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

Ladies and gentlemen, good day, and welcome to Amber Enterprises India Limited Q2 and H1 FY '22 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 the date of this call. These statements are not a guarantee of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Daljit Singh, Managing Director of Amber Enterprises Limited. Thank you, and over to you, sir.

Hello, and good morning, everyone. First and foremost, I hope you all are keeping safe and healthy. On the call today, I am joined by Mr. Sudhir Goyal, Chief Financial Officer; Mr. Sanjay Arora, CEO, Electronics division; Mr. Sachin Gupta, CEO, RAC and CAC division; and SGA, our Investor Relations adviser. We have uploaded our results presentation on the exchanges, and I hope everybody had an opportunity to go through the same. I would open my remarks by giving a brief overview on the industry environment, followed by business update and operational and financial performance highlights for Q2 FY '22. With India scripting history of 1 billion vaccination mark, a lot of confidence is coming back post pandemic, which should help in more stable and conducive operational environment. During the quarter, sales of consumer durable goods have recorded sharply as the restrictions stemmed with the pandemic's second wave were eased. The consumer sentiments were encouraging during the season. On the channel inventory, there has not been much inventory in the channel due to strong supply chain planning in line and ban on refrigerant filled AC announced last year, which led to increase in domestic procurement by the brands. On the raw material side, there have been challenges due to increased input prices of key raw material. Higher raw material prices have led to increase in prices of finished good. However, this has been well accepted by the end consumer and had no significant impact on the demand. Talking about the recent updates, during the quarter, we had applied for government notified PLI scheme. We believe the additional manufacturing capacity coming under PLI scheme would have huge multiplier effect and help build a robust supply chain network for the AC industry. The main objective of government for the scheme is to develop component ecosystem in India and increase domestic value addition in components from 25% currently to 75% in the next 5 to 6 years. This is going to be a very big game changer for component ecosystem. At Amber, we are all set to leverage on this opportunity. We believe this opportunity will further strengthen our presence in the domestic market and create a solid foothold for exports market. We have been seeing a good traction on customer addition due to ban on imports with refrigerant filled ACs. We have signed new customers for gas charging in the first phase during last season. Now the discussion on the second phase has also started with them for OEM/ODM solutions. On the export side, we have opened 100% U.S. subsidiary Amber Enterprises Inc. USA (sic) [ Amber Enterprises USA Inc. ], and approval process for our products is on track. At Amber, we are all set to leverage on multiple opportunities. Our endeavor is to grab majority of the market share on RAC and component side. We believe this opportunity will further strengthen our presence in the domestic market and create a solid foothold for exports market. I will now take you through consolidated financial highlights. Q2 FY '22 revenue stood at INR 587 crores versus INR 408 crores in Q2 FY '21. H1 FY '22 revenue stood at INR 1,295 crores versus INR 667 crores in H1 FY '21. For the quarter, RAC contributed 37% of total revenues, while Components and Mobility Application contributed 63% revenue. For the H1, RAC contributed 50% -- 52% of total revenues. Operating EBITDA. Q2 FY '22 operating EBITDA stood at INR 39 crores versus INR 22 crores in Q2 FY '21. H1 FY '22 operating EBITDA stood at INR 88 crores versus INR 19 crores in H1 FY '21. Operating EBITDA margins for Q2 and H1 FY '22 stood at 6.6% and 6.8%, respectively. Q2 FY '22 and H1 FY '22 operating EBITDA does not include ESOP expense of INR 4.17 crores and INR 7.43 crores, respectively. At Q2 FY '22, PAT stood at INR 8 crores versus INR 3 crores in Q2 FY '21. H1 FY '22 PAT stood at INR 19 crores versus loss of INR 21 crores in H1 FY '21. I'll come and update for the subsidiaries' financial. In Sidwal, Q2 FY '22 revenue stood at INR 72 crores, and Q2 FY '22 operating EBITDA stood at INR 17 crores. H1 FY '22 revenue stood at INR 121 crores. H1 FY '22 operating EBITDA stood at INR 29 crores. There have been a lot of opportunities in the mobility application industry, which are expected to play out over a longer period. The country has 733 kilometers of operational metro rail line in 18 cities with another 1,046 kilometer of network in pipeline in 27 cities. The rail industry targets to connect 50 cities and towns with metro network by 2024. Also, the government is increasing on the number of rail coaches being added along with the percentage increase in AC coaches. With the increase in government thrust towards mobility for all, we believe we are in sweet spot to leverage this opportunity. Sidwal order book stands at -- healthy at more than around INR 450 crores. PICL. Q2 FY '22 revenue stood at INR 40 crores. Q2 FY '22 operating EBITDA stood at INR 3 crores. H1 FY '22 revenue stood at INR 76 crores, and H1 FY '22 operating EBITDA stood at INR 7 crores. As for industry data, currently 70% of BLDC motor is imported. At PICL, we would like to capitalize on this opportunity, and we have already done R&D and required CapEx, and work has also started. During the quarter, we have enhanced our BLDC motor manufacturing capacity. Our endeavor is to provide solution for both captive users and our customers in exports. We are in advanced talks with few large OEMs for BLDC motors and also exports in U.S. IL JIN and Ever. Q2 FY '22 revenue for IL JIN and Ever stood at INR 91 crores and INR 50 crores, respectively. Q2 FY '22 operating EBITDA for IL JIN and Ever stood at INR 2.7 crores and INR 3.5 crores, respectively. H1 FY '22 revenue for IL JIN and Ever stood at INR 134 crores and INR 68 crores, respectively. H1 FY '22 operating EBITDA for IL JIN and Ever stood at INR 1 crore and INR 3.7 crores, respectively. As the market is moving rapidly towards inverter ACs, we are confident of growing our revenue share from IL JIN and Ever going forward with the help of our in-house developed inverter PCBs for RAC. To conclude, I would like to reiterate that our constant endeavor would be to increase penetration and increase our wallet share in the existing customers, continuously add new customers, create a foothold in the exports market and enhance our products with new technologies by focusing on R&D. With this, I open the floor for discussion.

[Operator Instructions] We have the first question from the line of Ankur Sharma from HDFC General Life Insurance.

I had a couple of questions. One, on the stand-alone, if you could just share AC volumes which was sold for Q2. And also for the full year, how are you looking at volumes? Do you think you can kind of come close to the full year FY '20 volumes? Or can you kind of exceed that number for FY '22?

So in the quarter, we did around 231,000 numbers. And on H1 basis, we did a volume of around 700,000. And if you see, the second wave of COVID hit us in the first quarter. Earlier, brands were left with inventory and everybody was envisaging a third wave also. However, with the third wave risk reduced, inventory levels have come back to normalized levels and consumer sentiment is also back. Our order book for upcoming quarters stands very strong, and we are confident of achieving more than 3 million, which is what pre-COVID levels were actually. So looking into the whole scenario right now, we are very, very confident of coming to pre-COVID levels and, in fact, overachieving the pre-COVID levels.

Fair. And sir, what would have been the price growth? So overall stand-alone revenues are up 55% and, I guess, the volume growth would be about 22%, 23%, if I get the numbers right. So 231,000 versus maybe 190,000-odd last year. So the balance, what 20%, 25% is the value growth? Is that or...

So both yes because there has been a huge hike in the commodity prices. And of course, as Amber, we have been successfully able to pass on all the commodity prices to our customers. And due to that, you see average selling price increases. And the commodity price, if you see, has increased in tune of almost around 12% to 13% for that quarter. And looking into that, you'll see that the price -- average selling price is elevated due to the commodity price changes.

Okay. And have you been able to completely pass on? Or do you think you need more price hikes to kind of completely pass on the cost increases? Because if margins are pretty [indiscernible].

Yes. So for each quarter, we have been able to successfully pass on the price hikes with the lag because we have quarterly lags in the pricing system with all the customers. However, looking into the future, as and when where the price hikes are coming, we are hopeful and we are confident to continue price -- increase the price and pass on the price hikes with our customers because that's how all the contracts are placed today with the price variation clause in -- with our customers. So we see not much dip. There could be a quarter lag but not much dip due to the price -- commodity price increases.

[Operator Instructions] The next question is from the line of Swati from ADV Partners.

Yes. Just wanted to ask a question regarding the debt levels of the company, the gross debt and the net debt levels for this quarter?

So total net debt level is -- the stand-alone level is INR 155 crores as on 31st March. And at the consol level, it is INR 250 crores. And the gross debt is INR 747 crores at a consol level and INR 625 crores at a stand-alone level.

The next question is from the line of Nitin Arora from Axis Mutual Fund.

Just one question. I think Ankur asked [ in fact ] about your volumes, how one should look [ to our ] pre-COVID levels. Just [indiscernible]...

Nitin, sorry, but you are not audible very well. Can you speak a little louder?

Yes, sure, sir. I'm audible now, sir?

Yes, better now.

Okay. So the question was, sir, that on a 2-year CAGR basis, your growth, and I'm talking specifically stand-alone or, let's say, if you look at the industry, CAGR is still down on a 2-year basis. And you can correct me because you [ have ] better data than us. So is there [indiscernible] market share loss or you think it's more of a supply chain issue which hampered some player for a few quarters here and there and which would not be reflected in the future? Just need your comment on that. And secondly, exports. Can you help us a little bit understand where we are in the stages of development? So the question is, I understand because in the last 3, 4 quarters, we are talking about, the product has gone for approval to a large client in U.S. But if you can throw some light where it is stuck. I mean it's more of queries coming from that side on the product? Is it more of [indiscernible] working that you need to do and then it can take time? I just need your comment on these 2.

Sure. So Nitin, to answer your first query about the volumes, so there is no market share loss over here. It's more about -- because the second wave of COVID hitting us in the first quarter. Due to that, there was a lot of inventory stuck in the channel. And everybody was waiting and even envisaging that there would be a third wave and everybody was pretty pessimistic. But overall, if you see now with the -- even the price increases, which has happened and right now the markets are completely open and back to normalized level. The channel inventory is now back to normal level. At the same time, consumer sentiment is back, and so is our customer sentiments. Our customers have already booked a strong -- placed strong orders for the upcoming quarters. So we see that, yes, there was a quarter -- year-end lag because of the second wave hitting us and all the supplies were halted. But at the same time, now it is back to normalized level, and order book for upcoming quarter is very strong, and we foresee that we would be reaching to pre-COVID levels on the yearly levels, basically. Secondly, to answer your export -- in export, we -- as we have already submitted our samples as well as each and every country have their own regulations. And those regulations are not similarly all -- similar all across. So every country have their own regulation and energy efficiency ratios as well as the safety regulations. So it's a high approval cycle. So it should take another 1 to 2 years -- 1 to 1.5 years, I would say, before the exports start kicking in. So we are submit -- our samples are already now under approval cycle and under reliability cycle. And looking into that, I would say, another 1 year, 1.5 years down the line, we would see the orders coming in from the customers. On the motor side also, we are looking at exports. There, we are a little ahead where 2 large OEM sites from U.S. are pretty interested and our reliable cycle is almost near to closure. So we would see purchase orders coming in probably first quarter of next financial year instead of next 1 to 1.5 years. So there, we should start tracking the numbers pretty soon. So that's an export update.

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

Sir, I had a question with respect to working capital. So we see that your cash flow for the first half has been negative. So if you could just throw some light on what have been the changes there. And how do you see this normalize?

So our working capital days have improved from 135 to 84 days now, and we are pretty vigilant on the working capital. The supply chain all across the world is disrupted. But -- however, we are confident that the supply chain getting smoother as we move forward. And this is expected to further come down to the pre-COVID levels as we move forward.

Okay, sir. And I had a question with respect to the captive consumption of, say, your other subsidiaries in your OEM business. So if you could just throw some light on how much captive consumption do you expect of these components, say, in the upcoming season and, say, in FY '23?

So in components, we are seeing a great traction on the customer side also. So if captive consumption will continue to go on today...

So -- this is Sudhir. So captive consumption during H1 was around INR 23 crores, and it will be in the range of around -- it would be like INR 60 crores, INR 70 crores by year-end. It could be more as we -- as people will start -- as the brands will start buying inverter ACs and motors from our subsidiaries, which will be transferred to the Amber and then ultimately sold to the brands. So currently, H1, it is around INR 23 crores.

If I can squeeze one more question here. Sir, just wanted to get your sense on how do you see your market share in the RAC segment in FY '23. I know in FY '22 and '21, you've seen supply chain disruptions. But on a more normalized basis, how do you see your market share moving from FY '20 levels?

So Dhruv, we see that we should be able to increase our market share because on account of -- if you see one that we have now, we are coming up with 2 greenfield facilities already, which are strategically located, one on the west side and one on the south side, so which will definitely help us grab more market share from our customers. Second is also that many of our customers, which were -- which came on board due to our gas charge -- charging basically as a Phase 1. Now we are already in discussion phase to convert them into OEM and ODM solutions moving forward in the coming financial year. So we see that our market share should grow further, and we are confident, too, of achieving that.

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

Just one element in terms of if you get your overall volume number of that 3 million-odd units, which is broadly back to FY '20 also, you had done about 3 million-odd units. Now if you look at it, there is some amount of market share gain, as you mentioned, because of the non-tariff barrier which has been imposed. So would industry kind of be still down on a volume base on a 5% to 10% on a 2-year basis? Would that be the right assumption? And you are just going back to precrisis levels just because of the market [indiscernible]. If you can just give us some thoughts there.

So on an industry perspective, if you see, Abhishek, that the markets are coming back to a normalized level. And yes, there was a dip due to, of course, the pandemic. However, we are hopeful that this year, the market should be somewhere around 6.5 million to 6.8 million numbers, which would be near to pre-COVID levels. But as you move forward 2 years, market -- the consumer sentiment is very high. AC is no more a luxury product. And it's more of a comfort-giving product right now. And with the new normal of working from home, obviously, more and more ACs are penetrating into homes. So we are hopeful that market should come back to its normalized growth level of 13%, 14% from the next financial year, hoping there is no third wave coming. So -- and so would be, of course, Amber. As Amber, we have always endeavored to grow our market share as well as grow -- outnumber the industry. And we are confident of achieving and keeping the same endeavor of outnumbering the industry.

So the overall, that 400, 500 bps higher growth in the industry, you would kind of maintain that?

Sorry, come again, Abhishek?

So your growth higher than the industry growth rate in that region of 400 to 500 bps higher than -- if industry was to grow at 10%, you'll grow at 15%, you will maintain that going forward is what the outlook is?

Yes, yes. We definitely maintain that. And in fact, we are confident more as like components are also gaining a lot of traction due to PLI year-on-year basis, yes, we are confident and -- as well as our -- we are adding more and more customers in Phase 2 of refrigerant brand. We would be adding a couple of ODM customers and converting them from the gas refrigerant filling to the ODM/OEM solution basically. So we are definitely confident in maintaining the 4% to 5% outnumbering the market.

Sir, 2 other questions. If you see the operating margins of IL JIN, still seems to be quite low at about 3-odd percent even for the current quarter. How should one look at that? Because IL JIN used to -- has been in that -- used to -- earlier was doing about...

Sorry to interrupt you. Please come back in the queue. The next question is from the line of Madhav Marda from Fidelity Investments.

I just wanted to understand from you that on the PLI side, now that the applications have been filed and probably the sort of the winners of the PLI will be announced in the next few weeks, how do you see the manufacturing landscape for ACs changing in India with the PLI coming in considering that there have been a few brands who have applied and, of course, we have applied for the PLI as well? So in terms of sort of getting more traction with companies, the customers, how do you see that playing out?

Madhav, this is Daljit this side. And Madhav, we see this as a great opportunity like brands, obviously, which already have their manufacturing facility, have also applied in PLI. But we don't envisage any shift in competitive landscape due to this PLI. Like we have already added 4 new customers on the component ecosystem, as PLI is primarily based upon the -- due to the component ecosystem to create the component ecosystem. So today, 75% of the components are imported, and it's a government's endeavor through PLI they want to achieve and bring it down to 25%. And we as Amber are rightly placed in a sweet spot. Fortunately, our both greenfield facilities are also covering PLI. And approval list of PLI will be disclosed by DPIIT by around 15th November. So we are hopeful that we should be there and we should get approval. And we should see a great opportunity as we move forward on the component as well as finished goods side of the business, both sides.

And do we see import substitution or export for some of the components getting reasonably accelerated once the PLI-related benefit of 4% to 6% starts accruing to us?

Yes, I mean, in PLI, we have seen like a lot of commodities, like, a lot of people from -- components which are right now imported such as compressors and copper, aluminum, that being localized post PLI. However, it will take another 2 years because these are high CapEx, high intensive components, and it will take another 2 years for everyone to bring it localized and start selling in local market, made in India and made for India. But yes, we see that that's a great opportunity as well as that getting localized will help us more -- being more competitive in the export side of the world also because then everything would be localized and there will be no freight components as well as our local manufacturing will, obviously, bring in more and more numbers and help the component ecosystem to be created also here in India.

And the second question from my side was...

Mr. Marda, I'm sorry to interrupt you. Please come back in the queue. [Operator Instructions] The next question is from the line of Sonali Salgaonkar from Jefferies India.

Sir, my questions -- I have 2 questions. Firstly, on the client additions. Now you spoke that the order book for RAC is quite strong over the coming quarters. So sir, any updates you would like to share in terms of client additions for both the RACs and the components and potential upside that you foresee in the coming fiscal years as well? And my second question is on the supply chain, sir. This was just an extension to the earlier participant's question as to what is the current supply chain, how much of that is imported and how much was the extent of our backward integration, which can help us have a moat against our competition.

Thank you, Sonali. So Sonali, on the client addition, I won't be able to disclose the names due to our NDA in place with all the customers. However, I would like to just update that on the RAC segment, we have already been able to convert 2 customers, large-size customers. And in this fiscal year only, they have started from refrigerant brand to the local ODM manufacturing. And we are already in discussion with 4 new -- 4 customers to be converted from OEM to ODM. This will add additional 800,000 numbers to our kitty as we move forward on the -- next financial year. On the components side, we have already added 3 customers and 1 customer is already we are discussing. And this is primarily based upon the heat exchangers and plastic molding and sheet metal solutions as components, which we provide. And both the customers -- the production shall be starting in Q4. However, that would be a ramp-up, and we would see that impact of the same coming in next financial year strongly. On the supply chain, if you see, today, as industry, we are importing almost 75% of component. And primarily based upon that, most of it is compressors, inverter PCB controllers, motors and copper and aluminum. Out of this, if you see, Amber is already present in inverter controller board, already present in motors. And like BLDC motor, 70% of BLDC motor is today imported. Now Amber has already -- its subsidiary PICL has already enhanced the capacity of BLDC motor, and we are rightly placed company, and we are already in the reliability cycle with a lot of customers whom we are already giving solution of induction motor. So there, we would be able to add the BLDC motors as a component. Similarly, on the inverter PC board, also, a lot of inverter PC boards is imported into the country today. And IL JIN has already developed the inverter PC board. We have already got approval from 2 of the customers and large-sized customers, and we are hopeful to add additional 2 to 3 more customers in manufacturing of inverter PC board. So as Amber, we would be -- we are in a sweet spot to capitalize upon this PLI as well as on this localized push from the government on the supply chain side.

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

I have 2 questions. First, if you can help us understand if there's any specific reason why IL JIN's margins are still lower than the usual levels of 6% to 7% despite strong volumes. And what would be the update on the commercial RAC portfolio that we were trying to drive? If we can have some more inputs on that, that would be helpful. And also if you can share the EBITDA value for Sidwal.

Sure. On the -- Renu, on the IL JIN -- on the operating margins of IL JIN, if you see, this is primarily based upon -- due to the mix of the solutions which IL JIN is providing. Like IL JIN provides a lot of solutions, a lot of PCB controllers for inverters to refrigerators, to washing machine, to television. So it is more likely -- more because of the product mix -- the reason is because of the more product mix change. However, on the year-round basis, like, with inverter controller board coming into picture as well as on the year-round basis, it should be on the similar side only. On commercial RAC, to answer your question, it has gained a lot of traction. We have already launched our entire product lineup of commercial ductable ACs as well as cassette ACs also. And we have already got a lot of queries from customers, and we are hopeful to -- again, there is a reliability cycle. Two customers, production has already started. Additional 2 customers are in pipeline right now, and that would kick in, in the next financial year. Our cassette AC range, which we have recently launched, has also started under reliability from our customers. And that would be pretty much launched. It should get approvals by last quarter of this financial year and hence, the production should start in the last quarter and full-blown production within the next financial year.

Sir, next fiscal, what is the estimated size of RAC portfolio that we are targeting?

Sorry, Renu, can you come back again with the question?

I'm saying, for FY '22, what is the approximate size of the RAC portfolio that we are targeting, commercial RAC portfolio?

So commercial RAC portfolio, we are anticipating around INR 30 crores to INR 50 crores of revenue coming from there. However, it's a slow start. We are hopeful that it should reach to around INR 100 crores in coming 2 years as we move forward.

[Operator Instructions] The next question is from the line of Naval from Emkay Global.

I have 2 questions. First, the way you have stated in your presentation about PICL in terms of outlook to double the revenues, so can you put the same comment for IL JIN and Ever, if that is possible?

So in IL JIN and Ever also, we are hopeful to almost -- going near to double the revenue in next 2 years, as the traction is very high over there, specifically also due to the PLI, and IL JIN is a rightly placed company to give that solution. We are already getting queries and already onboarded for inverter PCB boards, as I mentioned. In addition to that, we are also getting a lot of queries and approvals are already in process for refrigerator and washing machine and other new products also. So we are hopeful that in IL JIN and Ever also, we would be doubling the revenue in coming 2 years from now.

And with margin expansion as well?

Of course, this will be coming with the margin expansion only. That is one of the important aspects.

Okay. And second question is on RAC realizations. What you stated that because of the commodity price increase, that has kind of gone up to beyond INR 9,000. Now this would also include the impact of somewhat from gas refilling and product mix also. Is that understanding correct?

Sorry, can you speak again, Naval?

So I'm saying in the realization part, which has gone beyond INR 9,000 now, you stated that it is on account of the commodity inflation what you have passed on to the customers. Now this would also include product mix improvement and some benefit coming in from the gas refilling as well. Is that understanding correct?

Yes. I mean the majority of RAC realization right now is because of the commodity price increase because there has been a substantial increase in the commodities. And yes, also, there is a product mix change also. Gas filling is not included in this.

Gas filling would be in components or non-AC components, right?

Yes, yes, yes. I mean, that is still not an ODM solution basically. As we move forward, that would be included then further.

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

I have a couple of questions. One is with respect to the BEE norm implementation, when it is likely to be for ACs and how we are preparing for its implementation.

So Ravi, BEE norms have been already extended by 6 months, and they would be implemented now from 1st July onwards. The clearance from BEE has already come. And -- but as industry as well as, as Amber, we are already ready because they were supposed to be launched and implemented in January. However, there are a few issues, few clearances required, and that is why there is a change and BEE has agreed to move forward to launch it from -- implemented from the next financial year in July onwards.

Got it, sir. Will there be any price increase associated with that [indiscernible]?

Yes. There would be a price increase, of course, because as norms and energy rating would be changing, there would be additional impact -- should be additional impact of around 8%, I would say, 5% to 8%. And the industry is already working towards how to mitigate it, basically.

Got it, sir. And the next 2-year CapEx forecast for us would be helpful.

So the CapEx for, like, this year, we are envisaging around INR 400 crores. And next year, we would be somewhere around INR 300 crores on a year-on-year basis, basically. This would include the maintenance CapEx as well as this would include the new greenfield facilities and capacity enhancement.

Including the PLI...

Yes.

The next question is from the line of Shrinidhi Karlekar from HSBC.

I have a question on BLDC and induction motor. Sir, would it be possible to share what percentage of your captive need of both BLDC motor and induction motor comes from Amber's own subsidiary, which is PICL? And sir, how much volume are we talking about in terms of -- for a 3 million volume we are likely to do for this year? How much is, like, in number terms, need of motors?

So currently, in PICL, Amber contributes to somewhere around 35% as captive consumption and rest all is customers. And BLDC is a very small part of it because that is a part which we just recently started. However, as we move forward now expansion of BLDC is already in place and reliability cycle is going on. It would take another 3 to 4 months for it to start in production completely. So we see that this would -- BLDC would be adding as revenue from both sides, in captive as well as also on the component solutions to our customers.

And sir, you said 35% of PICL's demand comes from own consumption. I wanted to know like what much of captive demand of Amber's comes from PICL, the other way round?

I'm not...

Yes. So the 3 million ACs you manufactured, right, both indoor and outdoor units include -- both indoor and outdoor combined. So the need of those motors, how much comes from PICL? That number I wanted. Some of it...

It's only 1/3 only, actually, if you see.

1/3? Okay, sir. And how has that number changed over last couple of years?

It's pretty much the same. It might have increased from 28% to 35%. And it was earlier 28%, but with BLDC coming in, it has increased. However, we are maintaining now at around 35% as BLDC is kicking in, as more and more product lineup is increasing in PICL.

And sir, as the reliability starts improving and you get more and more approvals, realistically, can one expect that this number could go as high as 70%, 75%?

No, you are talking about captive consumption?

Yes.

Captive consumption. No way. It would be derisking. Basically, Amber also moves PICL, of course, as a supplier-partner relationship. And of course, there is always a risking and derisking supply chain strategy in place. So it might increase to maybe another 2%, 3% or 4%. But -- however, we have other suppliers also where we buy motors from, and they are present in India, and we are looking at more and more localization of the same also.

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

I have 2 questions here. Firstly, pertaining to BLDC motors, what is current production capacity that you have? And post expansion, to what volumes it will reach? And second question is more from the mix perspective. Given -- under PLI scheme, we'll see a lot of investments happening locally for components. Would this mean that our revenue share would tilt more towards components and would offset any operating leverage benefit that would get? Does [indiscernible] margins have limited scope for expansion from here?

So to answer your first question about the BLDC expansion capacity, so currently, we had very -- hardly any numbers were produced. It was just more about reliability and giving samples to our customers and getting approval of the line. Now the capacity expansion has been done, and we are at a capacity of almost around 2 million BLDC motors as we move forward. Currently, we would be at around 800,000 BLDC motors we can produce as we move forward. And so there is a huge -- as BEE rate norms are also coming, definitely there -- the BLDC would be required. So as PICL, we would be aligning more and more towards this strategy and expanding our BLDC capacity as we move forward also. And regarding the -- sorry, what was your second question, Sandeep?

Yes. Sir, it was regarding the margin trajectory. Given sales mix, we'll tilt towards components going forward with the PLI scheme investments coming in.

So in that, we see that as a great opportunity. PLI is a great opportunity because if you see, more and more traction is coming for -- from brands to localized. And there is a great opportunity for us to -- like on the component side is higher margins. So we see that, that margin expansion would happen now from the component side also as we move forward into the PLI ecosystem. And as Amber, already we are discussing with our customers, and we have already added new customers -- 4 new customers in the component ecosystem. So the component base would also increase as we move forward in Amber.

But margins would be higher in RAC ODM, right, versus components? So...

Yes. Sandeep, this is Sudhir. So margin is better in components, but under PLI scheme, the captive consumption is also allowed. So it will be very difficult to see that how much component margins are inbuilt in the AC manufacturing, right? So margins will be, yes, higher in components, but it gets merged in the AC volumes or AC sales.

Okay. So you are trying to say your margins in components are higher than what you make in ODM?

On the ODM solution -- see, ODM -- what is ODM solution? It is component in-house manufacturing as well as the assembly. So in assembly, there is a compressor component, which is a high-value item, which reduces the percentage margin in the ODM category as compared to the margins which are there on the component side. So if I talk about the percentage margins, percentage margins are better in components as compared to the fully finished AC assembly selling.

The next question is from the line of Manoj Gori from Equirus Securities.

A couple of questions. First, if you look at, a couple of your larger clients have been announcing the new expansion plan, and there are a few clients who would be -- who are almost close to finalizing their expansion plan, and they are also applying for the PLI scheme. With this regard, if you look at, they might be planning to build a component ecosystem as well. So if you look at the new client addition, you said like they would be adding roughly around 800 to 1,000 units of -- 100,000 units of components in volume terms. So that would be roughly around 3%, 3.5% of FY '20 volumes. So like your clients are already expanding their capacity plus you have been guiding on the market share themes. Can you elaborate a bit more in detail? That would be very helpful, sir.

Manoj, clients adding the new -- expanding their own capacities is a great opportunity for us from the component ecosystem. And today also, we are serving all our customers from different locations for their component need. And as and when they expand the capacity, more and more components would be required and, hence, Amber can give more and more solutions to the customers and clients. Additionally, if you see, as Amber, we have already initiated the 2 greenfield facilities, one in [ super ] side and one in -- down south. And there are many customers who are not expanding and who are purely on ODM. They would get benefit out of it as a logistically advantage and more and more capacities would be required, and they would be using our capacities as we give them a logistically advantageous position from that perspective. So we are hopeful that we should be able to increase more and more wallet share within our customers as we move forward. Thirdly, as I mentioned that in the Phase 1 of the non-tariff barrier with refrigerant ban, we started the gas charging for our customers. However, as we move forward, we have already started discussing, and one of the 2 customers have already now -- we have started giving solutions and the remaining 2 we are already discussing to convert them into the ODM solutions. And that would add additional 800,000 numbers to our RAC volumes as we move forward into the next financial year.

Right. Sir, but my question was regarding, like, obviously, your clients would be sourcing a number of components, but they would be setting up their own component ecosystem as well, if I'm not wrong. Correct me if I am wrong. So like doesn't, in any case, like, it hurts us or probably -- like, I'm just trying to understand the situation. It would be great if you can help me understand this.

Yes. So Manoj, not all customers do 100% in-house component manufacturing. So there are some customers who do heat exchangers, some customers do injection molding and not all customers do 100% in-house manufacturing. So more and more customers expand their capacities, there would be more and more components acquired, and we would be -- like, sheet metal and motors and PCB inverter board, these are all the components -- would be required by a customer as they expand their capacities.

The next question is from the line of Rahul Sony from SMIFS Limited.

I like the volume which you have done so far in the first half and you have good order book for -- from your customer side. So going forward, what kind of ODM mix do you see for FY '22 compared to FY '21? And also, what's your thoughts on FY '23 over this ODM mix going ahead?

So as -- Rahul, as ODM today also, we are doing -- almost around 95% is ODM, and we are hopeful that we'll be maintaining the same as we move forward in the next financial years. And the numbers, as we always maintained that we would be outnumbering the industry, and that endeavor remains the same that we would be outnumbering the industry in the coming financial years also looking into how Amber is ready to give the solutions to our customers from various geographies in the country and, at the same time, in the coming financial years the exports getting added to the kitty.

Sir, my second question on just 2 data points. What's your maintenance CapEx and your cost of funds?

So our cost of funds is between 5% to 6%, including long term and the short term. And if I talk about the maintainable CapEx, so maintainable CapEx for -- at a consol level will be in the range of INR 80 crores to INR 100 crores, looking into the various number -- more than 15, 16 plants and plus addition of new greenfield facilities, so maintainable CapEx going forward will be in the range of INR 80 crores to INR 100 crores.

So this 5% to 6% cost of fund you state, what was the comparable figure for FY '21?

For FY '21, it was between 6% to 7%. And prior to that, it was more than 7%.

The next question is from the line of Madhav Marda from Fidelity Investments.

Yes. I just wanted to check that our CapEx guidance was for about INR 700 crores for the next 2 years. It seems like it's gone up versus what it was earlier. Is it because of like more improved visibility for order book and sort of revenues? Is that why it's gone up? Or there is any other factor?

No, you're talking about the CapEx?

Yes, the CapEx that you guided...

Next financial year, too, CapEx remains the same as from the perspective of the greenfield facilities which we are bringing. However, yes, there has been a slight commodity increase, as you know. In tune of that, yes, there would be some impact. But -- however, we maintain the same around INR 300-odd crores year-on-year basis -- on a 2-year basis, basically, as we mentioned.

So sir, basically, we're spending INR 400 crores in FY '22 and INR 300 in FY '23. So a total of INR 700, of which I think maintenance CapEx should be about INR 150 crores to INR 200 crores, combined. So that leaves up with about INR 500 crores and the INR 400 crores is for the 2 greenfield plants, right?

No. See, I'll explain. So for the 2 new greenfield facilities, the CapEx is between the range of INR 275 crores to INR 300 crores. Balance is the maintainable CapEx across all the subsidiaries and including the existing plants of Amber. For the next year, it will be within the range of INR 200 to INR 300, depending upon how the growth is there in the industry. So sir has given you a number of the higher side, but it can be -- it will be in the range of INR 200 to INR 300 based on the industry growth because we will be needing some capacity enhancement across various plants, including the component side.

Okay. Got it. And second question was that when we say that you want to double revenues for PICL, IL JIN and Ever in the next few years. What [indiscernible] taking is this. Is it the pre-COVID base of FY '20 or is it FY '21?

Yes, it's a pre-COVID base on FY '20. We'll be growing our -- doubling our revenues in both the entities, PICL as well as IL JIN and Ever combined.

So by FY '23, you want to be double the revenues of FY '20, right, effectively? That's what you're saying?

No. Either '23 or maximum '24 because still the industry has to come to a normalized level to a pre-COVID level. So we have to see how the industry can come to that level. But yes, maximum by '24. But endeavor is that -- in '23 season, which is a mix of '23 as well as financial year '24 first quarter. So we -- our endeavor is to double the level at that -- by that time.

As there are no further questions from the participants, I will now request -- I would now like to hand the conference over to Mr. Daljit Singh for closing comments. Over to you, sir.

So with the growth opportunities we foresee on the domestic and export front, along with the government support, we believe we are well positioned to capitalize on this opportunity. And thank you very much, everyone, for joining us, and be safe and be healthy. Thank you. And I hope we have been able to answer all your queries. In case you require any further details, you may please contact our Investor Relations adviser, Strategic Growth Advisors, SGA. Thank you.

Thank you very much. On behalf of Amber Enterprises India Limited, we conclude this conference call. Thank you for joining us, and you may now disconnect your lines.