Arman Financial Q4FY18 Concall Summary

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Financial highlights

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  • AUM grew from 190 crores to 450 crores over last year which is 120% growth y-o-y
  • The growth is attributed to competition vacuum post demonetization and expanded branch network
  • Income from operations increased to 110% previous year Q-o-Q, with two third being from microfinance side, 20% from two-wheeler side and remaining from MSME side
  • Profit this quarter was Rs. 2.43 crores are compared to loss of 74 lakhs for fourth quarter last year
  • Last year was extraordinary due to demonetization effect, but the company has continued to grow at 40% to 50% for last 8 years
  • The NIM have come down from 17.3% in 1QFY2018 to 13.2% in 4QFY2018, the reason being that the companyhas now become almost completely leveraged for its Tier 1 and Tier 2 requirements


  • SAP has invested 50 crores in the form of CCD
  • It will be converted into ordinary equity after 18 months
  • The purpose of this funding is to decrease over all interest cost, better rating from credit rating agency and manage risk

MFI business 

  • Disbursements was 400 crores this category for completeyear
  • Company plans to foray into Rajasthan for MFI operation
  • Company is using aggressive write-off policy to take tax benefits
  • Average loan size in UP is Rs 18000 and 100% of the disbursements are cashless
  • Company is unique in having dedicated recovery staff in those branches where there are recovery problems
  • Next year target will be about 400 crores to 450 crores AUM in this category
  • Collection efficiency post-demonetisation is about 99.42%
  • Operating expense is 8.5%
  • Currently, there is not a lot of pricing pressure in this business, but it is more about timely delivery of funds that is important to customers of this segment
  • Company sees lots of opportunities in UP and hence it is going to open around 20 branches there in next year

Two-Wheeler segment 

  • Disbursements was 484 crores this category for the year
  • Next year’s target would be around Rs 90 crores to Rs 100 crores AUM in this category
  • Operating expense in close to 6% to 6.5%

MSME Segment 

  • Disbursements was 46 crores this category for the year
  • Company plans to start Loan against property product
  • Next year target would be around Rs 100 crores plus another Rs 25 crores to Rs crores from LAP
  • Operating expense is about 10% to 11%
  • The product is priced such as to achieve margin of 3%
  • The target group for this product is people with well-established businesses who are unbanked at the moment


  • Increase in provision was Rs 87 lakhs for standard assets because of increased asset size for this quarter
  • Write-off was Rs 87 lakhs for this quarter


Other Concall Summaries of Arman Financial Services

Cyient Q4FY18 Concall Summary



  • Revenues have grown to $607 million. It is a very strong growth, 12.9% in dollar terms and 11.7% growth in constant currency terms and this would be observed across all the eight business units of the company.
  • The operating profit for the year stood at Rs.594.2 Crores, which is a growth of 13.3% compared to the previous year.
  • The net profit for the year was at Rs.429.6 Crores, a growth of 16.1% over the last year.
  • A final dividend of Rs.4 per share is declared in this quarter, which takes the total dividend for this financial year or the financial year 2017-2018 to Rs.13 per share for the full year.
  • In terms of the cash, Cyient has a good cash of about 10,937 million. This is after paying the dividends at the enhanced payout of about 40% for this year.
  • Cyient  has made 408 million of other income and for the year 1,489.


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  • Revenue is $164.6 million, the highest ever in a single quarter, signifying a growth of 16.8% year-on-year, 8.3% quarter-on-quarter in dollar terms.
  • All the eight based business units have witnessed a similar growth year-on-year basis. The services revenue came up at $142.7 million signifying a strong growth 14.3% in year-on-year term.
  • Operating profit for the quarter stood at Rs.149.2 Crores, which is 19.6% growth on a year-on-year basis.
  • DLM/Design Led Manufacturing witnessed the highest ever-quarterly revenue and the operating margins in the recent years.
  • Net profit for the quarter stood at Rs.121.5 Crores with the growth of 16.2% year-on-year terms over the last financial year.
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Tax Rates

  • The tax rate for the exit quarter is about 25% 
  • With the focus on SEZ, they are looking at the full year benefit of US taxation, so definitely there is good possibility of much reduced tax rate in the next year.

DLM (Design Led Manufacturing)

  • The total pipeline in DLM is about quarter billion dollar, and the adjusted figure will be about 50%, 60% of that.
  • DLM had extraordinary growth in between the two quarters and because of that the working capitals had been consumed, so the free cash flow has been negative, but management is working on generating the free cash flow in case of DLM.


  • Cyient continue to support 25 government schools for education of the underprivileged children.
  • As a part of initiative to increase IT literacy, they have added one more Cyient Digital Learning Center, which now takes the total to 57.
  • Cyient was recently recognized by the Telangana Government for the green initiative wherein 6000 sampling have been planted in our facility.

Business updates 

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  • Cyient is planning to expand their Pune facility to about 100 FTE.


  • On the operation front, Cyient and Bluebird Aero Systems Limited of Israel signed a MoU to address the opportunities in the Indian UAV space and subsequently have entered into a joint venture on April 11, 2018. The joint venture is 51% owned by Cyient and 49% by Bluebird.
  • Bluebird brings 3 technologies: SpyLite, ThunderB, MicroB which are quite unique, and some of the things applications that they can be used in are very relevant for India, for example high attitude or the varied conditions that exists across the country or rather long coastline that we have in the country.
  • Therefore, the JV after the transfer of technology will indigenize, manufacture, integrate, test, support UAV systems and Cyient is in the process of building up a factory for this in Hyderabad with 100 systems a year.
  • The investments will be relatively minimal because the factory for example to produce UAV is quite it is not very capital intense. Payback is quite attractive.


  • Cyient created the initiative called New Business Accelerator (NBA) to facilitate innovations within Cyient to really focus on developing new products service and solution.
  • Cyient are committing this year that is about 100 basis points of revenue or margin, so about $7 million plus will go towards the NBA initiative.
  • $7 million is a combination of opex and capex and some of these will also be quite Capex intensive because how the technology is being developed.
  • There is pretty clear revenue plan because for something to get funded through the NBA there is process that is followed and one of the key elements that the processes or business case wherein management have clear anticipation of what is the revenue that it is going to generate out of particular business.
  • Cyient would see a lot of investments in newer and emerging technologies because the focus is now not just on building a better asset that maintaining it and running it more effectively, which means that people are embedding a lot more in terms of IoT and distributed computing and so on and so forth into the train itself. 
  • The utilities and geospatial market is also seeing some good traction.
  • Aerospace  and defense is expected to grow by 10%.
  • Cyient also became the founding member of Xynteo India, 2022 consortium; this is the government of India initiative to enable affordable medical facility to widest section of the society.
  • Their IRIS certification was extended to comply with ISO TS22163:2017 after its successful audit.
  • In terms of services business, they continue to have a good conversion of about 45%.

Growth in Services

  • There is no particular that is going to stand out. The medical business will grow at a fairly good way just because it is a small business unit, similarly with semiconductors.
  • Although there was a dip in terms of the aerospace customer, but going forward there will be sustaining of revenue because of new opportunities coming up in this area.
  • Services sector order intake for this quarter was a bit soft but forward-looking revenue targets is in place that there is no such decline if looked at full-year and also the overall pipeline is the highest ever and have more than billion dollar of pipeline.
  • Service sector margins is about 16% for next 2 to 3 years which can be moved up by 100 or 200 basis points but then investments have to be cut which are done for FY2020.
  • Cyient is confident with the operational improvements are going to be such that they will improve despite the wage hike, the services margins by 100-basis points and after making the investments, service margin will be flat.


  • There are two buckets into which the investments are going. The one is complete subsystems and the second is emerging technology:
  • There is a lot of work that is being done in machine learning in areas of interest for example the geospatial business machine learning from extrapolating features from a map, etc.
  • Second bucket of investment is developing products where subsystem level or assembly or sports system level and Cyient are able to actually completely design and own a subsystem.
  • Cyient have five customers in transportation unit given that it is concentrated industry and four out of that five grew in double-digit, so that was beneficial.
  • The free cash flow for services business typically targeted about 40% to 50%.
  • After generating the positive EBITDA and then over a period of time, a conversion like 40% of EBITDA to free cash flow in DLM can be achieved.
  • Breakeven is targeted for the next year for DLM, so next year also negative cash flow for DLM can be anticipated.

Cash Flows

  • Cyient have seen very handsome growth in this particular year. They have also seen that year-on-year our DSO has reduced.
  • There is no headwind on capex. There was a slight headwind on the tax this year but not anymore.
  • The impact of the foreign exchange fluctuation on March 31 wherever receivables are restated to the extent of about Rs.20 to Rs.23 Crores. Internally management is not at all worried on free cash flow, they are on the right track, having delivered a good conversion of about 50%.
  • 3 Subscale segments: semiconductor, off-highway and medical
  • Each one of the businesses different strategies; medical is quite bullish on design to build, so Cyient do designing, build manufacturing is a part of it, so which means very strong transaction is being witnessed there.
  • Semiconductor is also in a similar situation. So the semiconductor is also trying to beef up both internally and externally.
  • According to management, Off-highway equipment will be done internally.
  • Both semiconductor and medical especially are very, very important for the long-term growth because those are emerging areas and some very strong traction is witnessed.

Future margin

  • The business is transforming more into design led manufacturing. A lot of onsite centers have been put up in for aerospace as well as other verticals.
  • Now with business moving more to end-to-end, 14% margin would be the new near normal.


Other Concall Summaries of Cyient



Premier Explosives Q4FY18 Concall Summary

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Financial Highlights

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  • The total revenue of the fourth quarter stood at INR 83.28 crores with a reported growth of 15 % from the corresponding quarter in last fiscal year
  • Operating profit of the quarter stood at INR 23 crores which was considerably higher than INR 14.02 crores in the last fiscal year
  • PBT which stood at INR 4.02 crores has slipped from INR 11.89 crores in the last quarter of last fiscal year
  • However total revenue in the whole year saw a jump of 15.5%
  • Consolidated Financial Results
    • The total revenue of the group increased to INR 282.53 crores, outperforming their own estimates
    • PBT and PAT was less than PBT and PAT in the last fiscal year
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  • The costs of labor, power and other raw material has increased by little less than 5% while the selling price of the goods has decreased by 10% thus making it the single most largest factor for dipping margins
  • lso due to higher borrowing the cost of finance has increased by 25%

Cash Utilization

  • The QIP money and the preferential issue money would be mainly utilized as a Capex for raising new buildings

Defence Ammunitions

  • The company has decided to form a JV with next ammunitions
  • JV would equip them with the BMCS technology
  • For importing 30 mm technology a JV with PTL would be formed
  • Company would also add 40 mm to their technology base and they are anticipating to start trials on both the products by the month of August

Capex and Revenue Projections

  • In the fiscal that ended recently the total capex was INR 4.7 crores
  • The CWIP of the firm as of 31st  March, 2018 was INR 15 crores
  • The upcoming projects such as one on Katepalli site would incur INR 50 crores of capex outlay
  • Capex would be on purchasing new machinery and raising new buildings
  • Company is hopeful of producing propellants in the current fiscal year in the new facilities
  • Company is expecting a total jump of  15-20% in the total turnover from the last fiscal year


  • A company named PELNEXT has been already formed and put up on the website as well
  • It is fully a venture project of  Premier explosives and the partnering company has also asked France govt. for granting them permission to enter into this JV
  • Premiere explosives would retain 51% stakes in the JV while the foreign holding would remain at 49%

Major Products

  • In defense category the major sellers would be propellants and chafs and flares
  • They have also developed a new product for the army, and being the only bidder of this product, they are hopeful of getting a huge order from the army
  • The defense products category may account for 50% of the total revenue in the next fiscal year

Upcoming Business Opportunities

  • Company has received enquiry for products that are to be used in highly valuable missile systems of India namely, Pinaka, Brahmos, Astra and MRSAM
  • The insulation material offered by the company for the lining of motors has received a repeat order which is a positive sign for the 


Other Concall Summaries of Premier Explosives

Quick Heal Technologies Q2FY18 Concall Summary

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 Financial highlights

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  • In Q2 the retail sales team focused on efficient selling and managed the credit lines and as a result the cash position of the company has improved by 17.5%.
  •  The EBITDA has improved by about 10.5% and that is a result of multiple measures - the in-sourcing of the software basically instead of third party software using in-house software developed by the R&D.
  •  It can be seen that the EBITDA margin has improved by 6% this point over 600 BPS and EBIT and PBT also have gone up in the same sequence.
  • In the consolidated balance sheet , Cash-in-hand is of the Rs.250 Crores is in the balance sheet which is on account of cash submitted by the company
  • Rs.156 crore is on account of IPO money which has a very specific end use.
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  • Rs.24 Crores is the salary which is to be paid on the first day of the next month.
  • Volume growth and the license growth were around 3%.
  • In September 30, 02017 versus 2016 the working capital has come down and basically on account of debt, the debtors and receivable days went down from 71 to 51.
  • The Company has moved retail platform from primarily credit model to now cash carry model. The margins for the distributors have increased in the process.
  • The Company has in-sources some of the outsource activities using own skills and own software hence drop down cost substantially, which is visible in the direct cost and growth margins have gone up and operating cost have been kept under control.
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Effect of GST

  • After GST implementation, Company started collecting 18% from the customers, but then that has really impacted the pickup by the customers, so 10% to 11% have to be passed to discount to the partners, so that the sale does not get affected.
  • The lower end product is getting more sales, maybe this is because of GST impact.
  • Because of GST, there has been decline in sales, and company was not able to achieve any goal because of that in first quarter.
  • GST hit is more or less being compensated by the ITC, which is expected that will not affect the margin.

New products/offers

  • Company has launched the encryption offering in this quarter, so that gives the opportunity to cross sell this product and offering to all existing and the new customers.
  • Company recently launched Seqrite encryption which is available, which provides tool encryptions this encryption and this will give more opportunity to up sale to existing customers as well as open up those experienced customer.
  • Company is also focusing on HNS products, which was supposed to get released in last quarter, but due to some technical challenges that product is getting delayed by almost six months.
  • In February, Company will be launching a product to scale up to 5000 endpoints and also cloud version, which will help to get into the larger installations.
  • Products in the IoT and the cloud space are basically the product is in alpha stage right now, company is hiring some field trials. There are some hardware glitches that are being sorted out, but is planned to launch in Q4.
  • It is a home networking solution that is primarily for at homes where we have router, this network will definitely help to protect the devices that are connected to the router.
  • Company launched a feature called Safe Pane, which basically indicates if a mobile compromised and that is whole intent of showing to the consumer that while they are doing financial transaction they should be cautious and careful about what is going on the mobile, and company has seen good adoption in this.


  • Gross margin has improved because company has in-sourced a lot of work , company has cut out vendors or have re-negotiated and brought the cost down and much of it is using company’s own tech force and creating solutions, which would replace higher cost external vendors.
  • Company has grown the enterprise and the government sector sale by almost 27% compared to retail.
  • In retail, there is a decline, but when it comes to enterprise there is growth.
  • There has been 20% increase in the number of license sold into the enterprise and the government. Total number of licences sold are 267000.
  • Quick Heal monetizes via adds and the through paid subscription, which is Total Security
  • Mobile business is not growing too much and the management is really thinking on the entire mobile strategy,
  • Company has on boarded a large distributor in Q2 and will give expanded reach into the market and that push will continue to get more Sales and partners in the fold in Q3 and Q4.

Retail vs Enterprise

  • The goal for the government and enterprise business it is about 20% of the overall sales.
  • By two to three years’ time, company is expecting 50% to 50% of retail versus government and enterprise business.
  • In retail, company is focusing on home users as well as home offices and small offices.
  • Retail is going to have slower growth for sure because of the reduction in the laptop and desktops adoption.
  • Management wants to focus on the enterprise because the market, total addressable market is much bigger.
  • Just at a structure level there is a 3% to 4% growth on the retail business and round about 25% on enterprise and government, which has just turned about 10% of the total business.

Mobile business

  • The mobile business is 1%-2% of the total retail sales.
  • Company have stopped over 200 million Malware infections across Quick Heal users and the highest infection month being the month of July.
  • By having the good focus on acquisition, retention, and monetization, the company hopes to get more traction in mobile security.
  • Quick Heal Security Labs detected nine new Ransomware infections in this quarter with around thousands of more variant and on the mobile front the detection of Androidware in Q2 rose 40% in comparison with that of Q1, so potentially unwanted applications grew by more than 200%.
  • Monetization on the mobile happens to through advertisement in products where subscription is offered for free
  • Threat vector on mobile is not as strong, so the tool for customers from mobile security perspective is still not strong.


Quick Heal Technologies Q3FY18 Concall Summary

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Financial Highlights:

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  • There has been continued and steady growth in the revenue driven by a strong uptick of retail products by partner communities and following the stabilisation of GST.
  • Comparing Q3FY18 to Q3FY17, as seasonal comparison, it shows that revenue growth is of 18%. 
  • Growth in Seqrite brand for enterprise and government is 37% Q3-to-Q3, which is substantial, and retail, which was 7% up over the same period of last year. 
  • License in sales increased for retail in volume terms is higher than revenue, i.e. there is stabilization at the middle end for the product. 
  • On other hand, enterprise products, the volume growth is actually slightly lower than revenue growth, which means that there is better ARPU or better price per license from the company from entry level corporate to mid corporate customers. 
  • Net impact on working capital is that it has decreased from 86 days to 52. 
  • There is a PAT of Rs.6.6 Crores versus Rs.1.6 Crores last year. 
  • Revenue of Rs.6.6 Crores is the bottom-line for this quarter, for nine-months it is Rs.33.8 Crores despite bad Q1.
  • The EBITDA for three months 17.8% for the entire nine-month period at 27.5%.
  • Cash generated is Rs.280 Crores by the end of quarter. It is about Rs.40 Crores higher than what is was in last quarter. 
  • Employee cost has decreased substantially over the last one year, which was around 10 Crores and decreased to 7 Crores.
  • The net cash is around Rs.430 Crores on the balance sheet.
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New products/Offers

  • Cloud based end point security is launched this quarter and solutions for managed service provide as MSP product launched, that it will enable the service provider to provide solutions through Cloud Solutions i.e. it enables service providers to offer the solution and have a Cloud based solution to gives lot more efficiency for offering the solutions. 
  • Company is launching a mid-priced mobile security solution primarily targeting e-commerce channel so that should help to get more customers who want to adopt it first time and it will help to get in more paid customers. 
  • Company is driving more partnerships to get more free users who want to just have a footprint of mobile security solutions and hopefully they would upgrade from free to paid solution down the course. 
  • Company has launched a UTM product in December so far about 30 plus installation done successfully.
  • Company launched UTM 2.0, portfolio is increasing and the plan is to give more value for solution and also increasing the number of solutions in the portfolio.

Growth Updates

  • Company entered in technology collaboration with Finland Based Company, Jetico and introduced end-point encryption solution to enterprise customer under Seqrite. This product has received an encouraging response from businesses and government establishments.
  • The flagship products continue to win in sale recognitions which Seqrite end point security and Quick Heal Total Security receiving best Triple Plus Certificate from AV Labs.
  • In line with the commitment to secure digitization of our nation, collaboration with Government Cyber Swachhta Kendra to offer a free Botnet removal tool has resulted in a 51% decrease in Malware infection in all networks across the country, which demonstrates a robustness of our products.
  • There is lot of focus on strengthening the distribution network and primarily looking at the dealers, Currently company has brought 20000 dealers on board with Quick Heal.
  • In the encryption position, Company had a partnership with the Finland company and launched that solution in this quarter and things are progressed. 
  • Company bought the source code from Jetico and company will be using that source code for doing derivative of that. 
  • In Q2FY18 company had around 26 warehouses across India, but after GST then it has to be reduced to three warehouses across India, so the transportation time is taking play a bit time and that is the reason company has stared closing quarterly sales four to five days before quarter end actually because the delivery is important.

Enterprise vs Retail

  • In the enterprise and government segment, the strategy to focus on customer retention while adding new customer had led positive result with Seqrite successfully retaining 80% of its customers. 
  • In the enterprise business, there has been growth in both enterprise and government. Company has a good footprint of end point security solutions. There is opportunity to cross sell and up sell. The solutions in the portfolio like data loss prevention, we have added encryption, Company has MDM which is a mobile device management, all these are great products to get more value to our customers for not only to add more customers but for existing customers will give more value. 


  • Company is acquiring about 21 new customers every day and there is increased focus to have more larger accounts with 500 plus users
  • Company has added about 25 new customers with 500 plus users and that shows that the products solutions are getting adopted not only into plus 500 user accounts but in a larger account and that will drive further. 
  • The total number of customers that company have is about 25000 and the total number 500 plus user accounts that company have right now is about 100 plus. The largest account company have is about 5000 users. 
  • The median for per customer currently it is about 150 to 200 endpoints. 
  • Retention is about 75% as a percentage of active license.
  • The Retention on enterprise royalty, around 79% of the customers that are getting expired, will get renewed and company will retain them and on retail front, retention rate it is close to 35%. 
  • The maximum number of the users’ company serve in government is 5000 users company have installed and the highest for private players will about 3500 to 4000 users.


Mahindra CIE Q2FY18 Concall Summary

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Financial Highlights

Quarter Performance

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  • Excellent performance in terms of revenue and profitability
  •  Increase in EBITDA by 87% when compared to the same period last year
  • Increase in EBITDA margins by 1.8%
  • The growth of the divisions in India excluding Bill Forge was 21% vs 2016 3QCY17
  • Comparison with Q2CY17 has also shown an improvement in profitability
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Nine month performance

  • Nine months of MCIE growth minus Bill Forge is 15%
  • EBITDA margin without Bill Forge increased by 1% YoY; some part of this can be attributed to increase in steel prices
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Growth drivers

  • Positive market evolution across segments in India
  • Growth of key customers
  • MCIE grown higher than its key customers namely M&M, Maruti and Tata Motors both in 3Q as well as in the nine months

 Performance of Bill Forge

  • Performance in line with the expectations set during time of partnership
  • Growth of close to 20%
  • EBITDA margin of approximately 20%

European Results

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  • MCIE Europe has grown by 16% in 3Q 2017 that is approximately 22.6% growth after adjusting for currency movement
  • The 9 month growth was around 6% in rupee terms and 11% in Euro terms
  • Growth is driven by CIE Forgings and Metalcastello
  • Drop in EBITDA percentage between Q2 2017 and Q3 2017 due to stock consumption in August
  • EBITDA percentage over revenues on adding up both sales and stock variation is 12.7% in both periods

Consolidated performance

  • Net debt remains similar to the end of last calender year
  • CAPEX of Rs. 2,371 million on consolidated basis, spread across many verticals like the forging business in Spain and Lithuania, Metalcastello, Bill Forge (Both in India and Mexico), Gears and Stamping works in India etc.

 Impact of Electrical Vehicles

  •  Roughly 10% of MCIE business in India and 25% of MCIE Europe business could be affected due to Electrical Vehicles.
  • Consolidated, around 18% of the total business could be affected by EVs
  • No changes in the next two years; growth to be observed in the next 5 years; Impact on reducing revenues not expected for atleast next 10 years
  • Top automotive customers like BMW, Daimler, Volkswagen, Audi etc are likely to move towards hybrid vehicles instead of a fully-fledged Battery car

 European plant highlights

  •  Metalcastello plant – Awarded a project worth €15 million turnover per yer by Caterpillar
  • Lithuania – Supply of crankshafts to Volkswagen worth €5-6 million
  • Galfor company in Galicia supply crankshaft to several customers
  • Organic revenue growth in Germany in MFE was close to 8%
  • CapEx for Volkswagen line in Lithuania around €4 million; Peak Revenue : €8 million - €9 million


Elgi Equipments Q1FY18 Concall Summary

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 Key Highlights

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  • The Sales level the company has grown at about 4.5%, the compressor business has grown at 6+% across the world
  • At the consolidated level, grown at about 4.5%. while EBITDA is Rs 323 Cr.
  • The company has lost about 60-odd million in contribution margin at material cost level primarily because of mix variation compared to the first quarter of last year.
  • The company did a minor voluntary retirement scheme wherein about 22 people were retied primarily at the blue-collar level.
  • April was a bit of disastrous month for the company but the company had recovered fairly well in May and more so in June
  • In the Second week of June, the company was hit with the effects of GST due to delayed payments resulting from confusion of postponement of payments.

International Market Scenario

  • US had done well in terms of Medical business, in spite of the confusion of the Obamacare prevailing with the Trump administration.
  • Brazil continues to be a part of a challenge but not due to the operations but owing to the Brazilian Economy.
  • Africa has been marginally better than the last year, but Middle East continues to be a challenge
  • Far East has performed well in terms of the company revenue contribution.
  • Australia has done well and China has continued to sustain at the levels that has been earlier planned.
  • Company is continuing to support and service our customers and parallel are working on a plan to come up with a new strategy for China but that is not going to be immediate.
  • General economic revival in all the key markets in US. US has been doing well for the last almost two to three years.
  • Europe after prolonged thing from 2008 are seem to be coming back
  • Australia after a long pause is beginning to invest, so part of our growth in these markets has been contributed by the revival of the economies and therefore investment in capital goods.

Impact on Compressor Segment

  • Dealer-based business has taken the biggest impact but there have been saviors like Railways.
  • Compressors are 28% but there is some clause, which says partsin railways, is 5%


  • In the month of April, we were significantly strung by our ERP issue and the recovery that compressor business made in May and June.
  • ATS, the automotive equipment business could not do primarily because the concern of many of the customers in terms of GST
  • Post GST what will be the savings that they could potentially have so that kind of dampened things a little bit and many of the passenger vehicle companies that were looking at expansion of the dealership did not go through with it. But June was good, July continues to be good for the company and the lost revenue is forecasted to be recovered.

Impact of GST

  • On an average it is pretty neutral that could be a marginal point, 3.4% increase in ournet cost to the customer.
  • Company has started extending the credit to our dealers and customers due to which the cost has come down.
  • Now distributors are carrying inventory of the old parts where the MRP is higher where as now the MRP is lower. The net difference is about around 1%.
  • In terms of input credit basically the only thing is that the company is receiving a net set off and had a 2% CST, which was our input cost earlier.
  • Spare parts is at 18%.

Dealer Ecosystem and Online Connectivity

  • The online system is still not in fully in place, but the system between the vendors and company is pretty stable.
  • But many of the distributors especially the smaller ones have to go through this new thing of 18 credit and keeping accounts of, so it is also for the company to take credit of miscellaneous expenses.

Dividend from ELGi ATS in Q1

  • First Q1 about Rs.5 Crores is the dividend received in Standalone.
  • Growth in sales of ELGi branded compressors outside India
  • ELGi branded compressor growth in our key markets has been high double digit
  • The dealers cover all industrial segments, hence company does not keep track at this stage of the entry into various markets.

Broad BCG plan

  • Designed and implemented the program, which is basically the go to market program, structured processes, evaluation, and review systems
  • Running this program for a little less than a year and we have covered probably 60%, 70% of the market
  • Small companies, small to medium size or even large companies that are looking at incremental investment

Domestic Indian Economy Plans

  • Share in India is relatively large compared to markets outside. Unless there is a trigger in the economy in India company cannot predict the growth, whereas is in markets where the market share is almost nothing and company is beginning to have a strong presence


Salzer Electronics Q2FY18 Concall Summaries

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 Q2FY18 Financial Performance

Salzer Electronics Q2FY18 Financial Performance.png
  • Financials restated as per Indian Accounting standard, Ind-AS
  • The net revenues from operations were at 101 Crores
  • A year-on-year growth of 9% witnessed as compared to Q2 FY’17
  • A net growth in revenues demonstrated
  • Growth mainly driven by higher demand in Wire and Cable business and Industrial Switchgear business
  • 29% year-on-year growth in exports due to the increased exports to UK and USA
  • The EBITDA grew by 8% to Rs.13 Crores as compared to Rs.12 Crores in the corresponding previous quarter
  • Sequentially, growth of 23% witnessed for EBITDA
  • The EBITDA margins improved by over 270 basis points to 12.8% on a quarter-on-quarter basis
  • These were the best margins over the past four quarters
  • Further improvement trend for margins was expected to continue
  • Better product mix and increased exports was the main reasons for increase in EBITDA margins
  • The profit after tax grew by 8% to Rs. 6 Crores in Q2FY2018 as against 5 Crores in the corresponding previous quarter
  • Sequentially, the PAT increased by 43%
  • The PAT margins for the quarter were flat at 5.8%
  • Sequentially PAT margins improved by over 190-basis points
  • Exports contributed 23% of the total revenue in the quarter
Salzer Electronics Q2FY18 Revenue Breakup.png
Salzer Electronics Q2FY18 Geaographical Breakup.png

H1FY2018 Financial Performance

Salzer Electronics Q1HY18 Financial Performance.png
  • Net revenues from the operations were at 205 Crores in the first half of FY2018
  • A year-on-year growth of 13% seen as compared to H1 FY2017
  • Growth was driven by Industrial Switchgear and Wire and Cable business
  • EBITDA for H1FY2018 remained flat at Rs.23 Crores
  • The PAT increased by 2% to Rs.10 Crores in H1FY2018
  • Exports contributed to 18% of total revenues
Salzer Electronics H1FY18 Revenue Breakup.png
Salzer Electronics H1FY18 Geaographical Breakup.png

GST Implementation

  • GST regime was implemented in July
  • Slight teething problems to start witnessed though the overall long-term prospects remain extremely positive for the organized players like Salzer
  • Salzer was insulated to a large extent on account of its product offerings to a wide variety of industries, quality consistency and its recheck across geographies

About Salzer Electronic

  • Incorporated in 1985
  • Collaborated with the German Salzer, the manufacturer CAM operated rotary switches
  • Evolved from a single product company to a complete customized electrical solutions provider
  • Technical associations with the reputed companies across the world
  • Deals in high quality products of international standards
  • Associated with Larson & Toubro from 1993, Plitron from Canada in 1995 and with Trafomodern model from Austria in 2016
  • Focused on getting into niche and of great value technologies
  • Has a preferred vendor status with global giants like GE and Schneider
  • All the products are international certified
  • Operate under electrical and electronics segment
  • Classifies business into four different divisions-
    • Industrial Switchgear Division
    • Copper, Wires and Cable Division
    • Buildings Segment Division
    • Energy Management Division

External Environment and Impact

  • Country witnessed drastic and disruptive changes in economic terms
  • Government put forth its vision of make in India recognizable
  • Numerous economic reforms were implemented
  • A lot of teething problems in implementation of these reforms were witnessed by Salzer
  • Despite the numerous headwinds in the economy, Salzer continued to invest in businesses
  • The need to be future ready as soon as the business conditions revive is foremost priority
  • Salzer is very optimistic about the future prospects

Industrial Switchgear Division

  • Contributed 50% to the total revenues in Q2FY18 and 43% for H1FY18
  • With the GST regime in place and overall positive economic scenario early signs of revival in Switchgear business being witnessed
  • Received very good enquiries from large OEMs like BHEL, Schneider and GE, etc., for Switchgear products
  • Due to high standards of quality, demand expected to significantly improve further
  • New products like the Dry Type Transformers and Wire Harnesses witnessed a significant growth in Q2FY18

Wire and Cable Division

  • Second largest contributor to the revenues in Q2FY18
  • Focused at brand labeling for major brands like L&T
  • Started branding for companies like Crompton Greaves Consumer Products, Texmo, EFAB and a few other brands
  • In the previous two years, focused on giving value added products to customers
  • Came out with specialized products like elevator cables, solar cables, highly flexible hoist cables and other similar cables
  • This segment contributed 46% of the total revenues of the company in Q2 FY2018 and 51% for the H1FY18

Building Products Division

  • The only B2C business of Salzer
  • The contribution of the total revenue remains small
  • Increase in the contribution in the next two to three years to around 10% levelsis expected
  • Got annual rate contracts with major builders like Sobha Developers, Purvankara, Reddy Structures and Kumar Builders
  • The Building Product Division contributed around 4% of the revenues for Q2FY18 and H1FY18

Energy Management Division

  • Being order book driven business during Q2FY18, Salzer did not book any revenues
  • For the H1FY18 it was 1% of the total revenues of the company
  • Salzer expect to book revenues for the first year of the contract it took in Tamil Nadu
  • Contact is 12.5% of the total contract value of Rs.86 Crores
  • Focus remains to achieve profitable growth by adding newer, customized and value added nature products
  • Newer geographies, which can yield better margins were also explored
  • With a very competent team in place Salzer is confident of achieving the milestones

Strategy for Steady Progress

  • Board in its meeting on November 17, 2017 approved the proposal to acquire the entire business of Salzer Magnet Wires
  • Acquisition is as a going concern on a slump sale basis with appointed date as April 1, 2017
  • It is subject to necessary further consent from the shareholders of both companies and clearance from regulatory authorities

Salzer Magnet Wires

  • Founded in 2008 and was promoted as a separate company because there were other investors who wanted to invest and setup this business
  • Offers extensive range of enamel coated copper wires suitable for winding applications in transformers, motors, alternators, contactors, relay and auto-electricals.
  • Business witnessed a compounded annual growth of around 20% since its inception in 2008
  • Polyester coated wires for deep well pumps and fine enamel copper wires also manufactured
  • Absolutely no holding by Salzer Eelctronics. It is held by Salzer promoters
  • 50% is held by the Salzer promoters and the rest by other directors of Salzer and from some outside people
  • Cables and Wires made by Salzer electronics and enamel copper wires made by the Salzer Magnet Wires are very similar in nature.EBITDA level it is around 8.5% to 9%.• For current set of operations, being at 11% it is slightly better than Wires and Cable Division
  • The fine enamel wire for which the plant has been setup for manufacturing going to be better margin product
  • The selling price are significantly higher than the current selling products

Acquisition of Salzer Magnet Wires

  • Bringing a new business into Salzer Electronics without testing the waters wasn’t desired
  • Process of this acquisition will take two months
  • Some regulatory approvals and the shareholder approvals are expected to complete by end of December
  • The consolidated numbers should be there in FY2018
  •  Capital employed is around Rs.16 Crores.

Benefits of Acquisition

  • A lot of synergies can be seen in bringing that into Salzer Electronics today due to Wire and Cable Division and work with Larsen and Toubro
  • The synergies are mainly in sourcing of raw materials
  • Volumes are going to significantly increase due to acquisition for both
  • Rs.60 Crores will be added in sales volume for Salzer Electronics in FY2018
  • Result in incremental growth of 20% to 25% in the next five years
  • 3% is the PAT margins of the company and it is going to be EPS accretive
  •  Strengthening of the product portfolio will give opportunities for further improvement of market penetration of the products of Salzer Magnet Wires
  • It will enable to focus global markets over the next few years
  • Integration of the two companies’ business would provide leverage for better price negotiation with suppliers of copper on the volume growth basis
  • It will give price benefit of at least 1% to 2% in the raw material of both wires, cable and new company getting acquired
  • Acquisition would bring cost efficiency in manufacturing and provide scope for improvement in operational synergies of Wires and Cable Business
  • Products like three phased transformers and Toroidal Transformers would get more benefit in terms of better pricing and margin
  • The products of Salzer Magnet Wires will have better scope for innovation and application with support of Salzer electronics’ in-house R&D facility
  • Salzer Magnet Wires will also bring in completely new customer base to Salzer Electronics
  • It will provide opportunity to get new customers for our Salzer Electronics existing products

SMW Acquisition Cost To The Company

  • The cost to Salzer Electronics will be 10.3 lakh shares  on a fully converted basis
  • The shares are being issued at Rs.197, as per the SEBI rule for the pricing of the shares.
  • Approximately amounts to Rs.20 Crores
  • Company’s FY2017 turnover was Rs.60 Crores
  • For September 2017, it was around Rs.37 Crores
  • It is expected to be around Rs.70 Crores in FY2018

Focus Of The Company After Acquisition

  •  Approximately 15% of the production of this company will be used with 15% to 20% ason captive basis
  • The company has set up a fine wireenameling plant
  • The fine wire enameling has a very highmargin with limited Indian manufacturers and a very good market.
  • Salzer Electronic customer base will be able to consume a lot of this finewire fine enamel wires

Fine Enamel Wire

  • Used in electrical, auto electrical, the products like contactors, relays, lot of coils, and auto relays
  • It is 100% copper enamel and copper polyester wire

Raw Material Expense

  •  Raw material prices have always remained at around 70% to 72%.
  • Two major product segments:
    • Wire and cable industry
    • Switchgear.
  • On the switchgear front, it is around 60%
  • On the wire and cable, it is around 85% to 86%
  • The rise in raw material price for the commodities like copper and steel, is completely passed on to customers
  • The rest of the raw material, have not witnessed any major price changes

Target For The Full Year And FY2019

  • The full year target to be between 11% and 12%
  • It also depends onthe product mix that in the next two quarters
  • A higher EBITDA margin can be expected if the revenue share of the switchgear business is goes higher,
  • With the increase in revenue share of the wires and cable, the EBITDA margin percentage will be be low even though the absolute numbers are higher
  • A four to six week order book position I worked upon

GST Rate Applicable

  • Was at 28% when it was implemented then reduced to 18%.

Future Path Ahead

  •  For the past four or even six quarters growth has been very small
  • The main reason is the struggling Indian market
  • Going forward, the Indian market is on the verge of the growth path
  • Industrial switchgear business is one that is poised to grow at a much faster pace than what it was in the past six quarters
  • Exports will pick up significantly to Europe and US, giving better margins
  • 95% of exports are switchgears business.

Three-Phase Transformer Activity Wiring Harness

  •  Three-phase Dry Type Transformer production started in January, 2017
  • Significant enquiries were seen from very good OEMs in India
  • In Q2FY2017 a business of around Rs.3 Crores
  • Business around Rs.15 Crores to Rs.18 Crores in FY2018 is expected for three phase dry type transformers
  • Companies like BHEL, companies like Toshiba, Mitsubishi, and UPS, companies like Schneider, ABB, and from Indian Railway made enquiries

Wire Harness

  •  Wire harness segment was started in the previous year
  • A good growth almost doubling of business is being seen
  • It is not for any automotive, wire harness is for industries
  • Not many organized players are present in this segment
  • Focus is on Wire Harness industry where the demand is quite good
  • Got business from almost all the elevator companies and various other industries are being looking at for wire harness.

Affordable housing

  • Government of India is planning to invest for affordable housing
  • It is going to be a game changer in the real estate market
  • Salzer has products for building like wires, switches, MCBs, and distribution boards
  • There will be enormous demand if the Government of India invests for the affordable housing
  • More focus is into the building

Trade Receivables

  • Rs.86 Crores business was done with Tamil Nadu Government for the street light energy efficiency project
  • As payment term in the contract 12.5% will be received every year
  • The non-current is the first 12.5% that has been built and the payment is expected
  • By March of FY2018, the payment is expected
  • The overall receivable levels is going to be around 90 days
  • That has been the industry norm in the segment
  • It has increased a little bit beyond 90 days, going forward its expected to remain at 90 days

Industrial Switchgear Business Demand

  • The biggest advantage being a supplier to a wide variety of industries starting from the core infrastructure industries to the renewables to the backup power industry to machine tools to medical equipment industry
  • The general industrial pickup in the country will give a boost
  • The power generation, transmission, and distribution across all three sectors is a significant factor for the product growth
  • Around 30% of the business goes into power segment
  • No new business, getting large amount of business for maintenance

10 Years Contract With GE Transportation

  • GE Transportation signed the contract with Government of India
  • A locomotive plant will be set up in Bihar for manufacturing 1000 locos over the next 10 years
  • Coming around 100 locos every year
  • A contract with GE made for supplying a very special customized contactor to the locomotives
  • The size of the business is not very significant
  • The size of the business is approximately around Rs.12 to Rs.15 Crores over the next 10 years
  • The biggest advantage is getting an opening into GE Locomotive, which is much larger business globally
  • Starting the business with Indian company with GE Locomotive, aim is to get the products to GE Locomotive in US where the size of the business isat least 10 times bigger
  •  Significant opportunities in transformers is also being explored
  • Samples for various other Salzer products have been submitted to GE Locomotives
  • Testing is being done by GE as that require a very long-term testing
  • After getting through the quality testing a business of around Rs.8, Rs.9 Crores with GE Locomotives is expected

German Tie Up With The Salzer German

  • Focus is to sell CAM operated rotary switches to Salzer Germany and to market it in Europe under their brand through their network
  • If that stabilizes over the next two or three quarters, new products will be added in the same network
  • GST implication on cable business
  • The reduction is definitely good for the industry overall and demand pickup is expected because of that

Energy Management Business

  • Large project was done the previous year
  • An order from EESL company for Rs.20 Crores for Varanasi and Jharkhand was received in FY2018
  • Some portion has been built in the first two quarters
  • Could not do anything in Q3 as EESL actually postponed thedelivery schedules
  • The first-year revenue of the Tamil Nadu project, approximately around Rs.10.5 Crores has not been billed
  • Waiting some certifications to come in
  • After that in FY2018 first 12.5% of the Tamil Nadu project will be billed as well as some revenues for the EESL in the next two quarters
  • This was for Tirupur, Erode and Vellore, the three corporations.
  • Every year Rs.10.5 Crores is expected to be received
  • • The margins would be very, very high

Building Material Division

  • Q2FY2016 was extremely good for the building segment
  • That is why a little slowdown is felt in Fy2018,
  • Division on an annual basis is expected to clock around Rs.27 Crores, Rs.28 Crores compared to last year’s Rs.23 Crores
  • Definitely seeing a 20%, 25% growth in the segment
  • It has better gross margins, but less EBITDA as of now
  • Aim is to attain critical level of around Rs.35, Rs.40 Crores
  • After crossing a significant jump is expected in the EBITDA margins for this product in this segment.
  • The estimation for FY2018 is around 420 without the acquisition
  • With this acquisition 10% more or more than that is expected

Expected Financials

  • The company is expected to do in FY2018 turnover of approximately Rs.70 Crores
  • A margin of around 3% to 3.5%. on the PAT levels.
  • On the EBITDA level, it is going to be around 9%.
  • For FY2019 EBITDA margin is going to be between 11% and 12% depending on the product mix
  • If the switchgear segment witnesses higher growth, EBITDA margins can be a bit higher than 12% else between 11% and 12
  • 18% to 20% growth both in top and bottom line for FY2019 is excepted

Evaluation Of The Current Scenario

  • Major changes in the economy can’t be observed
  • The economy is still struggling to grow
  • That is the reason for very less demand for the products in India, in the industrial sector
  • The reasons for that is various reforms came in into shorter time
  • FY2019 will see significant pickup in demand resulting in growth of 20%
  • Growth will be much faster if the Indian economic changes.

Product Mix

  • More products are being added into industrial switchgear division
  • Wire Harness, Three Phase Dry Type transformers are the examples
  • That is going to be the more focused division
  • It gives 15% to 16% EBITDA
  • Good exports give EBITDA margins of around 16.5% in the switchgear business
  • The wire and cable division is growing at a much faster pace
  • The EBITDA margins are lower at around 8.5% or 8%
  • The absolute number will be much better if that grows
  • Focusing in the building segment business to sell wires under Salzer brand
  • Salzer has a good brand name as far as at least South Indian states are concerned
  • Started taking advantage of brand name
  • The same network of selling switches, MCBs and distribution boxes is being used to sell building segment wires

Plan for Getting CFO

  • Salzer has a very good team behind, though they are not facing the company outside
  • The team is excellent providing support in all aspects of the business
  • Mr. Rajesh Doraiswamy will be handling finance part

Growth Sustenance

  • No revenues for energy management were booked in Q2FY2018
  • Seen good growth and growth is expected to continue for next two quarters or even better
  • The Wire and Cable, year-on-year has grown 20%
  • Switchgear grew around 8%
  • Switchgear is expected to grow a little better and Wire and Cable will continue to grow at around20%
  • On energy management business, the demand is shifted to the not central government the EESL, Energy Efficiency Services Limited
  • The demand is picking up but EESL is finding difficult to deal with various corporations in various states
  • The future is going to be good for this division
  • With EESL stabilizing things will get better
  • No scope for this business in industrial market


  •  Will be touching around Rs.70 Crores for sure and may lie around Rs.80 Crores
  • Rs.39 Crores business has been done by half-year
  • 29% jump seen in second quarter exports as compared to the first quarter exports
  • The second quarter trend is expected to continue for the next two quarters
  • At least Rs.40 Crores to Rs.45 Crores will be done in the next half year

Dividend Payout

  • The Company has a dividend payout policy of around 15% to 20% of the PAT
  • It will be between 15% and 20% of the PAT in FY2018
  • No news for debt reduction but still looking at opportunities

Equity Dilution

  • Have ESOP running, and is getting issued right now