Amber Enterprises India Limited (AMBER) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Amber Enterprises India Limited Q4 and FY '21 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectation of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Daljit Singh, Managing Director from Amber Enterprises India Limited. Thank you, and over to you, sir.

Yes. Hello, and good morning, everyone. First and foremost, I hope all of you and your families are safe and all of you are taking necessary precautions during these unprecedented times. I wish best of health to you and your families. On the call today, I am joined by Mr. Sudhir Goyal, our Chief Financial Officer; Mr. Sachin Gupta, Head of RAC Division; and Strategic Growth Advisors, our Investor Relations advisers. We have uploaded our results presentation on the exchanges, and I hope everybody had an opportunity to go through the same. I will open my remarks by giving a brief overview on the industry environment, followed by a business update and operational and financial performance highlights for Q4 and FY '21. The consumer durable industry made a strong comeback in second half of financial year 2021 as the economy moves to normalcy. Work-from-home trend and pickup in the residential sales were the significant tailwinds for the demand revival. The overall recovery in the business was better than expectations at the beginning of the year. The RAC industry, which had witnessed demand uptick in the September quarter led by steady improvement in consumer sentiments, continued its improvement trajectory in the March quarter as well. In the anticipation of good summers, sales have been pushed to retail segment aggressively. The channel inventory at the end of March 2021 stood at normalized levels. However, the growth momentum has been disrupted by a second wave of COVID-19 during April and May. While the COVID-19 vaccination efforts have gained momentum, uncertainty is rising due to the resurgence of COVID cases across many parts of India and lockdown restrictions of various -- varying degrees. Local lockdowns in many locations has led to varying utilization levels at the plants. The extent of second wave of COVID-19 pandemic might impact the group results, estimates of which at this juncture is highly uncertain. The situation remains fluid and we will provide an update on the situation in the future. Now let me talk about the government interventions which will provide the much-needed impetus to the industry, and at Amber, we are confident to see this opportunity. As mentioned previously, the ban on imports while -- with the refrigerant-filled ACs will open huge opportunities for domestic manufacturers. With this notification, we have already signed 6 new customers for refrigerant filling solution since this notification has been announced. As communicated earlier, the government has approved PLI scheme for air conditioners and LEDs with a total budget reallocation of INR 6,238 crores. The scheme of air conditioners will provide an incentive of 4% to 6% on incremental sales of AC components manufactured in India over a period of 5 years. This will help in creating a [ component increase ] within the country and make India a manufacturing base for [ global ]. This will increase the domestic valuation from currently 25% to 75% the next 5 years. Over the past few years, Government of India has increased the import duty on completely built units and then components on these could boost local production. For instance, the import duty on RAC compressors have increased to 15% in June budget 2022. Similarly, fully [ printed ] AC units now attract an import duty of 20% against 10% earlier. The order -- this order bodes well for the growth in domestic manufacture of RACs and in components, and we would endeavor to grab majority of the market share. We had also announced 2 new greenfield facilities, one in [indiscernible] region near Pune and other in South India. We have completed acquisition of land for the Pune facility and construction has already started. We expect to operationalize the same by Q4 FY '22. We have shortlisted the land in South India and will be completing the formalities for buying the same in next 1, 2 months and start construction thereafter. I will now take you through the consolidated financial highlights. Revenue, our consolidated revenue for Q4 FY '21 stood at INR 1,598 crores as against INR 1,315 crores in Q4 FY '20, a growth of 22%. In Q4 FY '21, RAC contributed 60% of total revenues, while components and mobility application contributed 40% of revenues. For Q4 FY '21, we witnessed an operating EBITDA of INR 147 crores against INR 119 crores in Q4 FY '20. Operating EBITDA margin for Q4 FY '21 stood at 9.2% as compared to 9% in Q4 FY '20. PAT for the quarter stood at INR 76 crores as compared to INR 63 crores. This includes INR 11.24 crores positive effect due to change in tax rate in Q4 FY '20. PAT margins for Q4 FY '20 stood at 4.8%. Please note, FY '21 figures are not comparable to previously year due to nationwide lockdown during the peak summer season, which led to subdued sales in H1 FY '21. Our consolidated revenue for FY '21 stood at INR 3,031 crores. In FY '21, RAC contributed 55% of total revenues while component and mobility application contributed 45% of revenues. For FY '21, we witnessed an operating EBITDA of INR 229 crores with operating EBITDA margins at 7.5% and for FY '21 stood at INR 83 crores. Now coming to subsidiary financials. In Sidwal, Q4 FY '21 revenues for Sidwal stood at INR 80 crores. Operating EBITDA stood at INR 21 crores. FY '21 revenues for Sidwal stood at INR 201 crores with operating EBITDA at INR 48 crores. In the recent budget, 26 new cities have been earmarked to have metro lines and 1,700 kilometers of line to be added under metros. This will bring immense opportunity to supply more ACs for metro coaches, and Sidwal is well placed to capture this opportunity. Order book continues to remain healthy within the business segment. PICL. Revenues for PICL stood at INR 71 crores for Q4 FY '21. Operating EBITDA stood at INR 6 crores and operating EBITDA margin stood at 9.1%. For FY '21, revenues for PICL stood at INR 131 crores. Operating EBITDA stood at INR 7 crores and operating EBITDA margin stood at 5.1%. With the announcement of PLI scheme, we are preparing for the next leg of growth and expect to double the revenues for PICL along the improvements in margins in the next 2 to 3 years' time. IL JIN and Ever. For Q4 FY '21, revenue for IL JIN stood at INR 118 crores and in Ever stood at INR 59 crores. FY '21 revenue for IL JIN stood at INR 307 crores and Ever revenue stood at INR 154 crores. As of 31st March 2021, on a consolidated basis, we have positive cash flow of INR 115 crores as against net debt of INR 246 crores as of 31st March 2022. To conclude, I would like to reiterate that our constant endeavor would be to increase penetration and increase our wallet share in existing customers, continuously add new customers, create a foothold in export market and enhance our products with new technologies by focusing on R&D. With this, I open the floor for discussion. Thank you.

[Operator Instructions] The first question is from the line of Ankur Sharma from HDFC Life Insurance.

I had a couple of questions. One, if you could share with us what was the AC volume [indiscernible] to put this number in our slide, which I could not see? And also, what was it for the industry? Just trying to see how we've done versus the industry volumes?

So as in FY '20, when we have done AC volumes of around 2.1 million, and the gas charging units are separate. While on the industry level, as you see there was a national lockdown obviously in April, May and industry came back to the normalized levels. And as total industry, our estimates are somewhere around [ 5.1 ] million units, which were done in FY '21 basically. So overall, if you see the industry in the Q4, it has done fairly well. We have seen increase and growth in Q4, while obviously on the complete year of year-round basis, the industry was impacted due to nationwide lockdown.

Okay. Helpful, sir. And also secondly, on the stand-alone sales, we did about INR 1,300-odd crores in Q4. If you could give me the breakup into AC and the components business on the stand-alone side?

So if you see on stand-alone side, almost around 60% revenues was done by the RAC segment and remaining was component and the subsidiaries, basically.

Okay, okay, okay. Second, sir, on the inventory. So while you did touch about March and being kind of normal given the strong retail, but as we all know, right, I mean, starting second week of April, we've seen the lockdowns, et cetera, but worsen into May. So are you -- so if I had to say, compare it, say, to the last year same time when we had lockdown, is the inventory situation worse of better this time around where retailers better prepared? And more importantly, would you expect a similar rebound once things open up like what we saw last year also from June onwards all the way until March would be similar pent-up demand kind of playing out?

Sure. So Ankur, if you see, last year was very different because it was a complete lockdown. It was nationwide lockdown and industry was caught all unaware and nobody was prepared. But this time, the lockdown is more localized as well as industry was anticipating a little bit of disruptions due to COVID and everybody was a little aware. So I would say inventory levels are better off in the industry than last year. However, it is very uncertain times right now because we are yet to see how this unlockdown happens. Hoping that it does happen in May, if it opens up in -- like in June, it opened up. So we are sure that inventory liquidation shall happen immediately after that. See, the work-from-home is a new concept now. Everybody definitely looks for comfort living over there while working from home. So we are very hopeful that the pent-up demand as well as the demand should come back to normalized level again, and the industry should be on the path of its growth again. So it's yet to be seen how these lockdowns are -- again, unlockdown is happening, how unlockdown is happening, probably in month of June and how the COVID situation pans out, but we are hopeful that it should go better and the industry should rebound again as it was it did last year. And inventory levels are better off that it is not as bad as last year.

Okay, okay. And just one last one, if I may season, is on the PLI side, right? So while the announcements have come, we have some more details on what exactly the government has to offer. So what is Amber thinking? If you could just please elaborate, which components are you looking at in terms of the PLI scheme? In terms of compressors, we've heard noises and news around -- I'm sorry, not noises -- of news that you may be looking at a tie-up with some local Indian players to enter that space, so some comments on those would be very appreciated.

Yes. So Ankur, if you see the broad PLI [ centers ] are there, but yet the policy and then the narrowed down version is yet to be coming. You see the PLI scheme was announced and primarily, it is on the component basis only. And it is divided into -- primarily into 2 section, one is the higher value components such as compressors and [ in a group tubes ] and aluminum and the other ones are the PCBs, motors, the cross flows, fans and all that. However -- so as Amber, we are already present in PCBs and motors. So we would be definitely going forward and doing investment and making the best opportunity out of this PLI scheme. We continue to explore in the upper segment, which is a higher value segment over there. And if we find right partners, definitely we would be seeking this opportunity and looking forward also. And in PCB and motors, we are already aligned and we are already moving ahead over there. So we are still waiting for the fine -- refined version and fine-tuned version of PLI scheme to be out. So as and when it is out, we would be definitely moving forward and taking this as an opportunity.

Okay. And sir, just one thing. I think on the subsidiaries, if you could also talk about the margins for Ever and IL JIN. I think you mentioned the full year top line, but I think I missed out on the margin numbers, if you could share that [indiscernible].

Sudhir, can you just give that information?

Yes. Yes. So for the subsidiary, as we said [indiscernible] INR 130 crores turnover we have achieved in full year in PICL and operating EBITDA margin was INR 6.64 crores. And if we talk about the quarterly numbers for PICL, it is INR 71 crores and INR [ 6.43 ] crores operating EBITDA. And for IL JIN, we have achieved INR 307 crores of turnover with INR 14.65 crores operating EBITDA. And for March, it was INR 118 crores with INR 4.67 crores EBITDA -- operating EBITDA. And Ever, we have -- full year, we have achieved INR 154 crores turnover with a EBITDA, operating EBITDA of INR 7.34 crores. And for March quarter, we have done a turnover of INR 59 crores with operating EBITDA of INR 3.7 crores. And on Sidwal, overall year basis, we have done INR 201 crores turnover with an EBITDA of INR 48.49 crores. And on quarterly basis, we have done a turnover of INR 80 crores with an operating EBITDA of INR 21.4 crores.

[Operator Instructions] The next question is from the line of Dhruv Jain from AMBIT Capital.

Sir, I had one question with respect to the gas charging opportunity that the person you are speaking with? Yes, sorry. I had just one question with respect to the gas changing opportunity that you had earmarked. I said you signed about 6 customers. So how many of these customers would get converted to the full RAC business? And how many would be the cash charges bid only? And what would be the indicated market share of these customers?

Dhruv, please, like if you see in gas charging, the announcement of this band was made in last October, so October, November. And as a discussion with all the customers, we started to get the solution of gas charging. However, all of these as a Phase 1 only. However, all of these customers would be converted into long-term customers into the complete manufacturing, and so we would be definitely -- we are already discussing with all of these customers, and these customers are pretty large size customers. And they would be definitely moving into complete manufacturing shortly. Most of them -- some of them are moving in this financial year, and others would be converting in the next financial year. So we are highly opportunistic -- opportunity -- we are taking this as an opportunity, and we are very hopeful that we will be able to convert all these customers from gas charging into the complete [ built ] manufacturing and give the complete solution to them basically.

Okay. And just one other question on the PLI scheme now. You highlighted that you will be or fine pay but any indicative CapEx in the -- if you will go for the large investment that I just highlighted or will go from the [indiscernible] investment? And if there is any additional CapEx outlay that you would earmark for this, apart from what you had earlier highlighted for last quarter's call?

So Dhruv, it is a little early to give some numbers over here in terms of the CapEx earmarked for the PLI scheme. Like I earlier mentioned, PLI scheme is broadly into 2, which is one is higher -- higher CapEx -- intensive CapEx, which is corporate use and compressors and aluminum and other is PCBs, motors and cross flows and service walls. So Amber is already present in PCBs and motors. So definitely, we will be taking this as an opportunity going forward for applying the PLI scheme over there. We are hearing it might -- the PLI scheme might have sheet metal and injection molding and also -- and heat exchanges also, but we are still waiting. If it comes, definitely Amber is already present in all these 3 verticals. So we would be taking this -- that as an opportunity also. For the higher ticket size, we are continuing to explore and we are just waiting for the fine-tuned version. And as and when it comes out, then we'll look forward and we'll see what is there for Amber. But at Amber, we are pretty out there already and we would like to definitely capitalize this and -- as an opportunity and be ready for this. So PCBs and motor is already there. And -- but to give the complete numbers, it is very early stage right now that -- to give any numbers out there.

[Operator Instructions] The next question is from the line of Madhav Marda from Fidelity Investment.

My question is just in continuation to the previous one on the PLI. If I look at the PLI document, there is a section called AC components, which is, I think, as you stated, it's high-value or low-value or some [indiscernible] combination thereof. So in case I decide to go in for the high-value intermediates as well, should I assume that we were going for the combination package which is the sort of the first one in the PLI documents where the investment ranges between -- goes up at INR 600 crores as well for the large city side. Can that be something you like at?

So Madhav, as earlier mentioned, like we are still waiting for the fine-tuned version and also which all components get covered in lower intermediary value and higher value. Higher values though clear as well as definitely lower value still being discussed. While at the same time, if you see in lower value items like PCBs and motors are already there and if heat exchangers, injection molding and this sheet metal comes in, we would be definitely applying over here. And obviously, if in higher value also it makes sense and we find the right partners over there and combine together with [ SVB ], we are confident enough that we can apply for at components. Definitely, we can look forward for that. But however, for now, if you see, we are confident of applying in lower value intermediary higher value is still to be -- we are exploring. We are looking at the right partners. And if we find any right partners, we'll be applying in that also.

Okay. And [indiscernible] expected? Is it like the next 1 month or longer?

The fine-tune volume I think it should be out there probably in the 1 month, but however, due to lockdowns and all that, though the government is already working and aggressively working on it. So we are hoping that it should be out there probably in the 1 month time.

The next question is from the line of Naval from Emkay Global.

Sir, 2 questions. First, if you can share what was the industry growth sales for 4Q, like about we have delivered close to around 16% in RAC segment. And second, why have receivables gone up so much? Is it because of Sidwal or on the core business as well?

So Naval, I mean, if you look into it, Naval, the industry though due to lockdown, obviously, the first quarter was complete bought out, but then industry grew back. And the industry has grown at almost around 19%, 20%, if you see in the last quarter. So industry has definitely rebounded in the last Q4. And -- but again, obviously, now the lockdown -- the localized lockdown has happened, so we are impacted by that, definitely. But in Q4, there was a complete demand. And industry came back to normalized level as well as at the same time, growth grew by almost 19%.

So follow-up on this, we have added new customers in the last 6 to 9 months. Still, our growth number is lower than industry. So is it the case where we have lost some incremental volumes or competitive inventory have increased or there was something else to read into this?

No, if you see, I mean, we have outnumbered again the growth numbers over here, we have grown by almost around 22% on the revenue segment, while the industry grew by almost around 18%, 19% over here. So we have outgrown the numbers. However, definitely, if you see many customers were impacted due to lockdown, there was a lot of uncertainties over here panning out in the demand and demand aggregation. While at the same time, the industry was growing, but at the same time, many customers, they were -- due to the lockdown situations as well as the demand situation, there are a lot of uncertainties in the demand side of the world also. But yes, again, total as all, total industry it has been pretty good, and we are confident again that industry should rebound again now up both this lockdown are done.

Understood. And sir, second question on the working capital?

Sudhir, you have?

Yes, Naval. So on the working capital, you see that our revenue has grown in all the subsidiaries, except one. So the receivable number are in line with the growth because receivables are always in line with the quarterly sales, not for the yearly sales. So if you see quarterly sales, that has been increased by 20% -- more than 21% so that receivables are in line with that only. There is no exceptional thing or there is no delay in payment from any of the customers. There was some delay in Sidwal, but that has completely recovered in the month of April because there is slow payment in the month of March due to various [indiscernible] isn't part of the debtors, but there is no major thing. That is a year-round -- every year scenario in Sidwal. So that is not a exceptional thing anything happened in current financial year.

And no change in credit terms for the brands also?

No. No change in that.

[Operator Instructions] The next question is from the line of Pulkit Patni from Goldman Sachs.

Sure, sir. Sir, my question is slightly longer term. Can you talk about where we are in the VRV, VRF development cycle today? And how should we look at that segment over the next 4 to 5 years for us?

Yes. So to answer your question about VRV and VRF, definitely VRV and VRF are penetrating the air conditioner industry very well. And we see a lot of opportunity for VRF. And in view of this opportunity only, we started our commercial AC production and we already have already started offerings in the commercial side of the world. So we are -- earlier, we were to giving only room it 1.5 ton and 2 ton and 1 ton. Now we are already gearing the 5.5 ton, 8.5 ton, 11.5 ton of air conditioning. Also at the same time, we are entering and already developing the [indiscernible] also. Additionally, in VRV and VRF, which is obviously a completely new technology and which is a very technology product, so we have already started entering into that. Our R&D teams are already working on that. The 6 HP and 10 HP is something this year we've already earmarked. And VRV, VRF segment is something which we are definitely looking at as a growth opportunity as we move forward. So we are already in discussions with our R&D and R&D completely working on it on this segment. And this segment is something which we would venture as we move forward. But since it is a technological product, and it requires a lot of electronics and software development and a lot of development has to go into it, so it would definitely take a little while, but this is some segment which we are definitely looking at.

And sir, would you need a partner for this product? Or you can do everything in-house?

So Pulkit, we are definitely working on the both angles. There are some models of VRV, which definitely -- which we can look at a hard sell also. But at the same time, since it is a software technological product, we would be definitely venturing with some solution providers over there in terms of development. But we continue to explore, which is whatever the best sense makes in what segment it makes sense. So as a segment, if I talk about -- definitely, this is something good segment as we move forward, and this is penetrating into the air condition segment very well. But definitely, we are already working with our technological partners over there in order to give the complete solution to the industry.

The next question is from the line of Abhishek Ghosh from DSP Mutual Fund.

Sir just wanted to understand a couple of things. One is we've seen some amount of gross margin deterioration. So if you can just elaborate in terms of how should one look at it in light of the raw material price increase in your negotiation with customers? How should one look at it? Will it be kind of offset in the coming quarters? How should one look at it? That's my first question.

Yes. So Abhishek, in terms of gross margin, if you look at -- I mean, in percentage side because the commodity seem was very different, and there was a lot of commodity price increase. So in percentage time, it might look subdued, but absolutely, if you see it is in line to the historical values. At the same time, we have been able to pass on all the increases. And we continue to do the same. As per the pricing, whatever the commodity increase happened, we were able to pass on the same to all the customers and get the increases in a time on question.

Okay. Sir, effectively, whatever was the gross margin on a per unit terms, what you were probably early, you continue to earn despite the inflation is the effective way you're looking at it?

Sudhir?

Yes. Can you just repeat, Abhishek?

What I was trying to understand, maybe in percentage terms what SVGs kind of mentioning that percentage terms may not be the correct this thing. So what I was trying to understand, on a per AC term, the gross margin that you earned earlier, are you kind of maintaining that? Given the raw material price increase, have you been able to kind of maintain that [indiscernible]?

That is in line because our model is cost-plus basis. So whatever cost increases there in terms of the commodity or the raw material prices, that has been [indiscernible] customers with some lag, depending upon the customer. Some customers are based a lag of 1 month, some are a quarter and some are to a year level. So all of these are given to the customer. And there is no deviation in the per unit margins as well as it is concerned, so that is in line.

Sure. And especially just one more thing, if you look at in that journey, you are at some point in time where obviously port restrictions have been implied. There's a PLI testing in both for high value, low value. Also, there is a pressure this thing down the road. So in that light and given that now you are, virtually, you don't have leverage on your balance sheet, on a very broad basis, a, your CapEx announcements now will be a function of PLI detail coming in the near term? And b, in terms of how much leverage are you ready to take, and beyond that, you will get strategic partners given whatever be the expectation of the cash flows or the EBITDA? Can you just give us one broad picture around it? It will be helpful.

So Abishek, in terms of the expansion, the CapEx is we are pretty cognizant in terms of the leveraging, and we will be continuing to do so. However, definitely, there are a lot of opportunities on our way like PLI is coming. And then obviously, the customers, which we have done refrigerant, we would like to move them into the complete manufacturing so that's why we have earmarked already the 2 expansion plan to move the facilities in Supa as well as in South in Chennai over there. So -- but at the same time, we would be definitely always cognizant of the leveraging levels, while at the same time, grab these opportunities, which is PLI and at the same time, give the solutions to our customers.

Yes. Any numbers at which you kind of cap your -- or maybe net debt to EBITDA or anything? Any thoughts on that?

We always see, I mean, that's, again, like since the PLI schemes and all that has still been very fluid and fine-tune version is yet to come. So putting out the numbers over there definitely would not be there. But however, we would definitely keep in trend to what historically we have been. And we would not like to leverage a lot over there. At the same time, internal accruals are good enough where we can already fund all our expansion plans through internal accruals also. So definitely, I would not like to put any numbers over there. But at the same time, I would like to just ensure that we would be very cognizant in balancing the opportunities at the same time being not very leveraged.

We take the next question from the line of Shrinidhi Karlekar from HSBC.

Sir, just a couple of questions from my end. Firstly, sir, out of the stand-alone revenue of INR 2,300-odd crores, how much is the contribution of compressors, which is typically a pass-through item for Amber?

So Shrinidhi, out of this INR 2,295 crores turnover, around INR 320-odd crores is from the competitor.

And it's completely pass-through, right? No gross profit, no EBITDA?

Yes, yes.

And sir, second, I want to understand is how much has been the ballpark price increase on an aggregated level that you are billing in this quarter compared to same quarter last year, like Q1 '22 versus Q1 '21?

So on an average, there has been an increase of almost 10% to 12%, sir, on the total product, complete like in lower end outer mixed together.

10% to 12% is it?

Yes, yes.

Okay. And sir, last, I just want to understand the opportunity on the motor side. I know, sir, you said that you intend to double revenue in PICL over 2 to 3 years. But just, sir, out of the total motors that are required for the domestic market, how much according to you is imported as of now? And secondly, sir, if it is possible, would it be possible to say a couple of competitors that you have in this segment?

So invest if you see today, almost around, I would say, 70% of the motors is still imported. While at the same time, in PICL, we are not present, we are not offering the solution of BLDC in those motors. However, we have already done the CapEx of that. And in this year, financially, we will be starting to do that. So that segment is completely vacant for us where we can capitalize upon that and take this as an opportunity, both in the capital uses as well as the silicon to the customer. So we are already giving good solutions to our outdoor unit motors while at the same time, on the BLDC side, we would like to venture into that. Already, the CapEx and the R&D and the designs have already been finalized, and we are now talking to all the customers where we are giving the other motors. The same set of customers, definitely, we can give them the solution for [indiscernible]. The [indiscernible] also on the motors because of the China plus 1 strategy. For various customers out of U.S. and Middle East, they are definitely looking at PICL, and good growth can come out of that segment also. So we are already in touch or in discussion and, I would say, advanced stages to close down of motors for export to U.S. large size OEM over there. And hopefully, we should be able to start production probably end of this financial year over there.

Great. And sir, competition, is it predominantly MNCs, like companies out of China and Japan? Or do you have some competition from domestic suppliers as well?

So there are local manufacturers, which are MNCs. And the competition is both in China as well as local manufacturing, but multinational companies over here.

[Operator Instructions] The next question is from the line of Sandeep Tulsiyan from JM Financial.

So my first question pertains to the volume numbers you shared. They indicate kind of a 20% decline over last year while you mentioned there's a price hike. Overall, RAC segment, value has gone down by 30%. So if you could just help us connect, is it a function of mix or there is another factor over here that been missing?

Yes, on this, there will be a factor of other products as well. So with the new includes various components, and if I talk about the control level, it includes various subsidiaries, where the complete component segment is there, not just any [indiscernible] RAC. So RAC decline is in line with the industry decline, the way industry has declined due to the COVID factor in H1. So definitely, our volume was also impacted.

Okay. So this 2.1 million unit volume that you're seeing is not just pertaining to the RAC segment, it's a combination of [ your other segments. ]

No. This 2.1 million is the RAC only, but value is including components as well.

No. I'm referring to the RAC segment value that is down, this 2.1 plus a 20% decline as numbers you shared last year. That is -- the RAC segment is what I'm trying to actually [indiscernible].

So volume decline is by around 30%. And the [indiscernible] also to early decline [indiscernible].

Yes. And secondly, on the export side, in the previous call, you have highlighted some of the old relationships that were under development. If you can share some update specific to which regions with customers and by when are those supplies likely to start?

So on the export side, sir, last time on the call, we explained early, we were targeting 2 sectors, the Middle East side and second was the U.S. side. On the Middle East side, sir, the certifications and approvals have been completed, so we shall soon be starting the supply. While on the U.S. side, so the sample submissions have been done, to probably expect the approvals in the next 8 to 10 months.

Okay. So FY '22 for the Middle East will start and next year is when you're targeting to start in U.S.?

Yes and yes. Exactly.

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

Sir, I have one question on your manufacturing. Now given the nationwide almost most of capacities that is a factor...

Mr. Rahul, I'm so sorry, but your audio is not clearly audible, sir. We are unable to hear you well. Can you please use the handset mode while speaking?

Now given the lockdown in the country, I want to understand what is the capacities that your factories are running at and have you seen your customers curtailing their orders or dealing the orders? And over here, if you can give us some quantitative data, that will be helpful.

So sir, if you see -- so the lockdown started from somewhere around roughly more or less a wash out. But as the industries were allowed to operate. So obviously, the orders got curtailed because of the inventories in the session. But if I talk right now, what is happening is that we are again seeing some specific models, demand that is coming up. And also the delayed summer for the north side is [indiscernible] right now. So earlier north used to pick up in the [indiscernible] like inventory land or by week 1, while it has moved by 3 or 4 weeks. So 5,000 tons of capacity is for our factories, like RAC sectors are running at a capacity of somewhere around 40%, 45% right now.

Okay. And my second question is, now if the industry was to move to the next level of energy efficiency, which was expected in January '22. Any update on that? And if you were to move in January '22, what is the kind of price increase that we could be looking at?

So sir, if you see today out of the total market, so 60% contribution comes from inverters. So sir, in inverters, what is primarily there shall not be a price increase, reasoning is that because of the electronics. So we are able to match up in the same price. While on the on-off side, that is a balance, 40%, so there will be a price increase. So if I see average price increase would be somewhere towards like INR 400 to INR 600 per air conditioner.

The next question is from the line of Renu Baid from IIFL.

Sir, just 2 questions from my side. First, given that we have seen that the commodity price inflation has continued even now in COVID wave 2 and demand of stake has been a bit soft so how should we look at the pricing action for new as well as for the industry? And you think this pent-up price increase should come through in a timely fashion or there could be again delays like last year because of this demand uptake?

I believe you see if the price increase are majorly because of for commodities, so probably if you see right now out of the 4 commodities, aluminum, steel and resin and more or less stable. So what is like increasing is steel copper. And if I see in the total product price, the contribution of copper increase should not be more than like 2% to 3%, if I take copper alone as a commodity. And looking into the lockdowns probably in the month of May. So we feel that at least the second quarter, more or less, everyone should be covered with the inventories of the copper and the oil prices. So we don't see that the price increase would be affected at least in next quarter.

Sure. And so my second question is, we have started to hear a couple of smaller peers of Amber have started to scale through some of your other customers are supporting them. So are you seeing competitive intensity or competition for you increasing in the domestic market while you continue to retain the cost leadership and the volume leadership in the space. So are you seeing competitive intensity increasing for you across product ranges including largely RAC segment. And is that -- will that have an impact on potentially pricing or other discussions, negotiations with customers?

The competition is increasing for sure, but as we have earlier discussed, so these products are not like a very small entry barriers. These products have long entry barriers because of a lot of critical components being built into that. And second thing is that the scale equity we are along with that economy of scale that helps us for making the price competitiveness. Apart from that, the competitive wage comes without coming up, along with the backward integration of the controllers, motors that are to the main critical components that are playing the part, specifically the motors coming up into the picture. So we see that like the competitiveness that we are getting is primarily only on the family of the air conditioners. But if you see the overall package, the R&D support and the backward integration of all the critical components, so we are well placed on that front. So it should not be any challenge for us.

The next question is from the line of Ravi Swaminathan from Spark Capital.

Just wanted to check with you if we assume that all the lockdowns are lifted from June onwards, are we in line to do our revenue similar to what we had done, say, last year? Or if you say at these volumes similar to last year? So are we in line to do that? Or probably it will be more than that, volumes?

So last year, we are talking of like 2021.

Yes, FY '21, volumes will be matched FY '21 volumes or we can even do better than that? Or what kind of the growth we [indiscernible]?

So Ravi, I think so in this, if you see -- I mean, this time, what has happened is that localized lockdowns are happening. So no, they are definitely may is a watch out, but like, as Sachin mentioned, that the summers are still there in north. And so we are looking at an uptick in June. However, how this condition pans out, how unlockdowns pans out, these are very highly uncertain times. But we are hopeful that if all goes well and unlockdown happens in June, which would be fairly better than last year, definitely, for sure. And -- but at the same time, how those things do look out and how the look stands out, is it yet to be certain and looked into basically.

Got it. And in terms of CapEx, next 2 years, similar to what kind of CapEx we are likely to?

So in the terms of CapEx, if you see, Ravi, that we have earmarked already around INR 290-odd crores for 2 greenfield facilities, one in Supa and one in Chennai and down South. So Supa has already -- we have already acquired the land. The construction has started, but at the same time, the agreements and all that are being finalized or down south. And the construction should start probably in another next 2, 3 months' time and it should be in operation in the next -- by the end of this financial or next financial year. [ Our rest all ] is the CapEx maintenance, CapEx and the regular CapEx.

So overall, it should be INR 400 crores of CapEx. Can we assume that we can do that?

Yes because now the maintenance CapEx is not that high. So it should be a little less than that, yes.

The next question is from the line of Aditya Bhartia from Investec.

Sir, earlier we had spoken about these 2 greenfield facilities forming part of the usable CapEx on the PLI scheme. Now that the scheme is only for components, does that still hold true?

So the PLI scheme is right now only for components. This is what we are seeing. So it's divided into 3 parts. Obviously, one is the AC components if someone want to amalgamate the complete -- all the component together. Second is obviously the IGT compressors and aluminum, which are higher value. And the third is lower value, which is PCB and motors. And we are hearing that it might also include heat exchangers sheet metal and injection molding, but yet -- that is yet to be seen.

Sure. But the 2 greenfield facilities that we have been speaking about, would they form part of eligible CapEx, let's say, for category 3?

Yes. So...

Or do we have to do incremental CapEx, if you want to participate under the PLI scheme?

So like it's yet to be seen if it comes in sheet metal and injection molding. Definitely, it would be -- will be eligible, but otherwise, they might not be eligible also. But however, definitely they would also include the PCBs at that location so that -- then that PCBs would be involved. So it would be component to component basically rather than, I would say, location to location so -- because multiple components are made at multiple locations. So the PLI scheme would be definitely at the group level and at various locations rather than one location only.

Understood, sir. And sir, when we say that minimum CapEx of, let's say, INR 100 crores required for a low-value component, it is INR 100 crores for all components put together or it's INR 100 crores for motors separately [ to be billed ] separately?

No. So if you see, it is as per the application. So lower value, like if you mentioned, that it is INR 100 crores, so it would be completely as per the application. If you put an application in motors and PCB, definitely, that would be involved. But if you put it separate, then it would be as a separate one also. However, fine fuel version is yet to be seen. It might be that it can be looked at one application if it is various application to 1 group is putting whether that would be combined together is yet to be seen basically -- yet to be discussed, and it's already in the discussion, and we have to be seeing what it comes out in the fine-tuned version.

Understood, sir. Understood. And what is your take on, let's say, some of the brand owners also participating under the PLI scheme? Are you getting any feelers given the contours of the scheme? Or do you think that because finished products are not there, the scheme is no longer very lucrative for [ turnover ]?

Well, I would not like to comment upon anybody's strategy over here. But definitely, I'm sure everybody would be looking at what it makes sense and what opportunities. However, as per the PLI scheme since it is for components. And as Amber is it placed solution provider for components. So definitely, as Amber, we would be able to capitalize on it and also offer a complete good package, a benefit to the customer if we aggregate the complete demand.

[Operator Instructions] The next question is from the line of Hiren Trivedi from Axis Securities.

Just like to ask on Sidwal. If you could help with the current order book of Sidwal and the growth outlook over the next 2 years. So any internal targets where you would like to take revenues over the next 2 years' time frame for Sidwal?

So Sidwal, it is doing good and we have a strong order book over here. So we already bagged a big size project for [indiscernible] and we are already in discussion with a pretty big sized -- another project for rapid grade transport systems. At the same time, also there was a repo-based project, which also was backed by Sidwal. So we see a strong order book over there of around INR 350-odd crores sitting there, which had to be executed over next 2 financial years. So -- and then more like now, more and more modernization is happening of the coaches. So definitely, Sidwal is the rightly placed company for -- to capitalize upon that. As the moderation happens, the air condition will definitely happen. The speeds are increasing of the range. And projects like rapid rate transport systems as well as various cities have already earmarked metro systems in the in their respective cities. So definitely -- and then as Sidwal, we are now offering the solutions to pretty much all the major co-builders winters in the country today. So hopefully, looking into this scenario of increase in modernization, more and more new projects coming, Sidwal is a rightly placed company in order to give that benefit and take that as an opportunity.

The next question is from the line of Amber Singhania from Asian Market Securities.

Now just one for me on [indiscernible]...

We are not able to hear you. Can you please a little bit speak up? Or is it me only?

Yes. Is it audible now? Hello?

Yes, a little better.

Sir, sir, just one clarification wanted to move that you mentioned '19 [indiscernible] growth of this quarter, whereas [indiscernible] 22%. This is on the backdrop of imposed ban being in place, which was not there last year. So sir, I wanted to understand on this, is this [indiscernible] of the business happening? If it is happening then, would you consider other competition is taking a larger portion of those subsidies? Or what exactly is the situation? If you can give us some color on that, which numbers were on that?

Yes. So Mr. Singhania, if you see, the import ban happened in the month of October and the numbers which we did, the 2.1 million which we are mentioning is not the refrigerant filling. It's not -- does not involve that as well, that's only [indiscernible] filling. At the same time now, we are pretty confident, and that was a kind of Phase 1 and immediate action plan in order to just address that market and start giving the solution and connect with the customers. So let me -- in view of this import ban, we were able to add 6 new customers. And pretty much every one of these customers are talking about localized and complete manufacturing now in India instead of only represent that [ so only representing ] their city. So some of these customers shall be converted this year and remaining shall be converted last year. So end of next financial year, we should be able to see that all of these customers are manufacturing and with us. And they are pretty large size customers, all of them. And we are hopeful to -- that we convert this and start giving a complete solution of localized. And then you can see that these numbers would be transformed into our volume also.

So sir, if I hear you correctly, we were roughly around 2 million -- 1.822 million [indiscernible] used to be imported in India before the bank. And so given the current situation is something -- everything as one, what is incremental business you see coming to us in terms of just input substitution on the M&A situation and taking other [indiscernible]? And if you can even share some numbers on exposure at [indiscernible]?

So if you see that around in the imports, around 86% in ports were curtailed, like if you see the import data now. So starting in January, February, March, if you see pretty much all the imports which are happening is now transformed into localized manufacturing or refrigerant filling over here. So -- and as Amber has already grabbed the lion's share over here in refrigerant filling already and when we convert this into the localized manufacturing, so that would definitely add into the numbers. So if you see the import ban is helping us, but we could not grab this opportunity in terms of the volume addition because the import ban was announced in October, November, which in order to give them complete local [ infusion ], you need to enhance your capacity as well as enhance as a complete -- it's -- these are all the multinationals and big ticket-sized customers. So it requires a lot of valuation of the products, a lot of approvals are there. So it's a high reliable piece cycle over there. So it does take time. So we started with refrigerant filling and connected with customers. And now this would be converting into the local like manufacturing.

[ And the number one exposure ]?

Sorry?

[indiscernible]...

You're not audible.

Export number, export number.

Sir, export will play as well because it has been recently approved as we are just making up a shipment, so probably after the customer feedback on the product side. So I guess, sir, this year, probably it would be more or less sending the very few thousand numbers, which all convert into good numbers in 3 years down the line. This year, we see just it's a kind of starter.

The next question is from the line of [ Ashi Jain ] from Macquarie.

I just wanted one clarification. So the point that you made that 86% of imports are now impacted. But from what we have picked up from our check, a lot of it have made to a imported without refrigerant selling and all. So can you just indicate how much tax rate drop in volumes as far as imports of ACs are concerned?

Sachin?

Probably volume number, say, keeps on hearing, sir, the data that we have for the imports. So if they see like there would be a drop of a good asset percent, 75% now coming to your point that you are able to see that a lot of refrigerant filler consumers are coming. Probably, we will say that the [indiscernible] air conditioners are coming from the customers' parent companies. But there would have been a huge decrease from the ACs that were coming primarily from China. So if you see, the major import happens in our country from majorly 3 countries, out of which like 60%, 70% contribution is to come from China, 30% contribution used to come from Thailand and the balance used to come from the other part of the world like South Korea and all. So we feel that the Thailand portion remains as is because the customers' parent lies over there, while the 60% of import happening from China has come down. So this is the data point that we have here.

Well, ladies and gentlemen, due to time constraint, we take that as the last question for today. I would now like to hand the conference over to Mr. Daljit Singh for closing comments.

So thank you, everyone, for joining us. And I hope we were able to answer all your queries. In case you require any further details, you may please contact us or our Investor Relations advisers, Strategic Growth Advisers. Thank you and be safe. Thank you.

Thank you. On behalf of Amber Enterprises India Limited, we conclude today's conference. Thank you all for joining. You may now disconnect your lines.