Suprajit Engineering Limited (532509) Earnings Call Transcript
August 13, 2021
Earnings Call Speaker Segments
On behalf of Anand Rathi Research, I welcome you all to the Q1 FY '22 Results Conference Call of Suprajit Engineering. From the company side, we have Mr. Ajith Kumar Rai, the Founder and Chairman; Mr. N.S. Mohan, MD and Group CEO; and Mr. Medappa Gowda, CFO and Company Secretary. Due to paucity of time, we will have this call for 45 minutes from now. We will have initial brief comments by Mr. Ajith Kumar Rai and others. Then we will follow it up with Q&A. Over to you, Mr. Ajith.
[Audio Gap] for attending our Q1 results con call. As is the normal routine, I will request first Mr. Mohan, our Managing Director, to make a brief comment on the operations; followed by Medappa, who will give a short brief on the financials. And I'll follow it up with a quick remark, and we'll open the questions quickly as we need to wrap it up by 2:45. So with that, I'll start with Mohan. Mohan?
Yes. Thank you. Like what we have already published and you would have seen that we have got a reasonably good quarter. There was a lack of traction in the domestic market. And -- but I think to a certain extent, it was made up by our exports and overseas markets. So all in all, if you look at it, we had a reasonably good quarter. Now what I'll do is, like I do it usually, I'll take you through our divisions. And I'll start obviously in our Suprajit Engineering Non-Automotive, primarily Wescon and wonderful Unit 9, which is a plant here in Bangalore. Overall, I would say we have done very well on a Y-o-Y basis, quarter-on-quarter. In fact, this was the highest revenue that we have recorded in the history of Wescon for this particular quarter I'm talking about. So it was an exceptionally fantastic quarter. Having said that, we still have a lot of supply chain and also its associated operational issues. Sensors, which are -- one of the sensors that are required requires an IC, and as you all know, that's a big subject which is going on in the automotive market. Therefore, we also are a part of that problem being faced, that we also require this IC, so we are having shortages. Coupled with that, we also have resin shortages that has been plaguing us; and then to comp on that, the port condition and container shortage issues in U.S. So despite all these kind of, I would say, headwinds that we face, I think we did a reasonably good quarter. And the way it's going on, I think the second quarter is also looking pretty robust. If I can move on to our automotive exports, which is Suprajit Europe and Suprajit Automotive Limited. Basically, our past quarter showed again good results, and this was against the odds of the very similar problems, the same old thing, IC shortages. And hence, now it was not because we are using those ICs. It was stoppages or reduced call-offs at the OEMs, both in the EU and U.S. This was, again, coupled with severe container shortages and exorbitant, I would say, shipping costs. Q2, I expect our second quarter to be better than last year. But I don't think we will be reaping the full benefits of the new launches and their volumes, which we had anticipated. We are also on the verge of winning some new contracts with some of the marquee customers for new programs in Europe. If I can move on to the next one, which would be Trifa and Luxlite. This remains our Achilles heel. Even with EU slowly opening, we do some amount of movements there, but it is not to the extent that we would have hoped. Moving on to the domestic front. I'll start with the Phoenix Lamps Division. Again, on -- overall on the domestic front, I think it would be incorrect to compare our results with the previous year first quarter. Obviously, it's going to be not good, and it's nothing to say that we waved some magic wand there. So -- but what I'm more interested in comparing with is our 2019 levels. The industry in itself, when I looked at it, particularly the 2-wheeler portion, has not yet recovered to the 2019 levels. Therefore, obviously, it got reflected on our performance, too. Material costs price increases continue. And in some of the cases, we have been able to negotiate an increased price from some of the customers. And in some of the cases, the negotiations are still going on. Regarding aftermarket, traditionally, our performance in the first quarter would be tepid, which is normal. And -- but this time, it was a bit compounded by the fact that we increased the prices in the marketplace. Now we being the market leader, we thought we need to take the lead even on this. Therefore, we took the first step of correction due to the increase in material prices. When -- as leaders, we direct the competitors who are behind us. It also took time, but they also have increased. So there is a lag between us and them in terms of time line for the price increases that we have done. Having said that, August 15 is traditionally when we launch our usual trade schemes as we call it. So from 15th August, we'll be launching them. The idea is to fill up the shelves for the upcoming season, so I would expect to see an uptick going there. On to the -- in the -- we had this severe shortage of oxygen, the government mandate that we cannot use oxygen and all the stuff. Therefore, we wanted to be self-reliant on oxygen. So we have installed 2 oxygen plants: one in Chennai, one in Noida. The Chennai plant has been commissioned, and the Noida plant would be shortly commissioned. Moving on to the Domestic Cable Division. We did reasonably well here given that, again, the 2-wheeler OEM offtakes were low. But interestingly, I'm sure that you are keeping track, 2 of our customers has substantially increased their export market share. Therefore, with those 2 customers, we also did pretty well. Our expansion plans at Narsapura got slowed down. This was primarily because of the second wave of COVID. And we are -- but we are very confident that we'll be having our plant ready by the time customer launches happen and the volumes also pick up. Like in our Phoenix Lamps Division, here also the material cost headwinds are there. And we have been able to negotiate and get some of the price increases from customers. So that's one good news going forward. Maybe 1 or 2 customers are left behind, and we should be able to cover that up also. Moving forward, I would say, overall, we wanted to be a bit cautious with all the uncertainties of the potential COVID third wave, chip shortages, material prices, container shortages, shipping issues. And a lot of these things are there. Therefore, I would rather be a bit cautious. Having said that, as a team, Suprajit, we continue to be prepared. Good news is that about 95% of our employees have been vaccinated once, and about 45% to 50% have been -- have already got the double dose of vaccination, Therefore, hopefully, it's going to be coverage for all of us. That's on the employee front. And to shore up our capabilities and capacities, that work is also going on so that we will be ready when the economy opens up. Of course, we are definite that the economy will open up but the caveat is always when. Thank you.
Thank you, Mohan. Medappa?
Yes. Thank you. Good afternoon, everyone. We announced the quarterly financial results for June 2021. The results are exactly not comparable with the corresponding quarter of previous year due to core COVID lockdown scenarios. The consolidated revenue for the quarter ended June 2021 was INR 362 crores as against INR 177 crores for the corresponding previous year, recording a growth of 104%. The consolidated operational EBITDA was INR 49 crores for the quarter ended 30th June 2021. The stand-alone revenue for the quarter ended June was INR 209 crores as against INR 87 crores for the corresponding previous year, recording a growth of 139%. The stand-alone operational EBITDA was INR 32 crores for the quarter ended 30 June 2021. We are also happy to inform you that overall group debt level has reduced to INR 301 crores as against INR 354 crores last year, June 2020. For further queries, if any, you may approach me directly even after this call. Thank you.
Thank you, Medappa. I think from my side, quickly, I would say that our Q1 performance has been satisfactory against all the odds all, I think, the auto component manufacturers had. Divisionally as well, we had a good quarter but maybe excepting Trifa and Luxlite. The outlook for current quarter, although the uncertainties exist, I would still say is quite good. I think July and so far in August, things have been fairly decent. We have been able to manage to crank up volumes and see that our dispatches take place despite all the odds. So overall, I think despite the odds that we are facing, as Mohan has elaborated more, we still feel that Q2 should be okay. And subject to COVID and continued such issues, I think the year also looks fairly decent. So with that, I'll let the questions come on, and we will specifically answer the questions of all the participants. Thank you very much.
[Operator Instructions] The first question is from the line of Deepak Lalwani from Unifi Capital.
A couple of questions. Firstly, congrats on the strong performance in the SENA division. I wanted your commentary on the margin trajectory in the SENA division given that this division is seeing now a good turnaround, and in the last 2 quarters, we had about 21% and 15% kind of margins here. What should be the margin expectations here?
Deepak, I think just 1 or 2 quarters, frankly, don't make the whole story. But the challenges that we face today are not normal, I would put it that way, in the sense that today, for example, we are buying IC, some of the sensors at prices which are pretty beyond the price at which we settle with the customers, for example, just to make sure that the customer lines keep running. We have issues. The container costs are something like 5 or 6x today to move material from whichever part of the world to whichever part of the world. So the margin variation you will see from quarter-to-quarter, I think that will settle down only when the -- and the plastics price -- the engineering plastic prices have gone through the roof. So you saw 20% last quarter, you see 15% this time. I don't want to say what it will be. So there will be some kind of ups and downs in this. So I think this seesaw will have to settle down. I think we'll have to wait for a couple of quarters. But my overall view is that at SENA division, we will -- should be able to match whatever as a group we are doing, which is, again, 14%, 16%. That's a reasonable thing to do on a -- what I would call as a normalized basis. On a quarter-to-quarter, there will be fluctuations under these conditions here.
Yes. That's very helpful, sir. Sir, second question was on our European lamps business, Luxlite and Trifa. You had -- Mr. Mohan had mentioned in the initial remarks about the challenges there and also you talked about in the press release. I wanted to know your comments on what options we have now to turn around that business and if at all a provisioning is required, the quantum of provision that we'll have to take here.
It's difficult to comment on the provisioning, if at all. I think we work with our statutory auditors who are E&Y, and we take always the conservative approach on these matters. Having said that, I think in terms of Trifa and Luxlite, I mean, I have to step back a little bit, go back 5, 6, 7 years ago when we acquired, was that we will have a significant front end out of Europe for the Western world. That was the original thought process or the strategy. Which -- when we acquired also, we felt that was a reasonable strategy to continue with it. And the issue that happened was that the pricing pressures that are there in any auto component business. And to set up a full-fledged or manage a full-fledged operational entity out of Europe, it's -- what do I -- I don't want to use the word white elephant but it's a bit of a challenge. So we scaled it down last year, as you know, by shutting down 1 warehouse and moving everything into the other warehouse. We are continuing to monitor that situation to see. What's also happening in Europe is that with all the restrictions, there's a lot of -- retails are going either online or going different ways. So there is an amount of leakage in business as well. So all these challenges are faced by it. So what we are trying to do today is a change of strategy, is that we will try to do more and more direct exports, both OLM and direct. That has been successful. As you know, people like Osram and even other major international customers are buying more and more from us. So as this scales up, that, to some extent, may have to be scaled down because that cost structure may not work completely. But having said that, we still have to have some kind of a warehouse in Europe and some kind of a front end in Europe for the Western world. So we are still assessing it. I think either midyear or end of the year, we'll come to final stage on that, I would say.
Sure. Finally, before I get back in the queue, is it fair to assume now the overall Phoenix Lamps margin should come back to the normalized level given that the challenges that we had in the first quarter, the oxygen availability and other things, are now normalized?
Again -- Mohan probably did not touch on that. You must realize Halogen division use a significant amount of special gases, krypton and all of them. Those prices have all gone up 5, 6, 7x, I mean it's not 10%, 20% increases. So what has happened is that some part of it has been certainly passed on to customers. With some of them, we have a long-term pricing agreement where it's difficult to change the pricing until end of those contracts. So it's a blended thing. So today, I mean, I'm sure, people who are on this call who are invested in auto component business, the commodity prices are something unprecedented and unseen in the past. So we are trying our best to pass on most of those effects. As Mohan said, we've increased the prices also in the market recently. But there is always a little bit of unabsorbed costs. We are still working with our customers to get some of those -- balance things out. But probably end of this quarter, we will know more clearly whether we have been 100% successful or something we had to sort of absorb. That would depend on the margin pressure again on all the divisions, not just Phoenix Lamps.
Next question is from the line of Abhishek Jain from Dolat Capital.
Sir, despite higher chip and RM prices, your gross margin...
Sorry, I can't hear you. Sorry.
Hello? Are you able to hear me?
Yes.
So sir, my question is related with the gross margin. Despite higher chip and RM prices, your gross margin has trended in this quarter. Is it because of the higher mix of the aftermarket or better negotiations with the clients? And will it...
No. I think we have also mentioned in our business notes that there is some amount of past price increases that have been sitting on this quarter's numbers because negotiation with customers goes on and we get some certain amount of a prior period date for price increase. So there is some amount of that number in the first quarter. So that also would have had some tailwind on that margin that you're talking about.
So that means the gross margin will contract in the coming quarter or...
It depends. You must also realize, in first quarter, the volumes have been down. We also had some past year's advantage. But this quarter, hopefully, and [ this remains to be seen ], the volumes will pick up. Again, that will also give -- so it's difficult to say at this moment. But again, we have always been sort of stood by our margin guidance, and we still stand by that. I think that's where it will be.
Okay, sir. And sir, in core cable business, how was the revenue mix, export versus domestic?
Sorry, can you repeat?
In core cable business, how was the revenue mix, export versus domestic?
In core cable businesses, I think we have given the total mix. In core cable business also, it -- our automotive business has grown pretty nicely, as you will see. So obviously, our export part of it would be slightly better than in the corresponding period in the past.
Okay. And sir, in Phoenix Lamps Division, revenue was weak in first quarter. How is the recovery taking place? And what capacity utilization both Noida and Chennai plants are offtaking currently?
Phoenix Lamps Division, volumes were generally in line. Yes, it's -- compared to on the cable division, yes, it probably is a little less. But then the cable division has got the strong automotive exports as well as nonautomotive. So I think that's where SENA is. But I think you should not see the one quarter. It's also, as Mohan said, we had actually a bad time with the oxygen shutdown from the government. So we couldn't actually produce about 2, 3 weeks, although there was business. So we were able to really have to scramble to meet some of the customer requirements. So all those things will get normalized now. So I think the number would be slightly better as far as the growth, which looks little muted in the first quarter, will change going forward.
Sir, in automotive cable business, the company has added many products like electronic instrument cluster, CBS for the 2-wheeler stand-up bike and brake shoes. So how much incremental then we are targeting in FY '22 from these products?
Mohan, would you like to comment on our other products generally? I mean they're all in the starting phases, but Mohan, I'll let him comment.
Okay. Look, if you're asking me to put a number and -- going forward number, it would be difficult because, as you would know, that these are some of the products that we have entered into very recently. Having said that, I would put it this way -- let me take one by one. The brake shoe, we have -- the uptake is pretty good. And in fact, it's got a good amount of traction in the aftermarket. We have introduced quite many models there. Moving on to the instrument cluster. We are in the process of moving from mechanical instrument clusters to electronic instrument clusters. In fact, we are launching 3 platforms; of which, in fact, 1 platform has been launched. Another one is almost towards the readiness of launch. The third one is in process. We are calling them as platforms Supra 1 -- Supra 1.0, 2.0 and 2.5. So these are what are going to come into the market as we go forward. So we are in discussion in some of them, pretty much in advanced stage. Some of them, we have won the business in 2-wheeler and nonautomotive segments. So that's what is happening. So overall, on the GCBS, in fact, we would be launching -- you would have been seeing -- if you are on LinkedIn, you would be seeing that there have been some teasers coming. The teasers are all basically alluding towards launch of GCBS. So we would be doing a limited launch of GCBS so that we want it to be tested in certain territories, get more feedback and then do a much more wider launch. We want to be cautious there.
Okay, sir. Sir, my last question is related with Wescon. So you have -- you are moving from the mechanical control cables to the electronic control system. And you have also started supplying the electronic total control in U.S. market and gearbox in agricultural equipment in Brazil. So just wanted to know how much increase in content per vehicle due to the [ seat ] and value additions?
Again, Mohan, will you answer that question?
Yes. Look, it will be very difficult to answer in terms of content per vehicle because it doesn't work in -- like, for example, let us say I have a golf platform or I have a particular platform with one of the automotive majors and I can claim, okay, my content per vehicle is going up. These are all very disparate items. It can be a lawnmower. It could be a snow thrower, so -- or a tractor. So each one of them are different. So it is very difficult to answer your question that way. But if you are asking me a general question, how are we looking at this market, I would put it this way. There are 2 ways we are looking at this market. Number one, how can we go beyond the OPE segment or the outdoor power equipment segment? That is one thing. Second thing is in OPE, how can we increase beyond the cables and also with cables? With cables, we are doing the end attachments mechanisms. Therefore, we are providing the mechanisms. One classic case would be, let us say, we were giving trailing cable for the agricultural segment. Now we are looking at -- we have already developed, and it's already under testing with some of the customers, where we give the gearbox which gets fitted to the end of it. So now would that get enhanced by, let us say, instead of the power going in from the main [ prime mower ], it goes from the motor? Possibilities are there. Therefore, we can probably also fit the motor into it. And that's what customers are potentially going to ask us. Therefore, we are getting ready. Therefore, to answer your question, it's a multipronged approach that we are doing there to ensure that we keep growing our business, not just in cable but beyond cable.
[Operator Instructions] Next question is from the line of Amit Hiranandani from SMIFS Capital -- Limited, sorry.
Once again, a good set of numbers. Congratulations to the whole team. Basically, I just wanted to stress through the last question of new product initiation which we are doing. So could you please highlight on what could be the revenue potential of each product, its market size opportunities and on the competition angle also and continuing with this, could you please talk more about the CapEx requirements for new products and for the whole year also?
Yes. I think Mohan did elaborate saying that putting a number is not easy when you are just starting on this business. But let me just try to sort of position ourselves in this business. I think one product that he's talked about is digital speedometer. The other product he talked about is brake shoes. I mean these are all basic requirements in a 2-wheeler, so the volumes, one can always calculate. But the question is what is the market share one will get. We are in this -- then the other products, for example, the seating cable and the gearbox. There are other products like GCBS, which we are launching in the aftermarket. The market potential is large, but this is not a sprint where we'll get a 10% market share tomorrow. I think we are on a marathon on all these things. We have got some businesses, one. Whether it is for gearboxes, whether for some of the digital speedometer and whether it is for some of the brake shoes, we do have initial orders coming in. We are executing those orders. Some of them are likely to scale up with time. So to say today that we will get a 10% market share in digital speedometer. I think will be talking too much out of line. So we are looking at it as long-term investment, long-term product development, which we'll back until it comes to some level in the next 3, 5, whatever number of years. That's number one. CapEx, some CapEx we have already done. I think it's all been sort of clubbed along with our overall CapEx stuff that we have done earlier, and I think it goes on. For example, our digital speedometer line is set up in our speedometer division itself. We have additional space there. The clean rooms are set up. The production line is running. So it's all been added as we go -- as we do it. Our brake shoe plant is set up again in the Unit 3. All those things have been done as a part of our general CapEx. So if there's a major, major order, whether we need to go to a new place, yes, as you know, we are fairly financially strong and in surplus. So these decisions will be taken as and when those things happen. So CapEx are as a part of the overall CapEx, but we are ready to make it whenever additional CapEx is required.
And sir, how much CapEx we are expecting for this FY '22 and next financial year?
This year, I think we have not come out with a full figure. Probably we will -- we have only talked about 2 add-on capacity expansion, one in Narsapura and one in Noida for the halogen. There's other -- basically, we have earlier commented that our CapEx would be something like 2% of our annual sales for ongoing maintenance or minimal CapEx requirements. It would be reviewed by September. I think probably if there's any more major CapEx beyond that is there, beyond 2%, 3% of our sales, I think we certainly will be talking in the market.
Okay. And sir, next, in [ AR '21 ], so Mr. James Ryan stated that the cash is available for purchases and investment throughout the world. So directionally, in which areas we are actually looking for these inorganic opportunities?
I think we have made these statements in the past, and our appetite for inorganic acquisitions continue to be there. We have also made a very clear statement and we still think that it is very much a fact of life, is that there are too many smaller -- or small, medium auto component companies across the world. Consolidation will be the key. Customer wants a single solid supplier being able to deliver them in continents across the world, and they don't want to have small suppliers delivering in 1 area and not being able to deliver in another area. I think that's where Suprajit or suppliers of our size comes in the picture. And I think this consolidation will continue, and Jim has been a hardcore -- just to give you a directionally clear answer. He's a hardcore cable man for the last 30 years. He has been cable guy from Capro to Teleflex to Kongsberg to Leggett & Platt and then to us. That is his strength. And the fact that he's there, I think you can probably put 2 and 2 together as to what we are doing.
Okay. Just, sir, last question. Sir, have we started supplying to any electric vehicle OEMs any product?
Yes, we have. We have supplied to electric OEMs, yes. It's all going...
Cables, right?
Yes, cables. There are -- I think some of our other products are also being -- Mohan, would you like to touch on that?
Sure. I would like to basically bifurcate this into cable and non-cable, cable being our strength area, traditional area. Obviously, the 2-wheeler, wherever the cables are being fitted, they have come to us. And whether they are small customers or big customers, immaterial. We have risen up to the occasion and supported them. Now going to beyond cables, which is what we have always been talking about. While cable remains our strength, we should also look at diversifying also beyond cables. So for that, again, there have been supplier -- customers who have come to us and whom we are supporting with specifically the things that I talked to you about. Supra 1.0 and Supra 2.0 are -- quite many of them are EV customers. And other than that, for 1 EV 2-wheeler, we are supplying the brake shoes.
Brake shoes. And sir, what are cables actually we are supplying to an electric scooter?
It depends upon the size because each one OEM has got different ways of doing it. Some have got fuel lock opener, some seat openers, like that. It is different. It is all -- it depends on the kind of configuration that they have got.
Designs will have effect, too, so as to say.
[Operator Instructions] Next question is from the line of Pratik Kothari from Unique Portfolio Management Service.
Sir, my one question is on mechanical cables, the relevance of it. So we see a lot of electronics being introduced in vehicles and a lot of functions where if you press a button, there's a function which happens at the other end. So I believe the basic mechanics here is electricity is passed to wiring, harnessed and there's [ solid node ] at the other end. So is this a risk in terms of our mechanical cable, the presence of it in a vehicle?
It's a long debate. I think -- I suppose we could have another offline call on this, if you like. But let me say this in -- as brief as possible. Let's say in an automotive today, there could be an application of anywhere from 10, 12 to 20 applications of cables. If I see today compared to, let's say, 2 years ago -- because 3 years ago, maybe there were less EVs than what we have today in automotive world, particularly with China or even the European market. We have not seen any current cable applications changed. Let me put it that way. In fact, we have we also seen some, 1 or 2, interesting new cable applications, for example, for EV. They want a manual overlay to open their charging lock, for example. That has come as an extra one. What you would see is a button, what you rightly mentioned, in terms of seeing that it's all electronics. It's only a starting point. What we see behind the scene is something totally different. I mean -- just to give you another example, you press a button, your glass in your car goes up and down. You'd think it's all electronic. It isn't actually. Even today, it isn't. So it actually works through a mechanism. That mechanism requires a cable. So every door has a cable. So 4-door has 4, 5-door, whatever number of doors, has 5 cables. So that has not changed. It's become more complex and more pricey because they want it to be absolutely [ flawless ]. So that adds to the value. So you move your seat, do you think that there is some internal electronic mechanism that's moving? It's actually not. There is a mechanism which moves the entire slider thing, which requires a cable. So I mean it's an ongoing argument. Our reviews from time and time again only show today that in an automotive world, I think the overall number of cable applications, considering today, for example, autonomous vehicle coming in, we expect that to go more only, not come down actually.
Okay. That is very interesting. And sir, my last question. Last year, due to various reasons, the unorganized sector has faced certain issues, and then we had seen substantial growth on the aftermarket. And we said the weaker hands are moving out, and hence, we are gaining some opportunities. So do you see that reversing at least given the share that we have seen this year?
See, last year, what happened was there was like an absolute lockdown, right, for whatever, 60 days or whatever number of days. And when it opened up, there was suddenly a sense of demand shortages. So that's why there is a certain surge. And probably some of these gray guys were not able to restart their operations, for whatever reason, or they don't -- didn't want to be GST noncompliant, for example. So all that really surged our requirement of aftermarket. Whereas, this year, there is nothing like a national lockdown. It was all sporadic, here and there. So we've been feeding the market in some ways or the other ways. So that kind of a surge has not been there. But I think we are at a level where we think that the stronger is getting stronger and the weaker is getting weaker in this market. So we continue to -- although if you look at our aftermarket business, that growth doesn't look all that great because there is no sudden surge in the demand like what we saw last year. It is more, I would call as, a very labored growth, but it is a good growth. We still continue to believe that the aftermarket will be solid as we go forward in this year.
Next question is from the line of Deepak Lalwani from Unifi Capital.
New orders that were banked in 2-wheeler and 4-wheeler OEMs, both domestically as well as overseas in the last quarter?
Sorry?
New orders which we got both in the 2-wheeler and 4-wheeler OEMs, both in the domestic as well as overseas.
I don't think we can go into specific customers. But on a general way, I think I can ask Mohan to comment on the new business of cables. Yes.
Sure. On the domestic front, I can very confidently say that one of the major OEMs has repost a lot of trust in us. In fact, they have very clearly told that for some of their future-looking models, forward-looking models, we would be 100% sourced. In fact, they have told us that puts us more responsibility. In fact, we were awarded the best supplier award recently by that marquee customer. Therefore, we are also in the process of increasing the capacity for that customer because of the new orders that were coming in. So that's on the domestic market front. And similarly, with other customers, by and large, we are the first talk when it comes to cable. We all know about it, so -- also for the bulbs as long as it is halogen bulbs. Therefore, that continues because we are in a market leader position. Now beyond cables is where we are looking at winning new business. And that's where I would say that I'm pretty much happy with the way the team has been able to go out into the market, convince the customers and get the orders for new products where it's beyond cables. So I'm pretty much confident there, the way it's turning out. Now going to beyond the shores of India. If I look at Europe, again, one of the marquee customers, we are in the verge of -- like I already said, we are on the verge of winning some business. In fact, verbally, they have already called us up and told that we have won that business. The formality has to follow. In terms of what's happening in the U.S. market, again, it's a different approach, like I had already explained. One is look at cable and cable-based assemblies and go beyond cables and look at things like gearbox, et cetera. Therefore, it's just a -- in each one of the areas, whether it's domestic in India, whether it is Europe cables, whether it is nonautomotive cables in U.S., we are -- rules of games are a bit different as far as our game is concerned.
So to add to what Mohan has said. I think it's important to understand that at this moment, globally, most supply chain managers of large companies are just trying their best to manage their existing supply chains to cater to the day-to-day requirements with the kind of challenges of whether it's IC or shipment shortages, et cetera, et cetera. The new launches are getting delayed, and the volumes are not what was originally -- when launched, they are not what originally we are told. So technically, today, we are actually sitting on orders which, if it were based on their original estimate, would have been 30%, 40%, 50% higher, but it isn't. But despite that, our volumes are growing. That sort of gives an underlying current that when the situation changes for better, I think the volume growth will be much more robust. But at this moment, I would say that the new business, one, are being executed at a lower volume, but we still are showing a growth. And in addition to that, few platforms are being launched worldwide by some of our current customers. And wherever there is -- cable requirements are there, we are -- in most of them, we have either quoted closely or some of them we have already won the bid. So the pipeline is still very strong if -- to answer your question.
Participants, the next question is from the line of Chirag Shah from Edelweiss Financial Service.
Yes. Congrats on good set of numbers. Sir, first -- and apologies, I missed the comment on the Suprajit 1 and Suprajit 2. Can you please give it again? Meaning what are you trying to imply from that? My line has gotten disconnected at that time.
Yes. Okay. Fine. I think it's on the 2 models of our digital speedometer. I'll let Mohan answer that question, Chirag.
Yes. See, in electronic industry or electronic parts that we supply, it generally goes on platforms. Therefore, what happens is what gets into the gut would be almost similar on components. Therefore, there is some amount of standardization. But there would be very specific way that you are going to design in terms of how it looks for the customer. Therefore, the outer skin and the way it looks for different customers would be different. But the inside of that or the platform, as we call it, would be -- is what we are talking about. So like you have this Microsoft version 1.0, 2.0, something similar to that. I'm just giving you a very gray example probably. But that's the way we are looking at it. So Supra 1.0 has got certain features capability. Now all those features would not be needed by a customer. Therefore, we turn off some of the features or we switch on some of the features and give it to a customer. Similarly, Supra 2.0 will have all the features of Supra 1.0 plus some additional features. Therefore, it is much more sophisticated, but it will also move up the price scale and the development scale. Similarly, Supra 2.5. Therefore, if we don't have the entire basket of offerings to the customer, it will be difficult because they would be having an entry-level bike or mid-level bike or a performance bike. Therefore, depending upon that, the requirements for their end customer will also change. That's the reason we are doing it. As of now, Supra 1.0 is ready, made already, getting into production almost. Supra 2.0 already being presented to the customer. Supra 2.5 is under handle -- on the handle.
Does this refer to new products, adjacent products or it also refers to a different way of doing business with customers?
No, no. I think I missed the point there, I agree. We are referring to instrument clusters or speedometers.
Okay. So I think your speedometers have better margins than generally whole business.
It is basically multiple levels of sophistication in digital speedometer. 1.0 would be an entry level, whereas 2.0 would be the next level and 2.5 will be the next higher end. So that's how it has been sort of designed to present to the customers, I think.
By this, how will it help us in market share? And also in digital speedometer, where are we in terms of market share? I presume over the year, our market share would have seen some decline given the way industry has been. So if you can help understand that. What are you -- what is your aspiration? [ Strategy-wise ], what is your strategy?
Actually -- yes. No, the point is, Chirag, we are in mechanical speedometers, right? We've been there for a long time, and that is our core business in terms of speedometers so far. So as the speedometer business moves towards digital, we want to be in that space. That has been the decision that we have taken -- let's say, a year or 2 or a little longer, that we took and started developing these products completely in-house. And that product is currently being sort of finalized or established at the first, 1.0 level. That means that the entry-level digital speedometer that you would see in a motorbike or a scooter is that level. Then it goes up all the way. So the idea is that as the speedometer business has sort of switched into digital, we will also in that space and that we will also get the market share of that business so that the market share that we would have possibly lost because of mechanical instruments going into digital, we will garner hopefully more than that in the digital space. So that is the basic strategy for that particular little bit of our business.
So would it be right, sir, at aggregate level, when your strategy is laid out over the next 2, 3 years, this manual speedo will be digital? Overall, we are running for a further 40% of the industry market share? Is that...
No, we don't have. I mean Chirag, please understand. On speedometer, we have only 2 customers.
Yes.
So we are not a big player in that. So we are just wanting to enter that business. And I think what we'll be going to do in digital speedometer in the next 5 years or so would be to get a much higher share of business in speedometer than what we have today with just 2 customers. That is the idea.
Okay, okay. This is helpful. The second question was with just Luxlite and Trifa . Now what exactly is the issue? Because we have been trying a lot to turn them around over a long period of time, but somehow, we are not able to.
It's all pricing...
So is the brand the problem? Or is market dynamics a problem as of this?
There is a pricing issue -- no, no. I think it's clearly an issue of pricing. The market will accept a certain level of price. It has kept on coming down over the period since we acquired Phoenix Lamps to today. The price down might have been, I don't know, and depending upon the product range, anywhere from 30 to 50 to even more than that in certain cases. So because of the efficient manufacturing, we were continuing to be able to manage our margins in India. Whereas, in the Western world, when you are trying to put that business and be competitive in European market against the Chinese and the Koreans, it is impossible to have the kind of infrastructure that you are having in Europe, which the others do not have. So we have an extra cost sitting. So we are not competitive many of the times. That's why we have been starting to push direct exports more and less and less through Trifa and Luxlite. And as it became less, we shut down 1 warehouse. And we continue to believe that we need to have at least 1 warehouse and some front end. What is the size and scale? We are yet to decide. Based on that, we will take a final call. I think that's how it's going to work out. Because it's like as the market prices come down, we need to refit ourselves into the market scenario. That's what is happening there.
Is it possible to indicate what kind of drag it is on our EBITDA level? Is it possible to indicate or broadly indicate?
I think the point is that there is still a good EBITDA margin on the business we do with Trifa and Luxlite in India. But if you look at the total supply chain, including the Trifa and Luxlite's expenses, that [ masks ] our current margin, which is where we have a concern, and that's why we are trying to work on it. We'll take one last question. I think gentlemen, we need to really rush out. If there's any question, we'll take one last question.
The next question is from the line of V.P. Rajesh from Banyan Capital Advisors.
My question is regarding the business speedometer. What is the size of the market? And who's the #1 market share peer in that?
Mohan, will you answer? I think we just answered that question, but I will let Mohan to maybe re-elaborate on the point.
Well, this is an evolving market. You can just look at, let us say, the total. If you're just looking at, let's say, 2-wheeler market, there is a conversion ratio that you need to assume. And with that conversion ratio, again, you need to look at what is the base level cluster or speedometer mid-level and higher levels with TFTs or something like that. Therefore -- we have done a detailed study on that, but I don't think I would be able to explain it over a call like this, no.
You can come on a call -- later on, we can establish a call if you really want to have a discussion on this with Mohan or some of our technical team. But it's an evolving market. As you know, Indian markets are still in the 2-wheeler -- I don't know what is the current percentage. Probably it's -- less than 10% is in digital space. So -- but it will evolve with time. And so we are preparing ourselves for that space. That's all I would like to say.
Yes, sure. Sure. I will take you up on that offer. I'll have a separate call with you guys tomorrow.
Thank you very much. I appreciate all your continued interest in Suprajit. And I'd like to especially appreciate you accommodating our change of time. We had to change it a couple of times as there are some conflicts with some other auto component conferences. So we have changed the time. So apologies on that. And then we really thank you for attending this call. Thank you very much. I hand you over to the moderator to conclude the call. Thank you.
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