Salzer Electronics Limited (517059) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and a very warm welcome to the Salzer Electronics Limited Q4 and FY '20 Earnings Conference Call. Please note this conference call may contain certain 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 guarantee of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] I'm now glad to hand the conference over to Mr. Rajesh Doraiswamy, Joint Managing Director of Salzer Electronics Limited. Thank you, and over to you, sir.

Thank you very much. Good morning, everyone, and thank you all for joining our earnings call for the fourth quarter and full year ended March 31, 2020. I have with me here Mr. Baskarasubramanian, Director Corporate Affairs and Company Secretary; Mr. Murugesh, Assistant Company Secretary of our Company; Savli Mangle and Smit Shah from Bridge Investor Relations. We have already shared our results update presentation, and I hope you all must have received it and gone through the same. Before I discuss our quarterly and full year performance of the past year, I would like to spend some time on the past 3 months that has impacted the entire world. During the end of the fourth quarter, we witnessed lockdown announced by the government to control the spread of global pandemic, COVID-19, which resulted in shutting down of manufacturing activities across the country and the world. However, we have utilized this time to plan, fine-tune, reexamine our goals and focus on our strengths on how we can build our company better. Though the near-term market situation is extremely fluid and uncertain, we are quite optimistic on the medium term based on the indications from various OEMs and our customers. We do expect this year to be sluggish, but we are geared towards any form of recovery that takes place and even a slight pickup in demand would benefit Salzer automatically. The past year has been a tough one. As since August 2019, there has been a continuous slowdown in the economic activities in the country with no major CapEx happening across the sectors. Also due to longer monsoon, the demand for agri cables, which is one of the major products contributing to our Wires & Cables revenues, have remained constant with no major demand upticks. Even the real estate industry has been having a tough time with a lot of inventory in the hands of developers, thereby slowing down the demand for building products of us. Despite all these headwinds and the shutdown during the last 8 days of March, we have been able to show a very modest growth in our revenues on account of Industrial Switchgear business, which has shown a year-on-year growth of 10% as we have seen increase in our exports to U.S. and European markets last year. Our Salzer branded product is also gaining acceptance in export markets, and we have started to see fair bit of inquiries from various reputed players, mainly from North American markets and are hopeful that we start supplying to them soon in this year. On the positive side, we have successfully completed the acquisition of 74.91% equity shares in Kaycee Industries last year, which has now become a subsidiary of Salzer Electronics, and we have appointed Mr. Raman as Vice President, Finance and -- at the Kaycee Industries. We have also successfully commissioned the lan cable plant at Salzer and the trial production has started. We have submitted samples to customer approval and for third-party testing. So far, we have seen good inquiries coming from both local and export markets for this product. We expect the revenues to start coming from end of this second quarter this year. Now coming to our quarterly and full year financial performance. Our financials for the current and past years have been restated as per Ind AS accounting guidelines. As a result of a nationwide lockdown declared in March 2020, the net sales in the last 10 days of the fourth quarter, end of the year, were lower than the same period last year. Due to this lockdown in March, we would have lost approximately revenues to the tune of INR 18 crores to INR 20 crores across all business divisions for the last quarter. The operations at all our factories have started in a phased manner during May and June with all requisite protocols being adhered to in a stringent manner. Wherever possible, employees are working from home and necessary office connectivity is in place. Now to the financials. During the quarter, our revenues declined by 14.7% to INR 132 crore from INR 155 crore in the corresponding period, mainly on account of slower economic activities, combined with lockdown announced in the last week of March and a lower demand across key business of Wires & Cables and the Building segment. Our revenue for full year ended 31st March 2020, stood at INR 566.9 crore compared to INR 559.8 crore in FY '19, which is a year-on-year growth of 1.3%. This growth is mainly driven by the Industrial Switchgear business. During the quarter and full year, our exports contributed 18.1% and 17.2%, respectively, towards our revenue. The EBITDA for the quarter stood at INR 14.3 crores as compared to INR 16.9 crores in the corresponding previous quarter, which is a decline of 15.3% (sic) [ 15.2% ]. EBITDA margin for the quarter was at 10.81%. EBITDA for FY '20 full year grew by 2.4% year-on-year to INR 65.2 crores from INR 63.6 crores in FY '19, driven by increasing contribution from Industrial Switchgear business. FY '20 EBITDA margin stood at 11.5%, which is an increase of 13 basis points as against 11.3% percent in FY '19. The profit after tax was at INR 9.1 crore in Q4 FY '20 as against INR 8.4 crore in the corresponding previous quarter, which is a growth of 9%. And for full year FY '20, PAT grew by 10.2% to INR 26.4 crore compared to INR 24 crore in FY '19. Now moving on to the breakup of revenues as per the business division. The Industrial Switchgear division contributed 46.5% to the total revenues in this quarter and 44.8% for the full year FY '20. The Wires & Cables contributed 45% of our revenues this quarter, a decline of 19% year-on-year basis on account of lower demand in the domestic market. And for the full year, this division contributed 47%. Moving on to the Building Products division. This business is the only B2C business that we have. During the financial year, the real estate market has been on the slower side, and we are yet to see a pickup in demand that has impacted the overall industry. We hope that this changes in the coming quarters and will help us to increase the contribution from this segment to our overall revenues. This division has contributed 5.6% in this quarter and 6.2% for the full financial year. The fourth is the Energy Management division, contributing 2.2% revenue in this quarter and 2.1% for the full year FY '20. This is an order book-driven business, and revenues have been driven from annual maintenance contracts of the previous projects that we have secured. Finally, I would like to add that with all the recent happenings in our country and across the world on account of COVID-19 has had its impact on the business across the segments. Firstly, the lockdown announced by the government resulted in shutting down of factories and manufacturing activities resulting in production cuts. As explained earlier, the situation is extremely fluid and very -- and it is highly difficult to predict and give targets for FY '21, though our internal target is to maintain the FY '20 performance in all aspects. To sustain stably is going to be our motto this year. We expect that our enhanced manufacturing capabilities and brand visibility among our customers will enable us to scale our businesses and customer connect. Besides strengthening the revenue drivers, improving ROCE and working capital cycle is also a part of our core strategy. In fact, I believe that this lockdown has given us time to revisit and reformulate our strategies and look within the organization to identify slippages and address them more efficiently and effectively. This unprecedented event has only brought us closer, more motivated and even more determined to achieve our long-term goals. With a very competent team in place, we are confident of achieving the milestone we have set for ourselves. We're also constantly on the lookout for new opportunities and technical associations to strengthen and increase our product offering. Overall, we remain committed to set agenda of delivering consistent, profitable volume-led growth. I thank all the stakeholders of Salzer Electronics for their continued support and faith in our company. This is all from our side. I would once again like to thank everyone for your time and attention. We can now take questions.

[Operator Instructions] The first question is from the line the of Mulesh Savla from M.M. Savla and Associates.

Am I audible?

Yes, sir.

Just I would like to state that in spite of losing about INR 18 crore, INR 20 crore in last month, if we add this INR 18 crores, INR 20 crores to our last quarter target, still we are about INR 150 crores for the year. So last year, we did about INR 155 crores and I think we were targeting at least about 15% growth on the top line. So there seems to be substantial headwind or maybe issues with our demand or our products or I don't know. Can you please throw a little more light on that, why the top line is so poor? And what is the level of operation of all our plants as of now?

Sir, you have, actually, good point. You're right. I think we actually missed our -- even without lockdown, we would have missed our targets for FY '20. And I think that has been the trend. If you see since H1, except Q1 of FY '20, all the rest of the quarters, I think we have been flattish or declining compared to FY '19. The main reason for this lower revenues is because of the extremely low demand in the Wires & Cables sector. For example, if you look at last full year, the Wires & Cables division contributed almost INR 272 crores for us last year. As against that, I think we have done only around INR 265 crores this year, which is a 15% decline in Wires & Cables -- INR 15 crore decline in Wires & Cables revenues. Similarly Building segment, we did last year INR 42 crore and this year, we have only done INR 35 crore. So one contribution is the last 1 week lockdown. But apart from that, I think even starting second half of last year, the whole economic activity in the country was slowing down, and we were not able to push the product. There was no demand for the Wires & Cables and Building Products, also the Industrial Switchgear. But luckily, for us, the Industrial Switchgear grew because we had good exports. So overall, Industrial Switchgear gave a growth of -- year-on-year, this growth of 10% for us, whereas Wires & Cables declined by 2%, Building segment declined by 15%. So that is the reason that we see a negative growth. If Wires & Cables would have done a 15% or a 10% growth, then overall, we would have done a 10% growth.

But then in Wires & Cables, I think we were also doing some wiring harness for lifts and all those products.

No, sir, wiring harness comes under Industrial Switchgear division.

[Foreign Language] It comes under Industrial Switchgear division. Okay. Okay. But in all probabilities, we were expecting good growth from Industrial, this thing only and wiring harness and everything. We were not banking too much on -- because the Building Products, so we have -- I think recently started. And wiring cable, of course, was a major chunk. So how do you see future from here on, on all these segments?

So as I mentioned in the call speech, I think very, very difficult right now looking at the situation to give a guidance for FY '21 because it looks very, very uncertain as of now. Though we -- as you -- I think your another question was about the level of operations, we have been operating at around 40%, 50% in the month of May. In the month of June, we have improved it to close to around 65%, 70% across all units. Certain units are at 100%. Certain units are at 50%. So on an average, we are working at between 60% and 70% capacity as of now. That's the employee strength that we are getting right now.

But do we face any problem with the labor, or labor is available?

Labor is available. There's no problem with labor as we don't have any migrant labor. It's mostly local people for us. But we are only slowing down our operations because of the demand, market demand.

So you said that export to Europe and U.S. in the last quarter has grown, and you are expecting good demand from North America also. So how do you see this market developing? And especially after everybody thinking of alternate to China, do you see any fresh inquiries on that ground? Your customers are seeking more from you than from China or something like that?

We do see a lot of inquiries coming from North American markets as well as from Australia and Middle East. But I think it is still very early stage to really say that how much additional business we will get because people want to disconnect or disengage China. I think that's a little bit long term, I would say. But there is definitely a lot of inquiries. A lot of customers are talking to change over.

Right, right, right. All right. And if I may just squeeze in 1 more question. We have taken over the management of Kaycee. So was there any open offer also for Kaycee?

Yes, sir.

So everything is...

We did an open offer -- yes, we did an open offer, and we got some shares, and we completed that.

So now we are 74% holding in Kaycee. So is there any plan to merge that because a small company keeping it listed separately may require a lot of compliance burden and cost burden. And by and large, the product profile and everything is the same. So is there any plan to merge that?

Right now, that is not the thinking of the company. I think we are looking at maintaining Kaycee as a separate entity as of now. But the situation is quite dynamic. Going forward, we don't know. But as of now, there is no plan of merger.

Okay. Fine. And I will rejoin the queue in case if any follow-up question is there. And by any chance, have we proposed the dividend distribution for the current year? I couldn't find the note related to that in...

No, sir, we have not proposed -- recommended no dividend this year.

So are we planning to skip dividend for the current year?

Yes, sir.

But we will be breaking our record of continuous dividend distribution. I think maybe little lower, but my request would be to continue the same.

We'll consider. But as of now the Board has decided that we will skip the dividend for this year looking into various conditions, but we will consider this.

Next question is from the line of [ Zakir Nasir ], an individual investor.

Yes. I think I would have 2 questions for Mr. Rajesh. Sir, number one is, I think it's a pretty strong statement from your side saying that internally, you have a view that Salzer will be able to maintain March '20 numbers in all aspects in '21. Do you get a feel that from second quarter, mid of second quarter, things will be normal? And do you think with the kind of change of mind frame, your demand -- product mix demand has changed?

I'll answer first -- second question first. I think there's no change in the demand scenario in terms of the mix of the product or whatever it is. But yes, I definitely have a strong feeling while discussing with various of our OEM customers who have slowly started operating from the month of June, that things will definitely get better during mid of second quarter. I think looking at our own operations right now, I think we are definitely much better than May in June. So we hope that July is going to be much better. So hopefully, in August, I think we should be back to 100% normalcy.

August, we will go back to normalcy.

Yes. That is the reason that we are looking at sustaining these revenues for next year also.

Okay. And second question would be this, also for deferred tax -- our deferred tax. I mean is this due to a changing of the tax slab from 30-odd percent to 25%?

Yes, sir.

There's a INR 4 crore rightsize.

That's an important policy decision that the company has taken. We have actually changed -- come to 22.7%. So including surcharge to 25% tax regime. From the earlier 34.5% tax regime, we have come to this. And that is the reason that we have a direct tax saving of around INR 1.25 crores as well as a deferred tax write-back of around INR 3 crores. And that is the reason, the fact...

That is the reason why this has been written off?

Yes. Yes.

And Mr. Rajesh, I mean, do you find -- after the lockdown has been lifted and of course, businesses started, do you find any newer inquiries from sources which never inquired with you or -- in terms of newer customers?

Actually speaking, we have started getting inquiries from American and Australian customers, particularly, even before the lockdown started. So sometime, I would say, in December, Jan, we started some inquiries. And after the lockdown lifting also, we have seen a couple of new inquiries coming from these countries. So we have started working on that. I think they are mostly, what you call, custom-built products, I would say, to customers who have been sourcing it from China. And for various reasons, they are opting out of China.

And what is our debt level now, Mr. Rajesh? And going forward, do you want to -- I mean in terms of what level would you like to maintain the debt at?

We are currently at around INR 155 crore debt level, mostly working capital. And additional term loan that we have taken is to the tune of around INR 17 crores is for establishing the lan cable facility reduction last year. In this year, we are not looking at increasing any long-term loans. Short-term loans, I think it will hover around INR 150 crores and INR 160 crores.

Okay. So there's another INR 175 crores including working capital kind of.

Yes, sir.

The next question is from the line of [ Rohan Mehta ], an individual investor.

Just to build a little on the exports front. I just wanted to ask if we are seeing any trend of increase in exports going forward because especially since the export chunk fetches us better margins also, it will be beneficial. So are we seeing any scope of improvement in our exports?

Yes, I think compared to FY '19, I think we have seen an increase of almost, I would say, 15% compared to last year. Last year, we did a top line of around INR 85 crores. And this year, we have done a top line of almost INR 97 crores, close to INR 100 crores. Out of this, I think we are seeing growth coming from -- mainly from Europe and North America.

Okay. Okay. That's what I was going to ask. Beyond the U.S., there are other regions also that we are targeting for exports?

I think what we say North America is also including South America because Brazil is also one of the large customer country for us.

Okay. And in Europe, which countries would be would you call our top...

Europe, I think U.K. is the largest. The second will be Germany, Poland.

Okay. Okay. And sir, as you mentioned earlier, you don't believe that the effect of this anti-China sentiment will not manifest in the near term, right? That's what you said?

Yes. So I think it will definitely manifest. It will definitely bring a lot of new businesses to the country and as well as to our company, for sure. But it won't -- we don't realize into revenues and profits in the near term. I think it will be a long-term agenda, yes. But definitely, there is a clear sentiment across the world, in a lot of countries, like people want -- not want to disengage or disconnect with China, but they want to reduce the risk that they are putting from China.

Dependence.

Yes, that dependence on China.

Fair enough, fair enough. And sir, just one more question. If you could just throw some light on how our Salzer branded wires and cables are doing? And if we are seeing any improvement there? And what the contribution is?

We have not seen big improvement compared to last year. I think we have been flat, and we are still selling only in the southern 3, 4 markets: Tamil Nadu, Andhra, Telangana and Karnataka. And we expect that this will be picking up if the real estate segment gets better. The contribution is still very low. We are doing -- I think we have done only around INR 10 crores to INR 11 crores for the full year.

Okay. Okay. I guess once the real estate sector regains momentum, that should also gain traction.

Yes. Yes.

The next question is from the line of [ Chirag Patel from Avinash Shares. ]

Sir, I have 2 questions. The first one, what is our current capacity utilization post the resumption of our all facilities after lockdown?

Before lockdown, I think the capacity...

After lockdown and gradual resumption of them.

I'll come to that. I'll come to that. Before capacity utilization -- our average capacity utilization before lockdown was at around 70% to 75%. But after lockdown, and considering that 75% is 100% normal and then -- for that level, we are working at around 70%, 75% normal.

Okay. And currently, 60% to 65%, as you mentioned earlier?

Yes.

Okay. Including the -- considering the scenario where we were expecting the demand to be lower going forward. So we planned our production according to it, right?

We are actually pacing our production based on the market demand right now. For example, our Wires & Cables unit is operating at 100% capacity, in the sense full employee strength is working 24/6. However, the other units are working at between 60% -- 50%, 60%, 65% capacity.

Okay. And on really order book side, due to this lockdown and our government has so much began taking social-related decisions and all, are we seeing that going forward the decision-making fund for public CapEx with respect to the infrastructure and including railway as well will be lower and we may witness some slowdown due to this kind of event also?

I think it's a good question, but we're not sure if the government will really reduce the CapEx in the infra. I think that is possibly, I think, one of the main aspects that the government has to do to revive this economy, apart from the stimulus, whatever they've announced. So I personally don't expect that government will reduce the CapEx in the infra. And particularly railways, I think railways is kind of a little bit disconnected towards all these CapEx investments. So they have a steady plan for long term, and they are continuing to do it. And we are continuing to get orders from railways.

Okay. And how are we looking at this Atmanirbhar package?

I don't think we do really have something to get out of it. Unless otherwise the local market -- Indian market -- Indian industrial production really improves and runs at full speed, I don't think we have any benefit out of this package. We only have to depend on the market's strength.

Next question is from the line of [ Amisha Patel ], an individual investor.

I just wanted to ask is the labor-intensive unit, so under the current situation, under the problem of labor due to migration, how do we see us come back in? Or are we facing these issues?

Luckily for us, the 1,500 people strength that we have, we don't have migrant labors. Across units, all the laborers are local. We source all employees locally. So we have not faced any migrant labor issue at all. So as soon as we opened on the 4th of May, I think we had people to come in to work, and they continue to come.

The next question is from the line of [ Harshad Patel ] from India SME Investment.

I have a couple of questions. So number one, I recently started tracking your company and as I saw from all the earlier expectations that in 2015, you announced that we plan to reach INR 1,000 crores top line by 2020 and around INR 750 crores top line by 2019. But unfortunately, we are not able to achieve it, right? So I just wanted to understand the nature of the issue lying over here. Is it -- are we facing problem on demand side pertaining to domestic market or export versus our expectations? Or are we not able to ramp up our capacity, and we already have the demand?

So we definitely have the capacity ramped up, and we are matching the capacity. I think what we have done from 2015, I don't have the 2015 figure. But we have been growing at, I would say, 10% to 12% year-on-year as against 20%, 22% that we're supposed to grow, mainly on account of demand as well as implementation of new projects have been slowed down for the first 2 years. So this all put together, I think we have slowed down. And this year, again, our original target was to reach around INR 620 crores. But unfortunately, the economic activity in the country started declining after first quarter. We were not able to push products as we expected after the first quarter itself. So now I think we are ending up in this unusual COVID situation.

And then next question is regarding our top 3 clients. On the consolidated business, how much they contributed for the FY '20, the name and percentage contribution roughly?

Our top customers will be Schneider Electric. I think he will be our #1. Second will be GE. These will be the top 2 clients for us. And Schneider contribution last year was close to around INR 30 crores, INR 31 crores on INR 560 crores, which is around 5.5%, 6%. Schneider will be around 4%. Third, there will be many third customers, which we have a European distributor who is doing around INR 25 crores, INR 27 crores. We have an American customer who's doing close to around INR 12 crores.

So L&T is no more the leading client?

No, L&T is still a leading customer. L&T's business will be close to around 23%, 24% of our revenues, but L&T doesn't consume. So we treat L&T's business as a distribution business. So L&T buys and resells in the market.

Okay. So they resell by their own branding, right?

Partly on their own branding, partly in our brand. Some of the products, like out of the 23%, I would say, around 10% of the products will be in Salzer brand, around 15% of the products will be in L&T brand.

Okay. And regarding the Kaycee acquisition, I wanted to understand that we acquired the company at around PV of 13 whereas if you see the operating numbers of the company, over the past 10 years, the margins are all over the place. There is no consistency in the numbers. So what was our rationale behind the acquisition?

Our rationale behind the acquisition is only to enhance our strength, our market position in the rotary switch market. I think that is the single largest product that Kaycee is manufacturing and selling. And Salzer has been the market leader and Kaycee has been #2 in this particular field. So we just looked at acquiring a competitor who has been in the field for a long time with a reasonably good brand name and approvals with most of the government projects.

So right now, you're selling...

And I fully agree with you that there has been a lot of inconsistency in Kaycee's past performance, that's mainly because of the change of management of Kaycee for too frequently. So now I think you will see consistent performance in Kaycee, which I think this year itself, it has shown improved PAT margins and EBITDA margins.

Okay. And going forward, can we expect the margins to reach to a level of our company and then continue from there?

I think we can expect Kaycee's PAT margins to be much better than our company's because they don't have the mix of revenues like we have. So they are a pure-play of rotary switches, which we can expect a PAT margin of between 7% and 9% every year.

And top line of INR 25 crores is the maximum they can do or they...

No, I think that we can definitely increase that.

By what quantum?

Okay. That's, again, on normal terms, we would have told, but this year, it is difficult. But on a longer term, we can definitely expect a similar growth of what Salzer is at.

Okay. But already the Kaycee unit is operating at optimum utilization, right?

Yes, but increasing the CapEx for that particular product, capacity is not an issue because the CapEx required will be much less.

Okay. And we are continuing with the brand name of Kaycee itself?

Yes.

And any other lead on energy management business? Are we quoting any tenders?

So far, no. Because whatever we have quoted, even before lockdown is put on hold. So hopefully, by end of second quarter or third quarter, we will have some results on that.

Sure. And one last 2 question -- one last question I had was if we see our cash conversion, so over the past 10 years, only 40% of the profit has been converted into cash. So majorly, if you see more and more money is getting stuck in receivables. So how do we plan to...

I think mainly receivables, inventory and CapEx. I think these 3 has been taking a lot of cash. And I think that is the core area that we are working to how we can bring the inventories down. I think receivables, more or less, we are under control at 90 days. I don't think we will be able to bring it down below 80 in the best-case scenario. Only thing is we have to bring our inventories down, which we have been working. But unfortunately, we are not able to do that. And now again, because of this COVID situation, we are again stuck. So hopefully, in this year, I think we will be able to bring that down as promised last year.

And you also mentioned, sir, that we can reach INR 1,000 crore top line at the same -- without any major CapEx, right?

Yes.

So when do you expect to achieve that?

That statement still stands true. I think without major CapEx, we will be able to reach that level.

What is the expected duration for the same?

I think -- I don't know. It depends on how we are going to fare in this year will only tell us when we can reach that.

So excluding the COVID situation, regardless of that, can we see the top line doubling over, like, say, 4 years or something?

Yes. I think our target is to definitely double every 4 years.

The next question is from the line of [ Shiv Janani ], an individual investor.

Sir, I had a follow-up question on the Kaycee Industries acquisition. The 2-parts question, sir. One is, given the amount of time that has passed, just wanted your views in terms of any positive or negative surprises that you may have seen out of the acquisition? And the second part was, sir, in terms of -- would you need new approvals and things like that on the Kaycee Industries part or most of the approvals and everything is in place already?

No, I did follow your first question. What was your second one? Can you be little louder, please?

Second one, sir, in terms of approval with your customers, Kaycee Industries, would you need new set of approvals? Or do you think that those approvals are in place and you just need to ramp up the supply?

Okay. On the acquisition, on the surprises, I think we didn't have any surprise. I think proper due diligence was done. So we are only seeing what we have expected out of the acquisition. And we also know that we will be able to improve the efficiency of the operations at Kaycee. And that is the reason that we have acquired that. And we are seeing that efficiency improvement across manufacturing activities as well as sales activities over the last 7, 8 months after that we took over. So definitely no positive or negative surprises. So we know what we are getting into. On the approval side, I think Kaycee has been the first company to get into this business way back 50, 70 years ago. So their name is like across all the government projects, all the new projects, across all the consultants. So there is no necessity for us to go and take any new approvals. So that's one of the reasons that Kaycee's brand also carries some weightage and that is also the reason that we have taken over Kaycee.

And sir, again, just a follow-up. Would you need any investment just to modernize the plant or fix things here and there?

No, I don't think we need any major CapEx at Kaycee as of now, unless otherwise the capacity is going to -- requirement of capacity is going to double. We don't need any major CapEx as of now.

All right. And sir, would that entity have some order book? And is it possible for you to share that?

Actually, it's very similar to Salzer. So we don't operate on a large order book, except for the OEMs giving forecast and some tender business from railway that we have, which is quite small. So otherwise, the orders are on a monthly basis because our maximum delivery time is only 4 weeks, and we take the order and deliver it in 4 weeks -- less than 4 weeks. But there is always a forecast.

Sure. Sure. And sir, just last question on this. The Kaycee facility, would you keep it exclusively for the Kaycee range of products? Or you think you can leverage that facility to sort of manufacture Salzer products as well?

No, we will not be using Kaycee facility to manufacture any new products for us, but we are leveraging Kaycee's marketing network and approval strength to sell Salzer products in that channel as well as cross-selling Kaycee products in Salzer channels. So that advantage we are taking. And we are also doing a lot of optimization in the sourcing. But we are not planning to manufacture anything in Kaycee for Salzer. But we will be doing it the other way round.

Okay. Manufacturing Kaycee products at Salzer?

At Salzer, yes.

Okay. And sir, just again, in terms of -- you said there is an overlap in terms of the roofer products between Kaycee and Salzer. So do you think that it makes sense for you to rationalize the 2 brands and maybe have a higher weightage on the Kaycee and maybe bring down the manufacturing on Salzer side?

Actually, Salzer is the market leader in that particular product segment. So we command a premium of 10% to 12% over Kaycee and even a lot of other competitors. However, I think Kaycee still is able to sell at around INR 25 crore top line. What we are trying to do now with Kaycee brand is to leverage Kaycee brand and the pricing structure using the difference between Salzer and Kaycee and try to get to other competitors and take higher market share from other competitors to Kaycee.

Next question is from the line of [ Neha Jain ] from [indiscernible].

So I just have 1 question. In the opening remarks, you mentioned about rethinking and reformulating your plan. Sir, can you please elaborate on that, please?

I think I would say this kind of a, what you call, standstill situation has never happened before. We have seen recessions. We have seen slowdowns in the last 20, 25 years, but this is kind of a standstill situation. So which has made us to think a lot of things, a lot of ways, how we are operating, what are the processes we have been doing. We're also looking at various other companies, talking to our large OEMs, the large customers. Multinational OEMs have been taking classes in this lockdown for us, attending webinars. We found that there have been a lot of slippages, I would say -- I wouldn't say a lot of slippages, but there were a lot of processes up for improvement, which were gone unnoticed in all these busy times. So we have got some time to really align all those things and get our people also aligned to that effect to see how we can better optimize the operations. So that is what I meant during this time. But it really helped to learn a lot of new things and benchmark with the top-class customers. So that has really helped. Working with top-class OEMs helps in such situations.

Next question is from the line of Sonal Mistry from ICICI Bank. As there is no response, we'll move to the next question from the line of [ Suresh Jain ], an individual investor.

Sir, I had a few questions. So one is regarding the export -- increase in export that has happened during last year to U.S. and Europe. Is these products all belong to the Switchgear division only?

Yes, sir. All exports, 90% of our -- INR 97 crores belongs to Switchgear products. Only around 7%, 10% is other products.

Is it possible to share which are the major products, sir?

Okay. On the -- in the Switchgear, you say what products we are selling?

No. Mainly, see, what I'm trying to find out is, which of our Switchgear products are finding the customers in those developed countries?

I think that we have more than 15 different products under the Switchgear division product business. Out of which, I would say, transformers, contactors and switches, rotary switches and other isolator switches, these are the top 3 products that contribute almost, I would say, more than 60%, 65% of our exports. And the other 35% consists of various other products.

Okay. Fair enough. Sir, needless to ask this, whatever the new inquiries you're getting from U.S. and Australia, these are all for the Switchgear division only, the same type of product?

Yes, sir, Switchgear division. And I think now in the recent period, we have also seen some inquiries for Wires and Cables.

Wires and Cables. Okay. You also mentioned that most of these orders are on custom-made products. In a normal scenario, how much time it takes to convert this into orders?

With custom-built, there will be 2 types of custom-built. I would say 1 custom-built is just minor modification in our existing catalog products. That will be very quick. That will, I think, take less than 4 to 6 weeks. However, if there is a little bit more modification required -- change required, then we have to get into making of new tooling and then getting -- again, going back to the customer for approval of the product, which will take at least, I would say, 12 to 15 weeks.

12 to 15 weeks. Normally, what is the success ratio of this getting converted into orders, sir, from this inquiry stage?

So far, what we have seen -- we know by the way the inquiries come and the kind of products they ask, we know whether it will succeed or not. So most of the time, I think we get -- convert the inquiries into order. I would say 90%.

90%. See, why I'm asking is, if you're doing the tooling and other related work for them, so which would be an additional expenditure. And if you don't get order, so who will bear that cost?

No, we will get into making of tooling and converting a product only when the customer approves and comes into an agreement to us. Otherwise, we will not be investing into it.

Okay. Sir, these export of these Switchgear products fetch us better margins compared to the local players?

Yes, yes, for sure.

Sir, now if you see our Wires & Cables division as well as the Building Product division, they contribute almost 50% of our sales, which in turn depends on real estate?

I would say, no, sir, because our Wires & Cables business, of this INR 260 crores, INR 260-odd crores whatever we have done this year, 60% of this INR 260 crores, I would say, is coming from the agri market for us. So the building -- real estate business of the Wires & Cables is very less, I would say less than 10%, 15%.

Okay. So that means your -- sales of this division does not depend much on the, what do you say, improvement in the real estate?

No. Only our Building segment products division alone is dependent on real estate.

And this 10% to 15% what you said as being sold to the real estate, it is of the -- from the...

See L&T branded wires -- building wires that we sell to L&T.

Okay. Okay. Fair enough. Sir, the last question is, in the current scenario, with the so much pandemic and all that, et cetera, happening all over the world, are you seeing any merger or acquisition opportunities?

So far, no, but we have to wait and see if there's something coming up for us. But so far, no. We have not seen -- we have not got any opportunities as of now.

As there are no further questions, I now hand the conference over to Mr. Rajesh Doraiswamy for closing comments.

I thank -- thank you all once again for your attention and your interest in the company. Look forward to talk to you again for the next quarter call. Thank you.

Thank you.