Ladies and gentlemen, good day, and welcome to the Dixon Technologies (India) Limited Q1 FY23 earnings conference call hosted by Emkay Global Financial Services. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal the operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Naval Seth, Emkay Global Financial Services. Thank you, and over to you, sir. Thank you, Lizanne. Good evening, everyone. I would like to welcome the management and thank them for this opportunity. We have with us today Mr. Atul Lall, Vice Chairman and Managing Director, and Mr. Saurabh Gupta, Chief Financial Officer. I shall now hand over the call to the management for their opening remarks. Over to you, Mr. Lall. Thanks, very much, Naval. Good evening, ladies and gentlemen. This is Atul Lall, and we also have on the call today our CFO, Saurabh Gupta. Good evening. Thank you very much for joining this earnings call for the quarter ending June 2022. Coming to our overall performance for the first quarter, consolidated revenues for the quarter ending June 30th, 2022 was INR 2,856 crores against INR 1,867 crores in the same period last year, which is a growth of 53%. Consolidated EBITDA for the quarter was INR 101 crores against INR 48 crores in the same period last year. A growth of 108% owing to lower base year-on-year due to pandemic effect. There was a foreign exchange loss of INR 12 crores. Excluding that, EBITDA would have been around INR 13 crores with 3.9% EBITDA margin. Consolidated PAT for the quarter was INR 45 crores against INR 18 crores in the same period last year, which is a growth of 150%. Now I'll share with you the performance and the strategy in each of the verticals going forward. In consumer electronics, we had revenues in the quarter of INR 932 crore with an EBITDA of INR 25 crore and a margin of 2.7%. The revenues year-on-year look slightly lower, but the volumes year-on-year have grown slightly. This is primarily because of the unit value of the television coming down due to a significant price correction of open cell, which contributes more than 60% to the bill of material. In LED televisions, we are the largest capacity in India. Now we are ready with a capacity of 6 million sets, which includes the backward integration in both LCM and SMT lines, and we service more than 35% of the Indian requirement. Our JDM business with our anchor customer has already got into a revision mode, and we have a strong order book in Q2. For this particular anchor customer, we are also looking at exports to Southeast Asian markets. We're in active discussions with a large brand which is presently not in our customer portfolio, for our ODM solutions. We are also in discussions with our existing customers that are licensed by Toshiba on offering our ODM/JDM solutions. As we have been sharing in our earlier interactions, now we are in advanced stages of closing the ODM sub-licensing rights with Google relating to Android, and we'll be the first ones to do it. I'm fairly confident that this will happen shortly. As our backward integration plan, we're also gonna be starting injection molding for the mechanicals for the LED television in this particular financial year. Discussions have also started for commercial display and interactive screen for educational use, which is a high growing market. Monitors, we have also got large orders from largest of the global brands for manufacturing LED monitors, and the production commenced in April 2022 for Dell. For Samsung, the discussions are on. We hope that we'll conclude this business in a quarter or so. For lighting, the revenues for the quarter was around INR 231 crores with an operating profit INR 17 crores with operating margin of 7.2%. The demand in this business is normalizing led by liquidation of inventory in the channel and reduction in input prices, which will result in improved revenue and profitability in the current quarter and the next quarter. We're India's largest ODM player in lighting and have the largest capacity in various SKUs. In LED bulb, we have capacity of 300 million, which is 50% of the Indian requirement. We have already expanded the annual capacity in back ends to 64 million against total annual requirement of 110 million. Down lighters, we've expanded to 24 million out of total Indian requirement of around 45 million. We have also built significant capacity in LED panels under smart lighting and will be starting on some new product categories in this financial year. We have received the first export order from UAE market, and we are both working on a large RFQ for our anchor customer for US market. We are also in advanced stages of acquiring a smart lighting company with a cutting-edge technology in Bluetooth Mesh technology and are in process of developing Wi-Fi based technology for a smart LED lighting solution. We have also started investing under the PLI scheme for LED lighting components, which is primarily in the backward integration space in lighting. Coming to home appliances, revenue for the quarter was INR 255 crores with an EBITDA of INR 21 crores and operating margin of 8.1%. The margins have improved both year-on-year and quarter-on-quarter, led by passing on the impact of commodity costs to customers, improved operating leverage and cost optimization. In this vertical, we are also seeing softening of the commodity and input prices, which one feels that in a quarter or so would help improve in the margins. We have 160-odd models in semi-automatic category, ranging from 6 kgs to 14 kgs, with annual capacity of 2.4 million, and we have additional infrastructure footprint in Dehradun that will be ready in a couple of months. In fully automatic category, we have capacity of 0.6 million with 96 variants across 6.5-11 kgs with Bosch as an anchor customer. In addition to Bosch, we are also manufacturing for Lloyd and Croma, and have started doing monthly volume of 20,000 washing machines. Now we are introducing an economy series, which will be launched by end of Q2, and the volumes are expected to grow up significantly in the coming months. We are also in the final stages of getting a large contract with a large Japanese brand in FY24, both for domestic and global markets. Now we are increasingly focusing and investing on making this segment more underpenetrated to serve the industry with latest innovative technology. In mobile phones and EMS divisions, the revenues for the quarter were INR 1,305 crores with an EBITDA of INR 33 crores and 2.5% margin. The Motorola business volume is now ramped up and touching a monthly run rate of 400K per month, and we achieved the landmark of 1 million units in the quarter under our belt. We have a strong order book of around 1.5 million per quarter from Q2 onwards. For Motorola, we are also getting into backward integration, and we're setting up an LCD assembly line in our strategy for deepening of manufacturing. We have also started manufacturing Nokia feature phone business in addition to smartphones, and discussions are underway for more business for smartphones for both domestic and global markets. In addition, we have started manufacturing for itel in feature phone category. As shared in the last interaction, we are in advanced stage of discussion with two large brands having strong market share in Indian market, and we are hopeful of concluding with one or both of them in the next couple of months, with production likely to commence from Q4 of this financial year. We've started the construction activity in our new five acre integrated mobile facility on Expressway in Noida. Security surveillance system, 60% of revenue for the quarter, INR 131 crores with an EBITDA of INR 5.2 crores. That's 4.0% operating margin. The order book in this segment looks very healthy, and we're going for further capacity expansion from 10 million per annum to 14 million per annum in next three months. For this, we are relocating our existing setup in Gurugram to Panchgaon Electronic Manufacturing Cluster, where we have taken 200 sq ft constructed facility. In telecom and networking equipments, we have started manufacturing ONTs for Airtel in JV with Bharti Enterprises. The commercial production has already rolled out, and in the current month, we're producing almost 70,000. The PLI scheme has also been extended by one year with addition of hybrid set-top boxes and other telecom products added in the scheme. We have also bagged a large order for HP network set-top boxes and are in the process of finalizing a new category of manufacturing facility in Noida. We are in active discussions with some global clients for this work. Laptops, tablets and IT hardware. In addition to manufacturing laptops for Acer, we are also in final stages to close an agreement for manufacturing of tablets for one of the largest global brands, and this production is likely to commence by Q4 of this financial year. The government is expected to come out with a revised PLI scheme for IT hardware products with higher incentive offer. Our JV with Rexxam, a 40-60 JV with Rexxam to manufacture inverter controller boards for air conditioning is now operational in new manufacturing facility in Noida. The revenue potential looks very positive with healthy EBITDA margins and for a large export market for this. For wearables and hearables, a 50-50 JV has been formed with both Imagine Marketing for manufacturing wearables and hearables. Currently, we have already reached a level of 0.5 million devices per month, and this is being ramped up to 1.5 million devices in the next two months per month. More SKUs like neckbands in addition to TWS and the smartwatches is being added here. In refrigerators, we have started the construction on 20 acres of land in Greater Noida. Advances of machines have been given. We are creating a capacity of 1.2 million DC refrigerators in the categories of 190 - 235 liters. We're in the final stages of closing an agreement with a large brand with commitment of 0.6 million, which is 50% of our capacity. Trials are expected to happen by Q1 of next financial year and final production by Q2 of next financial year. I would like to stop now, and me and Saurabh are here to address any questions. Thank you so much. Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone wishing to ask a question may please press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Aditya Bhartia from Investec. Please go ahead. Aditya, your line is in the talk mode. Please go ahead. Aditya Bhartia, your line is in the talk mode. Please proceed. As there's no response from the current participant, we'll move on to the next. That is from the line of Renu Baid from IIFL Securities. Please go ahead. Hi. Good evening, sir. My first question is on the lighting segment. We have seen margins recover a bit, but still they seem to be relatively low. Now that the commodity costs are also have eased out, what is the outlook in terms of the margins required in this segment? Have you started seeing demand or the volume offtake improving in this category? How is the outlook here? Hi, Renu. Hi, sir. You see, undoubtedly the prices of inputs and components have started softening. Mm-hmm. It's on a highly positive note. One is carrying certain inventory. I think the actual benefit of this particular softening will start reflecting from Q3 of this financial year. It'll become better from Q2, but the actual benefit would start reflecting in Q3. Also, the demand has been slow in Q4 of last financial year and Q1 of this financial year. Now one can see an uptick, and the order book looks better. Now, is it gonna come back to normal in the current quarter? I don't think so. Would it be back to normal from Q3, Q4? I think so. That's the way it is. Got it. Right. Within this segment, while we have mentioned of export order coming in from the UAE market, we were also in advanced stages of certain large orders to come from the EU or European market as well. Any developments or progress on that side? Those discussions are already on. Mm-hmm. We are fairly confident of concluding it in current quarter. Got it. Right. Second, sir, coming on the washers portfolio, how should we look at because as in last six months the demand environment was expected to be relatively challenging for the white goods category. What is the outlook in terms of the order book that we have from customers in this, both for semi-automatic as well as for FATL category? What kind of growth numbers can be expected for this in the next fiscal as a ramp-up in FATL picks up? What you're saying is right. There has been a demand slowdown in the white goods category. Fortunately for us, our order book is extremely strong. That is because of new customer acquisition and also the anchor relationships and the performance of our customers in the marketplace. Mm-hmm. In the last financial year, we closed at around 1.1 million semi-automatic washing machines. In spite of the challenges in the market, we are fairly confident of closing at almost 1.5-1.6 million in the current financial year. Our current run rate is almost 150,000-160,000 a month. It looks good, and we have gone in for enhancing our capacity in our Tirupati plant. Now we have a capacity of 200,000, 2.4 million a year. Mm-hmm. The FATL is still in the starting stage, but we've already started touching 20,000 a month. That capacity is 600,000. In this financial year, we're targeting almost 175,000. Mm-hmm. In the next financial year, the kind of product portfolio we have and also the way the order book is looking, one is confident that one will be able to utilize the capacity up to 75%-80%. For us, the washing machine business is looking healthy. Margins in this category should now be comfortable in the double-digit range or how should we look at the pricing there? Margins in the last quarter, because we were carrying inventory, were somewhere in the range of around 8%-10%. Correct. We feel that will inch up to around 9-10. Okay. Got it. Lastly, if I can ask on the LED division segment, while there is an impact of the open cell price correction on the overall portfolio, how should we look at the addition of the ODM customers coming in this category to drive incremental volume growth for us ahead of the market growth? Can we expect margin improvement or margins to improve in this category from the 2.2%-2.5% level? Because the market demand situation in LED market continues to be challenging. Mm-hmm. We feel that, as far as the volume is concerned, there will be some growth but not a very buoyant growth in this particular vertical. Because we have migrated and a significant increase will take place in our ODM and JDM solution business, there would be a margin improvement, and we should be somewhere between 2.9%-3%. Okay. Trust. Thanks, sir. I have a few more questions. I'll come back in the queue. Thanks, and all the best. Thank you. The next question is from the line of Aditya Bhartia from Investec. Please go ahead. Hello, good evening, sir. Am I audible now? Yeah. Hi. Good evening, Aditya. Hi. Hi. Good evening, sir. Sir, my first question was on the lighting vertical. I'm sorry, I was facing some audio issues, so I'm not sure if you drilled onto that in your opening comments. In the lighting vertical, we have seen a fairly sharp slowdown and challenging conditions in the last few quarters. When we look at some of the brand winners, while they also appear to be facing certain challenges, but the kind of revenue declines or revenue slowdown that we are seeing, it is not that stark with most of the brand owners. Just want to understand what really is happening over there, and how should we see things going forward. To be candid, you know, when this kind of situation arises with combination of both external and internal factors. We had built up a large inventory, and the inventory prices started coming down. We had to suffer because of that, and also the competitive intensity increased. We face these challenges, and we have had significant internal organization changes in LED lighting vertical. We have a new CEO now who was heading earlier the Philips lighting vertical in India, Philips Lighting in India. He is leading the initiative now. We have brought in a new vice president operations who was the director of operations in Philips manufacturing plant. We have strengthened. We are building up a new R&D, and we are in the process of acquiring a smart technology LED lighting company. A lot of work is happening, and you will see a correction and improvement in the performance of this particular vertical from the current quarter itself. Understood, sir. You spoke about competitive intensity in this sector increasing. If you could just spare a few minutes and speak about that. We saw a significant price erosion from the competition side. That had an impact on business. We have embarked on a very intensive value engineering exercise, and we have been successful in that. We have been able to overcome this challenge, which we are facing in the last two quarters. In the current quarter, we have already been able to correct it to a very large extent. That's helpful, sir. When you think about the LED TV vertical, did I understand correctly that you mentioning that while there'll be some growth, it is not going to be very buoyant. You were speaking about Dixon and not for the industry, right? No, it's from the industry's perspective, and so is the case with Dixon. In Dixon's case, at least there'll be some growth because we've had new customer acquisitions. Please appreciate that both in Xiaomi and Samsung, and with both of them we have a very large relationship. They combine between themselves more than 45%-48% of the market. We have both of them, and then we have other significant brands. In industry itself, the growth is not very buoyant. Right, for the IT hardware space, given that the PLI scheme is likely to be revised, do you think that will be opening up many new opportunities, or is it that customers that were earlier thinking of opting for the PLI benefits as it is, were going slow, and all that the new PLI scheme will do is to infuse some life into it? How large can that opportunity essentially be? The new PLI scheme that we understand is being rolled out is undoubtedly extremely attractive, and I think it's going to be a game changer. One has to keep the fingers crossed that what will be the final shape and contours when the scheme, the revised scheme is rolled out. Irrespective of that, as I was sharing in my opening remarks, we are in final stages of conclusion of tied up with one of the largest global brands in the IT product range for manufacturing of their tablets and the motherboards of their notebooks. That contract we're confident we should be winning in a month or so. Yeah, that's a significant opening and uptick for us. Okay. That's great to hear, sir. Thank you so much. Thank you. The next question is from the line of Bhavin Vithlani from SBI Mutual Fund. Please go ahead. Sir, thank you for the opportunity. Good evening, gentlemen. The first question is, you had guided for overall revenues of INR 17,000 crore and an EBITDA between 4% and 4.5% company-wide. Do you believe it's still achievable? Undoubtedly, the market situation is not as conducive. But we are working on it, and we are working on the new customer acquisitions and also revenue generation from our new verticals. I'm not able to share what the numbers are gonna be, in which range it's gonna be, but it's gonna be a significant growth. Whether it's gonna be INR 17,000 crore or not, yes, I can't commit on that as of now. Sure. Fair. The second question is more on the margin expansion guidance that you have given for the television segment, consumer electronics. If you could just help us understand maybe. Currently you're doing more of an assembly and as you get into a slightly more higher value addition, like you mentioned, you're doing PCB assembly, then in the next stage you are looking at some parts of mechanics. Maybe if we arithmetically, if you can just help us understand, if you do PCB, maybe what percentage of the end product it could be and what's the kind of margins that that activity adds up. As you get into the next activity of more structurals and mechanics, what kind of margins that adds up, and eventually, what kind of margins that we could expect on in this verticals. Varun, when I was referring to margin expansion, responding to the question by Renu, there are two aspects to it. One is deepening of manufacturing, and the second is migration to our ODM or JDM solutions. That margin expansion was happening primarily with the migration of the business and a large part of business to ODM and JDM solutions, wherein we are doing the sourcing and the IP is ours, the tooling are ours. That is leading to the expansion of margins which I communicated. Now, looking at the question that you're raising, that how much which one is gonna add by doing PCBs, that's a very difficult question. It's a large matrix. Because the PCB of 32 inches - 65 inches, it differs. The values differ. To give an answer to that question in a singular way will be difficult. Saurabh can separately share with you those metrics. Here what I was referring to was primarily because of migration to the JDM, ODM solutions in which we have a large contract from our anchor customer, and we are hopeful of acquiring some new customers there. Sure. Fair enough. Maybe we can take that thing off, take the question offline. The second question is on the lighting part. Could you just elaborate on the acquisition opportunity that you highlighted? Obviously there is a shift in the market that you are anticipating and you're gearing up yourself ahead of time. A bit more elaboration on that will be very useful. Sure, Varun. We're looking at and we are in the final stages of acquiring this lighting technology company which is operating in the domain of a smart lighting. The technology that they have has Bluetooth LED mesh technology. At present it is more focused on enterprise solution. What they have committed, and they have the bandwidth, is also to develop the Wi-Fi based technology. At present, the market in India for a smart lighting is fairly small, but globally, particularly in the developed markets, it's a large share now. Finally it will grow in India also immensely. This acquisition is in this direction, that in Dixon we should gear up and we should be ahead on the technology front. Yeah, that's the rationale behind this initiative. Sure. Just one follow-up on the same. Is this the technology that you are expecting scalable to other verticals like Wi-Fi enabled fans or? Yeah, it can. It can be. Okay, great. Yeah. Thank you so much for taking my question. Best wishes. Thank you so much. Thank you. The next question is from the line of Amit Bhinde from Morgan Stanley. Please go ahead. Hi, sir. Girish here. Thanks for the opportunity. Just wanted to understand your CapEx plan for this year. Also if you could share if there's any bill discounting done at the quarter end, any levels on that number. Our CapEx plans for this year will be in the range of around INR 310 crores-INR 320 odd crores. The bill discounting that has been done in this first quarter is somewhere around INR 220 odd crores. Is it possible to get some volume numbers for the key verticals, please? Which verticals do you want? Mobile and home appliance and lighting to begin with. In washing machine, we did around INR 3.8 lakhs in this quarter, both semi-automatic and fully automatic. Fully automatic was around 30-odd thousand and the balance was semi-automatic. INR 3.5 were semi-automatic washing machines. As far as the mobile phones are concerned, on smartphone side, we did around INR 8.8 lakhs, so almost closer to INR 1.1 million. Feature phones we did around INR 8.5 lakhs. For Samsung smartphones, we did around INR 20 lakhs, and for feature phones we did around INR 19-odd lakhs. The last one on TV. How much was the LED TV volumes in the quarter? Any outlook for- It was around INR 7.4 lakhs. Any outlook for this year? Because we were expecting, I think, close to 40% growth. Obviously the market environment has changed. If you can help, on what could be the volume outlook here? We did 2.9 million last year, and we are targeting somewhere around 3.5-3.6 million. Great. Thanks, sir. Thank you. The next question is in the line of Ankur Sharma from HDFC Life. Please go ahead. Yeah. Hi, sir. Good evening. Thanks for your time as always. Just trying to understand, then going back to the TV industry demand per se. You know, as you said that clearly there's been some slowdown there. Is it just, you know, that post-COVID we started seeing people move out more often, and that's the reason why growth in TV has kind of slowed down? Is that the primary reason or do you think there's something else behind this? When we have the discussions with the brand owners. Mm-hmm. Because they have a deeper understanding of this. Mm-hmm. of the demand behavior. They give us a similar reason that post-pandemic, once the people and the consumer started moving out, the spend breakup has shifted. The focus has shifted. The purchase of consumer durables and IT products booming has Sure. Sir, just, you know, as you also said that given open cell prices have come off it is also kind of reflected in the revenue decline that we see. Has that decline kind of bottomed out? Are you still seeing that kind of continue? What would be your average realization from this side, on the TV side? I'm sorry, I missed the number on revenues for this quarter, if you also kind of throw that number. TV side, the prices, you see the main input is open cell. Yeah. Yeah. It's almost 6%-65% of the BOM. Yeah. There was a huge decline in the market globally, and the open cell prices have crashed. Just to share with you 32-inch open cell price, which used to hover at around $100-odd, has crashed to $27. Is it gonna go down more? I don't think there is a scope. It has already crashed to the bottom most level. Mm-hmm. I don't think there'll be now a very significant erosion of the prices. Mm. Now, our plan for this particular quarter, we feel that we should be somewhere around 1.1 million. Mm-hmm. Sorry, I was also talking about Q1, sir. What was the number for Q1? I missed that number. Q1 was INR 7.4 lakhs, and we are looking at somewhere around INR 1.1 million in quarter two. Sure. I think sir said about 3.5 million for the year, I think. Is that fair? Okay. Sir, lastly, on the cell phone side, if you could just update us, you know, you know, our production plans for this year. You know, how is the ramp up on Motorola and Nokia shaping up and what kind of revenue you think you could do on the cell phone side? Yeah, that's my last question. On the smartphone side, on the Motorola, we are targeting somewhere around 5-5.5 million smartphones. Mm-hmm. Which is a very significant increase from 2 million - 5.5 million. In the new customer acquisition and Nokia, but Nokia is relatively a smaller brand. Mm. Now, important is going to be the new customer acquisition, which we are hoping that we should conclude by Q3 of the current financial year and the production should happen by Q4, second or third month. Sure. Any sales number you can share with us? What's the kind of sales number looking at from this segment for this full year, for 2023? Broadly, Ankur, we are targeting 5.5 million of smartphones for Motorola. Mm-hmm. Other than Motorola, we have brands like Nokia both in feature phones, smartphones. We have itel on the feature phone side. Yeah. This business should give us a revenue of somewhere between INR 6,500-INR 7,000 odd crores this year. INR 7,000 crore. Great. Great. Follow up. Thank you. Thank you so much. That was all from my end, sir. Thank you. The next question is in the line of Sujit Jain from ASK. Please go ahead. Thank you for the opportunity. Sir, what is the progress on Google Android sharing their license for TV manufacturing in India? Because I believe that frankly opens up our opportunity in ODM and as well as in increasingly improved margins in the TV segment. Hi, Sujit. That's an important element for us also. Now there is a significant movement in a very positive direction. We're very hopeful that we should be concluding the licensing very shortly. Right. The 9% margin possibility that you spoke about in the washing machine could that be the peak margins? This is, you're saying, as we go along, not for the full year. No, it's not gonna be for the full year. I feel that in the current quarter, the margins should expand from 83.1%-9%, and then it should sustain at that level. Sure. Thank you, and all the best. Thank you. Thank you. The next question is on the line of Naval Seth from Emkay Global. Please go ahead. Yeah, sir. Can you share the number of, you know, on PLI incentive booked for this particular quarter? Well, there's a small income of INR 1 odd crore which has been booked in this quarter. Total H1 FY 2022 number would be? H1, January to June, it will be INR 10 crores. Sure. Okay. That was my question. Thank you. We'll move on to the next question. That is on the line of Amit Bhinde from Morgan Stanley. Please go ahead. Hi, sir. Thanks, Girish, again. Mobile margins at 2.5%, is there any one-off there, or is this more reflective of how the margins would look given the product mix, that we had in the quarter for the full year? Amit, the margins in this particular vertical should be better in the coming quarters. The margins have come down because we've opened a new factory in sector 63, and there are certain ramp-up costs which have been incurred. This factory operations we feel should be stabilized by Q3 of the current financial year. You can see the improvement in the margin in this particular vertical. Amit, to add to it, as Mr. Lal mentioned that we are looking at volumes of 5.5 million for Motorola. We have a dedicated plant for them. Initially in the first quarter we have done 1 million. As we progress along, we are looking at a quarterly run rate of 1.5 million. That benefits of operating leverage will also come in. As mentioned in his opening remarks, we're also looking at more backward integrations in Motorola and setting up a line for LGA assembly line. Clearly that would also add to our margins because that would mean more backward integration. Understood. Sir, on interest costs, last couple of quarters we've been clocking at around INR 14-odd crores. How do you expect the balance nine months will be slightly higher than this number, or could it actually decline from here? No, I think that broadly it will be in a similar range, yeah, INR 14-INR 15 crores. Annual number should be somewhere between INR 60-INR 64 odd crores. Thank you. Thank you so much. Thank you. The next question is from the line of Aditya Kondawar from Complete Circle Capital. Please go ahead. Yeah, hi. I just had one question on the wearables division. I believe we manufacture these products for boAt, so just wanted to know on the volume ramp up and how are we going to ramp up this wearables division? Thank you. This is already getting ramped up. From 0.5 million, we are looking now at a volume of 1.5 million a month. We are also adding more SKUs. Initially we started only with TWS, which is the largest selling SKU for them. Now gradually we are adding neckbands, which is another largest selling SKU for them. Over the next maybe another quarter or so, we will add Bluetooth speakers and smartwatches. Smartwatches are, again, a very high growth market. Clearly there is a big arbitrage between domestic manufacturing and import, so clearly we are shifting more and more of imports to this JV that we have. Clearly as a brand, they're doing very well in the marketplace. Clearly our numbers with them will keep on increasing. Sure, sir. Thank you. Thank you. Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is on the line of Aniruddha Joshi from ICICI Securities. Please go ahead. Yeah, thanks for the opportunity. Sir, if we exclude the high-cost inventory at the beginning of the quarter and the Forex loss that you mentioned, so adjusting for both these one-off, what would be the normalized EBITDA margin that we would have in this quarter? There was an expense out of the foreign exchange of almost INR 13 crore, INR 12 crore. We would have been at INR 113 crore. That would have been a margin. Of 3.9%. 3.9%. It's very difficult to quantify the inventory loss, but clearly we have had this inventory loss because we are in a falling commodity kind of scenario. The FX loss. That's quantifiable. It's very difficult to quantify that loss on account of inventory. We can assume that the company should be achieving the margin guidance of around 4% for the year. Will that be a safe assumption? Yeah. We maintain the guidance of 4%. Okay. Okay, sir. Yeah. Thank you. Thank you. The next question is from the line of Omkar Garude from Shree Investments. Please go ahead. Yeah. This quarter you haven't shared figures of your net debt to asset cash equivalents. Can you please share that? How much is it, cash and cash equivalents? Yeah. Net debt was around INR 130-odd crore. Yeah. Net debt was around INR 130 odd crores. Net debt was INR 130 crore. INR 130, INR 130. One three zero. Okay. Cash equivalents? Cash was around INR 360 odd crore. INR 360 odd crores. What would be the gross debt to equity and- Gross debt would be around INR 490 odd crores. INR 490 odd crores. Are you guys comfortable with this kind of level? No, if you look at our net debt to equity, it is still 0.1. We are comfortable with this level. Clearly we see that this year the cash flows, so capital intensity first of all has come down as in compared to last year. When we see that definitely the profitability will be better, so we'll be generating some free cash flow this year, and the debt repayments should also happen. We are confident that the debt levels wouldn't decrease from this level. It should only come down from here. Other question is, you mentioned that there will be a revised policy for IT hardware. Apart from that, any other plans to get into any other category apart from that which you have already mentioned? We already have a lot on our plate. Please appreciate that, one, we have to ramp up our mobiles. In lighting we have ventured into smart lighting solutions, and we have to integrate the new acquisition. We've rolled out the refrigerator product, which is a large product. It's completely on the OEM basis. In FATL, fully automatic top loading, we have to roll out more and more new model range. We have got into the telecom devices wherein the production of ONT has already started. We also bagged a large order for HD set-top boxes. We are venturing into Android set-top boxes, and we have set up a R&D team on the Realtek chipset for rolling out the homegrown ONTs. We have to ramp up the board production and set up a new factory. In telecom devices also we have to set up a new factory. Recently we have started the new factory for rigs, and that is a inverter controller and electronics for air conditioners. There's a lot on plate. However, we are always open to the new potential verticals in electronics manufacturing because the opportunities are immense. As of now, these are all the new projects which have to be rolled out, already being rolled out and stabilized. With the verticals you mentioned which are going to come up and the existing verticals doing pretty well for you, so are you confident of, say, around 25%-30% kind of revenue growth for the next four, five years? Or what your internal targets are? I wanted to know that. Will the margins increase further? I mean that we should grow at 25%-30% annually. What kind of margins do you think with the new sets of verticals that are also coming up and they'll also start contributing? Margins would be in a similar range of 4 to 4.3-4.4%, something like that. You are trying to maintain at least 4% margin, right? EBITDA margin. Certainly. Thank you. Thank you. A reminder to the participants, anyone wishing to ask a question may please press star and one. The next question is on the line of Rakesh from HDFC Mutual Fund. Please go ahead. Yeah. Hi. Thank you for the opportunity, sir. Just one simple question. Can you explain the source of this INR 12 crore of Forex loss? I mean, what business activity leads to that loss? My understanding was, if you have a prescriptive business, ideally it should not be having any losses because, by definition, that should be passed through. I just want to understand, you know, which activity is leading to this INR 12 crore of Forex losses. We have two revenue streams. One is the EMS, OEM revenue stream, which is on conversion basis. In that revenue stream, we don't take any currency risk. It's an automatic pass-through. A significant portion of our business now is our own design solutions. In those own design solutions, it's our inventory, it's our sourcing, and we get the credit from our vendors. When you get the credit because one doesn't hedge it, this time the depreciation of the rupee was very sharp, almost 6% in a very short period of time, which has led to this hit. There's a lag in passing on this increase to the customers. Any ballpark exposure in terms of either receivables you can talk about, which would be. Sorry, payable, which would be in foreign currency and that would carry this risk? Any way to sort of think about this particular phenomenon? Almost 85% of our foreign exposure is hedged. 15% we keep it open, which is compliant. Understood, sir. Thank you very much for the clarification. Thank you. Thank you. The next question is from the line of Akhilesh Bhandari from ICICI Prudential AMC. Please go ahead. Sir, thank you for taking my question. My question pertains to the Motorola mobile manufacturing. You had mentioned in Q4 con call that the order book for Q1 in the Motorola business was around 1.5 million, but the volume in this quarter has been around 1.08 million. Just wanted to understand the reason for the shortfall. Was there a change in schedule from the brand side, or was there some issue with respect to, you know, you ramping up the volumes this quarter? In April month we had challenges because of lockdown in Shanghai and in China on the supply chain side, and the production got impacted. That was one of the reasons. Second one was also some slowdown in the mobile market in India. The lifting slowed down a bit. It was a combination of these two factors. Our internal ramp up, we have been able to do it very well. Okay. With respect to you know backward integration which you're planning, any you know data or any comment you can do on what would be the potential value in value add increase from this? Display assemblies. We feel that we should be able to add to the margins for the models in which we're gonna do the LDSMP by around 0.5%-0.6%. You would be doing this for all the models which you are currently doing or is it only for part of this? I had said we are saying we're gonna start with some models and then we're gonna increase. A very specialized process. Yeah. What would specifically be the CapEx requirement for this part? CapEx for this is not very significant. It's going to be comparable in the range of INR 5-INR 6 crores. Okay. Thank you, sir. I'll get back in touch with you. Thank you. The next question is from the line of Hitesh Tonk from ICICI Direct. Please go ahead. Thanks for the opportunity, sir. You have given a guidance of 1.5 million units per month for Motorola in the mobile segment. Do we have such a guidance from Samsung also? Yeah, we have guidance from Samsung. In Samsung's case, we feel that we should be doing almost 2-2.5 million smartphones every quarter. The present volume of 2G is around 1 million a month. 2G is going to be coming to an end by December this financial year. We are in discussion with Samsung of adding some new SKUs. Hopefully, we should be able to conclude that business in next couple of months. Okay. Sir, my next question is just, say, for clarification, you mentioned about the INR 310 or INR 320 overall CapEx for the year FY 2023. Does it include our acquisition in the lighting segment, sir, or the acquisition will be beyond that? It's within that. Within that. Okay, sir. That's all from my side. Thank you, sir. Thank you. The next question is from the line of Sujit Jain from ASK. Please go ahead. Thank you for the opportunity again. Sir, we are a company which has done a great job in terms of reducing the client concentration. At the time of IPO, we were 95% two clients and, you know, after that we've become, like, below 15% for one client. Obviously we would want to grow business in mobile. But with mobile business we go back to, at least on the top line, significant client concentration, and which would pose risks for the business. How do you think about it and propose to bring it down? For that you'll have to work out on granularity, bringing granularity in the mobile business itself. Sujit, you know our business well. You are very correctly stating that, five years back, Dixon was completely dependent on one client, lighting was completely dependent on one client. Customer acquisition is an ongoing process, and it's an extremely critical process. We are working towards that. Please be rest assured, I am very sure that we'll have some significant breakthroughs. We already have in Samsung and Motorola large relationships. As I shared in my opening remarks, we are working with two large accounts. We are hopeful and confident that we're gonna have those breakthroughs. Customer acquisition is the way forward to de-risk any business, and same is the case with mobile business. Sure, sir. Thank you. Thank you. The next question is from the line of Amit Bhinde from Morgan Stanley. Please go ahead. Sir. Hi, sir. Good evening, sir. Just a follow-up on PLI schemes. Now, the government doesn't understand this, but the component prices have been influenced by commodity cost. When they have designed the scheme, they have some revenue investment targets. Now, what we see is, you are obviously exposed to five such schemes. Correct me if I'm wrong, I mean, if five is the right number, and then within that, if I had to just think through, if component prices have come down, is the government open to relooking the revenue targets threshold? Because frankly, I mean, it's still EMS business, right? Have you started discussing some of these ideas because we don't know when the deflation scenario will stop. I mean, how are you thinking about it? Because you'll have to make it up through higher volumes. Are you worried about some volumes in some of the smaller schemes like IT hardware or it could be telecom? Because, you know, I don't know the real impact of how the deflation will play out. We see essentially, there are two parts to it. One part is that what is the threshold for getting the PLI benefit. I feel the threshold across all the schemes in which Dixon is beneficiary, we are not impacted. We're confident of achieving this threshold and crossing those thresholds. Over and above that, yes, there would be an impact. How much is very difficult to quantify it because these are all macro numbers and how deflation is gonna play out, how each segment is gonna get affected. At the same time, there's an upside because of the currency. One has to see the net balancing that what's happening. To be very candid, I don't think that industry is in a position to take up this kind of issue with the government, or government will in a positive way respond to it. I don't think so. We'll have to manage as it is. These are all normal balances in business. There is some upside because of exchange, there's some downside because of deflation. Yeah, that's the way it is. I don't see it's going to have a very significant impact. No, fair. I mean, it might not impact you, but the reason I asked was you are obviously a larger player, but there's so many smaller players who get more impacted, who've been PLI beneficiaries anyways. The second question was just around, progressively looking in the next three, four years, does it make sense for you to, you know, think through the semiconductor PLI? And what part of that PLI would excite you? What stage are we at? I mean, if you could share some high-level thought process. The final question was on PLI related CapEx. Of that number of INR 300 crore or INR 20 crore, how much is towards the PLI schemes, please? On the semiconductor policy, have we taken any active decision to participate in it? No. Is the team deeply studying it and engaging with some potential semiconductor partners globally? Yes, we are. No final conclusive decision to pursue that has been taken, but we are actively studying it in certain verticals in which semiconductors is an important buy for us. That's on the semiconductor policy side. As far as the PLI is concerned, we have already crossed the complete threshold for mobile. What we have committed to invest is INR 36 crore in our PLI for telecom, in which 18 crore come from our side and balance from Bharti. On the IT hardware. IT hardware is a small play as of now. It's only INR 4 crore a year. In the case of lighting, yes, we have committed to invest INR 20 crore in this system. This INR 20 crore needs for the next five years. In the case of AC, the total CapEx committed is INR 50 crore, in which our share is INR 16 crore. It's INR 4 crore per year. That's the way it is. Thank you so much, sir. Thank you. The next question is on the line of Gopal Nawandhar from SBI Life Insurance. Please go ahead. Hi, sir. Thanks a lot for the opportunity. Sir, I think actually I joined little late. You know, I'm not sure whether you have discussed about payments of PLI incentives from the government. What is the status and what is the amount and how you are accounting this PLI incentives in our books of account? PLI status is that as far as the project management agency is concerned, which is IFCI, they've already appraised and audited our mobile PLI. Presently, that is getting appraised at the Ministry of Electronics and Information Technology, which is the administrative ministry in our case. Once they do the evaluation, ultimately the next payment goes to the empowered committee, which will have secretaries of Finance, Ministry of Electronics and Information Technology and Commerce secretary, and then the PLI gets disbursed to the applicants who have achieved the thresholds. That is the whole process. Clearly we are in active discussions with the authorities, and we clearly see that it should come to us in the next 1-2 months. Can't give you an exact deadline, can't commit exact number. Clearly, both on mobile PLI as well as the IT hardware, we have crossed and achieved those thresholds for revenues and CapEx. Now to answer your question, how much has been the PLI which has been accounted for. As I mentioned, in the first six months of this calendar year, we have accounted for INR 10 crore of PLI relating to our mobile business. The way we have accounted for and soon, of course, we will be releasing our annual report very soon. The way it will be done that there will be a receivable on the asset side of the amount receivable from the government. Then there's an amount on the liability side, which will say, as incentive, payable to the customers. Difference is what we have booked in the first six months. Within the annual report will be till March, so the difference is what we will be looking till March. That's how the accounting will take place. This INR 10 crore which you have mentioned is our share in that benefit or? Our share. Basically. Which we are not. Say, for example, whatever benefit we are keeping, X of what we are sharing with the customers. There will be a receivable and a payable in the balance sheet, and the difference between the receivable and the payable will be our share of income which has been booked in Q2. Sure, secondly, sir, what is the revenue contribution of Samsung feature phone on full year basis and margins for that? As I mentioned, we are looking for INR 6,500 crore-INR 7,000 crore of revenues, out of which Samsung feature phone. Samsung Samsung feature phone. Samsung feature phone margin profile would be. This is on a consignment basis. We are doing 1 million feature phones for them every month. The margin profile will be. Operating profit contribution in the whole year because of Samsung feature phone business is around INR 12 crores-INR 14 crores. INR 12-14 crore. Okay. Sure, sir. Thanks a lot, sir. Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for the closing comments. Thank you very much for attending this call. If anybody of you have any specific questions, I am always reachable, so please, do call and then, I'll be happy to answer those questions. Thank you. Bye-bye. Thanks very much, Naval. Thank you- Thank you, Dhananjay. Thank you, everyone, for attending the call. Thank you so much. Thank you. Ladies and gentlemen, on behalf of Emkay Global Financial Services, that concludes this conference call. We thank you for joining us. You may now disconnect your lines. Thank you.