Suprajit Engineering Limited (532509) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Suprajit Engineering Investor Conference Call for acquisition of the business of Stahlschmidt Cable Systems, that is SCS. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mumuksh Mandlesha from Anand Rathi Shares and Stock Brokers. Thank you, and over to you.

Thanks, Yashashree. On behalf of Anand Rathi Shares and Stock Brokers, I welcome all of you to the Suprajit Engineering investor conference call for acquisition of the business of Stahlschmidt Cable Systems, SCS. I thank the management for taking time out for this call. From the management side, we have Mr. Ajith Kumar Rai, the Founder and Chairman; Mr. N.S. Mohan, MD and Group CEO; Mr. Akhilesh Rai, Director and Chief Secretary Officer, and Mr. Medappa Gowda J, CFO and Company Secretary. Request Ajith sir, MD, to give an opening comment, and then we can follow up with the Q&A session. Over to you, sir.

Thank you, Mumuksh, and thank you Anand Rathi for hosting this call. Good morning, everybody, and welcome to this investor call to brief you about the acquisition of SCS. I will give certain basic background of this transaction followed by Mohan who will talk about the transaction perimeter and then Akhilesh will talk about the strategy side of the particular transaction. SCS has a long history, they're a century-old company in Bad Berleburg where they've headquartered since 1924. This happens to be their 100th year. There were basically cable makers in Germany. And they had a phenomenal customer reputation for many, many years now with marquee customers like BMW, Audi, Daimler and many Tier 1 customers, and we always had an interest in SCS, and I had met the family way back maybe 10 years ago. And of course, at the time, they were not interested, and subsequently, they sold the family office called [ Peter Morley ] Trust in 2015. And even at that time, we had met [ Peter Morley ] to see whether they are interested in doing a transaction with us. That was just before the COVID hit. And then eventually, of course, they sold to another private equity called Lafayette in 2023. What has happened in SCS was that to be competitive in the business -- their product has been excellent. Their customer profiles have been very good. But they were not as price competitive out of Germany. So they started moving around in their journey from Germany to Hungary to bring the cost down, then Hungary to Poland to bring the cost down further, then expanded in China to again bring the cost down and eventually to Morocco now in the last 1 year. So what has happened was despite wonderful production localities and customer profile, this multiple moves put them in significant cash crunch situation. And they were not able to manage the cash flows and that's what ended up they having to file for insolvency in Germany. And that's when, again, we got involved. So that's how the whole transaction has happened. It is a very good fit for us, which is what we discussed a little while ago. They have their sales and engineering in Germany. We are shutting down, of course, the Poland plant. Morocco move is now completed. So of course, it has to stabilize in Morocco and that has to be ramped up. And the Canada and China part of it operates independently of Europe. So that's why there are 2 transactions in this -- within this transaction which I think Mohan will explain. So with this brief background, I'll hand over to Mohan to give a little bit about the transaction and acquisition details. Mohan?

Yes. Thank you very much. Very good afternoon, everybody. Like what Mr. Rai said, this had been kind of cooking for quite some time. And finally, when it went into a state of insolvency and the liquidator was announced, we approached the liquidator. Now just to give you a color until now of all the transactions that we have done in terms of acquisition, either it has been an asset deal or it has been a share purchase deal and this is the first time we would be doing a combination of share purchase deal and asset deal. Some of them would go as asset deal, some of them would come as a share purchase deal. The areas involved are Germany, Canada, China, Poland and Morocco. One of the key things that we had to do was -- because this was in a state of liquidation was to understand the interest of the customers because at the end of the day, the customers want a continuity. And we just wanted to know whether the customers are ready to back us up if we are going to put in our base. Therefore, we literally had a smart start of the campaign where we just approached informally. The customers asked them whether it makes sense for Suprajit to kind of step in as a white knight to save the damsel in distress. So with this, when we got a thumps-up and also, we got a very good positive vibes about the company itself, everybody, all these customers told this is a very good company, it's got good technical capabilities, manufacturing facility is very good. And we ourselves visited. So with this, we felt that, yes, it's time to go ahead and move on this. But having said that, one of the key things that we had to do was -- because the company goes into liquidation, we had to novate all the contracts. So when we had to novate all the contracts, we thought it is a good occasion for us to look at these fresh contracts by seeking some sort of a favorable term, so that we have a sustained economic sustainability in this company. So we approached these customers, and I'm very happy to note that after extensive discussions, negotiations with the customers, customers have agreed for price increases and benign terms of payment, et cetera, which has been pretty much favorable to make this successful. We also had to do a similar kind of things with the vendors and also with the employees. Employees, of course, we could not do it directly. We had to go through the insolvency estate, and the liquidator had to do it. So what we are doing in for -- is a workforce reduction in Germany, which is their headquarters. And the smaller team, which is going to be left behind, will be integrating with Suprajit, and the Poland relocation is almost complete, it is at the tail end. So there will be some key employees who will be supporting Morocco because it has all moved to Morocco right now. We think this is going to be a 1-year comprehensive restructuring plan. And one of the key things to do this was to have the management support because while we do have the managerial bandwidth within Suprajit and we are confident, it is always better to rely upon the local management and take them into consideration and confidence and with our firepower add to that and make this happen. And there, the management also supported us. Therefore, the top management is also supporting this entire buyout. To explain it further. This is going to be done in 2 stages of closure. One would be on 1st of July, and that would be Germany, Poland and Morocco, which is basically, I would say, European part of it. The other one is a Canada, China part of it, which would be done in stage 2. Obviously, these 2 have got certain condition precedents attached to it. Therefore, the duration that is needed by both the parties to fulfill those CPs have been taken into consideration to make it into 2 tranches. We have already incorporated the new companies in certain areas, starting from Suprajit Germany GMBH, which has already been established. In terms of what it brings to the table, it is about EUR 50 million revenue and it is going to enhance our global supply chain. I am sure that Akhilesh will talk more about it. We have valued the whole thing at EUR 13.5 million enterprise value. And obviously, the equity value is less the contract is. And in terms of how we are going to fund it, it's also completely through internal accruals and cash on balance sheet. We are not going to increase our debt stock. So we are not going to leverage here. One rider that I want to say here is when the Q&A starts, please understand that we have certain SAPA, share and asset purchase agreement confidentiality. Therefore, our disclosure at this moment would be very limited. Thank you.

Akhilesh?

Thank you, Chairman. Regarding the strategy, I first will just give you a brief overview of what our customers expect. So when you look at our customers, they have multiple requirements. One is onshore requirement and next is a nearshore requirement and third is what we call a far-shore requirement. This all depends on the type of path and the type of complexity of those paths, the type of demand for that customer's product and the kind of volume that that customer has. Finally, it also is very important, different customers have different risk profiles. So some customers don't want to take supply chain risk of the Red Sea, long supply chain, and for many of these reasons, there are multiple customers of different strategies of onshoring, nearshoring and far-shoring. If you look at Suprajit today, especially our U.S. business now has all the 3 elements covered. We have onshore operations at Wescon in Kansas. We have 2 plants in Mexico, which is a nearshore operation. And finally, currently, the India plant, which -- the 2 India plants which export from India, which is a far-shore location. However, in Europe, till today, we only had the Siofok, Hungary location, which was an onshore location and India, which is an offshore -- far-shore location. So when this acquisition came out, the key location of Morocco, which is very much a nearshore location was a very key reasoning behind this transaction. If you look at Morocco, they are only 2 hours away from the European mainland. This plant that we are acquiring is also part of reduced tariff trade zone between Europe and with better terms and conditions between trading with the European Mainland. And also, this location in Morocco is just 6, 7 days from the U.S. So it's a very good strategic location and it also has people costs, which are lower than China, although still higher than India. So it is a good kind of a middle location for Suprajit at the nearshore locations. We also get with this transaction a key team in Germany of sales and engineering. This is something that till today, we've had a good Detroit -- strong Detroit office in sales and engineering. We didn't have an equivalent German team. And even though we had significant sales with German customers, this brings that strong German team, which will help grow Suprajit within these current products and in future products. Lastly, when it comes to the China side of the project, I think we have -- till today, Shanghai Lonestar, our current China operation, is only supplies domestically in China. There is no exports, no other source of revenue. And there, the current SCS China plant, which is quite close by about 2, 3 hours from our current China plant, exports completely -- completely exports all their products to Canada and from Canada with some value add is brought into the U.S. So it's a very complementary supply chain. Another very important thing that SCS comes with is like Chairman and Mohan said, very strong customer support. It is very difficult for us to win business in the past from SCS. And in fact, SCS itself has not sent a lot of the business from Europe to China. Most of the business in Europe still stayed within Mainland Europe, with all the kind of customer stickiness to have a European location. So SCS with their significant business in Europe also brings a lot of scale of purchasing within Europe. Hungary till today was a very small operation. But with the support of the purchasing power of SCS Morocco from European suppliers, there'll be a lot more scope in the future to consolidate. SCS Morocco also has in-house injection molding, which will allow us a lot more flexibility in the future, which we didn't have at Hungary till today. In fact, in a parallel situation when we took over the Matamoros plant from Kongsberg, we shifted a significant amount of injection molding from our U.S. suppliers to our own in-house injection molding team. And that has significant savings. And I'm sure similar things can happen as we go forward with Morocco. From our side, of course, we bring a lot of focus -- global focus on cable. We're also going to be working with these similar customers and a lot of the actuators that we're already selling in the U.S. This gives us a good team to sell those higher-value products and good relationships with those customers close by. And finally, we give the flexibility to our customers regardless of whether they want onshore, nearshore, far-shore, whether their platforms are in different continents, wherever they are, we can support them and we become one of the key global suppliers and probably one of the few suppliers that have this kind of global footprint. So with that, I'll hand it back to Chairman for any further questions.

Thank you, Akhilesh and Mohan. Just to sum it up, I think this transaction has happened with the customers' blessing. As Akhilesh said, we get in way a perfect footprint on onshoring, nearshoring and low-cost far-shoring. One of the success of Suprajit has been that to have the front end in the respective area of operation and a good manufacturing base elsewhere. And here, we do have a good team at Tamworth in U.K., but in Germany to have a good sales and engineering team will add significant strength to our front ending that will support to get larger businesses for any of these plants within the group. Tangier, where it's a very -- I think the sixth largest port in the world is just 2 hours from Europe and it takes 6 hours from U.S. and our plant is in Tangier. So very strategic positioning, and it is a low-cost destination in terms of manufacturing. So last but not the least is the consolidation of suppliers in cable business. I think one of the strengths that we'll achieve with this is getting that much needed strength as the leading cable manufacturer and have some strength in terms of giving value for money at a reasonable price for the customer. I think that is what is evolving in this process, which will help us in the long term to get larger businesses at reasonable prices. So we believe it's a strong win-win situation for us. And this, of course, there's a year or two's work is there. One would ask, of course, why now and things like that, but such things happen when it happens. I mean we didn't expect it to go into insolvency, and we have been looking at this asset for a while. So we had to get in and get this. So it has been a good transaction. There's some more work to be done as we have just said. With that, I'll give it back to the moderator. And just to say that just we're restricting to maybe, another 15, 20 minutes of questions, being just focused on this transaction. As Mohan said, we have certain confidentiality issues due to SAPA. So there may be certain questions we may not be able to answer at this moment, but we'll certainly answer in due course. So with that, I'll give it back to moderator to see -- to make a list of questions. Thank you.

[Operator Instructions] We'll take our first question from the line of Amit Hiranandani from SMIFS Limited.

Many congratulations to the team for this attractively priced acquisition. Sir, my first question is basically, when this acquisition is going to complete and by when financials will get merged with Suprajit's consolidated statements. Secondly, just for the clarification purpose, in the press release, it's written that Suprajit will pay the debt of SCS. So I want to understand the actual cash outflow from Suprajit's book to acquire this entity.

See, in terms of financial closure, I think the first tranche will be closed on the 1st of July, subject to certain condition precedents that needs to be completed. Second tranche will be a couple of -- 2, 3 months post that to make sure that the other part of the transaction that is Canada and China is finalized and all the condition precedents are met. So it's a 2-tranche transaction. In terms of consolidation, from the moment we consolidated the -- start -- operating the first tranche that is from 1st of July, that part will be consolidated. The idea is that at least for this year, for the first -- the 3 quarters where we'll report, we'll report about this data at least 3 to 4 quarters separately, so that the investors will understand what's happening in the new acquisition. End of the year, we'll take a call whether we'll continue for another year of separate disclosure or we'll consolidate with Suprajit's Controls Division. In terms of the other point that you raised, I think EUR 13.5 million is the enterprise value. The equity value will be less, not more. There is no separate debt additions. So total enterprise value is EUR 13.5 million. And of course, it will be fully funded internally. We are not borrowing anything.

Great. And sir, can you help me with the SCS financials?

We have certain confidentiality at this moment. All I can talk about is historic. The fact that we are interested in this transaction for almost 10 years simply means that they had fairly decent financials in the past. They had, of course, gone through a difficult time during COVID. And then again, they started moving around to Poland, in China and in to Morocco. So last couple of years have been not exciting, but the asset has been good. Now that everything has fallen into place, I think even next, say, 3 or 4 quarters of consolidation and some investments, I think it will be back to a reasonable health. So only when we are in the full saddle, I think we'll be able to say more, maybe during the call on the first quarter results, we'll have more updates. I think till such time due to certain confidentiality, I'm not able to reveal the actual working numbers at this moment.

Sir, at least if you can tell this is EBITDA positive SCS?

Please understand, last 2 years, they have been moving around. The fact that they've gone into insolvency means that they had trouble, right? So that's the answer. But then that is because of the multiple cost they had. You move around from Morocco to say, sorry, from Poland to Morocco, you're running operation in Poland, also running operations in Morocco. Obviously, you're running 2 operations at the same time. So these kinds of costs are all one-offs. So it is very difficult to talk about operational numbers at this moment. All we know is that -- we know what is their operational cost going to be in Morocco, what is going to be the, let's say, material cost in Morocco. We have an intern working. But at this moment, we do not want to talk about it. All I would say is that given a couple of years' time, it will have a global auto components kind of number with it. That's all I can say.

Understood. But sir, what will be the approx one-off cost for this restructuring for the next 1 year? And presently...

Amit, these are the things we will know. This has been bought from an insolvency. So quite a few things are known. Quite a few things are unknown. I would say there will be additional investment that we may have to do, maybe let's say up to EUR 5 million to make sure it turns around. We don't see anything beyond that at this moment. But I may be off by EUR 1 million here or there.

We have a next question from the line of Viraj from SiMPL.

There's a couple of questions. First is, what is the current debt level of the entity? And what are the conditions preceding? [Technical Difficulty]

Mr. Viraj?

Hello.

Yes, we can hear you.

Yes. Yes. Can you hear me now?

Yes, I can hear.

Yes. So just two, three questions. One is on the entity SCS, what is the current debt levels? And what are the condition precedents when you talk about Phase 1 and Phase 2 for the acquisition to go through? Second is, are there any other statutory deals or social security related contributions or payout, which will need to be addressed? And third is, if you can just give the sales number for CY '23 and the number of employees and the employee costs in '23?

See, there is a significant restructuring in people. So the employee cost of the past has gotten no relation to us. So there is going to be a reduction in people. In terms of the debt, that's why they went into the insolvency. So it is up to the insolvency administrator to negotiate. We are giving them an enterprise value. So that's it, that -- whatever comes to us will be reduced from the enterprise value, right? So the IA, insolvency administrator, will deal with the creditors and settle them. So we have nothing to worry about that part of it. So what will inherit will be a known debt. So to that extent, the equity value is reduced. So that is the condition. And in terms of numbers, I think last year, I think they did about EUR 50-plus million actually in sales. What are the other question?

So there are 2 questions, sir, other 2. One is on employee. I understand in the future, it will change. But as we speak today, what will be the employee...

It is not relevant to us, as you know. Current employee cost have no relevance.

What is the number of employees or the employee costs?

Number of employees, okay, yes. I think together, when we have it, it will be 1,000-plus between -- when everything is done between Morocco, in Germany, China and Canada, we'll have 1,000-plus employees.

And this is pre-restructuring, right?

Even post restructuring, that number will be there, yes.

Okay. And on the social security contributions or payouts or any other dispute or dues which are pending, other than...

We don't see any challenges there. If it is there, it will be all the part of the transaction. It will be all the part of the enterprise value.

Understood. Okay. Just can I ask one more question? I think in the website, they talk about also having a presence in industrial business.

In what?

So on the website, they also talk about the industrial cable. So they cater to a lot of industrial applications.

Okay.

Is it sizeable enough or?

Akhilesh, do you have some idea on their industrial side of it?

Yes. They do have, let's say, industrial and consumer goods related customers. But I think that is a much -- that is not a material part of their business, less than 5% as far as...

Yes, they're mostly into light-duty cables for the automotive.

We have our next question from the line of Nikhil Kale from Invesco.

Congrats, I think deal seems to be quite attractive. I think I had just one question in terms of, I think, the customers, the customers for this company, are they -- I mean, are there any new customers that you are adding? Or is it predominantly existing customers that these guys were also supplying to? And similarly, in terms of the products also, right? Are there any new additional products that we are getting into or getting access to? So just wanted to understand on that front.

Akhilesh -- sorry, Mohan, will you answer the general customer profile and the product profile maybe?

Yes, most of the big -- if I analyze it from a top 5 customers or top 6 customers that I have met there, except for 1 customer, all other customers have been our customers. Therefore, we were able to get a kind of a good cooperation from them. Out of the 5 customers, one of the customers we acquired actually very recently. So I would say out of the 6 customers, very easily 4 customers are common customers. One is a customer that we acquired recently, and one customer is a completely new customer, which is coming on our customer base. Moving on to the product profile, product profile by and large, I would say, 95%, 98% matches what we are doing. There are some unique cables that they are doing, which we aren't, but it is not very significant.

In essence, what happens is -- okay, go ahead, Akhilesh you're saying…

I would just add that even though the customers were very often, I mean, like Mohan said, very common, the amount of business that Suprajit had with these customers very, very significantly. So for example, their top German OEM customer is our top German OEM customer. But then if you go down the line, their second biggest customer has almost no business with Suprajit. I mean it is some small amount of business that we do with them globally, but it's their second largest customer. So I think from that perspective, there is quite a bit of difference where we'll be gaining a lot of market share and customers that we didn't have earlier and, of course, a few new -- completely new customers. On the product side, again, I think like Mohan said, the product is the same. We're selling cables, control cables, Bowden cables, but if you look at what SCS ends up winning business in, it is usually cables, which have a lot more content that in terms of volume content, which needs to be done nearshore or onshore. So that you can also see the slight difference in the type of products that they have. But overall, it is finally the same product as us.

I think what's key issue here is that between Suprajit and the SCS, we will emerge as certainly the leader in Europe with an option to customer for onshoring, and I'm talking about a long-term strategy in Hungary, nearshoring in Morocco or low cost either in India or in China. I think that's the key in this transaction. So that's up to the customer to decide what they want. So we are giving that flexibility to customers. And customers like that idea. And that's why some of these key customers, I think the largest customer wholeheartedly has welcomed us to take this assets over with their full support as well through this negotiation with insolvency administrator.

We have a next question from the line of Mumuksh Mandlesha from Anand Rathi Share and Stock Brokers.

Yes. Sir, I just want to understand how is the revenue breakup between the Europe and U.S. as we are doing 2 separate part transition, sir?

I think this is a rough thing now, EUR 50 million, I think about EUR 35 million is out of Europe operations and about EUR 15 million from China, Canada, I think.

Okay. And sir, when you say light-duty cable, it would be mainly the car segment, right, 4-wheeler segment?

Yes, yes. Mostly in the passenger vehicle, yes.

Got it. Is it possible to share any details on the net worth gross block for this business, sir?

At this moment, no, Mumuksh, because again, we are in the process of finally closing the deal. So I'm sure during the first quarter, the results, we'll have a little more data and color on such numbers actually. We know it, but we are not allowed to disclose at this moment.

Okay. Understood, sir. Just lastly, sir, we are expecting growing double digit across the divisions. Post this acquisition, over medium to long term, how do you see our prospects change, sir? Will the pace of the growth increase with the stronger hold on the business globally, sir?

I think in principle, I would like to say that the consolidation helps the supplier and also the customer to have these smaller suppliers not being able to survive the system. And obviously, those businesses will come to the more stronger hands and value for money suppliers like us. So that's exactly why we said we are growing. We will grow at 10% is simply because we think we are a stronger player in the business today, although the market is not growing at 10%. Once this comes and consolidate that, that will further strengthen. Our outlook is for this year. Once we assimilate this and does quite a bit of the initial integration part in a year's time, I think we'll be able to get a clearer picture of what could be the traction that would exclusively come from this transaction. The amount of enthusiasm shown by the customers clearly state that that would be positive. But the exact numbers, probably in a year's down the line, we will get to know.

Right. Just lastly, sir, in first year, it would be [indiscernible] negative impact...

Sorry, I'm missing you on the question. Can you repeat?

Yes, yes. So on the first year operation because restructuring that will go at least first year would be negative, sir, in terms of profit wise, sir?

I don't want to give a prediction on this. Yes, initially, they are going through a lot of process of consolidation from Poland to Morocco, that's still ongoing. I think another 3 months will be there just to complete that completely and at least start having a foot on the ground in Morocco. So obviously, that quarter may be not -- will be a very tough quarter. Then we'll see how the numbers is. As I said, probably in the first quarter, we will have a slightly better understanding of it. That's why we also said that there will be about maybe EUR 4 million or EUR 5 million of additional expenditure that we may have to do to complete this transaction. So that is something that short term for us is not really the issue. We look at it how it brings value to us over the medium term in a year or 2. I think that is very exciting.

We have a next question from the line of Jinal Sheth from Awriga Capital Advisors.

Congratulations to the team. And as Mr. Rai mentioned that you guys have been looking at this asset for the last 10 years and you managed to get it, so kudos to that. So coming to the question. So post SCS and LDC acquisitions, how much would our exposure to the Chinese OEM be from our China plant?

You are talking about -- between the 2, what will be our exposure to China? Is it?

Yes, yes.

Akhilesh, you have...

Are you talking about Chinese OEMs? Or what exactly?

Yes. Chinese OEMs.

I would say -- I mean, of course, the Shanghai Lonestar plant of LDC was supplying completely to OEMs in China, either directly or indirectly. So that full revenue goes to Chinese OEMs. But then the question is do you consider BMW and VW in Chinese OEM or you're specifically looking at BYD and all these other kind of local OEMs? When we look at local OEMs, probably the exposure is not very -- not as high as you would like to be, but I think now through our Lonestar team, we've been getting a lot more inquiries and interest. I think there are a few OEMs we're already supplying to in China, but definitely not a large number of OEMs. So I think companies like Greatwall and NEO and stuff are current customers, but we're working on some of the bigger ones as we speak.

So just to add, basically, this -- the SCS plant is basically exporting out of China to U.S. via Canada, whereas the Lonestar is basically supplying to domestic. Eventually -- so we will have 2 operations where 1 will be focused on domestic. And domestic OEM, by that, I mean, whether it is MNCs in China or otherwise. One will be for exports. So that's how this will -- it will not be conflicting operations, to say the least.

Okay, great. And my second question is, post SCS, does our capability to provide solutions go up, that is supply cables plus actuators versus cables only?

Certainly, I think one of the things that SCS is not doing is actuator. And we have that strength within our FTD and also the India team now. So obviously, they will be able to offer to their customers and we together can present to customers not only the actuation capabilities but also the STC products to their customers. So I think the fact that we have a strong engineering and development team out of Germany, they together with our Detroit team and also our STC here can not only work on larger contracts of cables but also actuation on some of the newer technologies, which we can present to customers.

We have a next question from the line of Gokul Maheshwari from Awriga Capital Advisors.

So just one question. Just on the -- during the LDC acquisition, we had certain [indiscernible] contracts, site contracts, et cetera. Anything which comes along in this, or I think in the opening comments, you said that they have been sort of renegotiated with the existing customers?

I think what we have done with the customers is that first, we ask them whether they have their blessing to -- I mean, not every customer, I mean we cannot go to all of them. But as Mohan said, top 5 customers, we did approach and say that, we have an interest, do they have an interest in Suprajit to go through with this? And they have accepted wholeheartedly and supported us. And as Mohan said, we have been able to do certain renegotiations on prices as well as payment terms, which is favorable. So unlike actually LDC transaction, which came as a black box, here, we are going clearly with what kind of pricing and what kind of payment terms with the customer. So that would be a positive in this transaction.

Great. And from a scale of plant firstly, Mexico plant, probably perhaps our largest plant, where would the China plant and the Morocco plant of SCS pertain in terms of their scalability or in terms of their ability to scale up over the next few years? Or are they adequately utilized? I understand the Morocco is still a new plant, but in terms of the capabilities, size-wise, are they underutilized or adequacy utilized?

As I know, I think just to give a general color to everybody, I think once this confirmation of this entire transaction happens, Matamoros, Morocco, India, Suprajit Automotive and China's SCS plant would be the largest plant of the group in terms of size. And as I know, both Morocco and China are underutilized at the moment. So we should be able to scale up if required. And certainly, in the Matamoros, we have got significantly more capacity that we can increase as and when we receive more orders. Of course, in Bangalore also in SAL, we are getting significant new contracts. The thing is filling up. For the next couple of years, we are fine. But as you said, we are already looking at opportunities as to how we should expand the capacity of Suprajit Automotive in Bangalore. We'll take 1 last question. We like to close it by -- if there's more than one on the line now, we'll take both the questions. Two questions more, please.

We'll take the next question from the line of Satish Karan, an individual investor.

Hello. Am I audible?

Yes, you are.

Yes. First of all, congratulations for your acquisition, I've been seeing the Suprajit growth since many years. Almost every year, there is an acquisition and a commensurate growth. Now top line, you mentioned about EUR 50 million. So going forward, once all the process is complete, will it be EPS accretive this acquisition?

Yes. Thank you, Satish, for the kind words. Certainly, I mean, we wouldn't be doing an acquisition unless there is an EPS accretive nature and the value for money for us. It's the value of the asset and also how it creates shareholder value in terms of EPS. Over the period of 2 years, I think this would be a pretty good asset for us, where it would generate cash and certainly will be EPS accretive.

We'll take a last question from the line of Ravi Purohit from Securities Investment Management.

Most of my questions have been answered. Just 1 question, Mr. Rai. When we look at the acquisition that we did with Kongsberg, right, the LDC acquisition of Kongsberg. There, we were really acquiring technology, new products and new platforms in terms of actuation systems, right, which we lapped in the past as Suprajit as an organization. But this time, it's purely a cable manufacturing. So would it be fair to say that last time the acquisition was actually on technology and capabilities, but this time, it's more of acquiring market share?

In a sense, yes, but in the LDC, please understand, we also didn't have a China operation. The China operation came into picture with the LDC along with the actuation technology, which we didn't have. So there were both sides to it that it helped us to increase our supply chain footprint, the LDC did. Whereas what this did is certainly increased the wallet share of customers has happened through this transaction. And it actually fitted us very well with the nearshoring opportunity at Morocco, whereas in that -- so far, we had Mexico for U.S. and India was doing far-shoring and low cost. And Hungary was onshore, and it was -- obviously, it's more expensive. So now Morocco fits that gap very well, too. And Tangier port is a very dynamic port, as I said, 2 hours to Europe and maybe 6 to 8 hours to U.S. So it's also -- we are getting away from all these Red Sea, Suez channel issues, right? So there are multiple dimensions to the whole thing. In essence, you are right, but there is more to it actually. Thank you, Ravi, and thank you all for your continued interest in Suprajit. We appreciate your patient hearing. I'm sure during the first quarterly number, we'll have more updates on this transaction. And I would like to thank Anand Rathi for hosting this, Mumuksh and team, and thank you all for participating in this call. Thank you, and goodbye.

Thank you, members of the management team. On behalf of Anand Rathi Shares and Stock Brokers, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.