Dixon Technologies (India) Limited (DIXON) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Dixon Technologies (India) Limited 3Q FY '21 Earnings Conference Call hosted by AMBIT Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Dhruv Jain from AMBIT Capital. Thank you, and over to you, sir.

Thanks, Aman. Hello, everyone. Welcome to the Dixon Technologies 3Q FY '21 Earnings Call. We have with us Mr. Atul Lall, the Vice Chairman and Managing Director of Dixon; and Mr. Saurabh Gupta, the CFO of the company. Over to you, sir, for your opening remarks.

Thanks, Dhruv. Good afternoon, ladies and gentlemen. This is Atul Lall, and we also have on the call today our CFO, Saurabh Gupta.

Good afternoon, everybody.

Thank you very much for joining this earnings call for the quarter ended December 2020. Wishing you all a very happy new year. I'm delighted to share that we had a good all-round performance during the quarter with highest stable revenue and profitability. The consolidated revenues for the quarter ended 31/12/20 was INR 2,183 crores as against INR 994 crores in the same period last year. And that's a growth of 120%. Consolidated EBITDA for the quarter ended December 31, 2020, was INR 100.6 crores as against INR 53.4 crores in the same period last year, which is a robust growth of 89%. Gross margins and EBITDA margin contraction year-on-year was primarily driven by a substantial change in the segment mix with a higher increase in share of business during the quarter from LED TVs and also due to certain input price increases. Large scale enabled us to generate a better operating leverage to offset some of the gross margin contraction due to increasing input prices. Consolidated tax for the quarter ended December 31, 2020, was INR 61.6 crores against INR 26.3 crores in the same period last year, which is a strong growth of 134%. Friends, the growth had been broad-based with secular growth across all the divisions led by improvement in consumer sentiment, festive season, a reduction in COVID-19 cases and also strong manufacturing base. The order book in the current quarter and forecast for the forthcoming fiscal continues to be very strong. The results also demonstrate, my friends, the durability of our business model as well as our strong execution capability. While the overall demand outlook has improved significantly and the growth is reflected across businesses, we are currently facing headwinds in terms of increased commodity costs. Certain surge in demand, coupled with a few supply side issues, led to global trade [indiscernible] for many commodities, presenting in sharp price inflation as well as occasional shortage of material. We expect the cost pressure to continue in the near to midterm, which will pose a challenge to our ODM business margins. However, our proven cost structures and large scale give us a competitive edge in this difficult situation also. We are continuing to monitor the situation closely and address the margin pressure in our ODM business through a combination of collaborated price increases and also focus on inventory planning. So we have always been focusing on very prudent capital allocation, building large scale to generate operating leverage, migrating more and more to our own demand solutions, deepening relationship with existing customers and acquisition of new customers. Further, whenever the opportunity comes, we are entering the new domains, however, without losing the focus on our capability and core competence in electronics manufacturing. Also in certain verticals, we see that we are globally competitive and also have technical bandwidth to start exploring the global markets. We are well positioned with a robust balance sheet with a cash balance of INR 151 crores, net debt of negative INR 54 crores as on 31st December '20. Our balance sheet strength enables us to weather any future uncertainty and also invest in the long-term development of the business. It has enabled us to invest -- to continue to invest in our organization and people through this entire challenging period of COVID. We also continue to step up our investments in people, in hiring and development of our R&D capabilities. I'm sure the benefits of this, which are already showing in results, is going to further strengthen our business in the long term. In addition, strong return ratios have been maintained with an ROE of 23.8%, an ROCE of 31.7% at the end of Q3 2021. We will continue to focus on 3 drivers of future cash flow: funding expansion, working capital efficiencies and extremely disciplined investment and capital allocation. Now I'll share with you the performance and the strategy in each of the verticals going forward. I start with LED television and consumer electronics. Revenues for the quarter under review was INR 1,360 crores against INR 454 crores in the same period last year. That has a robust growth of 199%. This has been led both by volume and pricing growth. Operating profit also saw a significant increase of 243% year-on-year. So we generated an operating profit in this quarter of INR 39.4 crores against INR 11.5 crores in the same period last year. Operating profit margins also expanded from 2.5% to 2.9% year-on-year. This is on account of operating leverage, higher level of backward integration through the PCBA rule, improved sales mix from larger screen sizes, that is 43 inches and above as against 32 inches at better margins. Growth has also come in because of government policy intervention, wherein the LED TVs were shifted from OGL to the restricted category. We presently have a capacity of 4.4 million sets, including backward integration in LCM and SMT lines, and this is already the largest capacity in India. It is almost 30% of India LED TV requirement. The order book and forecast from our customers continues to be very healthy. So as I mentioned in the last earning calls, we are further expanding our capacity to 5.5 million sets, which I'm confident will be completed by Q2 of next fiscal to catch the festive period. This will be done by adding an automated 65 inches integrated line with LCM and [indiscernible] to meet the customer demands. With this increased capacity, we'll have a large share of Indian requirement, equivalent to almost 40%. Further, we are adding to our SMT capacity and the PCB capacity, which has already been increased from 1 million to 1.8 million by Q2 of the next fiscal will be increased to 2.8 million. Now we have a total area of 0.5 million square feet in our integrated campus at Tirupati, which is fully backwardly integrated. Further, we are backwardly integrating even more because we have a traction and an instruction from our customer who will start doing the injection molding and also the backlight assembly. So in India, we're one of the most -- in fact, the most vertically integrated LED TV plant. Further, we have strengthened our R&D team, and they've already developed new cost-effective solutions for both analog and Smart TVs. We have also developed the Android TV solutions. And now we are working with [indiscernible] to cover up the IP piece. Next, coming on to lighting. The revenues for the quarter witnessed a growth of 26% year-on-year. We hit our revenue of INR 349 crores in Q3 of 2021 against INR 277 crores in the same period last year. With a very short span of time, our lighting business has exceeded [ forward ] growth levels and is back to the strong growth trajectory, which we have been demonstrating. Operating profit also witnessed a significant growth of 39% year-on-year. We had an operating profit of INR 33 crores in Q3 of 2021 against INR 4 crore in the same period last year. The margins in lighting business have further expanded from 8.6% to 9.5%. This is again due to operating leverage migrating more to our own brand solutions, value engineering, profitability improvement and better product mix. Practically all the brands in lighting are our customers today, and they're all on ODM basis. Also, most of the customers, we have a very large share of their wallets. We are presently in the largest ODM in lighting. And we have the capacity of LED bulb of 300 million. It is almost 45% of Indian requirement. We have also developed solutions for smart LED battens and downlighters and emergency bulbs for various customers. In the case of batten, we've already expanded our capacity to 2 million per month. We have -- order book is very healthy, so we are further expanding our capacity in Phase 1 to 3 million and then to 4 million. This is again almost 40% to 45% of Indian requirement. Also in downlighters, the order book is very healthy. So we expanded our capacity from 600,000 per month to 1.2 million per month in this space. Also, we have created a capacity of 5 million per month for 0.5-watt decorative lamp. The order book trend is very good. Therefore, we have decided to set up another factory for lighting. That's going to be in the hinterland so that the capital allocations, again, is very prudent. The sites are being explored, and we have almost finalized on one site to set up this new factory. And hopefully, we should be operative by Q3 of the forthcoming fiscal. We feel the kind of volumes in the entire range of our portfolio. We are now globally competitive and amongst the top companies in the world as far as volume is concerned in certain SKUs. We have the cost competitiveness and also the technical bandwidth. We have already started exporting for our anchor customer to U.S. and Indonesia. And we are in discussions with some very large retail chains globally. We're confident in the next couple of quarters we're going to have significant breakthrough in getting large accounts for export-ready bulbs. We've also completed automation of 1/3 of our capacity for LED bulbs, which will have a reduction in our manufacturing costs and boost productivity. Further, we are -- the teams, R&D teams are developing the auto lighting solutions, mainly the street light. And this product portfolio will be launched by Q2 of the coming fiscal. The third vertical, home appliances. Revenues for the quarter saw a good growth of 68% year-on-year. From INR 68 crores in Q3 of '19/'20, it has increased to INR 115 crores in Q3 of 2021. The operating profit also has increased by 28% year-on-year, which is lower than the revenue growth. So it has grown from INR 9 crores in Q3 of '19/'20 to INR 11.8 crores in Q3 of 2021. This has been primarily because of increase in the input prices and also the improved freight rates. There is a certain lag in passing on this price increase, so the margins for the current quarter also would be under some pressure. But we are hopeful that in the next quarter, we'll be back to normal. The order book in this particular vertical, again, continues to be very high, very good for the current quarter also. So we have decided to expand our capacity at a new site in Dehradun in an adjacent plot of land, wherein we're going to expand the capacity of semi-automatic from 1.2 million to almost 1.6 million. We have the largest product portfolio range from 6 kgs up to 11.5 kgs. And also, we have more than 170 models, which is the largest product portfolio either in any brand owner or with any outsourcing company. Our plant in Tirupati campus for fully automatic top loading is almost complete. The lines are being laid, and the trials will begin from February and early March. So this is a complete product portfolio with a capacity of almost 600,000 per year. The combined capacity in new plant is more than 2.2 million. Against the Indian demand of 7 million to 7.5 million, it will have almost 30% capacity with the largest product portfolio and a footprint both in north and south. So we are confident that finally, it's going to take some time, that it's going to be an extremely important and strategic vertical for us. Coming to the next vertical of mobile phones and EMS divisions. For this quarter onwards, we'll be -- we'll start reporting our mobile and EMS division revenues and profitability combined. Revenues for this quarter grew -- quarter under review was INR 299 crores as against INR 140 crores of mobile revenues in the same period last year, which is a growth of 114%. In the current quarter, the revenue of set-top box and medical equipment was INR 69 crores and INR 11 crores, respectively, out of INR 299 crores. Operating profit also witnessed a strong growth of 328% at INR 13.8 crores against INR 3.2 crores in the same period last year. This is primarily on account of contribution of our anchor customer's 2G phones, set-top box and medical electronics business. Also, operating margins expanded from 2.3% to 4.6% year-on-year. We have the largest capacity of 2.3 million 2G phones per month for our anchor customer, which is being used for both exports and domestic market. We have a very healthy order book from our anchor customer for 2G phones, and this will not be a part of mobile and EMS piece. We have already closed agreements with new global customers, global brands, Motorola and Nokia. The commercial production for Nokia has already started. For Motorola, the audits are happening, and we are confident that the commercial production is going to the start by end February, early March. The new factory under the PLI scheme is already being set up. The trials are happening. And to meet the eligibility criteria of INR 50 crores of CapEx are to meet the PLI -- when the PLI benefits has already been met. So finally, our capacity for smartphones annually in the next couple of years is going to be almost 20 million per annum. We think this is a very big opportunity for us. And we are very confident of generating a cumulative revenue of around INR 25,000 crores to INR 28,000 crores over a period of 5 years with 3% kind of EBITDA and a robust ROC after some ramp-up challenges, and it will be a quick payback on the investment. We're confident that we're doing the revenues much more on the [indiscernible] for each of the years starting '21, '22 as for the forecast from our customers. We also have an advantage as compared to our competition that we are one company which is purely focused on manufacturing and [indiscernible] activity, and there is no clash of other competition which is promoting its own brand also. Further, as we do -- we've done in other verticals, we'll be seriously exploring the backward integration of chargers, batteries and mechanicals in this particular category also. In set-top boxes, we manufactured 9 lakhs set-top boxes for Jio, DISH and SITI Cable in Q3 and reported revenues INR 69 crores vis-à-vis healthy order book of approximately 3 to 4 lakhs a month for the forthcoming quarters. Medical electronics, we have manufactured 500 units of the RT-PCR machine from Molbio. Revenues for the quarter under review was INR 11 crores with a healthy operating margin of almost 28% and extremely high ROC. Further, we have got into a new domain in wearables that is mainly TWS. This is our [indiscernible] book, and we got [indiscernible] of about 10,000 units. And the manufacturing for this particular product will start in February itself. We understand that the government is building out a PLI scheme for wearable, which we'll be definitely studying and pursuing. Coming to next vertical of security surveillance systems. There is a 10% year-on-year growth and 40% sequential growth in our share of 50% revenues to INR 55.5 crores with an operating margin of 3.5%. In my last interaction with you, I've shared that the demand for this particular vertical was under pressure. However, I'm pleased to inform you that it had recovered extremely well, and we have a very, very healthy order book. And the forecast -- further forecast, we are further expanding our capacity in this vertical also. Last but not least, our vertical of reverse logistics. The revenue for the quarter in this particular vertical is INR 4.5 crores and an operating profit of 46 lakhs. Mainly, this is for set-top boxes and LED TV panel repair business. And now we've opened up a new center for reverse logistics in [indiscernible] because this is more a strategic kind. So I would like to stop now. And here, me and Saurabh are ready to respond to your questions, please. Thank you.

[Operator Instructions] The first question is from the line of Vihang Subramanian from Samsung Asset Management.

Just 2 quick questions. On the PLI, we've signed up with, I guess, Nokia and Motorola, right? So just wanted your thoughts on why these brands versus like other brands like Xiaomi, et cetera. Like I kind of had the impression that these are sort of weaker brands. So just your thoughts on this. And how would this business look post PLI, like post FY '25, please?

So these are the first 2 customers that we have analyzed, and customer regulation is an ongoing process. Further, the order book and the forecast given by Motorola is itself consuming almost most of the ceiling that the government offers. And also in Motorola's case, a large part of revenue is going to be generated from the global markets. So we are of a firm conviction that this business relationship is on an extremely strong position. And we are fairly confident that it's going to extend beyond the PLI times. It's a huge deepening of relationship. The second question is that how beyond the PLI period of '24, '25 this business is going to be sustainable. So we feel that 4 to 5 years is good enough a time wherein the government is supporting the industry in its infancy stage. And this is a time more deeply of manufacturing will happen in India, more backward integration will take place within Dixon and in India and the country. And so we [indiscernible] with Dixon that we're going to be globally competitive without any PLI benefits. This is the way it works with most of the industry. And we feel that is going to happen in this particular vertical for Dixon also.

Got it. And any thoughts on why these customers versus like other ones like Xiaomi, Samsung?

So Samsung is already a large relationship between us and Dixon. Let me answer in Samsung. So we are already there, the supplier will complete commodity of 2G phones. And also, please appreciate for smartphones, Samsung is already -- is also a beneficiary under the PLI scheme. Now why not Xiaomi and why Motorola and Nokia? Well, again, I see, and I can't share more, that customer regulation is a continuous exercise. So nothing stops at Nokia and Motorola.

Got it. Got it. Sir, just my second question on TV. You mentioned that now you're 40% of the market, right? So at what percent of the market do you think you can go up to, After which you will like be growing in line with the end market?

So this year, in spite of the pandemic, we were close almost at 2.9 million to 3 million sets. And last year, we did around 2.1 million sets. So we feel like we'll continue to grow at 20%, 25% this year also. However, to be very candid and transparent, the issue today is not with the order book. The issue as of now is with the supply chain challenges that globally, the availability of open cell in glass is under huge pressure. And we feel that at least for a quarter or so, if not more, it will continue to be under pressure. So in Dixon's case, in the television vertical, growth, we are fairly confident it will come, and we should have a good number in the forthcoming fiscal also. Now how it pans out after that, we still have to wait and watch because we have a large share of the Indian play. And the other large players are already doing the remote manufacturing with also some other large partners. We will have to wait and watch and see for that.

Got it, sir. And just the last bit from my side. On lighting, you're expanding your capacity in battens and downlighters. So by which year you think this capacity will be completely utilized? Would it be like FY '22 or '23? Any sense on that?

So our order book is extremely strong. In fact, there has been some mismatch that we did not anticipate this kind of an order book. So we already have the order book for utilizing this capacity. We had to really rush in getting this footprint ready.

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

Congrats on a good set of numbers. So in continuation with the previous question, in LED TV, so if you can give what is the current market size this year? And you told around 2.9 million to 3 million pieces we are doing currently. And you told that we are also doing the higher inches, the 43 inch and above. So what is the opportunity there? And is there any export opportunity which can be given? This is my first question. And my second question is with respect to the wearables. How much amount of potential revenue that we can get from the wearables? If you can give that outlook also will be great, sir.

So on LED television side, one, the market has shifted from 32 inches to 43 inches. So the unit value of a sale, which used to hover at around [indiscernible], has increased to almost INR 14,000 to INR 15,000 in the last 2 quarters. So that's a significant jump. And also volume-wise, we have an extremely healthy order book because we've been continuously acquiring customers. Starting with Xiaomi, we added Samsung. We added private labels of Flipkart, Nokia and Motorola. We have added Reliance's private label. We added Vu. We have Tata Croma. So continuously, we're adding. And we're also expecting some more customer acquisitions in the forthcoming quarters. So both revenue-wise, unit value-wise, margin expansion-wise, backward integration-wise, I think they're in a healthy bucket. And '21, '22 looks to be fairly robust; in fact, very good. Now whether there is any potential for export, I don't think there's any potential for export because at long last, there's an open cell fab in India. As a country, I don't think we are there for export-ready televisions. On the wearable side, our understanding is that market is approximately INR 5,000 crores. But it's growing at a very fast pace, and we are tied up with boAt. boAt have an extremely smart and aggressive management team. Within a very short period of time, they have been able to create an extremely good and iconic kind of a brand, not only for the domestic market but for the global markets. So it's still too early to forecast the numbers, but I have a good feel about this business. So I'm not in a position to share the numbers as such, but I think it's going to be a good, strong, robust relationship.

Got it, sir. And second question is with respect to the PLI scheme. So I read in news articles that so basically, the FY '20 year base, you're planning to get -- I mean people have requested -- companies have requested to get [indiscernible] FY '21. So is it likely to get stuck with FY '20 itself as a base? Or FY '21, is it likely to be rolled forward? And is there any implication because of that?

So FY 2021, because of the supply chain constraints, both in the display and the microbusiness side, they will not be meeting and nobody will be meeting the thresholds. So the industry has requested the government for some kind of flexibility and extension. We are still waiting for government response. Let's see how it pans out. For next year '21, '22, the threshold is INR 1,000 crores, which we are very confident to meet fairly soon, both on the side of threshold revenue as well as the CapEx for meeting the eligibility criteria.

[Operator Instructions] The next question is from the line of Abhishek Ghosh from DSP.

Just the first question is in terms of Motorola. You mentioned the audits are on. Just wanted to get a sense, since these are mostly for overseas volumes, what kind of overall -- because I believe Motorola does about 40 million, 41 million kind of handsets, what kind of market share or production share that you envisage to get it over a 2- to 3-year framework? How should one look at it from that perspective?

So my sense is that by year 3 or year 4, at least 15% to 20% of global requirement of Motorola should be with us.

Okay. Okay. Fair enough. And in terms of Nokia, again, is that number going to be similar because their volumes are far lower? Or is it mostly for the domestic market, for the Nokia PLIs that you've signed?

So Nokia, to start with, is for domestic market. That's the initial discussions for exports, but it is going to be step by step. Nokia will start with this domestic.

Okay. And there's one more -- or there are a couple of more guys whom you're talking to in terms of mobile PLI, is it?

Yes, yes. We are in very advanced discussion with some very large global brands. I'm not in a position to share more details. Yes, but we are in discussions.

Okay. And sir, just one last question. In your sense, where is this production getting shifted to -- I'm saying in terms of Motorola, they're already producing in some part of the world. Where is the shift? And if you can just help us understand that.

You're talking about shifting the global footprint?

Yes, yes, yes. The global production shift that is happening, if they're going to give you the 15%, 20% of it, where is the shift happen from?

So it doesn't -- if you see the global footprint of Motorola, it's presently in China, it's in Brazil. And for domestic market, it was in India with [indiscernible]. So I see the China production be shifted out from India for servicing the global requirement also.

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

My first question is on the LED TV business. If you could just help us understand what proportion of our revenues would be coming from existing customers like Xiaomi, Panasonic and others and what proportion possibly will be coming from new customers that we have acquired? And how is the ramp-up for Samsung?

So it is Saurabh speaking. So on this -- in this quarter 3, between Xiaomi and Samsung, almost 75% of our revenues are coming. And then balance, 24% revenues are coming from the other brands.

Okay. And Samsung...

[indiscernible], I feel like with the addition of new customers, the 75% is going to come down to somewhere between 55% to 70%. And the balance is going to happen from other customers and new customers.

And also to add to it, I'd say, since last year, same period last year, this customer used to contribute almost -- so yes, the top 2 customers last year was contributing almost 85-odd percent, so it has significantly [indiscernible] to that extent. And as Mr. Lall mentioned, it continue to be -- continue to get lower with more customer acquisitions.

Understood. And as far as the Samsung contract is concerned, we have completely ramped up the overall kind of volumes that we were looking for them, 500,000 to 600,000 units this year. Or will we be achieving that?

So we have been guided for volume of 0.7 million in the forthcoming fiscal. We see that we should be achieving those numbers.

Sorry, sir, I missed that.

So Aditya, basically, this year, we should -- for Samsung, we should be closing somewhere around closer to 5 lakh kind of a number. And next year, we have been given an order book of somewhere around 7-odd lakhs.

Got it. Perfect. Understood. And my next question is on the set-top box business. How do you see the revenue potential for the set-top box business? And could there be an export opportunity out here?

So we feel that the set-top box business would be around 350 crores to 400 crores. And I don't see an export opportunity in set-top box as of now, yes. This is mainly for the domestic markets.

The next question is from the line of Tejas Sheth from Nippon India AMC.

Two questions. One, we keep hearing that there's a huge supply chain issue on the chip side and even you also mentioned about the open cell. One, how will you ensure that the supply chain for a new player like us, I mean, in the PLI gets a preference at the vendor level? And do the brands help you in getting the supply chain process in place?

So Tejas, there are 2 parts to this issue, this point. One is you specifically asked in the context of mobile and PLI. So there, the supply chain and the sourcing and procurement is managed by the brand owner to start with. So we feel confident that with the clout of the large global brands like Motorola and also Nokia, they're overcoming that. And I can see it falling in place. Then the issues are usually into the LED lighting. I think we took a very prudent call back in September and October to accumulate inventory, particularly of driver IC and LED chips, which is we are one of very few manufacturers which are able to execute the business. And we continue to have the inventory and supply chain in place in spite of the problems. And that is one of the primary reasons for consolidation and an increase in volumes and revenue in lighting for Dixon. In the case of televisions, there is a global shortfall of open cell. So even the big ones like Samsung and Xiaomi are facing the challenges. But let me assure you that they are much ahead of their peers and competition in sourcing open cell. So they're not at a level -- the sales would have been much better if they are to complete quantity source, but they're much ahead. So in turn, Dixon is in a better situation as compared to competition.

Okay. Okay. So the owners of the supply chain getting in place is on the brand, is it?

In the case of prescriptive business...

In the case of prescriptive business, it is. In LED lighting, we have to manage that.

Okay. Got it. Second question, now when the Motorola manufacturing or assembling has started, what are the service gaps which Motorola would want you to fulfill over next 2, 3 years when they compare you with their current sourcing from China? Are there any service gaps which they would want you to fulfill for the next 2, 3 years?

So first and the foremost is the technical order qualification. And it's a very comprehensive order. And Dixon, we're gearing up for it. We have qualified the first order. And also the lines have been installed. The second order and trials of the first 2 models is happening. Yes, there are definitely initial challenges, but we feel confident we should be able to overcome that and the commercial production should start in February, early March. Now this is what has to be sustained. They have an extremely close monitoring system, both from China headquarters and their India deals. That deliverable is extremely important. The second is on the aspect of business processes. It's an American company with an American culture although a Chinese ownership now. But the whole business processes go from there. So Dixon has to align and gear up for that. Now these 2 are extremely important deliverables on which Dixon will have to get up and mature more to really reach the optimum level of customer satisfaction. These are going to be the most critical things apart from cost, of course. Cost, I'm very sure will be. So if we are able to build a brand and we are working on them as we show you, then I think the relationship can be taken to the next level.

Okay, okay, okay. That's helpful. Just last, [ recently ], I guess budget had this tariff custom increase on the PCBs. I would just want to know at present how much of the PCBs which we assemble are sourced in-house? And 2, 3 years down the line, what could be this percentage?

So there is -- what the notification says, the inputs of PCBA [indiscernible] would be increased. Now most of the inputs of PCBA, they fall under the [ Tier ] 1, and the duty is 0%, and the government cannot increase the duty. However, there are certain items like connectors or inductors on which there is an increase of duty. But that's a very miniscule number. And in any case, for us, it's a pass-on, so it's not that much of a challenge. On the other side, the duties have been increased on the inputs of chargers and batteries. In the short term, there will be some small cost increase for the mobile brands, not for Dixon, because of pass-on. But it's in line with the government's efforts to deepen the manufacturing. So I think that went fine.

Okay. No I was just trying to understand, is there opportunity for us to backward integrate further in the PCB components or even larger, for that matter, PCB -- the whole PCB manufacturing over next 2, 3 years?

So we are not looking at backward integration on that side. However, we'll definitely be looking at the backward integration opportunities in the case of chargers, the battery packs and the mechanicals because that's our core.

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

Sir, congratulations for a good set of numbers. I have -- sir, I have 2 questions. One on CapEx. Any number you want to state for FY '21 and '22 as you are expanding capacity in various segments? And second, on lighting. As you have stated, there would be new facilities which you would be setting up. So will that be under upcoming PLI scheme? Or it would be separate from that? And lastly, Saurabh, if you can provide volume numbers for the quarter.

Sorry. I'll first respond on lighting and numbers is Saurabh to make. He'll discuss the numbers with you. So on the lighting side, Naval, we are talking about PLI. In any case, we will be expanding our capacities. And in all probability, this facility will be coming up with good [indiscernible], right, because the order book is extremely healthy. And if you don't do it fast, you're going to lose the business and you're also going to hamper our relationship with our customers. Now we are expecting the PLI lighting -- PLI for lighting to be announced sometime by second or third week of February. We have been deeply interacting with the government on the contours of that scheme. We are awaiting that scheme. And if it helps us in growing our business, which my friend says it will, we will be definitely pursuing it and we'll align our new factory under the PLI scheme.

So Naval, on the CapEx side, in the first 9 months, we have already done a CapEx of INR 104-odd crores. Mainly the CapEx has gone into the fully automatic washing machine project and also the mobile PLI project. And we expect to close anywhere between INR 145 crores to INR 155-odd crores when we close the financial year. And on the volume side numbers, so yes, if I take it segment-wise, LED TV volumes was 9 lakhs as against 4.5 lakhs same period last year, Q3 versus Q3. So there's a growth of almost 100-odd percent. So you must have seen that consumer electronics has actually seen a growth of 200-odd percent. So half of that has come through [ outlook ]. The balance is from -- on account of the higher selling prices or the higher category that we are doing. As far as lighting is concerned, if I break it down between LED bulbs, battens, downlighters and all. So LED bulbs, we sold almost 6 crore bulbs. Batten, we sold almost 45 lakh battens. Downlighters, 14 lakhs. And the balance, other, which is drivers, TLED and ballast, was around 46 lakhs, 47-odd lakhs. Our washing machine, we sold around 2.4 lakhs. And overall mobile phones, we sold around 75 lakhs, which was majorly 72 lakhs was feature phones and 3 lakhs smartphones. Of course, this number of smartphones will keep increasing under the PLI. And in terms of CCTV, we sold 9 lakh units and [ DVA ] was around 2 lakhs. And set-top box, as we mentioned earlier, it was 9 lakhs for the quarter. And the artificial machine for Molbio was around 450 units for this quarter.

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

Congratulations for the strong performance, sir. Two questions. First, given that our core business is having much finer growth opportunities and new business segments are opening up, these mobile phone, set-top boxes, some [indiscernible] for laptop and tablets as well. So as a company, how are we building our teams and capabilities and leadership to manage growth across all these businesses and drive long-term sustainability? So for us just to understand more on the people side, what are we doing and how are we helping to build the organization [ as far ] and robust? And second would be on the way we have seen opportunities opening up on the mobile phone side. On the telecom or related equipment, if you see, say, the laptop and tablet segment, what would be a right to win business in this segment? And if markets open up, to what extent you would be willing to invest and [ speed ] our portfolio in this business? That's all from my side.

So responding to your first question, Renu. Talent acquisition is presently an extremely important and a focused exercise. So let me assure you, although it's not easy and it's very challenging, we have strengthened our HR department. We have brought in senior people at the level of general manager from some extremely good organizations. We have put our HR processes in place. And we are really strengthening our senior middle management team and middle management team across all the functions, whether it's design, expertise in tooling and metals, expertise in manufacturing, the latest quality management systems, IT and manufacturing, engineering systems, all across the recruiting. In mobile, we have tied up with a global consultant who was the global manufacturing head with one of the largest TMS companies in Paris who will be guiding us in this graduating our program. So it's not easy, but I'm extremely conscious of it. And you have raised a very pertinent question. We are -- these are [indiscernible] we are strongly pursuing. Apart from it, we are also strengthening our IT processes, and we have engaged [indiscernible] for writing a blue book and defining our processes. Further, at the Board level, we have also expanded our Board. And yes, you'll be hearing something soon. So all that is happening. Now you talked about the new opportunities of PLI. Yes, we are very closely looking at both IT and wearables PLI because that's a part of our core competence. Let the PLI be announced, and we'll be definitely pursuing it. In the case of wearables, we already have a partner in boAt. So we already have an anchor customer. And in the case of IT PLI, also, we have a relationship with a large IT player. So let me now [indiscernible], but we'll be closely pursuing it.

[indiscernible], right? And if you understand at least for laptops or tablets, those -- this initial stage, relationship with Moto or Lenovo could come handy to expand this portfolio of [indiscernible] products.

So yes, Renu, I'm not in a position to respond to that. Yes. So we'll definitely be pursuing that.

The next question is from the line of Bharat Shah from ASK Investment Managers.

In the earlier part of your comments, you mentioned about cost and technology, global leadership. Were your comments confined to lighting alone? Or it extended to more?

So Mr. Shah, first, of course, I was referring to lighting because in lighting, we see that they already reached a certain level wherein we can venture into the global markets, wherein we've only started and we're getting a very positive response from the customers. The second vertical I'm referring to wherein we are a strong ODM player is washing machines [indiscernible], fully automatic, top loading. Now the product portfolio that we have, which is going to be launched in next 2 months, 3 months, and also the cost structures and industrial footprint in Tirupati Campus just being 125 kilometers away from [ Chennai ], and also the numbers and the research work that we have done, we feel confident that 6 to 8 quarters down the line, it opens up a global market for us. So I'm referring to these 2 product solutions.

Sure. You correctly reiterated 3 pillars of your strategy thesis to grow the business and revenues, to improve upon working capital efficiency and to be very prudent and wise about capital allocation and raising capital efficiency bar. On the first part of the earnings expansion, would you be able to give a broad idea of size of opportunity of each of these categories we're having our share today? And what kind of outcome do you think in 3 to 5 years we can expect in each of those categories?

So responding to each category, let's -- I will start with lighting. Now please appreciate Dixon is somewhere around INR 1,300 crores, INR 1,500 crores revenue range. Now LED bulb alone, the global market is approximately $8 billion. Now we're globally competitive. We have the complete product portfolio with us. We are #3 or 4 globally as far as LED bulb volumes is concerned. The markets and the customers are looking at China Plus One sourcing. So even it's able to get 7%, 8% of the LED bub global market, we're talking about adding approximately $500 million to the lighting revenue itself over next 4 to 5 years. Now same is the case with wafers. One, when you were able to achieve the global-level competitiveness and in-house design strength and some scale are depending on the domestic market, then you keep on pursuing the global markets. And there is a definitive shift in the industrial footprint, the global industrial footprint, wherein the alternate [ we look at ]. Our large anchor customers are already sending some kind of figures in that direction. It is not going to happen very soon. It's going to be having a lot of deliverable and execution challenges. But let me assure you, this is the path we will be pursuing. Now in the case of mobile, yes, we are depending on the PLI and our anchor relationships, [ global rights for the year 1 ]. And we are going to be working upon that we stand on our own feet in next 3 to 4 years with some level of backward integration and also some freight into the ODM part of basic 4G phones. So these 3 verticals, we'll definitely pursue for achieving some kind of the [indiscernible], global competitiveness and a position in the global market. Others are the government policy intervention wherein all of us are of the conviction that now the electronics products being sold in India will be manufactured in India. And we'll keep on grabbing it provided it falls into our filtration criteria of scalability, backward integration, migration to ODM and lower government entities. So we feel and -- very difficult to give you the numbers, but I think the opportunity is extremely healthy.

Next question is from the line of Sonali Salgaonkar from Jefferies India.

Congratulations on the great set of numbers. My first question is with the business mix changing more towards mobile phones and consumer electronics because of the new customer addition, what could be the steady-state operating margin that we should look at going forward?

So Sonali, your observation is absolutely right. I think both the businesses as a percentage of revenues will start contributing more. And you will look -- you will see that in the next fiscal also. I see mobiles in [ EMEA ] regions start -- will start contributing almost 35% to 40% of revenues next year. And similarly, if I look at and extrapolate this trend of consumer electronics as well where we have a strong order book and we are adding more customers there, again, and indeed if the market is also shifting to 43 inches and above, then clearly, the consumer electronic revenues in terms of revenues will also be higher. So my sense is what you see in this quarter, the kind of EBITDA margins, which have come down, of course, [indiscernible] EBITDA has grown significantly, but the EBITDA margins would have come down to 4.6%. I think so that should be the going run rate for next fiscal year as well. So we have plus/minus 4.5% to 4.7% kind of a range. That will be the going rate for EBITDA margins.

Understand. Sir, my second question is more from a strategy perspective. Our ODM share right now is about 35% of our revenue mix. With so many new opportunities opening up for us more in the design space, where do we foresee that ODM share to reach, say, over next 3 to 5 years?

So in the next year or a couple of years, ODM as a percentage of revenue would be lower because the maximum growth is coming in -- the outlier is going to be mobile phone, which is in a prescriptive mode; and LED televisions, which, again, largely is on a prescriptive mode. Now [ anyway ] leverage start with -- we are in works and we're in discussion for some [ JV ] kind of business. I have a strong conviction that somewhere mid next year, we should be able to have some breakthrough with some large customers. Now if that happens, I feel that the volume share in televisions is going to go up to almost 15% to 20%. Mobile would continue to be prescriptive for at least a couple of years to come. LED lighting is already at 91%, 92% of ODM, which further, I think, is going to increase to 95%, 96% because more growth is going to come from ODM side only. And appliances, in any case, is 100% ODM. And the other strategic thing, whether it's set-top boxes -- set-top boxes again, a part of it is going to migrate to [ JDM ]. And in the case of medical electronics and wearables, to start with, is all going to be prescriptive. So I don't have a number at certain times where electronics is going to pan out to be. But overall profile of ODM versus OEM in respective verticals is what I'm sharing with you.

Got it, sir. Sir, lastly, what could be the steady-state CapEx outlook that we could expect over the next 3 to 4 years?

So Sonali, we have mapped out the cash flows, CapEx from the source of funding for the next 15 months. My sense is, as I mentioned, this year, our CapEx should be somewhere -- will be closing somewhere around INR 145 crores to INR 155-odd crores and similarly with the going run rate for the next financial year as well. Yes. So at least for next financial year, the number of -- the CapEx will be almost similar to this year.

The next question is from the line of Nitin.

One question. In terms of now the business is now scaling up, growing at about 20-odd percent or more, how are -- what are the supply chain issues that could emerge for you or for the country? What makes you worried on the supply chain in terms of component availability? And are you seeing any progress related to this, in investments on the supply chain components in India through the ecosystem of these large brands, which are giving you big business?

So Nitin, the present, the pricing challenges are primarily on the glass side. So it is impacting both the open cell supply for televisions and display. Now some of the basic glass path of [ LG ] and Corning have had a shutdown. And also to open cell level, there has been some restructuring on the industry side. So I feel that in -- the current quarter and the Q1 of next fiscal, this kind of pain will continue. Post that, we are expecting the glass furnaces to revive by then. And there should be some smoothening of the supplies of glass, both for display as well as the open cell from Q2 of the next fiscal. On the semiconductor and the IC side, there is a significant shortage. One, because of the geopolitical situation, certain brands which were put under pressure have moved a lot of inventory. And also, a lot of semiconductor production and IT production is going in for the EV side because of better margins there. So I feel that at least for a couple of quarters and the time the new capacities come up, the pain point on the driver IC side, on the microprocessor side and also on the semiconductor side will continue. So that is the situation.

And any investment in this context happen in India, the ecosystem?

Not in India. I don't foresee that.

Okay. Sir, my second question was about the competition. So when you're working with these global brands for wash or for that matter, in mobile, in Motorola, I know India lacks competing capacities to you, what are the other alternatives that these brands are considering? Are they like Turkish players or Vietnamese? Who are the alternatives for China Plus One, which are also trying their hand?

So first, yes, the main competition from Vietnam. And in fact, they have banked a very large share of the global supply chain in electronics, whether it's mobile or other electronic products. So undoubtedly, it's Vietnam. Beyond Vietnam, I see the next option being very seriously evaluated at some large global brands in India. You have seen that people -- the companies, the large companies, which had their base in Thailand, they're also looking at India, which had their base in Philippines are also looking at India. So I would say in that order, China and then Vietnam and then India.

And where does Vietnam score more than India?

Sorry?

Where Does Vietnam score higher than India, in what aspects?

It already has a very large scale because if you see the global exports from India of electronics is somewhere around $6 million to $7 million. And Vietnam is already at somewhere around $100 million. You see the footprint of Samsung there. Samsung management is treated like an oil and gas there. And Vietnam already is much ahead because the ecosystem is being developed there. [indiscernible] from limited manpower. So I don't think it can replicate completely with [ Chinese ] where they would definitely [ been over ] through the other countries and which India stands very strong.

Okay. What I was asking, the question was the -- on the labor cost on a [indiscernible] basis of power cost or logistics cost, is India getting on any factor better than Vietnam so that incrementally, the share of India can be higher to you?

So on the labor cost side, India is better, both on the cost and the productivity side. Productivity side, we match them, and the cost is lower. And the power tariff is same. But there will be some disability on the infrastructure side around the land side.

Thank you. Ladies and gentlemen, due to time constraints, that would be our last question for today. I would now like to hand the conference over to the management for their closing remark. Thank you, and over to you.

Thank you so much. Thanks, everyone. Thank you.

Thank you, everybody. Thank you.

Thank you very much.

Thank you.

Thank you, ladies and gentlemen, on behalf of AMBIT Capital, that concludes today's call. Thank you all for joining us, and you may now disconnect your lines.