AMBERNSEOctober 23, 2023

Amber Enterprises India Limited

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Management on call

Jasbir Singh

EXECUTIVE CHAIRMAN & CHIEF

Daljit Singh

MANAGING DIRECTOR – AMBER ENTERPRISES INDIA LIMITED

Sudhir Goyal

CHIEF FINANCIAL OFFICER – AMBER ENTERPRISES INDIA LIMITED

Sachin Gupta

CHIEF EXECUTIVE OFFICER –

Key numbers — 40 extracted

rs,

ing of window AC and then split and inverters and further diversified into cassette air conditioners, ductables and package units of higher tonnages. Being backward integrated over the period we sprea

29.4%

r wings in RAC and RAC components spreading into different geographies of India. Today we command 29.4% of manufacturing footprint of Indian room air conditioner industry. To gain an edge over the chan

2.1%

gh the consolidated financial highlights. On the revenue front for H1 FY2024 revenue increased by 2.1% to Rs.2,629 Crores versus Rs.2,576 Crores in H1 FY2023. We have reported revenue of Rs.927 Crores

Rs.2,629 Crore

onsolidated financial highlights. On the revenue front for H1 FY2024 revenue increased by 2.1% to Rs.2,629 Crores versus Rs.2,576 Crores in H1 FY2023. We have reported revenue of Rs.927 Crores in Q2 FY2024 vers

Rs.2,576 Crore

ighlights. On the revenue front for H1 FY2024 revenue increased by 2.1% to Rs.2,629 Crores versus Rs.2,576 Crores in H1 FY2023. We have reported revenue of Rs.927 Crores in Q2 FY2024 versus revenue of Rs.750

Rs.927 Crore

eased by 2.1% to Rs.2,629 Crores versus Rs.2,576 Crores in H1 FY2023. We have reported revenue of Rs.927 Crores in Q2 FY2024 versus revenue of Rs.750 Crores in Q2 FY2023. On operating EBITDA on H1 FY2024 op

Rs.750 Crore

6 Crores in H1 FY2023. We have reported revenue of Rs.927 Crores in Q2 FY2024 versus revenue of Rs.750 Crores in Q2 FY2023. On operating EBITDA on H1 FY2024 operating EBITDA stood at Rs.203 Crores versus

Rs.203 Crore

venue of Rs.750 Crores in Q2 FY2023. On operating EBITDA on H1 FY2024 operating EBITDA stood at Rs.203 Crores versus Rs.182 Crores in H1 FY2023 a growth of 11.5%. For Q2 FY2024 operating EBITDA increased

Rs.182 Crore

s in Q2 FY2023. On operating EBITDA on H1 FY2024 operating EBITDA stood at Rs.203 Crores versus Rs.182 Crores in H1 FY2023 a growth of 11.5%. For Q2 FY2024 operating EBITDA increased to Rs.65 Crores compare

11.5%

n H1 FY2024 operating EBITDA stood at Rs.203 Crores versus Rs.182 Crores in H1 FY2023 a growth of 11.5%. For Q2 FY2024 operating EBITDA increased to Rs.65 Crores compared to Rs.52 Crores in correspondi

Rs.65 Crore

ersus Rs.182 Crores in H1 FY2023 a growth of 11.5%. For Q2 FY2024 operating EBITDA increased to Rs.65 Crores compared to Rs.52 Crores in corresponding quarter last year. Operating EBITDA is before impact o

Rs.52 Crore

H1 FY2023 a growth of 11.5%. For Q2 FY2024 operating EBITDA increased to Rs.65 Crores compared to Rs.52 Crores in corresponding quarter last year. Operating EBITDA is before impact of ESOP expense and other

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Guidance — 20 items

Jasbir Singh

opening

“Going forward we clearly see our electronic division becoming number 2.0 strategy having exponential growth opportunities in the year to come.”

Jasbir Singh

opening

“We are currently inching towards finalization of our first global order for Sidwal products and this division is also set to become Amber 3.0 strategy going forward.”

Jasbir Singh

opening

“Second division is electronics division and third is railway subsystem and mobility, and all have multifold growth opportunities going forward.”

Jasbir Singh

opening

“Net debt of September 2023 stood at Rs.956 Crores from Rs.662 Crores in September 2022 we expect this debt number to come down to in the range of 650 to 675 Crores by the financial year end.”

Jasbir Singh

opening

“Working capital days for September 2023 stood at 52 days as compared to 39 days in September 2022 and we also expect the net working capital days normalize by Q4.”

Jasbir Singh

opening

“Overall capex for H1 FY2024 stood at 149 Crores and we plan to incur a total capex in the range of Rs.350 to 380 Crores in the current financial year.”

Jasbir Singh

opening

“We anticipate a year-on-year growth in the single digit for the room AC industry in the fiscal year 2024 which bodes positively for Amber.”

Jasbir Singh

opening

“However, for motors division we expect exports to increase in the coming quarters and further expect the industry to grow in the range of 25% to 30%.”

Jasbir Singh

opening

“During the quarter gone by ILJIN entered into a JV with Noise this JV will be 50% owned by ILJIN and 50% owned by Nexxbase and we will have a new plant setup in Noida.”

Jasbir Singh

opening

“To begin with, ILJIN will develop local comprehensive integrated solutions in the wearable space and further intend to move into other electronic products.”

Risks & concerns — 2 flagged

Operating EBITDA is before impact of ESOP expense and other non-operating income and expenses.

— Jasbir Singh

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Q&A — 16 exchanges

Good morning gentlemen and congratulations on a good set of numbers. My first question is on electronics side. Why do we have a robust commentary for this division and have also delivered good growth in terms of margin, our topline for this quarter has been quite tepid at 3% and on the Q-o-Q basis it has been declined, so since this is a non-seasonal segment and our historical trend has been quite good, so why only a 3% growth that is my first question?

Sanjay Arora

So, such growth is mainly due to the muted growth in the AC segment like electronics division we supply a lot of controllers and the AC season was quite damp this time and it also affected the growth, so that was the main reason of the less growth in the electronics. Would it be possible to give a breakdown for electronics in terms of telecom, hearables and wearables, automobiles and PCBA that will help? Anyway Sanjay we can send it to Natasha later on the breakup of the four segments within the electronics division. Alright. Thank you so much Sir. My next question is on the consumer durables

Hi, Sir. Good morning. I had a couple of questions. First was on the electronics side just to build on the last participant’s question, so we have seen a tepid growth and while you have given a guidance of close to 35%-40% growth in the full year, so do you think you can continue the momentum in the second half will we see a better number there also?

Jasbir Singh

Yes. We have added new applications in this sector. We have added auto EV space. We have also added wearable and hearable customers and telecom business which we just on boarded in Q1 has started, so we expect that we should be able to match in the range of 35% growth for this division. On the standalone side we have seen a strong growth; however, I think SanjayJi made a comment that the AC season was tepid so that growth that we have seen was it on account of a newer customer just trying to connect, I think there is a little bit of disconnect in that sense? Multiple reasons too, new customers

Good morning Sir and thank you for the very detailed earlier commentary during the call. Sir just two questions firstly any update on PLIs, the two that we have received for AC components and secondly for Nexxbase you did mention that about Rs.1,000 Crores additional revenue just to clarify this Rs.1,000 Crores will be for the JV as a whole, so we will be taking about 50% of that or 50% is equal to Rs.1,000 Crores for us?

Jasbir Singh

No, the JV will have total 1000 Crores and since it is a 50:50 JV we will not be able to consolidate it in revenue, it will be a separate revenue which will be booked on the new company and we will be able to consolidate the PAT on the 50% part of it. As far as your first question is concerned regarding the PLI we are eligible in the PLI. PLI audits have started, a couple of factories have been visited and we expect that maybe by Q4 we should start receiving the PLI benefits. How much incentive we are expecting in FY2024 and FY2025 if we can share that? So, for the first year it was about Rs.1

Hi, good morning, Sir. My first question is on the electronics side how we really looking at this vertical, would it be an extension of what we have been doing until now or can it be completely different, a foray into even industrial application, defense, aerospace, are all options open or are we looking to be specializing in certain fields within the electronics space?

Jasbir Singh

No, since we have now learned the electronics space and we are expanding our knowledge base, so we are very open, we have taken two pronged strategy one is to increase our margins because we started with our lowest margin businesses available in the PCBA which is the consumer durables part whereas the defense and aerospace and the railways and industrial is the higher margin businesses, so we are inching towards that. So, as you see we started with consumer durables, then we entered into telecom, then we added a hearable, wearable and now we have added auto EV space. So, we will continue to gr

Good morning. My question was regarding you mentioned about doubling of revenue from FY2024 for electronics division in two years and doubling of revenue in two years for railway systems and mobility division as well. I just wanted to know what is your long-term strategy on both these, you are mentioning 2.0 for electronics and railway subsystem 3.0 for Amber, just wanted a broad long-term view on these two aspects?

Jasbir Singh

The broader long-term view is that these divisions will be heading for a very independent growth and have a potential of becoming as big as Amber is today, going forward. So it is very simple strategy which we have opted. We actually acquired into adjacencies and then we have grown those divisions into various applications. In electronics like I have explained that we have already entered into four applications now we are adding some more applications in that plus we are going to backward integrate into component space of the electronic PCBA part, which will help us both topline growth as well

Hi, Sir. Thanks for taking my question. My first question is on capex. Last year you invested almost Rs.750-odd Crores and this year also you guided for Rs.350-odd Crores investment, so I just want to know which are these areas we will be investing, of course it is a non-AC more about a hearable and wearable, but again if you can guide on that and again what asset turn you are expecting on a longer-term with this investment?

Jasbir Singh

So, we will be investing in all the three divisions, largely investments are happening in electronics division and the mobility division plus this complete Rs.380 Crores includes the maintenance capex of all 27 plants. It also includes the R&D capex and some new products which we are developing for the room air conditioner division. So, in total we will be reaching currently. On the return side as guided in the markets earlier also we will repeat. Last financial year we have done about 15% ROCE and we expect ROCEs to jump to about 16% plus this year and as guided earlier we will again maintain

Sir, thanks for the opportunity. Now we are seeing most of the brands are sitting at their own facilities so do you see any impact on the industry and on us considering there will be likely excess capacity in entire air conditioner as well as components manufacturing, also what is current industry capacity versus what is it likely to be let’s say after one, one-and-a- half years when most of the new plants will come on stream and what is Amber’s strategy to tackle the steep increase in industry capacity as well as the likely competitive pressures that may emerge post this capacity? That is it

Jasbir Singh

So the brands basically started investing in their own capacity from year-and-a-half back and most of them have started their facilities. Only two customers are pending to start their facilities probably I think in Q4 and one customer will start and by FY2025 one Japanese customer will start. So, the depth has already been settled with this landscape change of complete insourcing versus outsourcing by some of the brands and we have already aligned in tandem to their strategy towards moving into more component supplies rather than finished good supplies and we are seeing some benefits out of ou

Hi. Good morning, team. My first question is to understand that while we have embarked on pretty aggressive growth in both mobility as well as electronics business. As a company what are we doing to build capability with respect to team people and what kind of capacity expansion in yours is required to double these revenues in the next two years? That is the first question.

Jasbir Singh

The divisions are already headed by professional CEOs and they have a complete team in place. As we are expanding our applications, we are enhancing our team strength at the senior level as well as at the bottom level and this is happening at both the divisions and we are taking proactive approaches because we know which divisions, which applications we are entering into so there is a proactive approach on the team strength which is happening and few of the members have already joined in. On the capex side Sidwal will be bringing up a new plant moving forward, since already we have entered fro

Hello Sir and thank you very much for the opportunity. My question pertains to the debt part. As I look at in Q2 FY2024 the gross debt of the company is close to Rs.1,450 Crores, wanted to understand what can be our peak working capital requirement as we get in the peak summer season because this gross debt to equity ratio is quite close to net worth of now almost Rs.1,956 Crores and since we have aggressive plans going forward as well, how do we intend to fund them?

Jasbir Singh

So, one is that you are seeing from the gross debt side we have close to about Rs.400 odd Crores sitting in investments in fixed deposits and bonds, so net debt is a little less than Rs.1,000 Crores and as explained during my commentary that we expect this debt to be in the range of Rs.650 to Rs.675 Crores by the March end. This is a general trend in our industry and this year because this was a very poor season for air conditioners, a lot of inventory was piled up which was supposed to be paid on time and hence the debt got increased but as the inventories are getting liquidated it will come

Thanks for the opportunity. Sir just couple of questions first is you called out this consumer durable topline to almost double in couple of years from FY2024. How should we look at the mix in terms of the PCBAs in terms of the new areas which you spoke about industrial, railways, defense, what can be the contribution from that or will it be largely from the current segment that you are doing?

Jasbir Singh

No, we have guided that the electronics division and the mobility application division which is railway sub-systems division ‘Sidwal’, both are likely to double its revenue in next two years’ time and that the reasoning is very simple, we are adding new applications, new product categories, new customers and we are also deep diving into the bill of material of more passenger cars. So earlier as explained we were just giving 4% of the bill of material of a passenger car, which was only air conditioner as a product category, but now we have entered into multiple product categories which orders h

I just wanted to sort of understand the weakness in the motor segment margin this particular quarter what was the factor that we are back to single digits after sustaining double digits for a long time?

Jasbir Singh

In the motors division it was particularly because we sold more of a BLDC motors which are lesser margin businesses and our export shipments did not happen the way we anticipated so that is the reason why there were small dip, but I think the double digit numbers are maintainable for this division. For the full year we should be back to double digit? That is right. Yes. In terms of overall inventory given how Q2 was and maybe early part of festive season how do you see the AC market evolving just Q2 and Q3 any sense of how the market trends have been so far? Market trend as explained earlier I

Hi. Good morning, gentlemen. Two questions, first on the electronics division you mentioned about the growth and the margins if you can give us some sense on what can be the typical working capital dynamics going forward what would be the asset turns on this that is question number one and secondly any outlook that you can give on the motors part of the strategy there beyond this year?

Jasbir Singh

Can you repeat your second question? The first one was the electronics division, Second one was… The strategy going forward on motors beyond this year? So, on the electronics side the net working capital days they are not much, the asset terms are pretty good in that division. The asset turns are as good as about 11 to 12 and ROCEs in that division is in the range of 26% to 27%, net working capital days will be in the range of about 20-25 days, so we expect that it should be in the same range moving forward as well and on the motors front what we are doing is we are opening our global doors as

Sir, in Sidwal we are seeing that your current order book is around Rs.1,100 odd Crores any sense on where can this number settle over the next two to three years?

Jasbir Singh

Well, lot of activities are going on in that division so very difficult to give you a number but if our global doors open which we are likely to open it can be substantial number to add up to this number, but we cannot give that number right now. I think that is why we have guided that we are confident of doubling the revenue in next two years, but yes that division is heading towards a very robust growth moving forward. Doubling of revenues will be from FY2024 base or FY2023 base. 2024 base, current year base. Thanks. All the best Sir.

Sir my question is with respect to the new expansion that you are making that is into the EV auto space. Can you please describe or speak two lines on it as to whether it is a two- wheeler, four-wheeler or where exactly, what domain exactly are you planning in that space and what is the right to win versus that of the other peers? Thank you.

Jasbir Singh

We have cracked four-wheeler EV first and we have not become the Tier-1. We have become Tier-2 supplier right now and we are adding two-wheeler EV also very soon. I think probably by Q4 we should be able to add the two-wheeler also because that is a very focused segment for us. What we are offering uniquely is the geographical spread as well as our R&D capabilities which we have built over the last five years so that is the uniqueness which we are offering and we have plans in North India, West part of India and in the southern part of India, so that is helping us in this strategy. Are we in a

Hi Sir. Congratulations on a great set of numbers. Just wanted to ask you between your room AC and motors what would have been the split this quarter?

Jasbir Singh

Room AC has been on a consolidated level it has come down to 40% and then motor… Last quarter it was Rs.1,242 room AC what would have been this quarter? I do not have the number right now. Dhananjai what we will do is we will send you the numbers latter on. Dhananjai Bagrodia: What would be your capex for this year? So, this year we have guided that we will be in the range of Rs.350 to Rs.380 Crores. Perfect. Thank you.

Thank you everyone for joining on the call and I hope we have been able to address all your queries. I think two queries have not been addressed, which we will be sending you separately to Dhananjai and to Natasha. For any further information kindly get in touch with Rohit, or SGA our Investor Relations Advisor. Thank you very much and have a good day ahead.

Management

Speaking time

Jasbir Singh

Moderator

Natasha Jain

Abhishek

Alok Deshpande

Dhruv

Sonali Salgaonkar

Onkar Ghugardare

Deepak Krishnan

Aadesh

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Opening remarks

Jasbir Singh

Hello and good morning everyone. On the call I am joined by Mr. Daljit Singh, Managing Director; Mr. Sudhir Goyal, CFO; Mr. Sanjay Arora, Director, ILJIN Electronics, Mr. Sachin Gupta, CEO of RAC Division; and our IR Advisors SGA. We have uploaded our results presentation on the exchanges and I hope everybody had an opportunity to go through the same. Amber over the years has evolved as a comprehensive backward integrated and diversified B2B solution provider. As you all must be aware that we started our journey from room AC sector comprising of window AC and then split and inverters and further diversified into cassette air conditioners, ductables and package units of higher tonnages. Being backward integrated over the period we spread our wings in RAC and RAC components spreading into different geographies of India. Today we command 29.4% of manufacturing footprint of Indian room air conditioner industry. To gain an edge over the changing market patterns from fixed speed AC to invert

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