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00:00Good morning and welcome back to NDTV Profit.
00:02We are now joined by Mr. Ajit Kumar Rai of Suprajeet Engineering to talk more on the
00:06business outlook as well as the recent acquisition of the company.
00:09Mr. Rai, good morning, thank you so much for joining us today here at NDTV Profit.
00:15I just wanted to start with talking about, you know, the recent acquisition that you
00:19have done and announced this particular month now of SCS.
00:24Now I believe that this is from the insolvency proceedings in Germany.
00:30If you could just talk us through the same, what is the cost of the acquisition currently,
00:34what is the current revenue potential that the company has been achieving?
00:39And I do think that, you know, it will take some time, so probably the integration of
00:43the same in total current revenue of Suprajeet will be probably around from next year.
00:48So just how much do you see the potential of the same over the next couple of years,
00:51if you could talk us through that?
00:53Yeah, good morning.
00:54Thank you for having me on your channel.
00:57SCS is a company headquartered out of Germany, due to, you know, the various, you know, relocations
01:08that they were trying, they got into some cash flow issues and went into insolvency
01:11and we are in the process of acquiring assets through the insolvency.
01:18The assets are located in Germany, in Hungary, in China, in Canada, etc.
01:24The enterprise value of this entire transaction has been pegged at 13.5 million euros and
01:30the revenue run rate as we see it is around 50 million euros.
01:37The acquisition is very important for us because it gives us a very good footprint out of China
01:44as well as from Europe, but not actually manufacturing, you know, but manufactured
01:51in Morocco and delivered to Europe.
01:54And also we'll have an excellent engineering team out of Europe, particularly Germany,
01:58both in engineering resources as well as, you know, business development resources.
02:04So it will be a very good win-win position for us.
02:07It will also consolidate some of our customers who are common for both of us, giving us the
02:12increased wallet share with these customers.
02:16So we feel that it's a good acquisition for us going forward.
02:20Now, just to follow up on that, sir, you did mention that you already have a lot of revenue
02:25share with certain customers that SCS also has.
02:30What is the current, firstly, the timeline that you are targeting for closing this particular
02:34acquisition?
02:35Also, do you see that revenue from SCS will be incorporated fully from the next fiscal
02:41year of 2026?
02:43And also, do you see any kind of additional investment that you will have to make over
02:47and above this 13 million?
02:49Because as you said, that the company has some cash flow issues.
02:52So probably you will be paying the debt in this particular year.
02:56But just on these three questions on the acquisition itself, if you could let us know.
03:00Yeah, I think in terms of the enterprise value, that is the valuation they have set.
03:07As long as, you know, for the first couple of quarters, we may have to additionally support
03:12probably for certain working capital requirement, because it comes with, you know, no working
03:17capital base.
03:18So that may be some area where we need to do it.
03:22Additional capex as such, we don't really see anything there.
03:25I think we feel that they have enough capacities that have been inbuilt into the system.
03:32In terms of the overall, how it gets integrated into Suprajit, I think, as we have said in
03:38our announcement, it's a two tranche transaction.
03:42The first tranche that involving European operations will be completed subject to certain
03:48condition precedents in a week's time, that's on the 1st of July, whereas the other part,
03:53the China and Canada will be done at a later stage over the next few months, when they
03:58complete again certain condition precedents that requires to be met, and certain debt
04:03levels has to be achieved.
04:05So the overall transaction, you know, is, as I said, is a two tranche base.
04:10In terms of overall consolidation, the total, what I've talked about, about 50 million euros
04:16will come into our consolidation for the next year, because this year is already one quarter
04:20is over.
04:21And it's only the first tranche that would probably be there in the second quarter results
04:25of Suprajit.
04:27Whereas the other one will come a little later.
04:29So I would say it will be probably for the full year, it will be year 2025-26, I think.
04:37Understood, sir.
04:38Now, I just want to talk a little bit about, you know, the consolidated Suprajit business
04:42currently as well, starting, let me just start with margins first.
04:46So, you know, the pre-pandemic, we saw that, you know, the company around FY 17 to 19 had
04:52about 15 to 16% of total EBITDA margins.
04:55Now, post-COVID, we have seen it consolidate in the 11% to 12% to 13% range.
05:01How are you seeing this margin story over the next two to three years?
05:06Because, you know, you are increasing WalletShare with your existing business and now with this
05:10acquisition as well.
05:11So I just wanted to understand what you, what any kind of comments that you might have on
05:15longer term margin story for Suprajit.
05:19I think it is important to sort of segregate this question into two parts.
05:22One is our India business.
05:24I think what you are talking about 15-16% is our India business.
05:28It continues to enjoy that, you know, 15-16% EBITDA margins.
05:34Right now, the only part of the business which was not in that range was Phoenix Lamps division.
05:39Even that has been clocking that EBITDA margin in the last quarter.
05:43When you look at the global business of Suprajit, I think you must understand how the global
05:47auto component businesses are run.
05:50Typically, global automotive component business run between, you know, typically have between
05:556% to 10% EBITDA, that is the range, let's say 95% of the global auto component companies
06:02fall in.
06:03I think our, we are Suprajit Controls division, which deals with the global business, is also
06:09in the same range.
06:10Of course, we are at the lower part of that range, about 6%.
06:14As you have mentioned, I think in your earlier, you know, press reports and press releases,
06:21we have been saying that that will go towards the median, that's about maybe 7-8% in this
06:25year.
06:26That is our child, you know, our endeavor.
06:29So overall, I think our, you know, on a consolidated basis, I think the EBITDA margins are around
06:3612%.
06:37I would expect it to consolidate and improve from there.
06:40On the standalone, the historic margins that we just talked about, will continue to be
06:45there.
06:46Now, just one question on the export share, because we've seen a very strong share of
06:50export and total revenues currently, it's roughly 53%, from just around 10% a decade
06:56ago.
06:57How do you see this panning out over the next few years?
07:01Will it be consolidating around the 60% age, because we've seen very strong growth in India
07:05as well.
07:07And secondly, on just going back to a little on acquisition, because you have done seven
07:11acquisitions, you know, in fives in cable space, two in the halogen bulb space, and
07:16now with SCS as well.
07:19And generally, the consolidation and the turnaround is very quick for someone like Superajit.
07:23So will you be open to more acquisitions in the global space?
07:27Because we are seeing a lot of opportunities that are coming up, and other, you know, auto
07:31ancillary players are also lapping them up.
07:34So just on these two things on export share on other acquisitions that you might be targeting
07:39in the segments that you operate or the new ones as well.
07:43In terms of the first part of the question, I think, we feel that the traction to business
07:50development will be very strong going forward, we have made specific remarks on our exports
07:56and new business acquisitions, they're pretty strong.
08:00So the growth, although global businesses are growing at the single digit, or not even
08:04single digit, it's probably one or 2% low single digits.
08:08And in the last two years has been a very challenging time for global automotive business.
08:13That part of the business we are expecting to grow solidly.
08:17And hence our overall business that 50-52% that you said, will further increase in our
08:23total overall consolidated sales, because of the strong wins, although India business
08:29also will grow, but that will be more in line with the India business.
08:33So if you look at the overall picture, we continue to expect to have a strong double
08:38digit margin, you know, growth, and also double digit margin growth.
08:42So that is the position on that in terms of the opportunities, you know, I have said this
08:47in multiple forums that, you know, in most auto component, you know, particularly proprietor
08:54related areas, there are quite a few, you know, players in the market.
09:00So I would expect that there will be consolidation of vendors going forward, not just in the
09:05cable space, I think it will also happen in other auto component space.
09:10And I believe that this will be the way forward because customer also don't want to have 10-12
09:16suppliers.
09:17Globally, they want to have 3-4-5 suppliers capable to deliver globally.
09:22So I think that's where Suprajit comes into picture, we have capability to do on-shoring,
09:27capability to do, you know, close-shoring, and we also have a capability to do low-cost
09:32manufacturing.
09:33So that is a perfect solution to our customers.
09:35So we expect that that will add to our momentum going forward.
09:41Just one last question, sir, from my side, now, we've seen that non-auto business has
09:46grown and a newer segment for the company has grown very rapidly.
09:50Now, I think, please correct me if I'm wrong, roughly 80-85% of this non-auto is global,
09:55the revenue is global in nature.
09:57I just wanted to understand what segments within this non-auto business does the company
10:02operate in firstly, and how are you seeing this because we've seen a lot of competition
10:06globally as well along with geopolitical issues.
10:08So just on this business very quickly, and finally on, you know, for this year's outlook
10:14for FY25, if not any numbers, if you could just guide us, how are you seeing the market
10:19and any kind of capex guidance that you have over the next 12 to 18 months?
10:23I think the non-automotive business, you know, after growing nicely, had a little bit of
10:28a blip last year because of the high interest rates globally.
10:33You are right, I think probably 90% of the non-automotive business comes outside of India
10:39and probably a lion's share comes from actually US.
10:43So that business continues to have a strong headwinds even this year, but we are winning
10:50new contracts.
10:51So we are quite comfortable as far as that is concerned.
10:54That means the business came down last year, but from there, we expect to grow for this
10:58year.
10:59In terms of the guidance, I think we have made this in our press release as well, that
11:06overall on a consolidated basis, we expect, despite global weaknesses, we expect to grow
11:12our business in double digits and margins also will have a good improvement compared
11:17to last year.
11:18So that is the guidance that we have given in terms of those numbers.
11:23In terms of capex, I think we have announced about 180 crores of capex across all our divisions
11:29for the year for various activities in respective divisions.
11:33So that's the capex guidance.
11:35Well, Mr. Rai, thank you so much for joining us today.
11:39Thank you.
11:40Thank you for having me.
11:41Thank you.
11:42Thank you.
11:43Thank you.
11:44Thank you.
11:45Thank you.
11:46Thank you.
11:47Thank you.
11:48Thank you.