Suprajit Engineering Limited (532509) Earnings Call Transcript & Summary

Good morning, all. On behalf of Anand Rathi, we welcome to the conference call for Suprajit. This call is regarding the acquisition of the company -- one of the business units of Kongsberg Automotive. I request participants to restrict their questions relating to the acquisition. Due to the paucity of time, we'll probably have 45 to 50 minutes. [Operator Instructions] At the outset, I congratulate Mr. Ajith and his team for a good acquisition. Over to you, Mr. Ajith. Thank you.

Thank you, Vijay. Good morning to you all. I'm delighted to announce that we signed a SAPA and TSA agreement with Kongsberg Automotive, Norway for the transaction relating to Light Duty Cables unit of Kongsberg. We have already sent the announcements and PPTs to you all, which I hope you have had a chance to see and try to understand. We'll be making necessary clarifications as we go around. This is a pretty transformational transaction for Suprajit in terms of the reach and the fit. We'll talk about it more in a while. We've also been eyeing this asset for many years due to its fit and we are happy that it has now fructified into a transaction in our favor. This call is only for this transaction related. As you know, we are in the quiet period, our Q2 results are going to be announced in about 2 weeks' time. And we'll have 1 more investor call post that results to discuss results as well as probably some more data relating to this transaction. So I will ask our team to talk about this transaction. We have with us today, Akhilesh Rai, who is our Chief Strategy Officer and Director of the Board; Jim Ryan, who is our Global President out of U.S., he's also on the call, who will talk more about this transaction; Mohan, our Managing Director and CEO; as well as Medappa, who is our CFO. I'll first ask Akhilesh to talk about the transaction. Medappa will talk about a bit on the financials. Jim will talk about LDC and Mohan will talk about the synergies. With that, I will ask Akhilesh to talk about the transaction and probably introduce himself as he's probably for the first time coming on the investor call. So over to you, Akhilesh.

Thank you. Good morning, everyone. Yes, as a quick intro, I've been with Suprajit for about 10 years. I am an engineer qualification, but I have an MBA from London Business School. And for the past 4 years, I have been leading Strategy at Suprajit. I was the lead in the PLDC (sic) [PLD] acquisition from Osram, and now this acquisition of LDC from Kongsberg Automotive. I will refer to the slides that we have on the acquisition highlights. So this is Slide 2. This acquisition is -- I mean, is pegged at an EV on a cash and debt-free basis that is USD 42 million. This is quite a good -- I think it's a good opportunity and a good deal for us, considering the projected USD 100 million revenue and double-digit EBITDA that the LDC, our Konsberg is forecasting for the LDC business unit, and it is something that we also believe is possible considering good strong -- especially with a good strong bounce back of the automotive industry next year. The time line for the closing is Q4. This is mainly because there are various IT carveouts and moves of people and some manufacturing business into the legal entities that we are acquiring. Most of the LDC-related business moves have been completed. So it's mainly the IT carve-out that needs to be done before closing as well, of course, there's the usual regulatory clearances in these various jurisdictions. All legal entities of LDC are being acquired in Mexico, U.S., Hungary and China. The main manufacturing locations are in relatively low-cost countries, which makes it a very key strategic opportunity for us. So Mexico, Hungary and China are the key manufacturing locations. But they also have a legal entity in Townsville, which is mainly the warehousing and distribution for all the U.S. customers in the U.S., which will also be a key part of our transaction. So we're looking at about 1,300 people, full-time employees that we are going to be bringing under the Suprajit group. It's -- of course, it could be -- it would be much higher once they're able to reach their projections, but currently it's at this level. This will add a lot of engineering and sales strength to Suprajit, bring us very close to the customers. The strong -- the main R&D and sales team is about -- is across the globe for LDC with about 25 plus people. But the main engineering is out of Novi, the U.S.A., which is very close to the car customers in the Detroit area. But they also have engineering out of the U.K. and Germany and further application engineering and engineers, of course, near each plant. The salespeople are similarly very close to customers. They're at all the manufacturing locations, but also in Germany, Sweden, U.K. and France to support our various customers -- LDC's various customers in those regions. So with that quick outline of the transaction, I will hand it over to Medappa. Thank you.

Thank you, Akhilesh. Good morning to everyone. We have carried out the financial tax and operational due diligence across the target entities located in Hungary, Mexico, U.S. and China. According to our due diligence and also as per Kongsberg, the revenue forecast for the calendar year 2021 is USD 90 million. And for the calendar year 2022 is USD 100 million with an EBITDA margin of 10%. We have sufficient cash balance -- surplus cash balance in the balance sheet. However, we are discussing with one of our bankers to partially fund these transactions. Thank you.

Jim, over to you.

Okay. Well, greetings, everyone. Just quickly an introduction -- a short introduction of myself. My name is Jim Ryan, and I'm based in the United States. I was brought into Suprajit approximately 6 months ago for strategic reasons such as this acquisition. My background is, education-wise, is in mechanical engineering, but I've been in industry for approximately 37 years, combination of engineering and sales work initially and then in general management and operations since 1997. I've actually been involved with cables in one way or another since 1987. Regarding with being a supplier to the cable industry and then joining an actual cable competitor named, Capro, that was the genesis of what this business is as far as its acquisition from Kongsberg and now the divestiture to Suprajit. So I've got quite a bit of experience in and out of cables on a global basis. Have also been involved with aerospace, medical and electronics, but primarily industrial and automotive in the area of controls and control systems, such as cables and electromechanical, which is related to this acquisition. I was part of Teleflex Industrial, which was a conglomerate of products geared primarily for driver control systems, inclusive of cables when Kongsberg acquired them from Teleflex in 2007. So I'm very familiar with this business. I worked with this business in various forms throughout the years at Kongsberg, leading into 2015 through '16, '17 effort to divest this business for strategic reasons, much like they're doing today. Unfortunately, those projects did not move forward at that time, and I elected to leave in 2017, and I've been with Suprajit now for 6 months, helping the team with this acquisition and other elements of the cable business in terms of cable global operations. This acquisition, again, is something that I'm quite familiar with both in the operations for the 3 entities that are being acquired as well as still many of the people that are involved in the business. Mohan?

Thanks, Jim. I would like to just talk about a few synergies. I know you would have gone through the slides already. But fundamentally, what I would like to draw your attention is that like C K Prahalad used to say this is a core competence. So our core competence is cables. And this makes us literally get into a sort of a full position in the cable world, particularly in the light duty cable area. It also enhances our engineering capabilities and definitely our manufacturing footprints, not to just say about the manufacturing capacities. Fundamentally, we always used to get into this question in North America, more so in the U.S.A., whether we can serve the U.S. market from Americas. And since we had Wescon which was predominantly the nonautomotive portion, we always used to be wondering how do we get into the automotive part of it. So this gives us a plug-in into the North American market, particularly in automotive. Since this has also got exposure to nonautomotive, it expands our nonautomotive portion there. While we continue to build stronger relationships, when we were Suprajit we add those relationships, when we acquired Wescon, we expanded those relationships. And this, again, does the same thing in expanding our relationship with the existing customer and also onboarding new customers, for example, like Tesla. So one -- another important thing is, along with LDC, which is the cable, we are also getting into, what we call as, EMA or electromechanical actuators. So this is a new product, which is going to come under our belt, and that's going to probably help us get into the next level. So overall, in terms of manufacturing footprint, we are now into automotive in the U.S. market. We are strongly entrenched in the European market, the Hungarian plant, and we have got an access into the Chinese market. So with this, we will be one of those global leaders in the cable business, and will help us in enhancing our capabilities, be it in terms of quality, cost, development or delivery.

Thank you, Mohan, and the rest. I just wanted to conclude saying that we, I think, got a very value for money deal as Medappa sort of said that next year, the target is about USD 100 million revenues with about 10% EBITDA. And the enterprise value at no debt, no cash at $42 million. you can do the math to say that it is a good buy for us. And this is our core competence, as Mohan has said. So having this kind of a perfect supply chain footprint, will really lead us to do a lot more in this space and consolidate our position, and we will easily be able to be the global leader, which we already are, to the next level of service to the customers. Ultimately, customer satisfaction is paramount to us. And at this kind of footprint, this kind of warehousing, these kind of delivery capabilities, these kind of engineering capabilities and our reach in multiple geographies hands-on would give us a solid global presence. So I believe that this would add significant value to investors as well. The other important point that you would -- some of those investors who have been with us for long, 20 years ago, we were 95% in 2-wheelers. After this transaction gets consummated, I think we will be only about 20%, 25% in 2-wheelers. And our presence in automotive, in nonautomotive and in the aftermarket will get further strengthened. So we will really be -- our theory of derisk can grow profitably will perfectly be answered with this acquisition. With this note, I would like to now hand it over to the moderator, and we are ready to take on some questions from some of you as and when it comes. So thank you very much, and I hand it over to the moderator. Vikram?

[Operator Instructions] We have a first question from the line of Deepak Lalwani from Unifi Capital.

Sir, I just wanted a sense on the sales number. So you said $90 million for this year. What was the number, say, 3 years back, how has the growth been in this business? And historically, what are the margins that this business has made?

From what I know, frankly, I was involved with Kongsberg transaction last time also. The business in those days were also generating double-digit margins. I think in the last 2, 3 years, the sales had sort of stagnated. I think the numbers are around this last year also. I think this year, the number is stagnating mostly because of the COVID scenario. Otherwise, I think the original budgets were much higher. But then right now, due to IC chips, there is a certain amount of lag in their original -- from their original target.

Right, sir. And this would be a slightly lower margin business compared to Suprajit India. So what gives us the confidence to turn around the business as well?

I think in terms of turning around, obviously, we will have to get in to see what all we need to do to improve. But today, I think a 10% margin business in automotive is pretty good. I think what we are getting is a kind of a transactional value, which is I think is very difficult to get in this business in terms of valuation itself. So you're right, the current margins in this business is slightly lower, but that's why we are also getting at a much lower valuation, right? So in terms of return on investment, I think this would match with what we are doing currently.

Right sir. So with this transaction, does Suprajit get any technical abilities, which would enhance us to improve on the efficiencies in India as well and globally?

I think the engineering strength of LDC is pretty strong. I think they have been working with some of the marquee customers, which we have shared with you, the Teslas of the world and some of the marquee other customers. I think they also are having multiple patents with them. I'm sure between their engineering strength and our engineering strength, which is also pretty good, I must say, together, I think it will become a stronger team. I think that's what I would like to say at this moment. But eventually, I think when we are really in the saddle, we'll get to know how much more complementary strengths we have. They are certainly much stronger in, let's say, seat and seating-related businesses, whereas we are much stronger on the door and body cable. So together, I think it makes it more complete in terms of the content for [ cape car ]. Secondly, more importantly, EMA will be the one which will add on for our future businesses. We have been only making cables. And with the EMA, we become also a very clear system supplier.

Okay. Right, sir. And lastly, sir, you said 10% margin on 90 million. So at the PAT level, how much will this entity make? And if you could touch upon the debt and gross block that this business will get onto the Suprajit balance sheet?

No, there is no -- we are not taking any debt. It is debt-free, cash-free.

Okay. Got it. And the PAT, what would be...

That, I think, again, there is projections made by them. We don't want to really get into that at the moment, but their depreciation charges are not very high at the moment. So it's pretty good. Cash flows are pretty strong, that's what I would like to say.

We have next question from the line of Abhishek Jain from Dolat Capital.

Congratulations for this acquisition, sir. Sir, how much capacity and the current utilization for the light duty cable business? And what could be the future avenue.

On capacity, I think, Jim, do you know their capacity under utilization?

Yes. So it's the mix by facility and by the number of potential shifts that can be applied. But in general, I would put the capacity at roughly 60%, 65%.

So I think their capacity -- total capacity is around $100 million, and probably they are now operating about, I think, at about 55%, 60%. So you can you can make out at the full capacity, what could be the revenues. It's almost like another 60%, 70%, 80% higher than the current run rate.

Okay sir. And how much addition would happen in the gross block and how?

Gross block. Akhilesh, do you have any idea of the gross block that's getting added. I think it is somewhere there in our data room, but...

No, I think we will have to get back to.

Yes, we will have to get back to you on this.

Okay, sir. My next question is related with asset turnover of this business. So what was the asset turnover in the past years and how much asset turnover is remaining going ahead?

For the same thing, I think we will have to look at the gross block correctly to answer that question. It's again connected with that only. So I think you'll have to come offline to Medappa. I think we'll be able to provide that data to you.

Okay, sir. So I was thinking that this business has won large business from the EV players. So I just wanted to understand what is the current order book. And what is the contribution of the revenue from the EV side out of the $90 million revenue.

I think we will not get into the -- there is -- Tesla is one of the main customers for them. But as I know -- Jim, do you know which part of Tesla's requirements we meet for LDC?

Yes, it's primarily through the seating elements of Tesla at the moment. And there's the Model Y as a marquee application for both cables and electromechanical.

Okay. So both EMA as well as cables we are supplying to Tesla. And as I know, we also supply to some of the Chinese EV manufacturers. And there also, these cables are used for the EV. In terms of the segment-wise split, how much is EV, how much is non-EV, I don't think we have the data with us. But as you know, globally, also the EV is still emerging in terms of number of vehicles. So the fact that we are with the leader in that business as a supplier, that is Tesla. I think that speaks that we are well entrenched to capitalize on these opportunities.

Okay. And my last question is just that after this acquisition of you would be able to win business from the Indian OEMs, particularly for the actuators. So how much market side of the EMA like on India, and what sort of the revenue are you targeting?

No, it's too early now, Abhishek. I think, we are just in that acquisition mode. Once the transaction closes and we are in the saddle, we'll have to assess closely what are all the EMA technologies they have and how much it's really usable in India. I think this transaction is not necessarily India-centric. I think we are looking at what EMAs are required in higher-end cars, in Europe and U.S. I think that's where the business will be. But whenever like whether the Tatas or the Mahindras want to have EMA-actuated cables for their seating systems, particularly for the higher-end vehicles, I think we will have the ability to service them. So these are the things that we need to know once we get in. But the point that we are making is from just a cable supplier, we are becoming a more a system supplier through EMA.

Okay, sir. And sir, the interior segment of the Kongsberg Automotive consists of 2 businesses. One is the light duty cables and another is the comfort system. So you are a ...

Sorry, sorry, I didn't get your question.

So the interior segment of the Kongsberg Automotive consists of the 2 business units. One is the light duty cable and another is the comfort system. So I assume that you have only taken the light duty cable business.

Absolutely, we have taken only the LDC and not the interior systems, no.

[Operator Instructions] We have next question from the line of Resham Jain from DSP Investment Managers.

And congratulations on a very good acquisition. So sir, I have just 1 question. Typically, a lot of this foreign entities with multiple plants in different geographies, we have seen in the past had some of the very high fixed costs and very high employee cost. So -- and Mr. Jim has worked there. So if we can get some sense around that. Are there any like low-hanging fruits which you have seen with your kind of experience and with the setup in India and other things? Will there be any cost benefits which you can bring in over there? Any thoughts around that would also be helpful.

Jim, any thoughts on the cost optimizations that we could do, and then I'll probably add on a few more points.

Yes. I'd say, firstly, the acquisition is related to growth more so than squeezing synergies and cost. That said, because of the complementary nature of the businesses, whether it's the manufacturing footprint or the customer points of call and the markets served, there is rather minimal overlap for the direct resources. But I would say in risk of speaking on behalf of Kongsberg, Kongsberg's portfolio is very complex. And as a result, their corporate overhead structures were very different from Suprajit's. And the focus that Suprajit has within cables, will enable us to have a leaner organizational structure at Kongsberg. Additional synergies, I think, can be extracted, as Mohan had mentioned. We will certainly have the opportunity to optimize operational processes and apply best practices between the groups. And we'll also be able to find some opportunities to leverage our spend and commonize our products. So there will be indeed some opportunities for cost improvement. But I think the more important elements of this acquisition are growth.

Yes. Thank you, Jim. And Resham, I think, just to again add on to here, what we have really been doing so far was made in India and distributed in the world. You know what's happening in the supply chain today. There is a complete disruption. Containers get locked down. We have 20%, 25% of our inventory stuck in some container in some port. Now what this brings to us is that a better and more efficient distribution in the long run because we'll have a local footprint. The fortunate part of this transaction is that all these footprints are in the lower cost countries. It is not manufacturing in Germany or manufactured in the U.S. We only have engineering support, warehousing in these places, high-cost places and they're manufactured at local, low-cost countries. So geographically, we are now having a footprint of manufacturing, which gives the comfort also to the customer that not everything is depending upon India. So what is a big manufacturer of automotive is today looking at suppliers who have a perfect footprint. That means they are able to also socially -- locally deliver. I think that's what we're going to give it to them. And because we are working on a low-cost structure, I think generally, the high-cost structure that you would see for out of, let's say, a German or American plants would not come. And then what the point that Jim brought out was clearly compared to Kongsberg, where the overheads are a lot more complex and much more higher, I think Suprajit, as you know very well, we've always been operated on a very lean structure. So I think that helps in bringing additional synergy and cost optimization.

We have next question from the line of Viraj from Securities Investment Management.

Congratulations for the team. It seems like a very good opportunity and platform for us for coming years. I just got 2, 3 questions. If you can just give some color in terms of EMA and LDC mix between -- in the business?

Okay. Akhilesh, do you know the split between EMA and cables.

Yes. The split between EMA and cables, I think we have about 12% to 15% in the EMA system and the rest will be into cables and mechanical system. So I'm not just talking about just cables, but there would be some kind of mechanical system component with it as well. So that would be the split, 12% to 15% in electromechanical actuation.

Okay. Second question is, as you rightly said, the focus is more on the growth part of element. And if you look at our journey and we had the acquisition of Wescon a couple of years back and that gave a footprint into the nonautomotive. But the market there was quite more fragmented and it's being really the first subsegment. So if you were to understand this particular business profile. One is, how is the landscape in terms of competition intensity. So what will be our position in automotive? Would it be concentrated in, say, 2, 3 larger customers? Is it concentrated in a particular market segment, say, PV or heavy-duty or light-duty vehicles. And then the opportunity is there and so how kind of we are looking at the opportunities for next 3 to 5 years.

I think it's a multiple question, so I'll -- let me try to generalize the answer. I think typically, what we have seen in the diligence is that we -- the customers are normally complementary, excepting 1 or 2 customers, we do not have large common customers, so that helps. But when we're integrating, there is no overlap, number one. Number two, it is interesting that the business the LDC does is more in the seat and seat-related and less in the door and body-related, although they make those cables as well. Whereas it is the other way around with Suprajit. So when you put the 2 things together, our customer base enlarges and our content per car increases. So that is what actually is happening in this. In terms of customers, I think they have -- the customer list is there in the PPT and you also know our customers. Although there are some common customers, the applications for those customers are different. So we have not been competing direct -- of course, there has been some competition from time to time. But we have not been directly competing with each other on a really head-on basis in many of these markets. So that helps to say that we can now leverage that different, different customers, more cables. For example, LDC is supplying only the seats to Tesla, why not Suprajit supply the door cables or body cables. I mean these are all the possibilities for the future. So I think it brings a lot of synergies in that sense. I don't know whether I answered all your questions, but...

Just 2 follow-ups. One is on the content part. So if I have to understand from the current offerings which we have seat and seating related. And we are more than on the, say, doors the body unit. So how does the content change versus current offering? And second is, as again, say Wescon, where there are so many subsegments in nonautomotive market, would the understanding be right that the sales growth acceleration with us coming in will be much higher, say, in next 3 to 5 years?

It's about business development. Jim, would you like to comment?

Yes. When we look at the portfolio from a product perspective, I think in many ways, the product itself is secondary to maybe the services and the locations for distribution and manufacture. We see things in the marketplace like the trade barriers and the logistics challenges that was mentioned by Ajit, that within the footprint and the services themselves for the products become a dimension that we'll be able to offer people in a much greater sense. If we take automotive and you start to segment it, then you do look at body cables, you do look at seating cables and you have some specialty applications inclusive of things like sunroof. And within the portfolio of cables, there's elements of LDC that they will be bringing to us that we don't currently participate in. Some of them include some of the systems whether that be the electromechanical systems, whereby a motor and a gear train and multiple cables can provide seating a unique functionality or if it's in the systems such as with steel, whereby there's handles and molding and triggers and electronic switches that come together in a subsystem. So the growth opportunities in cables are rather complex in terms of the opportunities themselves because of the nature of the applications. But what the acquisition does is it provides us a breadth and scope and diversity of customer base and geography to combine the services and the products into unique solutions for our customers that many of the competitors really won't have the same footprint or overall capabilities to provide. Is that helpful? Does that answer the question?

Yes, that's really elaborate. One follow-up, if I can. So the kind of gaps which we have in the sense that, say for body-related or for door handles related product segments, do we need to make any investments from our end in that business to meet that requirement going forward for those geographies? Or the existing capacity...

As you know, the capacities are in place. I think currently, LDC is doing, I don't know, 55% of the capacity or something like that. So there is -- enough capacities are there. What happens whenever a new product is developed, Viraj, is that the tooling developments are the one that take some investment. Typically, many a times or most of the times, these toolings are also paid for by the customers. So when the capacity of, let's say, lines and space and equipment are existing, I think the increasing the capacity, there would be -- I'm sure there would be some kind of capacity in terms of cost. But I think most of the time, it is the component developments and the tooling and things like that, which also is paid for by the customer. So I would say, generally, cables are, as you have seen in Suprajit, are not high-intensity CapEx projects. They're lighter. Some of them are also transferable to the customers.

We have next question from the line of Sreemant Dudhoria, an investor.

I'm just trying to understand this transaction better. To Deepak's earlier question on the EBITDA margin and the historical EBITDA margin, ideally would have liked to see the pro forma financials of this specific segment. The reason why we're asking is because the interiors division, which Kongsberg's reports was the listed entity, the margin of that division has never crossed 10% in the recent past, at least in the last 3 years. So is it fair to assume that even this division under that segment was making similar sort of margins about 6% to 7%?

I don't know the interiors overall margin, but you must realize that this was a smaller part of the interior. And generally, it has been making 10% margin, let's say, plus/minus a couple of percentage points. This is carved-out business. So to some extent, we know what the cable margins are in business with the similar products that we also make. So our own assessment is also that the double-digit margin is certainly possible in this business.

All right. And for the execution of the order book, which this division has, how important is the availability of semiconductor chips? Because in the recent quarters, the performance of this division of Kongsberg has not been so great and the rational being said that the shortage of semiconductor chips.

I'll again put the question to Jim. But I don't think we have a -- we have -- in our production, we have much of a semiconductor issues, but our customer has. So Jim, anything to comment?

Within the product portfolio in EMA, there are some what would be called smart motor systems that rely on a chip. And there is some risks and turbulence, obviously, with everybody involved in that. But I'd say the greatest issue is indirect with the OEMs themselves, and the demand constraints that they themselves have for chips not directly to this business.

Okay. And 1 last question, if I could check. As per the press release which Kongsberg has shared and the rational for the sale of this business is, they wanted to execute this as part of the shift gear transformation, which we're undertaking and be ready for the future proof product portfolio. So out of curiosity, just checking, why was this division not a future proof product portfolio given the various discussions that the automotive industry is currently facing.

I will answer. Because, first of all, I think to give you a larger perspective, this cable division, it was not -- never a part of the core product of Kongsberg. It just happened to come because they did this transaction in 2007 with Teleflex, where the automotive division was sold off to Kongsberg. So they have this as a part of that transaction, and it never got the attention it required because they were focusing on all of their other products, which was what their focus was. So this sort of was, how do I say, kind of a trying baby for multiple years, and that's why this business never grew under them. So I think it is just that they decided there's no point in doing the half attention to a division. It's better to sell it off and refocus on their business. Whereas for people like us with the kind of footprint that they have, we could have never created it ourselves and the customer profile that they have along with the engineering strength. So it's a question of -- for them, it probably was not core competence, whereas Suprajit's core competence is cables. And that's where we have been doing so well. So it's just a question of priorities for the organization. Being a listed company, they also had their own requirements of funds. If you see their balance sheet, you'll understand why they would have required funds. So I would leave it there.

Great. Sir. Lastly, does the products like fuel filler cables have this from EVs?

Sorry?

Products like fuel filler cables, like which you have 1 mentioned in your presentation, would that have?

I can't hear you.

He's asking if the fuel filler cables is concerned when EV cars come in.

Akhilesh, you can answer it. You know the answer also I think.

Yes. I mean, look, in general, the EV in the passenger vehicle segment, there's no real concern for the cable and cable systems. And this is a good example that you bring up a fuel lid. You may think that a fuel lid cable will no longer be there in an electric vehicle. But to plug in your charger, you still need something to open. And in fact, we have within Suprajit and I'm sure within LDC business, those sort of cable systems that are coming in for EVs.

We have next question from the line of Nikhil Kale from Axis Capital.

Congratulations on the transaction, on the deal. My first question was on the EMA side. I think talked about that's a good opportunity. Can you just provide some more color on this? Maybe what is the content of EMA in some of the higher-end cars today globally? What could be the opportunity size? And generally, I think you spoke about content increase. So can you provide some data on what was the content today in, say, for some of our European customers? And because of this acquisition, what could that content be going ahead?

I think, all I would say that, currently, I think, only about 15% of the LDC business is in EMA. I think to give a little higher color on what exactly EMA does, I'll probably again passs the question to Jim. Maybe he can give some more color to this.

Yes. The EMA product is primarily geared towards the seating applications and where actuators are difficult to package within a seat, particularly for larger vehicles, second and third row seating. The electromechanical devices or motors with gear trains and then pulled cables, and they are capable of sequencing and pulling multiple cables fourfold and tumble and stove. So as people are looking for more and more functionality in their vehicles or the larger vehicles with second and third row applications, the EMA has its primary home there.

Any data on what would be the average content in dollars or something like that.

In terms of value is it? Jim do you have any idea on how much -- I mean, they will certainly vary from application to application. But the total value per [indiscernible] much as in cable because this will have a cable mechanical actuator -- I mean, electromechanical actuator. So the cost of the actuator itself also is higher. So total content increases. But do you have a number for this, Jim?

I don't have a specific number to give. It's fairly complex because it could be as much as a motor and a cable or it could be as many as 6 cables and the gear trains there for the change in complexity. So it's a mix that I would be reluctant to try to provide a specific value to.

We have next question from the line of Chirag Shah.

Vikram, I think, we will take 2 more calls. After Chirag, maybe 1 more call, please. We have got a hard stop. We'll take Chirag's questions and then maybe 1 more person. Then I think we will let go.

I have 2, 3 questions, actually, and some clarifications actually. First sir, you mentioned we are strong in body of door cable and CB and fitting cables. Now why are we not necessarily strong in fitting cables. First is that question. At least for India perspective, we should be there at all places, right, given our market size and...

Hello, in India, we are with everybody. I'm talking about the global scene. What happens in the global scene is that the customers, the Lears of the world, the Adients of the world or Magnas of the world have been working with the LDC much more stronger on the seating systems. So that entry barrier was there for us. Now that entry barrier goes because they have become part of it. That's how it is. Whereas we had a strong presence with the guys who are making the door panels, et cetera, et cetera. And that's where we score and the LDC is not having such a presence.

So across leveraging to our existing customers like BM or GM, will you assume it will be 3- to 4-year cycle because you will approach them and they will approve it. And at least 3-year cycle it will take or if it is a much shorter cycle?

No. If -- I mean the point is that whenever the new -- I'll probably ask Mohan to answer how a new product launch happens and how they take the custom -- I mean suppliers in terms of assessment. So probably he will give you a color on this. Mohan?

Basically, in automotive industry, everything goes on platforms. So once the platform is getting refreshed or being launched, you get on to the platform and then you serve the entire platform. So I would put it this way. It gives us an access directly to a platform through this acquisition. So if we don't have any content on the platform. If we already have a content on the platform, it adds to the content of the platform. In terms of getting on to a new platform, it's a totally new business win, which as a normal part of the business, be it as LDC or [indiscernible].

We take the last question from the line of Amit Hiranandani from SMIFS Limited.

Congratulations to the whole Suprajit team for this acquisition. I have some data question. Just wanted to -- we are getting some additional 106 million of cables capacity for Kongsberg. So how many cables Kongsberg manufactured and sold in the last 2 years? And secondly, on the margin side of Kongsberg, how we are planning to include the financials of Kongsberg, especially on the margins? And do you expect the consolidated EBITDA margin will slightly come down post this acquisition?

In terms of the last 2 years, as I know from the diligence, I think they are utilizing around 55%, 60% of their capacity. So that means there's still capacity available to increase the value -- I mean, volume of that. What was the second part of the question, sorry, I just missed that.

I just wanted to understand the margin side, how we are planning to improve the margin?

Improve the margin. I think we have answered in a way, let me toss this question to Mohan again to probably give another perspective in terms of margin improvements, if at all?

Basically, when we talk about margins, fundamentally, it is what can you do with your material cost, what can you do with your labor cost and what you can do with your overheads. Let's -- I'm trying to simplify the whole complex situation. Now like Jim has already answered the, the overheads part is pretty easy to understand and explain. With the complex overheads that Kongsberg has, which gets replaced by our, I would say, frugal management style that we have at Suprajit, to a great extent, it is going to reduce the overheads portion. Now when it comes to the labor, you know that these are all in the low-cost countries. Now beyond this, what productivity improvements can be done is an ongoing process. Now there could definitely be exchange of ideas between the legacy Suprajit business, where Suprajit business can learn from K, at the same time, K can also learn from Suprajit. This is going to be a very typical manufacturing scene where you do Kaizen's and you keep improving things. Therefore, productivity improvements can be done. Vis-a-vis the material cost, it is going to be very, very interesting. As we get more deep into it, I think we will be able to discover where are those synergies, and can we operate on those synergies, and leverage to reduce our total material costs. So obviously, as a manufacturing output and an organization, it would be our constant endeavor to ensure that maximum value is produced by minimizing our cost.

Ladies and gentlemen, that was the last question. I would now like to hand the conference over to Mr. Ajith Kumar Rai for closing comments. Over to you, sir.

Thank you all for participating and asking the questions regarding this transaction. As I said earlier, this is transformational for us. This is going to make Suprajit truly a global name in cables, if not #1, we'll certainly #2 now. I think beyond that, I think, the kind of footprint that we have, both in manufacturing, business development, engineering, warehousing, et cetera, et cetera, and the strength of both the teams -- engineering teams at LDC as well as with us, I think we'll be a formidable cable manufacturer globally, and we'll be able to leverage the scale for the benefit of the customers and improve our own margins over the period of time by understanding the best practices at both the places. So we think that this is going to be a significant value add for Suprajit and it's investors. And I look forward to interacting again with you post the Q2 results, on the results as well as maybe some developments on this. So thank you very much. And at the same time, I would like to thank Anand Rathi for hosting this call, Vijay Sarthy and his team. And thank you very much, Vikram for moderating this discussion. Thank you.

Thank you, sir.

Thank you very much, sir. Thank you, ladies and gentlemen, on behalf of Anand [Audio Gap].