow with exports targeted to cross the 1100 cr. So these were the four P five or a set of parameters which we had set for ourselves and when we look at the figures for the year gone by it gives a great sat sense of satisfaction that we have achieved uh a beta of 545 crores even if we exclude the LCOM a beta it still stands at 490 plus so the original start guidance of 400 to 490 crores of operating a bit exported we had targeted 1,00 cr we are at 1200 plus cr working capital cycle we had said that we'll endeavor to bring it down and we have brought it down from 69 days to 63 days xelcom this figure is at 58 days all this has enabled us to generate a positive cash flow operating cash flow of 290 plus crores which is almost at 53% of the operating a bit. For all these four parameters, we have sort of exceeded what we had guided the market.

[00:04:25]If I was to sort of exclude consumer business from our sort of portfolio because consumer is a low margin business and there's a conscious effort of the management to sustain it at a certain level. My exposed my revenues have grown by a healthy 38%.

[00:04:47]X andcom they have grown by 31%.

[00:04:53]All the key drivers of superior margin automotive, industrial, healthcare, export and ODM they have all fired in the right direction.

[00:05:07]Automotive has grown 39% industrial 30% healthcare 36% exports 41% and uh ODM has also gone up significantly to approximately 17% which is almost like a 80% jump from 453 to 825 cr.

[00:05:33]Now this gives us a good platform to grow in the coming year. Uh we achieved 1477 crores revenue uh in the last quarter which is a run rate of approximately 500 crores a month which translates into 6,000 crores revenue at the same pace without a growth coming in in the second half of the year. My exports at C72 crores give us good run rate of 125 crores which is again equivalent to the next year the target of about 1,500 crores.

[00:06:14]So we are well set to capitalize on this consolidation which we have done in the current year and going forward we are very confident that on the three critical parameters which we measure ourselves against primarily the AITA operating cash flow and the revenue growth. uh on all these three we would be able to exceed the performance of this year or sustain the performance of this year.

[00:06:49]>> Thank you very much.

[00:06:54]>> So yeah so so now I hand over the call to uh Sijay Agraal chief financial officer. Hi, good morning everyone and welcome to Stigma SGS earnings call for quarter 4 and full financial year 2026.

[00:07:09]I'm pleased to report that this has been a landmark year for us defined by strong execution, meaningful margin expansion and significantly strengthened balance sheet. Let me begin with quarterly numbers first and then I'll take you through the annual performance.

[00:07:26]Quarter 4 2026 was our strongest quarter yet. Consolidated total revenue for the quarter was 1477 crores up by 56% on a year-on-year basis and 16% steeply an outstanding upcoming way. On business side industrial vertical contributed maximum as a 31% of our revenue followed by consumer vertical 26% auto vertical 24%.

[00:07:53]While all verticals showed a solid double digit growth on a yearon-year basis, IPM railway was the standout segment this quarter growing 122 182% yearon-year basis.

[00:08:06]Our operating for the quarter came in 174 crores up by 51% yearon year at 11.9% margin. EVT grew 61% Y to 150 crores and PAT rose 67% to 119 crores with PAT margin of 8.1%.

[00:08:28]Up by 60 basis points over last year.

[00:08:32]On a sequential basis margin moderated slightly operating income margin was 11.9% versus 12.6% in quarter 3 primarily due to higher risk of IT business during this quarter.

[00:08:45]Moving to our annual performance, our totality for FI26 came in at 4857 crores reflecting 27% yearon-year growth. When we see as we have previously guided that we will keep consumer business vertical below 35% which is actually 31% for FI26 and when we calculate our growth X of consumer business our revenue growth is actually 38% on year on year basis.

[00:09:11]More importantly, this revenue was always this growth was highly profitable. Operating VA extended 68% year-on-year basis to 545 crores with operating VA margin improving 270 basis points to 11.3%.

[00:09:28]Reported VA stood at 582 crores at a 12% VA margin.

[00:09:34]The profitability story is even stronger at the bottom line. PBT grew at 88% year-on-year basis to 445 crores. What a PBT margin expanding 300 basis points to 9.2%.

[00:09:49]PAT is about 346 cr rupees for the year up by 87% on a yearon-year basis with pack margin of 7.1%.

[00:10:00]You can see this kind of a leverage where bottom line growth is nearly double the top line growth reflecting a structural improvement on a business model reflecting our operating leverage benefit reflecting into the business model on revenue mix side exported business constitute 24 35% of my operating revenue and green 41% year-on-year basis highlighting our increasing global relevance across vertical IT and our fastest growth segment 74% year on year followed by auto 39% and healthcare at 36% growth on a year-on-year basis.

[00:10:37]Our revenue for the year is about 17% substantially increased on 12% last year.

[00:10:45]Coming to customer concentration, our top five customers contribute around 34% of revenue. Top 10 around 47%. Top 20 around 63% of my revenue on a full year basis FI26 on the order book visibility as on March end we have about 6600 crores of total order books of visibility together of which auto is about 29%.

[00:11:09]Consumer is about 30%.

[00:11:11]Industrial vertical is about 24%.

[00:11:15]Healthare is about 5% and IT and range together is about 11% of my revenue or coming to balance sheet and capital allocation we moved from a net position of 264 crores as in 2015 to now a net cash position of 467 crores. This year total debt reduced sharply from 611 crores to 353 crores and while cap and equivalent increased uh to 83 crores at the end year end debt to equity is now.1x and ROC improved from 12.4% 4% to 16.9% this year. When we calculate ROC on a goodwill registered basis, my actual ROC is 20.1%. The threshold uh number which we have been tracking always.

[00:12:05]Coming to working capital performance, our working capital days improved from 69 days to 63 days on a year-on-year basis reflecting better operational efficiency. Networking capital days when we calculate on X of Elcom which we have recently acquired it is actually 58 days. So on a like to basis versus last year the overall improvement into the networking capital base is about 11 days for the year we generated a healthy operating cash flow of 290 cr rupees which is around 53% of my operating and this outcome is based on disciplined working capital management and strong profitability delivery here. The capital investment for the year is about 140 cr rupes and we expect another 100 to 150 cr rupes of capex investment into the current year which is fi27.

[00:12:54]We want to update regarding one of our previously announced JV with premier energy wherein we were planning to acquire a company called JV. uh we want to agree that there were certain conditions precedent which we agreed with the sellers for the acquisition and which the seller was not able to fulfill as per the timelines. Hence we decided to drop the same acquisition or JV transaction.

[00:13:19]To summarize FI26 has been a strong execution across revenue profitability cash flows.

[00:13:27]We enter FY27 with the next cash position improving ROC a diversified and growth revenue base and capacity investments that position us well on the next phase of growth. We also want to update to the market on our rating upgrade long-term rating upgrade from A minus to double now showing a strong confidence of the all the stakeholders in the market in our credibility.

[00:13:52]We remain committed to our aspirations of sustained revenue growth of 35% with a sustainable operating margin of at least 10 to 10 and a half% targeting 700 crores of total IITA for the next year FI27. The demand environment across all key verticals auto industrial healthcare and the emerging IT railways and the defense maritime business remains encouraging. With that I'll hand it over to Mr. Satendra Singh our CEO.

[00:14:19]Thank you Vijay and thank you Vijay G and everyone on the call. Uh thank you for joining today. As always I'll start uh uh my comments with thanking all my 10,000 plus colleagues in our factories in our offices who work day in and day out to ensure that our customers stay delighted and that they help us in the growth story which uh Gujarat gi and Vijay uh shared with you.

[00:14:49]Financial year 26 has been a defining year for Serma. It's the one where we didn't just grow the top line but we strengthen every pillar of our business, our people, customers, operations and supply chain.

[00:15:06]Uh on profitability, margin expanded meaningfully across the year. Our gross margin improved from 22.6 to 25.6 six uh year on year and margins improved significantly as Vijay shared and profit after tax doubled almost year on year and margin testing 7.1%.

[00:15:28]This clearly reflects operating leverage at scale.

[00:15:33]We continue to make u improvements in our uh customer acquisition. We acquired several customers and we those customers will help us fuel the growth in uh financial year 27 and onwards. Most importantly, we continue to deepen our engagement with the customer customers which is reflecting in larger wallet share with many of our customers and maturity of the programs which we execute with them.

[00:16:03]This year uh operationally we have made several improvements.

[00:16:09]The utilization of our people resources utilization of our machines have gone up significantly over FY25.

[00:16:21]This all the improvements and all the efforts across the operations and across our businesses clearly has been noticed by our customers and by industry alike.

[00:16:33]We got nine customer awards and 19 industry recognition during the year.

[00:16:40]As we know uh the supply chains are going through certain anxieties and our supply chain team and procurement teams across the plant have worked hand in hand with our customers to ensure continuity of supply chain and ensuring that we stay competitive on people.

[00:17:02]Our engagement continues to improve and our last great place to work score rose from 83 to 86 this year. We continue to upgrade our processes across all the areas of our business.

[00:17:17]Looking ahead, uh FY27 reflects strong conviction in our pipeline, our new customer additions and our operational readiness. and our balance sheet provides strong balance sheet gives us the flexibility to invest in this growth while delivering delivering consistent returns. We remain committed to our long-term vision of being India's leading integrated electronics manufacturing partner and this year the FI26 has brought us meaningfully closer to that goal. Thank you everyone on this call and once again to our customers to our colleagues across the factories for great support and we look forward to similar support in the years ahead.

[00:18:02]Thank you once again and I'll hand it over to NL. Yeah.

[00:18:05]>> Yeah. Thank you Sendra. Uh uh over to Michelle. Uh we can go ahead on the Q&A session. Thank you.

[00:18:11]>> Thank you very much. Ladies and gentlemen, we will now begin with a question and answer session. Anyone who wishes to ask questions may please press star and one on the touchstone phone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question.

[00:18:31]Ladies and gentlemen, we will wait for a moment while the question Q assembles.

[00:18:41]The first question is from the line of Indrajit Agarwal from CLSA. Please go ahead.

[00:18:47]>> Uh hi, congratulations on a good set of numbers and thank you for the chance. Uh two questions from my side. If you can highlight uh the capeex pending capeex on key projects not just for FI27 but also over the medium-term PCB and any other projects that you're undertaking right now.

[00:19:04]>> Sure, I'll take this one. So overall the large project which we are taking over right now is the PCB related business.

[00:19:11]So PCB related we said that we are planning to spend approximately $90 million which is $800 crores of capex over the years for this multi-layer line kind of a PCB setup and this capex we are spreading across uh two phases initial phase is 400 crores which is going on and of which about 50 cr is already spent till last year this year we are expecting we'll be spending around 250 all crates the same process balance 100 can go the next year and the second phase can be spent over the next year and we will meet of FI29 also that's what we are spreading that multi-layer business related 800 crores of capex apart from that organic capex within the system normal EMS business we are expecting 100 to 150 crores of capex this year >> okay so 100 to 150 is only the organic and then add to that the 250 cr so broadly overall expect something around 350 to 400 >> and when do you expect the incentives or the uh benefits to come from the government post FI20 28 right?

[00:20:12]>> We are expecting the commissioning of the projects towards the end of this year maybe start of next financial year FI28 then we will be eligible to claim for the incentives in the park basis and generally I expect at least a year will take to get that incentives frankly.

[00:20:29]Sure, very helpful. And second, uh while you touched upon it in the opening remarks, if you can get more granular details on the impact of the current geopolitical tensions, right? Is there an issue in availability of raw materials? What kind of inflation are you seeing? And are we passing that on with what lead lag?

[00:20:50]>> See the supply chain issues are again global in nature and not specific to one company or one industry.

[00:20:58]So it is a phenomena where the basic metal prices have gone up. Uh the Middle Eastern crisis has sort of disrupted the supply chain roots. The logistic costs have gone up. Now these things are a part and parcel of the business and when all the companies are impacted sort of it's not unique to us. Having said that, we are in constant touch and we have contract arrangements with the customers where there's a pass through mechanism of variation in prices. Now does it happen on day zero? The answer is no. It is negotiated and then uh taken into account.

[00:21:44]We believe that in the current year uh these things would continue to play out till the situation comes back to normal.

[00:21:57]We believe that this partial increase in these costs could be offset by better buying. uh the volumes go up, you get a better uh negotiation path, operational efficiency and then sharing these costs among the four stake. There are essentially four stakeholders in the entire supply chain.

[00:22:20]In our case, it is our vendor, Serma SGS, the customers of Serma and the ultimate consumer.

[00:22:28]Now once the situation sort of stabilizes then the cost impact will be known by all the four stakeholders.

[00:22:39]What is the impact of that? We are not very clear right now but uh having delivered a beta margin of 12 odd% this year next year we are guiding 10.5 to 11% keeping this turmoil into account.

[00:22:57]Now if the situation stabilizes and we come back to normal situations if it warrants a upward revision beyond that uh we will uh guide the market according.

[00:23:11]>> Sure this is helpful. Thank you.

[00:23:15]>> Thank you.

[00:23:17]The next question is from the line of Sumant Kumar from Motila Losal. Please go ahead.

[00:23:23]>> Hi sir. So can you talk on uh the IT and railway we have seen a 182% growth. So uh can you uh talk on more uh subsegment how other sub subsegment and what are the uh the key driver for the segment?

[00:23:39]>> The IT and the railways are a small portion of our revenue and uh again we don't look at the revenues on a quarterly prism. If I look at it on a overall basis, my uh IT and railways have gone up uh from uh about uh 240 to about 476 on an annualized basis.

[00:24:07]uh this is as we said that the railways we were in uh uh touch with the customers and it is essentially the laptop related and the motherboard related business and the memory related business which we do. So going forward we expect this momentum of 80 or 90% not to continue but it will continue to deliver healthy 30 40% growth rates over the coming years.

[00:24:36]Okay, thank you so much.

[00:24:42]>> Thank you ladies and gentlemen. In order to ensure that the management will be able to address questions from all the participants in the conference, kindly limit yourself to only two questions per participant. Should you have a follow-up question, please rejoin the queue. We'll take the next question from the line of Achelare from Nubama Institutional Equities. Please go ahead.

[00:25:04]Uh yeah good morning sir. Am I on?

[00:25:07]>> Yes please.

[00:25:08]>> Yes sir.

[00:25:09]>> Yeah uh thank you for the opportunity.

[00:25:10]Congratulations for excellent performance. Uh I was just curious uh while you have I know indicated on the margin. Uh I'm just trying to dig deeper on this aspect. You know we have touched 12% margin for last two quarters 12 and a half and 12%.

[00:25:27]uh and if we are talking about a similar growth across vertices uh why the margin guidance uh you know that 10 and a half to 11% uh despite having an uh you know improvement on the on account of exports ODM mix going up and third the operating leverage just curious you know uh given it's kind of a pass through arrangement for the cost um any particular reason apart from the generic reason what you have reason for the margin.

[00:25:59]>> See, as I just said in the preceding questions, we would like to er on the side of caution. Uh the current uh volatility in the global trade, in the shipping routes, in the geopolitical, the basic metal prices going up uh would cause a stress on the economy on a macro level which is beyond our control.

[00:26:23]Hence we would like to earn the side of caution and we have guided 10 and a half to 11% margin despite having delivered 12% margin to be very honest. Now if 3 months down the line when we talk when we meet you again for the Q1 earning call of FY 27 if the situation has stabilized and we have a better picture we'll revise the guidance. uh but we'd like again at the expense of repetition on the side of caution and the pass throughs are there but it doesn't happen on day zero. It takes time. So keeping all the things into account uh we have guided that thing. uh but the more critical thing which we have guided is that we'll deliver a 30% absolute increase in AITA.

[00:27:18]I understood and if you could uh uh you know comment on each of the segment what is the outlook on the growth path uh you know while you have given a broad uh guidance uh if you could give on each of the segments the two segments which segment your voice there's a echo in your voice which we have to come closer to the mic voice is not clear >> sorry sorry for that uh if you could uh talk a little bit on each of the segment like auto consumer healthcare you uh if the underlying industry growth is as much uh if this growth is driven by domestic or exports and stuff like that you know give little bit more detailing on each of these four five key >> yeah if we go back to 256 what do we see we see a 39 odd% growth in automotive 30% in industrial 36% in healthcare 38% in only consumers and 31 41% growth in exports.

[00:28:21]My current order mix which we have order book has uh the same level of component of each with the automotive accounting for about 30% industrial about 25% healthcare about uh 5%.

[00:28:38]So based on this I think we are in a position to deliver a blended growth of about 30 35% for the current year.

[00:28:49]Individual verticals or annualized basis some would be at 35% some would be at 28%.

[00:28:57]The industrial growth would primarily be driven by exports and uh uh new sort of products or the which will be manufacturing for the power management units and other things. Automotive would primarily be driven by domestic though for the first time last year we have crossed 125 crores in automotive exports then would register some increase over there.

[00:29:25]Medtec has grown significantly. The healthcare business has grown significantly from 291 to 395 this year and we expect this continuous growth to happen which means the next year my met business should cross the 500 cr.

[00:29:44]consumer we are cautiously pegging it down at about 30% of our revenue and uh which this year it's about 1452 crores and uh 8 10% growth it should be about 1,600500600 cr rupees so the blended growth would coming from the dominant sectors of automotive industrial healthcare which is met IT and railways are a small portion of our revenue grow.

[00:30:21]>> Got it. Uh thank you. I'll call back in with you sir. Thank you.

[00:30:26]>> Thank you. The next question is from the line of Pavia Gandhi from Bajage Alternate Investment Management Limited.

[00:30:33]Please go ahead.

[00:30:34]>> Yeah. Hi, thanks for the opportunity. My first question is regarding the total order book. uh uh between December and March our order book uh has grown by almost 3%. Versus our historical run rate of 7 to 10%. Uh if you can explain uh is there any slowdown in terms of uh order intake or what is the reason for this or better execution or some any other factors if you can proide dig to take this answer. So when we see there is high delivery in this quarter we have done almost 1500 crores of revenue for the quarter. So this is after executing the quarter four also.

[00:31:13]So in the previous quarter in 6400 you should actually see it because out of 6,400 cr 1470 is already delivered during the quarter and then additionally we were able to add about 1670 or 1700 cr to 6600 cr level. The growth is even higher than the previous quarters net addition. This 200 cr is the prediction after the book >> right basis the current order book and run rate uh the overall revenue growth for the next year comes to 24% uh whereas we are guiding for 35%. So are we seeing any order pipeline uh that we are expecting order intakes in coming quarters.

[00:31:54]So we are guiding actually about 35% of the growth for FI27 and this order book is indicative whatever is there in hand today but this order book has to be over the period over the next few quarters has to be completely continuously upgraded based on the new order addition and all these orders are not for one year in this order book there will be many customers who will be giving you orders for a very shorter period maybe 3 months 6 months 5 months four months that way right so that's how that's how this operates similarly >> okay Got it. Just to add just to add on, we have achieved a run rate of about 1465 crores in the current quarter which is tag uh less than uh sort of 500 crores a month and that's the starting point. Now if the starting point is 500 crores or 495 crores a month the run rate and going forward historically the second half is much better than the first half uh we are very confident of delivering the figures which Vijay just pointed out >> and said in my opening my exports are currently at 125 crores run rate and we're talking 1500 cr plus so we are already at a 6,000 plus cr revenue level at the current timeline and the second half typically is a superior half in terms of top line and the resulted figures on the bottom line.

[00:33:26]>> Right. In terms of >> Yeah.

[00:33:29]Right. Got it. Got it. No wonderful. Uh so just in terms of cash, we are around 470 crores of net cash at this point in time and bases your capex that you announced uh for the PCB if I'm not wrong. we have to spend around 1,400 crores. So after a year uh we'll be short of cash in terms of and if you assume another 200 300 crores of operating cash flows also next year still we'll be short of cash. Uh so how do we plan to fund this because we only spent 50 crores for the PCB thing.

[00:34:00]So this year for the PCB business we will be spending around 250 crores rupees and for the same it will be partly funded through debt and partly through internal approvals and there is a GG partner also 25% of this cap has to be funded by the GD partner also together. So that's how this has to be funded against uh the current cash net cash position is 470 but actual cash on the balance sheet is about 820 cr rupees. We are confident of using this cap uh cash on the balance sheet for the growth purpose going forward and cash flow side we don't see any challenge over here >> just wanted to understand on the PCB KPEX we will not fall short of cash right that is what I wanted to understand will not fall short of cash you see what we spend we have projected about $14 million which is about 400 crores of whatever 360 400 crores for the current year and next year we'll get a 50 60% subsidy of that. So this will be a sort of a circular thing that you spend in one year, you get back a subsidy in the next year, then you again invest partly from that subsidy, partly from your cash flows and borrowing and you get back. So we don't we have planned our cash flow that we will not fall short of cash for this project over its uh execution life cycle.

[00:35:21]>> Perfect. Really helpful. Really helpful.

[00:35:23]Wonderful. That's it from my end. Thank you so much sir.

[00:35:27]>> Thank you. A request to all the participants to kindly use your handsets while asking the questions and also selfmute yourself that when the management is speaking for an optimum audio quality in the conference. Thank you. We'll take the next question from the line of Bhavik Ma from JP Morgan.

[00:35:45]Please go ahead.

[00:35:46]>> Hi thank you. Uh so my first question is you recently received ECMS approval for flexible PCB and copper laminate. So any color you can provide in terms of the capex which will go into this and over what time frame we could expect.

[00:36:03]So we got approvals for PC and copper clad laminate plus HBI and flex PC that's another one. So both put together we will be spending another 800 crores for those projects but that project capex may uh get executed somewhere between fi 28 to 30 fi 30 this entire 800.

[00:36:24]>> Okay got it second question is on working capital and cash flows how should we think about working capital for next year will keep on coming down and hence the year will keep on going up in F27.

[00:36:37]See with the defense business coming in our portfolio and we have reached a 63 days uh working capital cycle uh the endeavor would be to say if we can bring it down further uh how much by 3 days 5 days I really can't say but I think uh we should be all rest assured that working capital management and capital education is one of the prime focus of the management.

[00:37:08]We are willing to sacrifice topline growth if the working capital cycle is elongated.

[00:37:17]We are not chasing growth at the expense of working capital cycle. We'll be selective in our customers. We'll be selective in the verticals. uh reflecting is that we do our due diligence to ensure that each vertical has its own typical working capital cycle. We would like to have the best working capital cycle in that vertical and that is reflected in the way we have brought down the working capital cycle over the last four years for I think when we started off it was 90 odd days.

[00:37:51]>> Yes.

[00:37:51]>> And from 90 days last year we came down to 69 days. This year if 69 was to compare Apple to Apple if I was to exclude Elcom both from the revenue and the working capital my days have come down from 69 to 58 which is 11 days reduction 11 days on uh 69 is almost like a 16% reduction efficiency improvement in my working capital cycle. So that would remain the focus of the management and I think uh everyone should be rest assured that we'll not let this lift out on an annualized basis. Quarteron quarter there could be some variation.

[00:38:36]>> Okay, got it. Thank you.

[00:38:39]>> Thank you. The next question is from the line of Reu Bugalia from Capital. Please go ahead.

[00:38:47]>> Yeah. Um hi, good morning team. Um so if you can throw some more uh insights in terms of um the um value add products and inputs that we're targeting within the industrial segment and how do we see these applications scaling up in our portfolio over the next two years. Um some more insights would be helpful.

[00:39:05]That's my first question.

[00:39:08]See uh the value addition the superior valuation as I was saying in my opening uh remarks comes in from ODM business from its ports within these each vertical each vertical has its own uh margin profile and a medtech and medtech.

[00:39:27]Now what do we see that we have seen our ODM business growing up from 453 gross to 825 gross. Now this is almost a growth of uh uh 45 about 70% >> 70% growth. Uh my exports have gone up by 41%.

[00:39:58]uh our effort in the current year is to try and sustain the ODM growth to around 16 17%. I don't see it going up beyond 17%.

[00:40:11]Uh because we are planning targeting to grow by 35% 30 35%.

[00:40:17]I personally don't see that in the current year my uh export the podium growth would grow. If you're able to sustain it at 17%, it means we have grown the ODM business by another 30%.

[00:40:32]>> 17% of the revenue mix.

[00:40:35]>> Yeah. Yeah. Yeah. No, no, no. See, if my overall revenue goes up by 35% and if the OD business has to sustain at 17%, this also has to grow by naturally.

[00:40:47]Uh a 30% growth on 825 is we have to grow the OD business by another 250 cr rupees next year.

[00:40:55]in 26 27 we'll endeavor to sustain this in the coming year but the profitability would come in from working capital management exports met and ODM and all these verticals we are showing a very healthy growth uh over the last uh year and we expect this growth to continue my exports grew by 41% last year I expect them to cross the 1,500 cr from the 1200 cr against the target of 1100 crores which we had set. So 300 cr in exports absolute increase in exports add to the margin prof. >> Sorry >> sorry continue. Now I'm just wanting to ask what percentage of the ODM business would be uh housed in the industrial segment or how would be the ODM split across key end segments in which you operate.

[00:41:55]>> So tech is typically all ODM. So if I was to take my healthare business which is 395 crores it's all broadly back of the hand calculation we have to split it into the thing but back of the head calculation out of the 825 crores 395 crores is met. So remaining comes in from consumer and industry automotive has very little tech.

[00:42:23]>> Got it.

[00:42:25]So 430 >> 430 crores is both industrial and uh consumer but I don't have the figures of how much of this is among it.

[00:42:38]>> Sure. Um and so secondly just follow up on hopping bit again on the margin side while I know I understand you would uh to be slightly more conservative here but given that the ODM portfolio exports both are expected to further um improve in terms of mix rupee has been in our favor which will probably help offset some of the cost headwinds that you're sitting on there's operating leverage um still do you think uh that um the quartly run rate which you were doing in the second half or middle of the year of 12% uh will um see headwinds of about 200 basis point or you think um the cushion are very thin here and we may not have beyond 100 bits margin cushion >> end of the day the current situation in the market volatility and everything I think we expect that we should have the luxury of uh being conservative >> let's put it that way >> there's no point yeah but no point Tomorrow I say 12 and I give 11, you'll skin me down why it is 11. So you would like to have the luxury of being conservative.

[00:43:47]>> Absolutely. Uh and sir lastly um just your thoughts on now we are seeing uh larger players also for into electronics uh EMS focusing on industrial um and other segments. Um so how do you see uh a the India EMS market growing and also do you uh feel that competitive intensity in the domestic space may increase uh even for experienced veterans like SMA SGS here um despite newer entrance um entering in the space so for example Larsson has recently announced a significant for electronics 50 billion rupees of capex in the next two years um so that's I'm just trying to connect the dots and see how are we looking at the market outlook See okay now we've been in the industry for 40 years so we've been exporting since 96 when China was at its pride and our exports have grown uh domestic there are big players already in the country whether it was whether it is Jabel whether it is seen uh they were present uh not now they've been present for quite a while uh we are competing with the tier 2 uh global EMS companies uh competition competitive intensity would increase.

[00:45:06]Am I afraid of it? No. Am I mindful of it? Yes. And how do we take care of that? Uh I think we can give a far better cost structure than the big corporates within the country.

[00:45:24]Uh we have to be relentless in our focus on uh cost control, frugality, uh efficient buying and uh as we get integrated to the global supply chain with our global customers uh it gives us a confidence that that we are doing something right otherwise my exports would not have gone up by 41%. But there are companies all around the world who are competing for the same business.

[00:45:52]So we are very mindful of the emerging competition. Uh but we welcome it. We can't stop it. So welcome it.

[00:46:02]>> Got it. Understand.

[00:46:06]>> All right. Uh thank you and best wishes.

[00:46:08]Thank you.

[00:46:11]>> Thank you.

[00:46:13]>> The next question is from the line of Kesha Loti from HDFC Securities. Please go ahead.

[00:46:20]I thank you for the opportunity. I just want to understand when you talk about you know 30 35% addressable growth in your business going forward for multiple years. So the growth is is industry growing so fast or is it more like you are gaining market share or is it like you are you know getting a new product segment. How should we see this growth?

[00:46:40]>> I think you have hit the nail on that.

[00:46:43]You have provided all the answers in your question. We are gaining market share. We are expanding our portfolio.

[00:46:50]METTECH was not there in my portfolio couple of years back. It is now contributing approximately seven uh 78% of my 8% of my revenue.

[00:47:02]Uh defense has just been added. So that's a incremental sort of a vertical to a thing. We are uh now migrating to bigger contracts with bigger customers.

[00:47:14]So it's not one piece which gives me the confidence of a 30 35% growth rate. It's a mosaic of all the customers put together global domestic verticals uh my ODM business which gives me the confidence of delivering what I'm saying and this is backed by a very detailed working by our teams going down to industries customers SKU of customers what are the plans of the customers how they intend to grow what is the wallet share which we'll be taking and to us growth is just a figure. To me what is most satisfying is the quality of growth and the quality of growth comes in when I gain market share from my competition.

[00:48:02]When I gain wallet share from my competition and on both these two fronts I think our teams are doing a phenomenally good job.

[00:48:14]>> Got it. What would be the addressable market growth you know as you cut better to multiple segment but blended what would be the addressable market growth and lastly when we talk about the growth in effort into you will be entering PCB manufacturing business so possibly this growth would be faster because of entry in that segment >> yeah the PCB business would kick in somewhere in 2728 so whatever growth I'm projecting today for the next year is for the businesses in my portfolio.

[00:48:48]Uh 2728 would be the first year when my PCB business will kick in. If it gives me a 400 cr, 300 cr, 700 cr whatever is the figure that will be incremental to this growth. So if you're saying we'll grow by uh let's take a wrong figure of uh 30% or 35% you have to calculate on 4,800 crores it will result into some resultant figure. add another 30 35% that will be the organic growth in 2728 add the PCB to that so 2728 logically the growth should be superior to 30 35% because of the addition of the PCB vertical one of my question was what would be the addressable market group where you're entering >> see the addressable market It's so huge like what what are we talking of? We are not even a billion dollar company uh uh if you take uh the likes of Jabil and all that there will be multi-billion 2025 billion company. So I think addressable market is a sort of just a feelood factor that this is a biggest market what we are addressing what we are concentrating is the market is there we should be able to consistently deliver 30 35% growth over the next 2 to 5 years organic coupled with inorganic when we grow Maybe if I just quick add on so as a business we are addressing not only India we are addressing global like if you see our numbers we are 25% of our revenue comes from exports and global addressible market for reference is about north of 600 billion so and today what we reported to you is give or take about 500 million plus uh revenue. So there is there is huge potential for growth and that that's the market we are looking at addressing overall.

[00:51:03]>> Got it. That is very helpful. Thank you so much.

[00:51:07]>> Thank you. The next question is from the line of Pravin Sahai from PL Capital.

[00:51:12]Please go ahead.

[00:51:14]>> Yeah, thank you for opportunity and many communications for a very good set of numbers. Uh the first question is related to the export. Uh so uh as you had a guided for 15 cr for 27 and also in the last call you had highlighted the strong EU market exposure is driving your number. So if you can give some color on the how the EU market and what how much is the contribution and how is the growth going there.

[00:51:43]>> See Mike the growth in exports last year has been 41%. And uh what we are targeting this year is less than 30%. If I do 1560 it will be about 30%. So I'm guiding 15. And these are based on the customers which we have on board uh where we have started supplying. Some of the new customers which we have onboarded this year which means till March 26 would go on stream on a pilot basis in 26 27.

[00:52:16]That gives me the confidence that 2728 the customers which would have 2 5 10 15 20 crores of revenue in FY 2627 would have the potential to cross the 50 crore revenue 100 crore revenue 40 crore revenue in 2728.

[00:52:34]So we believe that with the existing customers already sort of reaching their uh uh what you call regular uptake level the new customers which you have onboarded which would be doing the prototyping this year the growth of exports of about 25% minimum over the coming years is a distinct possibility and we'll be able to achieve that If some of the major customers which you have onboarded they have the potential to further accelerate the export growth but for the time we are being conservative and putting in a target of 20 to 30% 25 to 30% uh export growth for the coming >> any contribution from the EU can you highlight Sorry.

[00:53:33]So if you're talking about UFA that has a positive impact in a way that there is a maybe sentimentally, psychologically there will be larger business opportunities that are available which we can expand further. In terms of number yes in the select cases there was a duty applicable about one and a half%. That will be that is something the financial benefit one can look for going forward. These FDA agreements don't typically have a immediate positive or negative impact.

[00:54:05]You see it takes time for the negativity to set in. In negativity, it is slightly faster. In case of positivity, it is slightly slower. But long-term impact is very very positive. And I believe that we are very well positioned uh to take uh benefit of the FDA which the government of India has signed with EU, with America, with New Zealand, with Canada and other things and other things.

[00:54:34]>> Okay. Uh next question is related to the >> related to the to the SMA and premier which decided to not go with the K solar acquisition. Uh so uh uh is there any expense related to that we have accounted and uh related to that is >> see there was very little expense related to the K solar acquisition.

[00:54:59]Whatever has been spent has been charged off to the PNN. Uh the there were certain conditions precedent which K solar had to comply with. when they expressed their inability to comply with uh we both decided that uh it was best to drop the deal. Uh so we have dropped the plans to acquire K solar but I would like to reiterate that we have not dropped the plans to be not to be in the renewable energy space. We have very solid intent of entering the renewable energy space market in the inverter business and the related products. Uh instead of a inorganic acquisition uh we would now be putting up a green field project. Uh currently we are evaluating various proposals which we have got from the technology partners. uh I would not be able to give a color on that because nothing is warmed up but I think in the coming uh quarter or something we should come back to share our plans on that but uh renewable energy space is very much in our focus for future growth.

[00:56:18]>> Thank you. And any thing on the PLI benefit for a full year? Last quarter you had given indication of 32 32 cr for 26. How much we had done? Uh PLI benefit we received.

[00:56:32]>> Gross PLI for the full year would be approximately 80 cr rupees and posting we expecting it will be net PL would be approximately 38 cr rupees for the year FI26.

[00:56:44]>> Thank you sir and all the best.

[00:56:47]>> Thank you. The next question is from the line of Nikil Kandui from Access Capital. Please go ahead.

[00:56:54]>> Thank you for the opportunity and congratulations for a good side of the world. Sir, just with the Q4 PL number also Q4 PL Q4 PL will be approximately the port number will be approximately 10 cr rupees.

[00:57:11]>> Okay. So just wanted to understand that the order inflow of 6200 crores majority inflow from consumer and IT business around 44%. And if I include also that is that comes down to 17%.

[00:57:27]Just want to understand that these are your relatively lower margin business where the Orient share from these business are very low. the guidance uh of 10 10.5 because of the increasing share of lower margin business is that right understanding apart from the supply issue which you highlighted so order book is just an indication first of all order book is not a clear reflection of the same similar way percentage for the full year of business whereas in order you can see current order book for industrial business is 24% only because in industry customer generally does not give you full maybe more than 3 months kind of a or change.

[00:58:05]So that's how that's how generally it follows. My business needs mostly we are expecting it should remain same as it was in FI26. Consumers should be around 30 32%. IT business it is growing it can be around it will raise around 10%. And about 25% of auto business and 28 to 30% of industry business keeping the same my margin would be in check. Yes, as Mr. Gujarat has already we are expecting because IT business is also slightly growing and maybe some bit of geopolitical factors which are also impacting including raw material prices increase that's where we are guiding for these markets.

[00:58:43]>> Okay. I have one last question from myself. Can you show in more light on the smart metering business? How much is it in the other book and how much did it 26? And a related question that would be that sly consider business to be similar to smart m business which is high working capital intensive but also giving us high margins.

[00:59:07]So smart meeting business we have done in the current year approximately 250 260 crores of total business in the order book I need to check exactly what's the number but as Mr. has already explained that we are going slightly selective here keeping the working capital balance in mija and that's how we are we are following only and smart ming business are they almost similar because not not in terms of uh industry but in terms of high working capital and high margins which can impact future working capital days for us >> uh the smart metering business is not a high margin business. It is a normal industrial. It would come lower in the industrial category. Uh so in terms of margin profile, the two businesses cannot be compared. One is a superior very high uh margin business. The smart metering business is not a very high margin business. It's a moderate 15 odd person gross material margin business.

[01:00:08]12 to 15% gross margin material business. But it has the same elongated working capital cycle.

[01:00:18]Hence the profitability of a smart metering business if you are not choosy about your customers. If you change revenues would we suspect in case of defense despite it's a longer working capital thing but since it's a very high margin business it's a OB and you give a solution uh to the customer uh it is offset uh such that even the higher working capital cycle results in a very superior AITA margin business And if I just share that if we were to exclude Elcom business from our working capital for a minute and exclude its revenue, my working capital cycle for my business is down from 69 to 58 days. Uh with Elcom it is down to 63 days. uh ELCOM on its own would be a defense is the business is notorious for long 3 to 5 months 6 months working capital cycles but since it forms a very small portion of our revenue I don't see it negatively impacting my overall working capital cycle significantly >> got it and just if I can add one more question s what will be the percentage this order book from Elcom in the total order book >> in the total order book Elcom's order book will be approximately 5%.

[01:01:53]Okay, thank you. That's all for me sir.

[01:01:56]>> Thank you.

[01:01:58]>> This will be the last question for today from the line of Pame Sha from Dam Capital. Please go ahead.

[01:02:06]>> Yeah. Hi sir. Um good morning and congratulation on a great set of numbers. I have two questions. Um first one being that uh while we're on track to grow at around 30 35% for FI27 can you possibly discuss um you know how the how are we going to get that growth uh possibly some client additions which you would have added through FI26 and for what applications would that be across segments uh which will sort of help us get that growth and the second question would be um so I'm assuming that uh the defense number is coming in the industrial piece right now And um you know if we exclude that we have seen some softness out there as indicated by you for smart meters but uh going forward x of the defense business u you know some color on uh the applications in industrial which will sort of help us uh continue the growth profile. Thank you.

[01:02:59]>> Okay. uh now uh going forward we are projecting a growth of 30 35% and that's backed by the orders which we have in hand and the the visibilities which we have received from the customers uh we expect the businesses to grow deeply uh sort of at the same pace automotive they say has grown by 39%.

[01:03:24]Healthcare has grown by 36%.

[01:03:27]uh industrial including LCOM has grown by 30 excluding Elcom it would be slightly lower but some of the new customers in the power management sector and the uh uh UPS sector and those uh uh industrial electronics and controls would give us the revenue in the next year. We have added how many customers last year? So 42 customers is what we have added onboarded in the last year and of which if we talk about industrial about seven customers they have onboarded onto the industrial segment.

[01:04:02]In fact if we talk about applications it is varying across human systems solar trackers data center applications related motherboards uh liquid processing machines for SMC as applications. So those kind of applications for which we have added customers here. And when we talk about this 32 customers have a potential to add at least a,000 cr plus in my current year revenue of 26 and full potential maybe about 2,500 cr plus in a long-term basis for >> that's got that thank you that was helpful and congratulations and wishing you all the best for the new >> thank you >> thank you >> as that was the last question for today I would now like to hand the conference over to Mr. Gujar for closing comments.

[01:04:51]Thank you and over to you sir.

[01:04:54]>> Thank you. Uh or overall basis is a very satisfying year but that's fast. We have to focus on what we are going to do in the future.

[01:05:05]And as we have all the time been saying that we would like to build a sustainable business which has superior margin profile which has a decent component of exported ODM and of all these products I think we are well poised to achieve that. We are relentlessly focusing on quality and environment and uh uh it's small issue but would like to share with you uh that we are the first company in the country to get a certification for automotive electronics information security for automotive industry known as SCEX. I didn't know it about six seven months back we were so informed by our one of our overseas customers which we are starting off the production somewhere towards the end of the year which will give us a series production in 2728 to get this certification.

[01:06:09]So, Tyax. So, we are relentlessly focused on building top-notch factories with solid processes to give us operational efficiencies. We are among the first Indian company to have a realtime monitoring system on our S&P line. It is being inducted in phases over all the plants and the initial results have been very very encouraging.

[01:06:40]We have seen a 5 to 7% improve improvement in the operational efficiency. So I think uh broad customer base, solid customers, reputed blue chip companies, leaders in their vertices, uh very strong set of operational parameters in place at the plants and a hunger for growth and hunger for learning. I think these two three factors define the DNA of SIMA FGS and I think going forward in couple of years when we again talk I think Surma would be at a different platform level in terms of revenues and product mix which it is servicing and the customer profile which it is servicing. So this is a journey. It's not a 100 m sprint. It's a marathon which we are running. Uh but mindful of uh meeting the street expectations on a quarterly and annual basis. So I think uh we are well poised to be uh among the top leading companies uh globally also. Currently I was told we are ranked somewhere about 65 uh globally. I was reading in some magazines. So the uh effort is to that keep graduating that Serma SDS is the first brand which is recalled in the mind of a potential customer when he's looking for a EMS or ODM business. With this I thank everyone for the support all the stakeholders the vendors the employees the bankers the investors uh for the faith we post in the management of theirs and we on our part would ensure that we build our institution which is part excellent in the country.

[01:08:40]Thank you.

[01:08:42]Thank you members of the management.

[01:08:44]Ladies and gentlemen, on behalf of ICICI securities, that concludes this conference. We thank you for joining us and you may now disconnect your lines.

[01:08:53]Thank you.