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

Ladies and gentlemen, good day, and welcome to the Q4 and FY '21 results call of Dixon Technologies India Limited hosted by Emkay Global Financial Services. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Naval Seth from Emkay Global Financial Services. Thank you, and over to you, sir.

Thank you, Sadan. Good evening, everyone. I would like to welcome the management and thank them for this opportunity. We have with us today Mr. Atul Lall, Vice Chairman and Managing Director; and Mr. Saurabh Gupta, Chief Financial Officer. I shall now hand over the call to Mr. Lall for his opening remarks. Over to you, sir.

Thank you very much, Naval. Good evening, ladies and gentlemen. This is Atul Lall, and we also have on the call today, our CFO, Saurabh Gupta.

Yes. Good evening, everyone.

Thank you very much for joining this earning call for the quarter ended March 2021. I hope that you and your family are safe and healthy. We, at Dixon, are dedicated to the health and safety of our team members. As such, we continue to invest in our policies and protocols to operate in the safest manner possible in the face of challenges presently. Coming to the numbers. Consolidated revenues for the quarter ended March 31, 2021, was INR 2,111 crores against INR 857 crores in the corresponding quarter last year, which is a growth of 146%. Consolidated EBITDA for the quarter was INR 80.8 crores against INR 55.9 crores in the same period last year, which is a growth of 45%. Consolidated PAT for the quarter was INR 44.3 crores against INR 27.6 crores in the same period last year, which is a growth of 60%. Gross margins and EBITDA margins contraction on year-on-year was primarily driven with substantial change in segment mix with a higher increase in share of business during the quarter from LED TVs, which is an OEM business with a lower margin, and also steep in putting the price increases on the commodity side, which had an impact on our OEM business. EBITDA also factors in the ease of expenses of around INR 8 crores in Q4 on account of new [ ISO ] plan 2020. Adjusted for that, the EBITDA and EBITDA margins should have been higher. A rapid and large increase in commodity costs, which started happening since November 2020 and continued throughout in Q4 has impacted our contribution in EBITDA margins. In our ODM business, that is primarily lighting and washing machine, and wherein we offer design solution, there's a lag in passing on the increase in commodity prices. So in short term, there has been a negative impact for some time. At the time, we have passed on according to our principle. So in lighting business, majority of the cost increase was passed to the principles in the last quarter itself, largely. But in the case of home appliances, the same has been already passed on in Q1 of the current fiscal. Our frugal cost structures and a large scale gives us a competitive edge in the challenging situation. We are monitoring the situation very closely and are confident of addressing the margin pressure in our ODM business. through a combination of calibrated price increases, inventory planning and also value engineering. Overall, fiscal year 2021 has ended with a fairly strong growth in revenues and profitability, as the teams have demonstrated their ability to resolve and to mitigate the challenges and complexities of COVID-19. As you all know, the second wave, unlike the first wave, has turned out to be more ferocious, spreading wider and significantly impacted demand even in the rural areas. From second week of April, the growth has slowed with further deceleration in May. We are cautiously hopeful that by May end, I want to start seeing at least some of the states and districts are starting to open the lockdown or allow the markets to function and see an uptick in demand. Although we strongly believe that in Dixon, we have a platform to sustain the strong revenue growth moving forward as and when the overall demand strengthens. We're well positioned with a robust balance sheet. We have a cash balance of INR 154 crores and net debt of negative INR 8 crores as on 31st March '21. Our balance sheet strength enables us to weather any future uncertainty and invest in the long-term development of our business. It has enabled us to continue to invest in the organization and people through this challenging period of COVID. We also continue to step up our investments in people and hiring and development of R&D and capabilities. The benefits of which are already showing results and long-term results will continue to be realized over the years by the organization. In addition, in the last fiscal, at the end of March 31, we have delivered strong return ratios with ROE of 25% and ROC of 31.4%. Now I'll share with you the performance and the strategy in each of the verticals going forward. Revenues for the quarter that is with consumer electronics I am sharing, under review was INR 1,179 crores against INR 393 crores in the same period last year, which is a robust growth of 200% led by both volume and pricing growth. Operating profit also saw an extremely good growth of 189% against 28.2%. This is 28.2% in Q4 financial year 2021 against INR 9.8 crores in the same period last year. We presently have a capacity of 4.4 million TV sets, including backward integration in both LCM and SMT, which is the largest capacity in India. And we have also started production of large screen TVs like 70, 75 inches and 85 inches for our anchor customers. As we have shared with you earlier, we are further expanding our capacity to 5.5 million in the next couple of months, adding new automated 65-inch [ integrated ] line with LCM and FA. And also one more high speed SMT line to meet our customers' demand. So we will have the largest capacity, which is more than 35% to 37% of Indian requirement. And similarly, our PCB capacity with new line of SMT is going to further increase from 1.8 million to 2.8 million. We have a total factory area of more than 0.5 million square feet, which is in the campus of Tirupati. We are further investing in backward integration by setting up an injection molding unit. So to be one of the most backwardly integrated plants in LED TV in India. We are vertically integrated. We have the largest capacity in LED TV, and we also have a large R&D team. Our R&D team has developed new cost-effective solutions and technologically advanced and broad TV set, with customized features for our various customers. In this particular vertical, now we're getting into a new product SKU, which is LED monitors. I'm pleased to inform you that we have tied up with 2 largest global brands for manufacturing LED monitors. And the production will commence from Q3 of current fiscal. The lines and equipments have already been ordered and will be creating a capacity of 1 million LED monitors to start from Q3. The expected volumes in the year 1 will be in the range of 0.5 million LED monitors and we expect the order book to significantly increase from year 2. The revenue and the profitability numbers are being worked out, but we expect it to be in a similar range in LED TV. Now coming to our next vertical, lighting. Revenues for the quarter again witnessed a strong growth of 50% year-on-year. We had a revenue of INR 382 crores in Q4 against INR 255 crores in the same period last year. And this is, again, a strong growth trajectory, which we have been able to demonstrate. Operating profit also witnessed a good growth of 21% year-on-year. We had an operating profit of INR 31 crores against INR 25 crores in the same period last year. The margins in lighting business have contracted because of the impact of input cost as there is always a lag in passing on the price increase. However, in the case of lighting, most of the cost increase has already been passed on. All the brand new lighting business are on ODM basis. And also a large percentage of our sales is being sourced from Dixon today. We are India's largest ODM and lighting and have the largest capacity in various SKUs. So in LED bulbs, we have a capacity of almost 300 million, which is between 45% to 50% of Indian requirement. We have also developed solutions for smart LED bulbs, patents, downlighters and emergency bulbs for various customers. As I had shared with you last time, we have expanded our capacity of patents to 3 million, then -- 3 million a month and the Indian requirement is around 7 million a month. So we again have a large scale there. And similarly, in downlighter, we expanded our capacity from 600,000 to 1.5 million. The Indian requirement is 3 million. In addition, we also have created a capacity of 5 million per month of 0.5-watt decorative lamps. We feel with the kind of volume that entire range of product portfolio, we are now globally competitive and among the top companies in the world as far as the volume is concerned. We are working on certain export and global contracts, and we are expecting a significant breakthrough because the final approval on the technical side is on and expect some good results to come out of it within July, August. As I've shared with you last time, we are in the process of developing outdoor lighting solutions, namely street lights and commercial lights, and these will be launched in Q2 of the current fiscal. The government of India on 15th April, '21, launched the PLI scheme for manufacturing of components of LED light. The detailed guideline of the scheme have also been rolled out. This is a part of effort of the government to create the component ecosystem. We are closely studying it and in all probability will be pursuing it, particularly on the mechanical side for the LED lighting solutions because that's a part of backward integration, and we have a deep understanding of that particular domain. Coming to home appliances, the revenues for the quarter again saw a steady growth of 63%. From INR 90 crores in Q4 of '19, '20, it has grown to INR 146 crores. But on operating profit margin side, there has been a significant pressure because of the increase in quote prices on commodities. And there has been a lag in passing on the increase in the commodity prices in last fiscal. But let me assure you that the same has now been passed on to our customers in Q1 of the current fiscal. And we presently have 140-odd models and have the largest product portfolio ranging from 6 to 12 kgs across the semi-automatic category, and now we are expanding our capacity to 1.5 million from 1.2 million, which will happen by August, September this fiscal. In the new facility for fully automatic top loading which has been a plant that has been set up in Tirupati is now ready. With all the machine installs, the trials have been completed and the samples have been submitted to our customers, to our anchor customer, Bosch, which is under approval. We are expecting the commercial production to start by end August, early September. In this, we have approximately 40 models, again, the largest range between 6 kgs to 10 kgs, and they should have an annual capacity of 6 lakhs, and we are -- the various agreements with our existing and new potential customers are in works. Coming to mobile phone and EMS division. Revenues for this division for the quarter grew to INR 290 crores against INR 60 crores for mobile revenues in the same period last year, which is a growth of almost 381%. In the current quarter, the revenues set-top box and medical equipment business in this vertical was INR 46 crores and 92 lakhs, respectively, out of INR 290 crores. Operating profit was INR 7.4 crores against INR 8.4 crores. This is on account of increased fixed cost in terms of manpower and other overheads that have been built in setting up the new factory under the PLI scheme. It is already [ being set up ] when the commercial production has started. But you know that in our business, there's an initial ramp-up cost, which has led to the pressure on operating profit. So we have already commenced production -- commercial production for Motorola in mid-March and also the production for Nokia has started in February. We are confident of achieving the [ same ] revenues of this financial year under the mobile PLI. We are making further investment to meet the threshold levels, and we'll be targeting to take the capacity up to 15 million per annum in the next couple of years against a present capacity of 3.5 million to 4 million. We have a strong order book from Motorola. And out of this 60% to 65% will be for the export markets. We will start exporting from Motorola to [ some ] countries next week and the U.S. by first week of July. We were the first Indian mobile manufacturing company, which has an Indian infrastructure, and that is capable of building the 5G phone as per any global requirement. Further, we have placed with a land bank of 5 acres in Noida, which has been directly allotted to us, in which we'll be setting up an integrated mobile phone facility handling set-top boxes. As far as set-top box is concerned, we manufactured 6 lakhs set-top boxes in the last quarter and 21 lakhs in the whole year. In Q4, we had a revenue of INR 46 crores. And in the whole year, we had a revenue of INR 156 crores with approximately 3% operating margin. And the order book in this vertical looks very healthy with almost 0.5 million set-top boxes per month. But due to shortage of components, we feel confident that we should be able to approximately 0.35 million per month starting Q2 this fiscal. Medical and electronics. We have manufactured almost 550-odd units of RT-PCR machines. It generated for us a revenue of INR 13 crores with an operating margin of 28% and a strong ROC because in this, the investment in the form of working capital, is very minimal. In security surveillance business, we have seen a strong growth of 100% year-on-year in this quarter. We did a revenue of INR 109 crores in Q4 versus INR 54.6 crores in the same period last year. Operating profit also increased from INR 1.9 crores in Q4 last year to INR 3.1 crores in the current fiscal, which is up by 66%. There again, because the order book in this as committed by our principal looks healthy. So we are further expanding our capacity. Now I'll share with you and update you about the opportunities on which we are working. So we have shared with you that we are going ahead with the refrigerator product in the direct cool categories. So we have already kicked off this project. We record the market study done. We have finalized on a technology partner. We have started building a team. We have got the project manager and the R&D managers in place. The project design is under works. So we'll be initially creating a capacity of 0.6 million, which will be in Phase 2 with some balancing equipment. We ramped up to 1 million. Please appreciate the Indian requirement of [ DCF ] is around 10 million. So this is the 10% event in market. This will be in the category of 170 liters to 220 liters. We applied for 10 acres of land back in Greater Noida. And we are confident that we'll be able to get it. The target for commencing commercial production at this particular growth category is Q3 of next fiscal. The next opportunity that the company is pursuing is laptops, tablets and IT hardware. So we have [indiscernible] under the PLI scheme on 29th April '21, and we are a strong contender for the sale. Approvals is likely to come in a month or so from the government. We have already signed an MOU with one of the largest global brands to start manufacturing their laptops. And we're in discussions with some other large global brands to pursue these products. The next is telecom and networking products. So as we have already shared that we have entered into MOU with Bharti Enterprises to form a JV through wholly-owned subsidy of Dixon Electro Appliances Private Limited. This particular company will be submitting application in the PLI scheme. The scheme has been announced, but we're still awaiting the guidelines. And this will be basically IoT devices, modems, routers and various other telecom products. This JV, Dixon will be owning 74% and 26% by Bharti Group. We'll be filing our applications under the scheme. Also, let me share with you that irrespective of this PLI scheme, we are -- we have finalized an agreement with principle for manufacturing modems and routers for supplying to the telecom operators. And this kickoff, it will take place within Q3 of this fiscal. Also, next, we are pursuing the PLI scheme for AC components. As you know, that we are already a supplier and for more than INR 100 crore business for us. For PCB assembly, for controllers, for AC. So we are in discussions with our Japanese partner for the JV on this. And here is the deeply embedded supply chain with this partner in China for servicing global markets is being worked upon to be shifted to Dixon to the JV for servicing, not only the domestic market, but also global markets. So this is what I wanted to share. And now we look forward to the Q&A. Thanks very much.

[Operator Instructions] The first question is from the line of Aditya Bhartia from Investec.

Sir, on the mobile phone business, just wanted to understand if you are having discussions with any additional customers also? And it does appear that some of the other players who have filed for PLI applications may end up missing their targets. So does that open up a much, much bigger opportunity for us with the ceiling numbers that you have seen?

So I would say at present, the large tie-ups that we have with Motorola and Nokia. We are in works that -- again, a player from the global market for export to U.S. market for the operators there. I'm not in a position to share the final details because it's in the works. But we are targeting to start exporting the 5G phone to U.S. for this particular brand from August, September. So that's also going to be a large business for us. Now what you are stating is correct. I'm keeping my fingers crossed. And we're pursuing these relationships, hoping that the overall benefits can accrue to us. Because I find the global market is still strong, and I still feel that our anchor customers are absolutely committed and the numbers are going to be fine.

Sure, sir. And on this set-top box business and the medical equipment business, how should we really look at the revenue potential of these 2 verticals?

So the business is on a strong footing. At present, our major customers are Jio, [ for Den ] and Hathway. And also, we are now supplying to DishTV and also SITI Cable. So the order book is extremely robust. The order book is almost 0.5 million a month. And -- but it doesn't get a challenge on the supply chain side, particularly on availability of chips. That's the reason in the opening remarks, I had shared a slightly conservative number of almost 3 point -- 0.35 million per month. So with that, I think the revenue is going to be in the range of around INR 450 crores, INR 500 crores.

And if you could give some indication about the...

On the electronics side, the numbers have trickled down. So I feel that it's going to be somewhere around 50, 60 pieces a month. This is a high-value SKU. So it will be somewhere in the range, I feel of around INR 12 crores to INR 13 crores a year.

Understood, sir. And lastly, sir, I think we are looking to be participating in PLI schemes for lighting, IT hardware and telecom [indiscernible] along with now APs as well. So all these 4 PLI schemes we are thinking of them, right?

That's right.

Could you also give some indication about what could be the CapEx requirement for all of this put together along with the normal CapEx requirements CapEx needs for refrigerator plants as well as the capacity expansion CapEx, and how you're looking to kind of fund it? I'm specifically asking because I understand that there is a fundraising approval also which has been taken in the Board meeting.

Yes. Aditya, this is Saurabh. I'll update you about the CapEx plan. So this year, our total CapEx that we have done in FY '21 -- FY 2021 was around INR 167-odd crores. And you're absolutely right, our CapEx intensity will go up where there's more PLIs coming in and expansion of capacities in various verticals. So my sense is the final numbers are actually worked out. But yes, it should be somewhere around INR 200 crore plus kind of a CapEx number for next year that we're looking at. If you look at our balance sheet, I think we have a very strong balance sheet with a cash balance of INR 164 crores and a net debt of INR 8 crores. Our working capital intensity is also quite low right now, and operating cycle is also in the range of 0 to 2, 3 days. And also to -- on top of that, I think we have enough working capital facilities and long-term trade facilities to ensure that we'll be able to fund the same to internal recurs and some form of control date. But having said that, we are taking this enabling provision just to get this [indiscernible]. So in case tomorrow in this situation really [indiscernible] demand doesn't normalize, then -- and because of this CapEx commitment that we already have and other opportunities that may come in, then the idea is to take an enabling provision from the Board and ultimately get it approved by the shareholders within the upcoming AGMs.

Also, Aditya, taking forward what Saurabh had just shared, if you look at the PLIs, in the case of IT products, the CapEx requirement as per the government is INR 5 crores a year. In the case of lighting, I feel, as per the various thresholds are given, it should be around INR 10 crores to INR 15 crores a year. And same is the case in ATV components. In the case of telecom is INR 20 crores a year. So these 4 PLAs are not that huge. And yes, what is -- a committed number is INR 50 crores for telecom. And then over a period of 1.5 years is going to be about INR 100 crores for the refrigerators.

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

I have 2 questions from my side. One, if you could just reiterate your FY '22, the sales looking at, and also by segment, what kind of in value terms numbers are looking at for FY '22?

Ankur, Saurabh speaking -- yes, please go ahead, sir.

So FY '22 as of now because of the pandemic -- when we have our internal budget. But as of now, how the market is going to open, how the demand is going to pick up is very difficult to say. So to share those numbers at this stage, I think it will be premature. So in this fiscal, we have a large share of the global revenues, which I'm very sure we're going to meet the internal target. On the domestic front, I think one will have to wait and watch to do the final number crunching.

Okay. Fair. And just a second question to follow if you could share the FY '21 volume numbers by segment, please?

Saurabh, can you please do that?

Yes. Yes, I'll do that. Yes, so basically -- Ankur, you're looking for Q4 numbers or you're looking for the annual numbers?

The annual numbers will do. We have the 9 months here already for, if you could share the annual, please.

Yes. So annual numbers are very [ detailed ] are numbers for the full FY 2021 was 27.9 lakhs as it is 21 lakhs in '19/'20. For [ AT PCB ] that we do for our -- either Japanese partner, the number there was around INR 11 lakhs. As far as the lighting SKUs are concerned [ in a native bunch ] it was INR 18.5 crores. And that in, there has been a significant growth of 91% year-on-year. So that manufactured in FY '21 was INR 1.4 crores. Downlighters was 34 lakhs. And then others, which includes [indiscernible] was around 87 lakhs. Washing machine was 8.9 lakhs as against 8 lakhs in '19/'20 And then we manufactured 9 lakhs smartphones and 24 lakhs 2G phones. And then we had a separate business for Samsung 3G phones, where the volumes was almost INR 2,007 crores. As far as security systems are concerned, we did 33 lakh of CCTVs and IP cameras and almost 8 lakh of DVRs. And set-top box, as mentioned in this line, we did around 22 lakh of set-top boxes in 2021 and almost 500 units of RT-PCR machines for the medical electronics.

[Operator Instructions] The next question is from the line of Bhoomika from DAM Capital.

And congratulations on a good set of numbers in a difficult environment. Sir, just wanted to understand, in this quarter, we've seen a marginal slip in mobile revenues on a Q-o-Q basis. So has there been a shortage of some input material which has impacted that? And my second question is that we've talked about several PLI schemes from laptops for telecom, et cetera. So over a period of 2 to 3 years, assuming we get the license for the same, what kind of incremental revenues we are expecting from these PLI schemes?

So Bhoomika, responding to your first question. Yes, the shortage of chipsets and displays has definitely had an impact on the mobile business. So demand has been robust, but the supply chain challenges have had an impact, and they continue to have an impact. On the PLI revenue side, so you know that we have already shared the numbers on the mobile side, right, [ fan ] out over the next 4 years because we are confident of meeting the upward ceiling as stipulated in the PLI scheme. That's INR 4,000 crores, INR 6,000 crores, INR 8,000 crores and INR 10,000 crores. On the other PLI schemes, it's still in works. We are still working out. But we've been confident with the tie-ups that are in works that whatever is the threshold and upper ceiling stated by the government, we should be able to meet the numbers. We're slightly premature to share with you those numbers.

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

Sir, my first question is, if you look at the washers, now that you mentioned that by the third quarter, you would be expecting volumes for Bosch to pick up. What kind of volume growth are you expecting here? Because in some of the media statements, Bosch India had [ itself ] mentioned that the launch of fully automatic washers is postponed to Jan '22. So would it be a soft launch initially and then volumes will stack up towards the end of the year? Or how are you looking at this portfolio scale up?

So you specifically will be talking about the fully automatic top load in from the new plant, right?

Yes.

Yes. So Bosch has a very complex and a very long-duration approval process, which is over a period of 7 to 8 months. So those samples of the first platform of 6 to 8 kg, they have already been submitted, and they're going through a reliability process. So it's not going to be a soft launch, but I think that our deliveries to them would start for some time around October. And they're going to formally launch in December, January. When I mentioned about the commercial production, it will start from August, September, here we're talking about different models which are for other customers. So those toolings are awaited by June and early July, and we plan to launch that by August, September. That's what I was referring to. Dixon's Bosch is going to be in October, November deliveries for 6 kg first, 6 to 8 kgs then.

And how should we look at the revenue numbers from this category in terms of in the next 2 years as operations stabilize in a normalized environment?

So the capacity here is around 6 lakhs. One is targeting the next 2 years, 2.5 years and should be 80% of the capacity. So this should be approximately INR 550 crores to INR 600 crores of revenue. And yes, lower double-digit operating margins.

Got it. Sure. And on the lighting side, last time, you mentioned that irrespective of the PLI, we are going ahead with the CapEx plan. So what are the updates there? And obviously, if it comes under PLI, we will have the benefits there. But the benefits are for components under PLI, and obviously, the plant is for the finished product. So where are we in terms of that manufacturing facility? And by when do we expect the facility to come up on stream?

So Renu, the PLI guidelines for LED lighting focuses mainly on creating the component ecosystem, right? And there is a 6-month window for the application. The application, they're going to start welcoming from 1st of June up to 30th of November. Now there are various categories there. Now in Dixon's case, we are going to confine ourselves in the component space, only into the domain that we understand deeply. And that domain is plastics. So it's going to be plastics, which should now be a backward integration piece for [ their extrusions of ] mechanicals. And that's what we're going to pursue, right? And it's not going to be a huge CapEx, which is going to be a CapEx of INR 50 crores, INR 60 crores over a period of 4, 5 years. But definitely, it is going to increase the margin by 2% to 6%, 1.5% to 2% in the categories in which they're going to get into mechanicals.

Got it. And most of this capacity should be able to cater to our captive requirement itself, or we might look at supplying to other vendors as well?

So initially, it's going to be for captive. In the patent itself, first focus, to be more candid with you, is going to be focusing on the extrusions of patents. As I had shared in my opening remarks, the capacity of the patent has been expanded to 3 million. And we're going into another round of expansion to almost 5 million. So the first focus is, which is being evaluated as of now, is going to be for investing in the extrusions of patents.

[Operator Instructions] The next question is from the line of Sonali Salgaonkar from Jefferies India.

So my first question is regarding the medium-term growth outlook. Now I understand it is a bit premature to talk from the new PLI deepened perspective. But overall, there are so many new products that we have launched and so many new categories that you have entered. Over a 3- to 5-year time frame, what would be the kind of revenue growth and the operating margin trajectory that you would foresee?

So let me share with you our business concept. First of all, we might be looking to be getting into various categories. However, I am practically stating that we are speaking to what we know well and we have a deep understanding. And across all the product categories that we're getting into, it's all about electronics manufacturing. And that's our domain knowledge. And that's the core common factor across all the categories. So we'll go deep into it. When I am talking about deepening, I'm talking about backward integration, whether through PLI or without PLI. And we're going to be bold and we're going to go broad. So we're going to spread ourselves. So that's the reason we're getting into various categories. So that's what we're pursuing. Now please appreciate, that in the last 3 years, we had more than tripled our revenues. And as things go fine, there's going to be a huge growth in this fiscal also, in spite of the pandemic. So it's difficult to put into numbers, but I feel that within 3 to 4 years, we should be, if not more, at least 3x of where we are now.

I understand, sir. So my second question is any further update on the wearables category that we have entered into in terms of what is the kind of opportunity that we are [ pursuing over here ]? And how do we expect to ramp up?

So in wearables, you know that we have a tie-up with boAt. The commercial production for boAt from one of their SKUs has already started. [ We are now ] -- will be deepening this relationship with boAt because boAt has recently a round of investment. And this relationship, I can't share with you at present. The [ control ] is the same. But I'm fairly confident it's going to be deepened to a very different strategic level, right? And we are also awaiting a PLI for wearables and hearables. So we're awaiting that, and that's how we're going to be pursuing. At present, that's what the status is, but it's a high-growth category in India, and we are going to be pursuing it aggressively.

The next question is from the line of Ashutosh Garud from Ocean Dial AMC.

So my question is, and an earlier participant did touch upon it, since we are getting into these many categories -- and I understand from a manufacturing point of view, we do have the expertise from an electronics perspective. But if you can give a broad idea of how you're managing this from a mid-level management people perspective, from a relationship perspective and how's the marketing. And because these -- the companies which we engage in different segments, they would be -- how do we mine these companies? So on those lines, if you can give a broad strategy perspective, if we are going to grow so far, then we should have the level of management who can handle the long-term relations.

So yes, there is a very significant effort in building up the middle management team. We are in the process of hiring some large global consulting companies on building up and mapping our manpower requirements that [ excise ] on the way. And very shortly, we should be able to finalize the consultant. But the middle management buildup is already happening. Please appreciate, just to give you certain examples, in the new category that we had of, let's say, in the project for Samsung, for mobile phones, we were able to execute it within a short span of time of 6 to 7 months. And nothing happens without creating a middle management robust team because the customer satisfaction of a highly demanding customer is an extremely important thing. And the same thing has happened in the execution of our new mobile project, in our new set-top box project. So I'm not in a position to share the final details, but please be rest assured that adequate resources and the organization buildup at the middle management level across the various functions, which is engineering, manufacturing, quality, logistics, supply chaining, manufacturing engineering systems, IT, is always on the way.

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

Sir, I have 2 questions. So first is on -- in earlier interactions, you had stated that you are working with [ somebody ] on a blueprint on various aspects. So can you elaborate on that? Where are we? And what is the progress there? Second would be on what Saurabh has explained on fundraise. But apart from the growth opportunities, which are immense, what you had spoken in your initial remarks, are there opportunities which you don't want to comment, but are there opportunities specifically which are still on the table, which you are pursuing beyond these and hence, if at all, potential fundraise will also come in, if at all, it is required?

So Naval, responding to your first question. And the bluebook has been finalized, and the rollout is going to happen from 1st of July. And it covers various aspects of the business. It covers HR, recruitment, manpower planning. It covers supply chaining, procurement, execution, customer interface, IT controls, finance and accounts, integrations with SAP, so many things. So all that has been covered has been finalized. It's under the final stages of deliberation with the stakeholders. And internally, it's going to be rolled out on 1st of July this fiscal. That's a month more [ than one that's given ] to the team. And that's what the status is. Now responding to the second question, you've asked me a very tricky question. Yes, but I'm not in a position to share the details.

Our next question is from the line of [ Jathan Jilrodia ] from [ Asai Kirrick Advisors ].

My question, with respect to the different realized schemes that we are applying, so with respect to these schemes, whether if you can please share what is the market size for this component in India. What is the domestic market size for telecom components, routers and modems? And also, for lighting, PLI for AC and PCB, so what is the market size of that, if you can share it?

So when we are looking at the telecom products, we are primarily looking at routers, modems and IoT products. And the truncated market opportunity for Dixon is somewhere in the range of INR 1,600 crores to INR 1,800 crores a year. This is as per our estimate. When we're looking at the AC and PCB, the current business is in the range of around INR 110 crores, INR 120 crores. But if one is able to shift the supply chains to India under this partnership for servicing the global markets, I've seen this opportunity can reach INR 400 crores to INR 500 crores. Now when we are looking at under components for LED lighting, that is primarily small value. It is primarily for expanding the margins for captive consumption.

And sir, lastly, on the LED export, so last time, you had guided that your company will be able to do a revenue size of roughly around INR 3,000 crores in a span of 3 to 5 years for LED export. So where are we on this LED exporting now?

So on the LED lighting side, as I shared with you, we're expecting a breakthrough shortly. The samples have been approved. And the commercials have been finalized with a large brand. However, LED lighting is a safety product. And the safety approvals and the product approvals on the technical side have to be certified by certain international labs. So that is the [ excise ] which is in works. I'm expecting that to be over by July, and the exports will start from the next quarter.

The next question is from the line of Keyur Haresh Pandya from ICICI Prudential Life Insurance.

Congratulations to the entire team for great results. My first question is on TV, just based on the volume that Saurabh mentioned. If I look at the realizations, they are already about 13,000. So now are they sustainable realizations considering we are doing higher-priced TVs? And in the past, a related question in the past, we have seen that [ we backed ] margins per unit basis And so when the price goes up, percentage margin goes down. That holds true right now, and this margin drop is [ particularly because of the increase we saw in Q4 ]? And how do you see going forward?

You're absolutely right. So the size -- the average size of the TV being sold now has gone up. And that is, in fact, reflected in the revenues also increasing very sharply along with the volumes. So the per unit price has significantly gone up. Now in the absolute terms, the gross contribution goes up significantly. But as a percentage, there is a drop, which you have correctly caught in the last quarter revenues. [ I hope that -- yes ]...

Okay. Okay. And just last question. So when you mentioned -- understood. Yes, Yes. Yes. That the global contract less demand would -- there won't be any issue with that, while domestic demand will depend on how this unlock happens. So if you can just bifurcate your products into where it goes, I mean, just to clarify, and how is it going currently, how the situation is currently for each product category? It is a short-term phenomena, but just to get a trend.

So if you see vertical by vertical, or in fact, in all the verticals, the main contribution is coming from domestic revenues only. The main export revenues in this fiscal are going to come from exports in the case of smartphones, which is almost going to be 55% to 60% of the number that we have kept for ourselves, which is upward ceiling under PLI and some starting of revenues for export under our LED lighting category. So that's the way. So on the exposure, I feel fairly confident because the global demand is good. On the other domestic side, in certain categories like LED televisions, we've done fine, not that badly in April and May also. But I'm just keeping my fingers crossed. And I'm conservatively optimistic and sanguine in that how the demand is going to pan out because this COVID impact is slightly different -- not slightly, but quite different from what it was last fiscal. In the case of lighting, if the markets open up because it's a low-unit product, a low-value unit, I see the demand is going to recover much faster. But in the case of higher-value items, mainly the LED televisions and the washers, I feel the recovery might be slow. [ I'm just ] keeping the fingers crossed. How this will pan out is very difficult to share.

The next question is from the line of [ Skanda Babu Naidu ] from [ ESI Investments ].

Congrats then on a great set of numbers. I mean so I just want to understand, heading into FY 2022, what kind of a margin profile can we expect across the board? So what do you think would be sustainable?

So if you see the trend, in our case, the major increase is happening because of the change in sales mix, and that is getting more and more aligned towards the prescriptive business, which is a lower operating margin. So the -- in absolute numbers, the margins are going to increase [ to signify that ] the profitability is going to increase significantly. Now as per the mix, I feel the margins are going to be in the range of around 4.2% to 4.5%, something like that.

Yes. That's right, sir. That's right. So basically, it should be in the range of 4% to 4.5%.

That's great. And for the export business that you are kind of working on right now, which probably should start later this year, is that a higher-margin business? And if that side of the business picks up a little more, can we expect a little more margin expansion?

So initially, it's going to be similar or slightly even lower because they could break onto the deeply embedded supply chains in our neighboring countries. So getting those breakthroughs. But I think over a period of time, the margins [ are going to look like ] into a better zone. But initially, there might be slightly lower impact.

The next question is from the line of [ Anth Haid ] from [ MRLR Capital ].

And congratulations on a great set of numbers. My first question is with regard to the relationship [ that has been established for growth with Motorola. ] So firstly, if I look at the product mix here, what is the product mix between, say, feature phones and smartphones in this case? And also, what are the countries that Motorola expects to serve through this relationship?

So in case of Motorola, everything is smartphones. In fact, a large part of the product portfolio is going to be 5G phones. And Dixon, as I was sharing, is the first Indian phone manufacturing company, in which has a 5G manufacturing infrastructure, which is called as an [ MML ] infrastructure. And the exports, the main country, target country for exports, is going to be U.S.

Right. And if I also kind of look at the longevity of the smartphone business, could you have, say, any experience with regard to customers that [ you are in talks, that you could be speaking to with a lot of ] smartphones? And how does the perspective look like also for India? I understand a lot of players have their own plants, but there would also be kind of demand for people to kind of obviously look at specializing on [ factories ].

Sorry, I didn't get your -- the next question. Can you please come again?

So I said the services with regard to the longevity of the smartphone business, do you kind of see the product mix also shifting towards the smartphone business overall for your phone service? Or do feature phones kind of continue to dominate the mix [ in the business ]?

No, I see that more and more accelerated shift [ now towards ] the smartphone. That's the way it's going to pan out. Yes.

The next question is from the line of [ Vikas Mistry ] from [ Moonshot Ventures ].

Sir, I have 2 questions. First question is on laptop, tablet and hardware. You had said in your opening remarks that MOU with global brands, what is the size of opportunity? And I want to understand the competitiveness at a global scale, how much we are competing now.

So if you see the PLI for IT products, the capital investment over a period of 4 years is INR 20 crores. And there is an upward ceiling on revenue. And there's a value addition plan shared with the government, that in year 1, there's going to be [ us getting in India too, so basically, assemblies are ] going to be done there. Subsequently, the batteries and chargers and power supply are going to be done in India. So that's the way it's going to pan out. So one has to still work out the numbers, but this MOU has been signed by -- with a large global brand. And the factory has been audited and qualified by the technical people. Now the final details of the business opportunity are going to be discussed once the approval comes through. There are 19 applications in all, [ and they're going to select 10 ]. We feel we are a strong contender, but let's keep our fingers crossed, one doesn't know. So all this number crunching will happen once we have the approval from the government.

Can you throw light on competitiveness with respect to the Chinese player?

Well, this is basically we're servicing the domestic market.

[ But you know about the small one that's going in ]...

[ It's in their IT one ], which is a 0% duty. But once you import, the imports are also at 0% duty. If you're able to have a frugal conversion charge and on top of it, one gets the PLI, that's an added advantage to the manufacturer as well as the brand owners in this highly competitive space. So you obviously become more competitive than the Chinese player on account of the PLI. Now when you go more and when you deepen then the manufacturing, the business case becomes more robust. Now let me share with you. In my opening remarks, I stated that in telecom products, like routers and modems, please appreciate that these products are also covered in the [ right ] Tier 1, and there is no import duty on them. And we are going ahead with the manufacturing of those products without any PLI benefit because of backward integration and deepened manufacturing. We had been able to make a business case without any direct support from the government or even the PLI. So the same thing is to work out -- work on the IT products over a period of time.

The next question is from the line of Keyur Haresh Pandya from ICICI Prudential Life Insurance.

Sir, you mentioned, I mean, our entry into or application into a lot of PLI schemes. Just if you can broadly tell us the time lines either for the applications or by when we can, if selected, can start manufacturing?

So the application, that has been already submitted as for IT products. We are awaiting the approval in next month or couple of months. If the approval comes, let's say, by August, I think we should be able to roll out, by Q3 end of this fiscal, as where the IT products is concerned. In the case of LED lighting and also the AC components, the guidelines have been rolled out. The date, starting date for filing of application is 1st of June up to 30th of November. So they've given a larger window. So it's being pursued. Number crunching is being done. The strengths and the weaknesses and the challenges is being analyzed. So I feel, that in Dixon's case, that rollout that we pursue is going to happen only in the next fiscal. So both lighting as well as AC components. As far as telecom products is concerned, the guideline, that is still awaited. The [ launch ] is key, but they still have to roll out the guidelines. So we're waiting for it. So it's difficult to say that how soon is going to happen. But without the PLI, our telecom products rollout is going to happen in Q3.

Understood. And just last question on the LED monitor you mentioned, if you can throw some light on, say, realizations of profitability or market size and how fast we can ramp up. That is the last question.

So as I shared in my opening remarks, that we have already concluded [ the tie ] with 2 large global brands. The equipment and the lines have been ordered. I expect the lines to be installed August, September and the manufacturing to start in Q3. The capacity for this line is 1 million [ screens ] a year. But I feel, that in this fiscal itself, we should be able to churn out almost 400 -- 0.4 million to 0.5 million of the LED monitors. And the operating margin, I feel, is going to be in the range of 2.7% to 2.9%.

The next question is from the line of Pulkit Patni from Goldman Sachs.

Sir, I have 2 questions. So my first question is, I mean, if you look at some of our products like lighting, et cetera, which is fairly fungible, I mean, the same bulb that we make for 1 company, we can sell it to 10 other domestic brands. But as we move into some of these JVs, MOUs with specific hardware companies, to what extent will our capacities be fungible? And the reason I'm asking this is that are MOUs longer-term, that tomorrow, in the possibility of any business sentiment changing for any of these large global players, does our capacity sort of become more like a liability for us? So how is the new business that you are targeting different from some of these generic products that we were doing so far? That's my first question.

So responding to this question. The main thing, when we're creating an asset base, is one is looking at the fungibility. And please be rest assured, all the new investments that are coming up, they're primarily fungible. So the lines of telecom products, mobile phones, we do set-top boxes, we do medical electronics, we'll be doing our IT products. And all the dedicated equipment for the anchor customer, the commitment that we recover our investment are well entrenched into the definitive agreements. Please be rest assured that all these investments, to a very large extent, are fungible. Again, [ I would say ], the core is electronics and the main [ gross growth is done ] in the form of the SMT lines.

Sure, sir. That's helpful. Sir, my second question is more broadly on the PLI scheme. I mean given the fact that we are making investments, other companies are making investments, is it -- are these PLI schemes in compliance with WTO? Like my only concern is it should not happen after a couple of years. You have some issues raised by WTO on these schemes. So any view that you had there given that these are some of the key investments that we are going to be making?

So WTO just primarily comes into play if you are subsidizing your export. Now the PLI initiative started by the government as a replacement, first, to the MEIS scheme of the Government of India, which was to incentivize exports and in which there were challenges on the WTO compliances. So the MEIS scheme was withdrawn and the PLI scheme has been launched. Now PLI scheme is primarily done to promote the manufacturing industry, electronics and other ones in India. And what our understanding is that has been well thought out, so that it's absolutely compliant with WTO requirements.

Sure, sir. I mean the only reason I asked that question is because some part of this also is going to be exported, and that's where maybe there is sort of that gray area.

Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.

So thanks very much, and thanks for being with us. Our teams are always endeavoring to deliver what we commit and we are working on it. Presently, there are challenging times. The first and the foremost is to look after the Dixon family members and our extended family members. But in medium term and even in short term, we have a strong conviction on our business model and in our industry, in which we [ feel is at again in ] an inflection point. So again, we want to thank you for all your support at all times. Thank you.

Yes. Thank you, everybody. And in case anybody has a follow-up question, I'm all -- you can call me and I'll be more than happy to answer that. Thank you very much.

Thank you.

Ladies and gentlemen, on behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.