Rishabh Instruments Limited (RISHABH) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Rishabh Instruments Limited Q1 FY '27 Earnings Conference Call. Before we begin a brief disclaimer. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and may involve risk and uncertainties that are difficult to predict. [Operator Instructions] Please note that this call is being recorded. I now hand the conference over to Mr. Dinesh Musalekar, MD and CEO, for his opening remarks. Thank you, and over to you, sir.

Okay. Good evening, ladies and gentlemen. A warm welcome to all participants joining us today for the Q1 FY '27 earnings call of Rishabh Instruments Limited. I have with me our CFO, Vishal Kulkarni; and our General manager of Strategy, Nishant Dudhoria. The results and earnings presentation for the quarter have been uploaded on the stock exchange and on the company's website. And I hope we had an opportune to review that. The Q1 FY '27 marks a positive beginning to the new financial year. We have reported consolidated revenue of INR 1,983 million, up by 4.3% year-on-year and achieved a consolidated EBITDA margin of 16.8% in Q1 FY '27. The consolidated EBITDA stood at INR 333 million, up by 18.3% year-on-year and the reported consolidated tax to that versus INR 194 million in Q1 FY '27. [indiscernible] operating mix continues to be shaped by geopolitical uncertainties tariff development and supply chain volatility, we should have remained resilient with a clear focus on profitable growth, operational excellence and technology unit expansion. At the segment level, Electrical and Electronics Instrumentation, which we call EEI, remains our primary growth engine for the group in Q1 of FY '27, delivering a robust 34% year-on-year revenue growth while maintaining the EBITDA margin of approximately 24%, excelling our initial guidelines here. More importantly, adjusted EBITDA increased by 59.1% year-on-year to INR 382 million with margins of finding significantly to 24.8% from 19.6%, a 520 basis point improvement. The PAT margin improved to 16.4% in Q1 FY '27 from 13.8% in Q1 FY '26. Our performance reflects the benefits of operating leverage, improved product mix procurement efficiencies and disciplined cost management, reinforcing EEI position as group's primary growth and profitability engine. The strength of near businesses underpinned by a diversified product portfolio and a sustained focus on innovation. Over the past few years, we have successfully launched around 50 new products with further more than 15 products planned for FY '27. These initiatives are expected to create new revenue stream broaden our advisable market and strengthen our presence across both domestic and international markets. Going forward, our strategy is to accelerate on high-value application yet products and were expanding portfolio and global customer reach to drive sustainable and profitable growth. So stand-alone India business continued to deliver strong momentum supported by a deeper customer engagement healthy export demand and improving product mix and an expanding distribution network. [indiscernible] India delivered 25.6% year-on-year revenue growth with a healthy EBITDA margin of 23.9%, reflecting sustained demand and disciplined acquisition. Our international counterpart of EEI business also remains an important pillar of the group's growth strategy. Lumel Alucast delivered strong performance despite our relatively subdued European industrial environment, supported by high-value electronic manufacturing, product diversification and new customer gains. The revenue grew 59% year-on-year, while EBITDA remained healthy 24%, contributing to 50% of our consolidated bottom line for Q1 FY '26. Our business in that is U.K. and China continue to remain profitable and further strengthen the group's diversified global platform. The U.S. and U.K. businesses grew by over 40% year-on-year, while China delivered 1.3% growth during Q1 FY '27. While these businesses currently operate on a relatively smaller base, the strong growth momentum provides a significant opportunity to scale our international presence and contribution to the group over the coming years. Further, the [ Solar String Inverters ] continues to make meaningful progress during the quarter. Following the successful launch of our [ Solar String Inverters ] series, the product has received encouraging market acceptance and enables the business to achieve operational profitability. In [ Huron ], we further strengthened the [ Solar String Inverters ] with an addition of the next generation of 3-phase high new mortar model approved 3 kilowatts in addition to the single-phase IMO up 5 kilowatts, a further development is underway for the next generation range up to 50 kilowatts. Further, we are also getting ourselves to develop hybrid renewable solutions to address the growing demand for integrated and flexible renewable energy system. Hybrid inverters are becoming extremely important to manage peaks and often [indiscernible] demand or similar in battery utilization, reduce fleet dependency and enhance overall energy reliability. These initiatives will grab our as market and position the [ Solar String Inverters ] for the next phase of growth and established solar models as an increasingly meaningful growth plan of our grid. [indiscernible] continues to execute this transformation with the discipline and remain breakeven at operating level in Q1 FY '27, although the adjusted EBITDA remains at net 6.4% in Q1 FY '27, I believe that we would be able to procure adjusted EBITDA for the full year by end of FY '27. At present, our focus is to progressively fill available capacity with higher value, profitable opportunities in real sustainable business. [indiscernible] are close with a number of new projects that we copied in the last year is now progressing through advanced commercial negotiations, qualifications and customer approval stages, as these opportunities come merino production programs and available capacity to get progressively [indiscernible]. We see a clear pathway for Lumel Alucast to restore a double-digit EBITDA margin over the medium term. [indiscernible] our strategy remains clear. We are prioritizing value over volume and will not pursue growth at the expense of profitability. Another important milestone has been the partial commissioning of our new manufacturing facility. This investment significantly enhances our manufacturing capacity and strengthens our ability to address growing demand across both domestic and international markets. The expanded facilities also provides the platform to support new product introductions, larger export opportunities and welding customer department across our portfolio. Further, during the last quarter, as a part of our market expansion strategy, we opened our first reserve [ DMA ] experience center for suggesting our customer instrument we comparing even to bring our same in listening and solutions to set, customers and panel partners through wild demonstrations, application-based interaction and technical engagement. This initiative will help us strengthen customer relationships, improve product awareness and accelerate adoption of our expanding portfolio, which with similar centers plan for Mumbai and Delhi to be operational by end of this financial year. In [indiscernible], we continue to invest in apportion our excellence, advanced crystal capabilities and R&D infrastructure to enhance our global competitiveness as industries increasingly digitize and modernize we significant opportunities emerging across AI-enabled vehicle centers, rig modernization, energy efficiency, smart infrastructure and renewable energy integration. Our products and technology road map are aligned with the structural trends, positioning wise to capture these opportunities and drive sustainable growth over the coming years. The [ latter ] industry outlook remains structurally attractive supported by sustain global investment in electrification, energy efficiency, renewable energy integration, industrial acquisition, renomination and digital infrastructure. while industrial activities in Europe remained relatively moderate. We continue to see encouraging opportunities across the U.S., Middle East, Southeast Asia and Africa. Our diversified geographical spin enable us to satiate across these growth markets while reducing dependency on any single geography. Relative expansion of their and data center can including energy intent to digital infrastructure is creating an additional growth avenue for advanced in and power quality monitoring and energy lines solutions, areas are aligned well with our evolving product portfolio and technology capability. In India, continued policy support for manufacturing, power infrastructure, renewable energy, transformation, transportation, formation and localization of electronics provides a strong foundation for sustained demand. The country's renewable energy ambition, alongside the accelerated global adoption of [ Solar String Inverters ] and distributed energy solutions for seeing our long-term opportunities for our business. While near term [indiscernible] and macroeconomic uncertainty made purses, we remain confident in the underlying structural group drivers of our industry and a portion to which rate for the shop over the medium to long term. As we move to [indiscernible], our strategies, strategic priorities in an accelerate profitable growth across our core EU business, expand presence in high-growth international markets, continue strengthening our product portfolio renovation and R&D increase contribution of software-enabled and solution-oriented offering to improve operational efficiency and capital allocation, build a stronger pipeline of opportunities across [indiscernible] energy automation, energy management and medium voltage products, continue transforming [indiscernible] profitable and sustainable business. Our ambition remains clear to well result from a productive organization into a globally recognized engineering and technology solution company. I would like to thank all our employees across the group our customers, suppliers, channel partners and shareholders for their continued trust and support that we get we have achieved over the last few years is a reflection of the dedication of our team the confidence of our customers and the support of our stakeholders. We believe the foundations we have built out the investments in technology manufacturing, people and innovation position us strongly for the future. With a clear strategy expanding capabilities and growing global presence, we remain confident about the opportunities ahead of and our ability to create sustainable long-term value for our stakeholders. With that, I will now hand over to Vishal to give group's financial performance.

Thank you, sir. Good evening, all. Please note that all the numbers are in INR, the financial performance, I will describe as follows: the consolidated revenue for Q1 FY '27 stood at INR 1,983 million, which is up by 4.2% on a year-on-year basis. The consolidated EBITDA stood at INR 333 million for quarter 1 FY '27, marking a 17.3% year-on-year increase. In Q1 FY '27, the consolidated EBITDA is after provision of $20 million on account of [ ESOP ] cost and stock appreciation rights. The consolidated PAT for Q1 FY '27 stood at INR 194 million, decreased by 1.4% year-on-year. This is mainly on account of increase in depreciation by INR 20 million. The stand-alone revenue stood at INR 776 million in Q1 FY '27. registering a robust growth of 25.6% year-on-year. The stand-alone EBITDA for Q1 FY '27 stood at $178 million, up by 24.5% year-on-year with EBITDA margins at 22.9%. It includes the provision of INR 4 million towards the soft cost. Stand-alone PAT for Q stood at INR 119 million which is up by 20.2% year-on-year. Now for Lumel [indiscernible], the Q1 FY '27 revenue stood at INR 639 million, reflecting a staggering growth of 39% year-on-year. Adjusted EBITDA for Q1 FY '27 stood at INR 153 million, which is up by 175.3% year-on-year. The adjusted EBITDA margins expanded to 24% in Q1 FY '27, an improvement of 1,190 basis points. The PAT for Q1 FY '27 remain at INR 150 million up by 32.1% year-on-year. For Lumel Alucast, the revenue for Q1 FY '27 stood at INR 443 million, reflecting a de-growth of negative 41.2% on a year-on-year basis. This is a planned decline as communicated earlier by [indiscernible]. The adjusted EBITDA for Q1 FY '27 remain at negative INR 28 million, and the adjusted EBITDA margin stood at negative 6.4%. We are at operating breakeven in Q1 FY '27, and expect to break even the adjusted EBITDA by end of FY '27. As we fill up the recent capacities with new orders just kicking, the PAT for Q1 FY '27 remain at negative INR 59 million. On the consolidated level, we remain net debt-free with a strong balance sheet. Net cash and cash equivalents as on 30th of June 2026, stands at INR 1,606 million. With this, I shall now leave the floor open for Q&A. Thank you.

[Operator Instructions] The first question is on the line of Dhwanil Desai from Turtle Capital.

On the EEI side, I think we have done a fantastic growth of 34%, while we have guided for INR 500 crores. So is it -- if you can elaborate on what is driving this growth? Is it new products, new geography combination or we have seen certain products scaling up very well? And are there any kind of lumpiness, which is kind of building to the current numbers and eventually it will monitor it. How should we think about the [ ABL ] business for the rest of the year?

This really something which even the Board was asking me. We are difficultly talking about the sustainability of this growth which we see in Q1. Obviously, it's not something to long up in any quarter or something. So we see the growth coming out of multiple papers in reserve India, we can see that growth, which is coming from increasing coming transformer business, which is happening globally. This is also driven from the fact that go into data centers. And Solar is picking up, that is started to grow profitably and growing MI sector is also a -- so we are kind of timing into metal engine. And in Lumel in Poland, which is again in mobile for EEI business, this is coming of our phone again, product spread. And we also have energy distribution upgradation, which is happening in Germany. So obviously, we are not Tier 1 per to supply we are in that supply. So that also is coming up and then some of the new products which are launched also are picked up by the market very well. Then you can see that U.S. narrate is also growing rapidly. So we have been having reactive to 50% growth in the last 2 to 3 years, even though it is on a smaller base. So our 22 [indiscernible] cores within 30 is expected to be so that sale of which are happening. Again, we are introducing more products with UL certification and products into that market or from both Rishabh as well as email package. So this is a -- I mean I would say it's filing expect metal in hiring in terms of product, in terms of market. So it's not coming from one or two specific things, which is good for us. So risky spread, the growth is also spread. So again, on a very conservative of what we gave as a guideline we stand by that guidelines have been anywhere between 20% to 25% top line about 20% top line growth and EBITDA 20%, 22% we have said. And this quarter, we have delivered more than that on the business. And it is around that throughout the year. That's what we can take so sustainable.

Got it. Sir, on the U.S. market, you talked about, if you can elaborate more on, as you said, we are on a very small base. So how do we scale up very fast given the opportunity and the CapEx happening there. I think this question I asked last time also -- and any plans to do in organic to speed up things so that we can capture the larger market at a faster pace? Any thoughts on that?

Yes. So we have been good for organic as well as inorganic. On the organic side, we are adding more resources there. We also added resources in Mexico and we are looking at Canada as a medical and that's the organic part of it. On inorganic, we have a couple of opportunities which we are booking right and we will say mature, we will announce them when it is appropriate, but that is also part of our strategy to look at the organic side of it. On the other side, on the organic side, we are adding more products there. So as I remember telling in the last year. [indiscernible] most of additionally, traditionally designed for European and division market. So we have to redesign these products for American market that it probably going to introduce more products to that market.

Got it, sir. So this INR 30 crore number I think that INR 100 crore is a fair number in a couple of years? Or can we achieve that number on organically?

Yes. So Yes, on the organic side, our target is to get to INR 100 are in 2 to 3 years' time.

And sir, last question on [indiscernible] side, I think we have seen a decent scale down as what -- and I think this year probably we had talked about INR 20 crores kind of a number -- anything that ballpark that number on a quarterly [indiscernible]. So next year, how is the pipeline filling up to go back to that INR 20 crores, INR 30 crores kind of a number? Are you having the line of sight for that number so that we can go back to double-digit margins any evolution on that?

So as I tried to highlight it in my speech also. So we have been filing a lot of RFPs and a lot of the processes we are done. So they have a strong pipeline of [indiscernible] and first already submitted, and they are different stages of qualification. So some of them have come close to approval space because this goes by the audit of the company and of contracts and [indiscernible] just bitartrate, which is also given the ramping up of the product also take for the 6 months after the project is awarded, so we are cool with that. So I would see that debit number have been the couple years' time once we have to have a breakeven and then we will be bidding. But the pipeline is quite encouraging. So what has happened is we do one of problems that we're getting within the industry and many die casting companies going down. So the rents which were resilient are still there and are getting those projects from the companies and many of them have shifted to China also, but not all of them. So we still have -- if you are a last minting still consolidation of suppliers, and that's where we will be part of that to which is going on broadly. So I don't hear anything that this is going to go negative way, but we use time. So we are working on that. It is very much committed. We have cut down lots of cost there. So we made a very efficient amount. So any addition to the top line will very quickly reflect the bottom line.

[Operator Instructions] The next question is on the line of [ Zaki ] [indiscernible] an individual investor, please proceed with your question.

Sir, Q1 is generally the weakest quarter in your 4 quarters, sir. And you've done a 34%, 35% growth. So could we see this carrying on quarter-to-quarter because if I have the numbers in front of me from 115 , you've done 154, so could we expect that from 137, 138 and 147, the same kind of win trajectory?

Yes. Yes. Like you said, that's kind of a planning addition, but we want to be really careful in giving those suggestions. You're absolutely right. The kind of numbers that we have put out something which we normally get in Q4. So the Q1 is even this [indiscernible] almost comparable with Q4 of last year. So do because we're a lot of markets, lots of products and [indiscernible] trend, but not 100% all the time. but our commitments are what we have given, and we don't want to do guidelines is much higher than that. So we will try to deliver more on that. That's what we can tell. So your [indiscernible] is absolutely right. And people like pleasant success and pleasant to price, we want to keep our guidelines, which are already kind of secretive and we want to do them, that performance rather than giving the guidelines to [indiscernible].

And sir, what -- how is our trajectory or traction for AI and data-centric offtake coming on in domestic market, sir? Do you see traction for products in that space?

Absolutely , we have a good sector enters, we started with some -- one first time, we made some announcements also after that, we had under 34, which we won from data centers and another time, we are putting. So the data center boom in India is -- we are part of the study for sure. And order bookings in domestic markets have been really good compared to last year, we had almost 20% upside on the booking several bookings in Q1 compared to last year. Of course, some of them billing has not reflected that. So there's a bit of a background, which we will be testing it. So the booking has been very encouraging in internet market this year.

And what would -- how would you read Europe coming along sir? Because I think Europe looks like having bottomed out and I think even their traction seems to be appearing sir. So you are closer to the market. So you would -- could you throw some light on that?

Yes. So this is very difficult question to answer because if you look like our individual company growth, you may say we have about 39% year-on-year growth whereas how the European markets are doing. Then [indiscernible] uncertain give that the market is so to and what percentage of our business we get is very small. And as always, if you beat your competition, you in new businesses and then you have multiple revenues. For example, melanocytic mine is not just our product that we sell reducing edition data projects, which because really active materials at airports and at [indiscernible], et cetera, the sensor equity in Europe is more. So we are into that. So that's a good opportunity for us. Medium voltage products, which are media protection relays or ample which get into ablation of energy system, where we have opportunities. We do solar installations here, there or then the grid operation which is happening in Germany, we have proprietary [indiscernible], so we run by INR 5 million -- INR 50 crores rather and then INR 30 crore we won. And now again, we are working with the same customer or new or a few more orders. So there are multiple streams of revenues for us. So we have kind of not dependent on only selling the product we have more solution selling and at one also, we do so many being target. So because we have got multiple revenue streams, so we are able to get the growth still the economy is not being so good in Europe, and that will continue to be there because we know the game now.

You're talking of inorganic growth. So what kind of fund would you deploy in organic growth? So I think we have INR 110 crores cash on books. So what size of acquisition would you be looking at, if any?

Yes. Typically, we look for acquisitions in the range of an even between INR 50 crores to say about INR 150 crores to INR 200 crores based on how strategically fits with our business, how much we can give literate should not be below -- it should be more than it was this one of the things which you look at. And we look at -- because we run the company very applicable can businesses, our division processes being and really meet and very thorough. So we will only look at businesses which are strategically a good fit for us. And also companies return partially also good. So we are looking at least a we are all the time looking at our renminbi and strategical distance is already busy with many of those opportunities in India and also outside, but these things take time, and we are always on a lookout for that at as we look at. Thank you so for keeping invested and increasing your portfolio so we will appreciate your confidence in our company.

The next question is from the line of Ankur Gulati from Genuity Capital.

Can you give me [indiscernible] revenue and EBITDA in [indiscernible] for this quarter, please?

I could not derate realities...

[indiscernible] revenue or EBITDA impact?

6 Yes. Revenue per Lumel [indiscernible] for this quarter is INR 639 million. EBITDA is INR 153 million. [indiscernible] the part is INR 115 million, 17.9%.

Okay. Fair enough. So if you can give us more details on your broader Americas market go-to-market strategy, please?

So on the American market, as we said, our growth organic growth ambitions are in the range of 30% to 40%, and that's what we have been delivering last couple of years. So we were around INR 20 crores, which we got it to INR 13 crores in the last financial are and this year, we have a target of 45% gross. So that's the rate at which we are planning to grow there. The strategy has been multiple cost. One of them is to introduce more products to that market. So that we have to upgrade our products to suit the American market because one of a standard by different from Europe and Russia. So we have to hire anti retail products there. And also we have to have new certifications to sell in U.S.A. So that's one process we add more products from our existing power. That's what our R&D is on the product modification in aging there. And then second one is market expansion. So we are adding more resources in American market in terms of more sales managers. And also, we are looking at that operation like North American and operations in Mexico, Canada getting into focus more looking resorts there. And also, we will be looking at Latin America as an emerging market. So I do reloading products is gusty then as there was a question also from the other investor about inorganic. So that's one of the things which we are looking at. So we want to get to a stage of around [indiscernible] in 2 to 3 years time.

So [indiscernible] basis.

So our first target is to get to INR 100 crores in 2 to 3 years' time.

And if I look at the presentation, the other segment is entire Americas or is there the other geographies in Asia, Europe and others for those entire only Americas?

So Nishant, can you answer that?

Ankur, this is other continents, including U.S. is on the U.S. it has different cases as well. enough to kind of the profit, yes.