Thank you, Hina. Good morning, everyone.

On behalf of Elara Securities, I welcome you all to this Q3 FY26 earnings call of SGS Enterprises. From the management team, we have with us today Mr.

K. A.

Joseph, who's promoter and the Managing Director; Mr. Sanjay Thapar, Group CEO and Executive Director; Mr.

Mahendra Naredi, Group CFO; and Miss Devanshi Dhruva, Head Investor Relations. As usual, we will begin with a brief opening remarks from the management team, and it will be followed by the question and answer sessions.

Now, I will hand over to Devanshi. Devanshi, please take over.

Thank you.

Thank you, Piyush. Good morning, ladies and gentlemen, and thank you for joining us on today's call.

We appreciate your time and participation. Let me briefly outline the agenda for today's conference call.

I will first invite Mr. K.

A. Joseph, our Managing Director, to share his opening remarks.

He will then hand over to Mr. Sanjay Thapar, our Group CEO and Executive Director, who will walk you through the key highlights from our investor presentation, which has been uploaded on the stock exchanges and is also available on our website.

Mr. Thapar will cover the industry overview, business performance, and the strategic outlook for the company.

Following this, Mr. Mahendra Naredi, our Group CFO, will take you through the financial highlights, and we will then open the floor for Q&A session.

The total duration of this call is scheduled to be approximately 60 minutes. We will try and complete our comments in about 20 minutes to allow adequate time for questions.

In case we are unable to address all questions due to time constraints, please feel free to reach out to us via email and I will ensure responses are provided at the earliest. Thank you once again.

I now hand over the call to Mr. Joseph for his opening remarks.

Over to you, Joseph,

sir. Thank you, Devanshi, and good morning.

I hope everyone is doing fine in this new year of 2026, and I trust you all had the opportunity to review our results and investor presentation shared yesterday. The company maintained strong momentum in Q3 of FY26 and delivered its 25th consecutive quarter of outperformance, recording a robust YoY growth of 46.

46% in the automotive business. Building on its leadership position, SGS continued to outperform the automotive industry across key segments during the quarter.

This compares favorably against the industry growth of 15.7% YoY in the automotive two-wheeler and passenger vehicles put together. Reflecting this strong performance, SGS has reported a consolidated revenue of ₹2,435.35 million in the Q3 of FY26.

With a strong financial base and consistent cash flow generation, SGS is well positioned to advance its growth priorities. Our focus remains on planned capex in the cover glass segment along with capacity expansion across our Bangalore and Pune facilities.

Our strong balance sheet provides the flexibility to efficiently scale operations across businesses while also evaluating selective inorganic opportunities to further strengthen our market presence. Looking ahead, SGS remains focused on driving long-term growth through premium aesthetic solutions, new product development, and deeper engagement with large OEM customers.

The company aims to increase the contribution of new generation products across the two-wheeler, passenger vehicle, and consumer segments while strengthening its export presence in key international markets. Continued emphasis on technology, partnerships, localization, and operational efficiency will support sustained growth with a strategy centered on outperforming the industry growth while maintaining robust margins.

With that, I will now hand over the call to Sanjay to take you through the business and industry highlights for the quarter. Thank you and over to you, Sanjay.

Thank you, Joe. Good morning, everyone.

Building on the strong foundation established in the first half of the year, we are pleased to report another quarter of strong operational and financial performance. In Q3 FY26, the company continued its consistent growth trajectory supported by disciplined execution, premium offerings, accelerating export growth, and strong relationships with the customers.

Strategic initiatives have been taken over the past few years that are translated into sustained momentum, enabling SGS to outperform the underlying automotive industry while maintaining healthy margins and strong cash flows. Key highlights for the quarter: Q3 FY26 marked an important milestone for SGS, with the company reporting its highest-ever quarterly revenue of ₹2,435.3 million, representing a year-on-year growth of 36.4%.

Our automotive business grew by 46% year-on-year compared to a 15.7% YoY growth in the automotive industry volumes, that is the two-wheeler and passenger vehicles put together. Resulting in approximately a three times outperformance of the industry growth.

This performance was driven by strong growth in the two-wheeler, passenger vehicle segments, as well as exports, and as a result of our strategy focused on premiumization and expanding our customer base. SGS clocked its highest quarterly profitability margin since the IPO, with EBITDA margins at 30.5% and PAT margins at 18.5%.

Notably, I'm pleased to share that SGS has surpassed its full-year FY25 PAT within the first nine months of FY26, underscoring our strong focus on bottom-line growth and sustained cost reduction initiatives, leading to value creation for our stakeholders. During the quarter, we added new EV-focused two-wheeler customer, Raptee, and Urban Company that is launching its own range of water purifiers.

We continue to expand businesses with key customers like Mahindra, Hero MotoCorp, Whirlpool, Samsung, Hyundai, Spark Minda, Mabe, John Deere, amongst others. We are progressing well on capacity expansion at our Pune and Bangalore facilities.

Pune plant is set up and under commissioning at the moment. Expanding our global footprint remains a core pillar of SGS' long-term growth strategy.

During quarter 3 of FY26, exports recorded their highest-ever quarterly revenue of 283.1 million rupees, growing 146.2% year-on-year and 12 22.1% quarter-on-quarter. This reflects increasing traction with global customers and strengthening acceptance of our decorative aesthetic products.

We are further strengthening our presence in Germany through a sales representative. These efforts will reinforce SGS' position as a preferred partner for global OEMs.

SGS continues to generate strong cash flows. As of December 31st, '25, the company reported a net cash position of 2,030.1 million, supported by healthy operating cash flows.

Free cash is close to about 76% of EBITDA. This financial strength provides flexibility to fund capacity expansion, invest in new technologies, and pursue inorganic growth opportunities.

Reinforcing our long-term strategic growth initiatives, we are very excited to announce that SGS has entered into a technology license-cum-supply agreement with BOE Varitronix, Hong Kong, to undertake optical bonding and assembly of automotive display systems for four-wheelers in India. Under this arrangement, BOE Varitronix will provide key components and support localization of critical elements such as optical bonding, cover glass, and backlight units.

This partnership enhances our capabilities not just for cover glass, but also as a player offering advanced display solutions, making our foray into a new vertical which is slated for rapid growth. During the quarter, the company received several recognitions and awards, recognizing our leadership and excellence in financial management.

These recognitions highlight SGS' commitment to build strong organization culture, operational excellence, and sustainable business practices. As a part of our commitment to sustainability, SGS continues to advance its ESG agenda.

During the quarter, we launched the Pink Line initiative, a dedicated production line aimed at promoting women empowerment, inclusion, and workplace safety. This initiative will help increase women employment across our operations, particularly for quality inspection roles.

We are also in the process of securing a 2 megawatt wind power from DV Renewables Private Limited. With this, 80% of the SGS Group's energy needs will be met from renewable sources.

SGS, as a responsible corporate, supports education of specially-abled children and also provides meals to the needy at orphanages and old age homes. We also contribute to CBCI Society for Medical Education for providing medical aid to the underprivileged.

I will now hand over the call to Mahendra, our CFO, to walk you through the financial performance. Over to you, Mahendra.

Thank you, Mr. Thapar, and good morning, everyone.

I will now take you through the financial highlights for the quarter. Slide 13 to 16 of the presentation provide a snapshot of our consolidated results.

Quarter 3 of FY26 was a landmark quarter for SGS, with the company reporting its highest-ever quarterly revenue of ₹2,435.3 million, registering a strong YoY growth of 36.4%. This performance was driven by robust execution across the two-wheeler and passenger vehicle segments, continued premiumization, and a growing contribution from export and new generation products.

EBITDA for the quarter stood at ₹756.4 million, reflecting a YoY growth of 56.9%, with margins expanding by 396 basis point YoY to 30.5%. It is important to note that during the quarter there was a one-time impact of 18.1 million rupees under employee benefit expenses due to the implementation of the new labor codes announced by the government of India in November '25.

Excluding this non-recurring impact, underlying operating performance and margin trajectory remain strong, supported by favorable product mix, higher gross margins, increased export contribution, and sustained operational efficiencies. Profit after tax stood at ₹450.4 million, growing 62.5% year-on-year, with PAT margins at 18.5%.

Lower finance costs, disciplined cost management, and strong operating leverages contributed to SGS delivering its highest quarterly EBITDA and PAT margins since IPO. During the quarter, new generation products contributed over 23% of consolidated revenue, reflecting increasing adoption of advanced aesthetic solutions.

Segment-wise, revenue contribution was 38.8% from two-wheelers, 42.3% from passenger vehicles, and approximately 19% from consumer and other segments, providing healthy diversification. The company continued to generate strong and sustainable cash flows.

Free cash flow for the nine months was 975.9 million rupees, driven by robust operating performance and disciplined working capital management. As of December 31st, 2025, cash and cash equivalent stood at ₹2,098.8 million, resulting in a net cash position of ₹2,030.1 million.

This strong balance sheet translated into healthy return metrics, with ROCE at 34% and ROE at 19.8%, reinforcing the quality of earnings and capital efficiency of the business. For the nine months ended December 2025, consolidated revenue grew 24.1% YoY to ₹6,949.5 million, EBITDA increased 37.8% YoY to ₹2,072.1 million with margins at 29.3%, while PAT grew 44.4% YoY to ₹1,229.2 million with margins of 17.7%.

Exports remained a key growth driver. Q3 FY26 recorded the highest-ever quarterly export revenue of ₹283.1 million, contributing 11.6% to the consolidated revenue.

For nine months FY26, export revenue stood at ₹655.9 million, already surpassing the full-year FY25 export revenue of ₹567.9 million, reflecting strong traction with the global OEMs. On the capital expenditure front, capacity expansion and technology-led investments remain strategic priorities.

Expansions at the Bangalore facility is progressing well, and the new chrome plating plant has been set up and is currently under commissioning. This investments are being funded entirely through internal accruals while preserving balance sheet strength and flexibility.

With this, I will now hand the call back to Mr. Thapar to outline our growth outlook.

Thank you, Mahendra. With a strong balance sheet and sustained profitability, SGS enters the next phase of growth with clearly defined priorities and robust execution capabilities.

The company's cash position, strong cash flow generating capability provides flexibility to fund capacity expansion projects, including the greenfield chrome plating facility of SGS Decoplast, Pune, capacity expansion at the Bangalore plant, and the greenfield project of cover glass and display systems being set up at Hosur. All this is through internal accruals.

Expanding the global footprint remains central to our long-term strategy. SGS targets increasing export contribution to 14 to 15% of our overall revenues by FY28, driven by deeper penetration in existing markets, entry into new geographies, and new businesses from global OEMs.

We are now strengthening our presence in Germany through a sales representative to focus on opportunities in that market. New technology and product innovation will continue to support our growth roadmap.

The company is building capabilities in optical cover glass and automotive display solutions in India through its partnership with BOE Varitronix. Our TLA with BOE Varitronix, SGS will not only manufacture cover glass as a new product, but will also do optical bonding and assembly for the automotive to display systems.

As a result, the future kit value for passenger vehicles will increase to 5 to 8 times as against 4 to 6 times of our legacy kit value earlier. This development will advance our next-generation product offerings and increase content per vehicle.

Strong OEM relationships and robust revenue momentum position SGS to outperform the industry growth by over 2.5x, as I've said earlier. This growth, along with disciplined capital capital allocation, global business expansion, and continued focus on operational excellence will create sustained values for our share stakeholders.

With that, we conclude our remarks, and now open the floor for questions.

Am I audible?

Hi. Three questions.

Congratulations on a very good performance. I had three questions.

One one was on the cover glass. Is there any further update?

When are we expecting revenue to start flowing? Previously you'd spoken about it starting sometime in FY27.

Are we sticking to that guidance? Second is regarding the business with Hero MotoCorp.

Clearly, that's been growing very well for us. Right now we were mainly in decals and logos with them.

Are we in advanced discussions or have we won further products with them? The third one is on the consumer durables.

We've of course done very well in two-wheelers and PVs. Consumer durables is one place where we are yet to see that kind of a turnaround in performance.

Any update here? When can we expect some sort of a turnaround and a strong performance like we are doing in other two segments?

These are my three questions.

Thank you, Chintan. One by one: cover glass, what I'd maintained earlier was that we've signed this, we have a plant in Hosur that is set up, the equipment is on order.

What I'd mentioned earlier was that the equipment will be installed in FY27, and we should expect to see sales in FY28. As regards Hero MotoCorp, yes, we were confident that we have the wherewithal to offer products in a very agile manner and of the highest quality standards.

Hero MotoCorp appreciates that and we are consolidating our position with Hero MotoCorp. Of course, we are in discussions with them for other products that we have.

As I've mentioned earlier, this is a gradual process, and as we go along, we will try and tap into what opportunities Hero MotoCorp offers for us, not just for decals and logos, but these other products we have in our portfolio. As far as the consumer business is concerned, we've grown very well.

Maybe it does not show because the plant that we announced that we won business with Whirlpool globally for a plant where we maybe are the only suppliers who supply product on. That traction is growing and we expect that this will increase further.

We grew this consumer business by close to about 7.5% quarter-on-quarter. This grew on a YoY basis, we grew this by 7.5% compared to last quarter.

As volumes ramp up, we should improve further. We're quite confident that we should continue to do well in the consumer business as we've done in our automotive businesses.

Understood. Just one follow-up here on the Hero MotoCorp side.

For logos and decals, are we supplying for all the models currently?

We can't declare for reasons of confidentiality who we supply and what we supply, but as I said, needless to say we are consolidating our position as a very, very strong supplier for them.

All right, thank you and all the best.

Thank you.

Thank you for taking my question. Congratulations on a strong performance, Sanjay, Mahendra, Devanshi, and team.

Now, when you grow 3x over industry, I would almost say the industry is probably not the right benchmark to look at anymore. In that context, if you could kind of give us a sense as to what the contribution from new products or new customers has been this quarter.

Given that growth has far exceeded our initial expectations in the previous few quarters, and that we have only two months to wrap up this year, are there initial thoughts on how you expect to perform in FY27 versus industry, basis the ramp-up that you might have from the different products and new customers?

Ganeshram, we see strong traction, we are very confident of our growth story. We keep consolidating our position with OEMs not only in India, but globally as well.

We are winning large businesses for new models, and we hope to continue that momentum. What I'd guided earlier was that this year we'll outperform the industry by a factor of 2.5x.

We continue to maintain that. Yes, we are better, but I would like to ensure that we perform in a robust manner.

It's not just the top line. We have a very, very strong focus on the bottom line to create value for our stakeholders.

If you see our trajectory for margin expansion that we've done over the years, I think we've done fairly well on that basis. On a yearly basis, we are now close to about 30% EBITDA margins, which I think are healthy, and we hope to continue that momentum forward.

Got it. Would you like to put a number on it, Sanjay, as to what you expect?

Do you expect to sustain 2x outperformance? Do you expect to sustain 2x outperformance into FY27, etc., basis the ramp-up that you see?

No, for '26 is what the guidance I gave was 2.5x. The traction that we see for premium products and all the new launches that have happened recently, we've won very significant businesses which are high-value products, I continue to see ourselves outperforming the market.

I would not like to put a number now, we are finalizing a plan for the next year. Yes, we are extremely bullish on what our growth trajectory is going to be in the future.

Understood. Just my second question is from a cash point of view and value creation point of view.

I think earlier you'd mentioned you're looking at some M&A targets probably for some customer acquisitions or access overseas. How is the progress on that?

Or are you still waiting and watching? If you could just give us an update on the capacities that you're putting up, what has been spent so far and timelines and what's left to be spent?

That's it from me.

I'll answer the question on inorganic and then I'll hand over to Mahendra to take you through the capacity. We are evaluating.

This is a process that takes some time. We have targets in mind, we are reviewing their financials, and as I've stated many times earlier, we focus on inorganic targets which we can add great value to, as we've done in the past two acquisitions we've done.

We are in the evaluation phase at the moment, and we will make our bids as we go along. The target for year to have a cash surplus, we've accumulated sufficient cash, and hope to hear from us when we conclude this transaction within the next year, that's our internal target.

Mahendra, if you could elaborate on the capacity.

Ganeshram. Regarding the capacity, we are adding the capacity for SGS Decoplast.

We have marked ₹100 crore. Far we have incurred close to ₹65 to ₹70 crore already been incurred, the remaining amount is on progress.

The plant has been set up, the factory has been set up, the plant is under commissioning at this moment. That is going on.

Quarter 4 will be the further we'll enhance it here. Regarding the capacity addition for SGS Bangalore facility, we marked around ₹45 crore for that, and that is progressing well.

By quarter 4 we will be complete this expansion. Cover glass and the display unit, Mr.

Thapar already have informed, we marked ₹40 crore earlier for the cover glass which is we had to be happened between this year and the next year. Further there will be a capex on the display.

We are finalizing our plans, but probably a broad number is around ₹20-25 crore will further going to be happen. Currently we are in a ordering phase.

This will spill over from current year to the next year. That is on the capacity side.

We are operating SGPL around 95% like we earlier said. Walter Pack is running somewhere 75%, and SGS, this was last year 66%, with the increase now we are around 75% capacity utilization.

Perfect. Thank you very much.

Thanks a lot. Congratulations on a very good set of numbers.

Sir, my first question is on this mega accounts. Can you give us some sense because if we look at last quarter versus this quarter, all the major two-wheeler customers, except for Hero, has been taken out of from your deck in terms of mega accounts, and you've added Samsung, Hyundai, Spark Minda, Mabe, and John Deere as new mega accounts.

What is the criteria of mega accounts and how do we see it? Fundamentally,

wherever we see a long runway to growth, the potential that we can offer multiple products, basis our initial discussions with them, we classify that. For want of space on that page, you don't see the whole bunch of logos there, but essentially we continue to grow all our businesses.

We have good traction, we are winning new businesses both with existing and with new customers. Wherever we see that there's a potential domestically, and there's a large untapped potential domestically and there's a large potential maybe outside India, those are the accounts where we say are mega accounts where we think that we have a very strong runway for growth.

That's the classification. There's no hard and fast rule in terms of what turnover we will have, because our ambition is very large, we intend to be a global supplier.

At the moment, as I've mentioned earlier, we have got good success, we are confident that our products meet the quality, cost, and delivery requirements of these customers. We will leverage on that customer relationship and trust to grow these to be much, much higher.

Our ambition, of course, is to be a global supplier with these companies, at least the global companies, so that we have a large chunk of their business.

Just a clarification. You think that when you put this say for example Mabe or John Deere as a mega account in this quarter, is it a thinking that it can be bigger than Honda at some point in time?

Right now Honda would be quite big, right? Honda is not part of this mega accounts.

This is confusing in that sense for us to understand in terms of is there this revenue

Let me clarify. What is mentioned, this is a quarterly report.

If during the quarter we've unearthed some new businesses, new accounts with that customer, that is mentioned here. What continues at normal continues, Honda of course continues to be a very strong customer for us.

This is just an update for this quarter that went by.

Okay. My second question is on Exotech.

The new plant, has that started? Has the revenue started coming?

This QoQ growth in exports, this has come from Exotech, or this is Stellantis and Whirlpool?

From SGS. Largely the Stellantis business that we won, which we said is a large business, we will supply across North America, Latin America, Europe.

A few plants have started, this will gain momentum as we go along in this current year, as I mentioned earlier. That growth is there.

Exotech has grown very well. This new plant that Mahendra told you is under commissioning at the moment, next year you'll start revenues coming out of this.

We are currently sweating the asset that we have, and we are on a very, very strong growth trajectory for Exotech or SGS Decoplast. Now that's what that's

New plant has not started as yet, right? Because in last quarter you had said fourth quarter it will start.

The building and the plant is ready, the equipment is under commissioning because it's a complex SCADA-based system, so that is under commissioning at the moment, and next year we should see revenues coming out of this new plant as well, supplementing the existing plant. That's good news actually for

My final question on WPI. WPI has been static because of consumer durables being static there, and now Tata Motors has started reviving, right?

Industry has started reviving there. Should we expect coming quarters to see good growth in WPI?

Absolutely. Our focus on WPI, as I mentioned earlier, is there are legacy customers which are very large customers.

The new generation products that we started supplying to from WPI, not just from Tata, but also to Mahindra, have grown exceedingly well. We have good acceptance, and you should see traction going and we are happy that we are now coming back to the profit levels for the EBITDA levels that we bought in that business.

That also is being standard very well. We are very happy with the current state of affairs where all our businesses, including Decoplast and Walter Pack, now are coming up to speed in terms of our threshold EBITDA margin that we had set up for ourselves internally, and that has resulted in the overall, as you see, the record EBITDA margin that we have for a company as a whole.

Thanks, Sanjay, and all the best. Thank you.

Thank you.

Thank you for the opportunity. Sir, just wanted to understand earlier you explain on the WPI side.

Where does WPI stand today in term of EBITDA margin versus group average and by when do you expect full margin converges on that front?

Jyoti, as I've said many times earlier, think of us as a consolidated company. We don't share margins by business.

Of course, SGS is the main company that we have here, but I will not be able to share you the share the number with you. In terms of an internal benchmarks, we are at Walter Pack today as what we set out to do when we acquired this company.

There's a very good turnaround that we see in that business, and moving forward, they will be a strong contributor to the overall growth story for SGS Group.

Okay. Sir, also wanted to understand this time some differences compared to two-wheeler and PV side on the revenue mix that has increased for the PV compared to two-wheeler.

Are we seeing good order wins on the four-wheeler side?

Absolutely. On behalf of the complete auto industry, I would say that there's a very healthy traction in the market.

Just to give you an example, Mahindra, which is a key customer for us, launched their two new vehicles, and there was a record booking of 94,000 vehicles in four hours of opening. I'm happy to say that SGS is a very, very strong content in those vehicles, we hope to benefit from that.

These are new high-technology products that are offered to them, and they find very good acceptance. As I've said many times earlier, that when one OEM launches a product, it sets the benchmark for the industry and other OEMs follow suit.

The premiumization story continues to march ahead, and you've seen that in the new launches that have come from the stables of Mahindra and Tata, which we find very good acceptance in the market. I'm happy to say that SGS as a group has a strong presence in all those models.

Nice, great, sir. Sir, just last question on the strong cash side.

Are we looking actively for any new acquisition or just looking for the existing business to grow?

No. Acquisitions are a very integral part of our growth story.

The last four years, we've acquired three two companies, and we, as I said earlier in this call, we have a healthy cash reserve, and we want to deploy it to further propel our business forward, and we shall do that. Answering your question, inorganic growth is a very integral part of our growth story, and we shall continue down that path.

Great. Thank you so much, sir, and just congratulation on the strong execution and consistent delivery with the company unlocking a new level in every quarter.

Congratulations.

Thank you, Jyoti.

Hi, sir. Congratulations on a very good set of numbers.

I have two questions. First is how SGS Enterprises will get benefit from this Indian EU trade deal?

My second question is in the last quarter, you mentioned that export revenue will reach around 14 to 15% by FY28. After this trade deal, can we see an increase in the revenue percentage?

Okay. Thank you for the question.

India as a whole, not just SGS, is very excited about this EU deal that we've done, which is classified as the mother of all deals. There are a lot of very strong automotive customers and appliance companies that are based in the EU.

We have strengthened our sales presence in Europe, and the best German OEMs produce parts or produce vehicles and platforms globally. What I'd mentioned in my previous earnings call when we announced that we've won global businesses from Stellantis, which has now started, we want to repeat that with other OEMs, and you have some very marquee names in Europe, specially in Germany, which supply parts globally.

We see strong traction, they like us, they like our parts, and they like the agility we demonstrate as a company. We are extremely bullish that this EU deal would help us access those markets in a much faster manner, while we continue our focus on North America, it's not that that is out of focus.

EU also, as I've announced specifically, Germany is a key area, and we've extended our sales organization there. We hope to benefit.

I'm not altering the guidance for FY28 as of now. So 14 to 15% is an ambitious target, and I'll be happy and delighted when we exceed that.

We are working towards that, but as a guidance, I would still maintain 14 to 15% of my top-line revenues should come out of exports by FY28.

Thank you.

Thank you.

Congratulations, team, for one more outperformance. Really appreciate this performance regularly.

Sir, I have a few questions. First is, are you seeing any input cost pressures from Q4 onwards?

What steps the company is taking to improve margins from here on?

As a company, our DNA is to squeeze inefficiency out of the system by better utilization of assets, by declaring a war on waste, by leveraging our growing sales with our suppliers to get better prices, and support our customers. We are helped by the tailwinds that premium product get refreshed, the new raw material prices are pricelined every time this refreshed.

Strategically, I think we are in the absolute right business, and that is what demonstrates our very steady and growing EBITDA margin profile since we got listed. If you track our history, we've been delivering strong margins, and we hope to continue to do that in the future as well.

Right.

Any input cost pressures, sir?

Pressure is always there, but then we are, I think, more resilient for the reason that I mentioned earlier. We have our very, very strong focus on day-to-day buying that we do, on the operating efficiencies that we do, on reduction of rejection and scrap, and we have a model of excellence that flows through all our locations.

We've expanded margins at Exotech from 12% to now close to about 20% or SGS Decoplast. We've increased margins at Walter Pack, and we've of course increased margins at SGS.

It's a secular theme, and focus on the bottom line is a key area of focus for SGS, and we'll continue to remain so.

Good to hear, sir. Sir, secondly, any update you want to give on the BOE with respect to the plant setup timelines and any initial soft commitments from customers?

SOP and market potential?

With BOE, as I've said earlier, the plant is ready, the equipment orders have gone, we expect that during FY27 we should have the plant ready with equipment and trials complete, and FY28 we should see sales coming out of that plant. We are in discussions with many customers, and we see good appetite.

There are some positions where we are unique in the country, and we have a lot of demand from customers who are talking to us about what we can do with them, specifically for cover glass, and that is something that we intend to focus on, and we are building capabilities and capacities to address that huge opportunity that we see in front of us.

Right. Sir, lastly, directionally, in what areas we are hunting for this M&A size?

Anything on the table at the moment?

Sorry, could you repeat that question?

Sure, thank you.

Thanks for the opportunity and congratulations on a great set of numbers. Following up on the Amit's question on the margin, we've maintained the guidance around 26 to 27% on a steady-state basis, but for the last two quarters we have outperformed that significantly.

This quarter if you adjust for the one-off the margin comes around 30%. Do you see upsides to our guidance, or would you like to update your margin guidance moving forward?

If I talk of our past track record, we've grown very well, and our focus of course will continue to remain there. Yes, we are today operating at about 28, 29% sort of margins.

That sort of profile is something that I think we can look forward to.

In the sense that we are going to expand our margins significantly on a steady-state basis from there

on? Not just here on, if you track our margin profile since we got listed on the stock exchange, we've steadily improved margins over the years, and I think that's the direction that we've gone to.

From 24.7% in '22, the first quarter that we reported, we are up to 30% over the last four, five years.

Okay. That's it from my side.

Thanks a lot.

Thank you.

Thank you for the opportunity, sir, and congratulations on a great set of numbers. Sir, a couple of questions.

First, on the display segment, could you elaborate a bit on the opportunity that we see in terms of the entire market in terms of rupee crores, if you can mention the TAM in the auto segment first since that will be our initial segment to which we cater, and some color on the asset turn or the margin profiles if it will be on a company-level basis or accretive for us? Secondly, sir, is there any update on the IME products in terms of customer acceptance or customer approvals, because I think that was one of the next-gen products that we were prototyping before?

Yes, Khush. On the display, currently we see a very steady transition from small displays to large displays.

Let's say from 4 inches or which was only a display for the instrument cluster part, to the infotainment which was 7, 8 inches. The new RFQs that we're getting from customers are for 10.25, 12 inches, and some cases even 14 inches.

Directionally, that is the way the market is moving. Currently, we estimate that the size of this market is close to about, and of course these larger displays are for the premium models, and close to about 20% of the automotive market today uses displays.

This display content my expectation is by FY 2030, almost 100% of passenger vehicles would use displays in one form or the other. There's a huge tailwind for larger displays, display penetration across models, and then percolating down from the high end to the entry-level segment as well.

Of course, the size of the displays will vary. You could have a single display, you could have a dual display, you could also have a pillar-to-pillar or a three-panel display of a much larger size.

There's a very large market that we see. Our initial estimate is that the size of this market by FY 2030 could be close to about ₹3,000 to ₹4,000 crores.

That's the huge potential that exists in the market when you have penetration across the board. I think strategically, we are absolutely in the right area to leverage our existing capabilities for aesthetic parts to emerge as a strong player in this segment.

There are different elements to it. One is the cover glass, as I said, our ambition is global, we should be able to do that across the board.

For specific customers, of course, assembling the display is going to be a focus area. We have a great partner in BOE, which is a global leader.

We have the best of both worlds, strong capability within the SGS Group, with a strong technology partner globally. That should be a winning combination where we can play a meaningful role in this market as it evolves.

The question was on Margins of course will, as we increase the content of localization, it's not just the part, but also speciality coatings are required, there are premium offerings. We hope when we start supplying, honestly, that is the right time to answer the question on margins, but directionally this would be a high-turnover business.

Maybe the margins could be a little lower, but as I said, in our DNA, we focus on a 25% is the threshold that we have for all businesses, we will move in that direction to see as we get into the localization of these parts, perhaps there'll be an opportunity to get decent margins. The inventory turns of this should be extremely high, ROCE of this business will be very good.

I don't know, Mahendra, do we have a map on the inventory turns that is a Fixed asset turn that we have on this business?

So These kind of business have a higher asset turn, it should be more than 5 times. Currently we are operating around 2, 2.5 times, but this business will have more than 5 times.

Like Mr. Thapar said, ROCE, which is the right way in here, the higher turn will generate with the higher ROCE.

The margin side, like Mr. Thapar said, since we have planned for localization of couple of parts here, margin will be directionally towards what we are operating currently.

Great. Thank you for this.

On the second question on the IME side?

IME, customers continue to show interest, but then this is a platform strategy that we'll have to follow. Many customers we've given demo samples and we are continuing to engage with them, not just in the automotive segment, but also for the consumer segment.

I would imagine that they would take their own time to see what models they would like to introduce that, but it should happen sooner than later because it reduces the number of parts for the OEM and it improves the quality of the human-machine interface. This would happen.

The traction would be more once you have a larger penetration of battery powered vehicles. We see good traction in all these software-defined vehicles and we see that that should be the first entry point for IME, and we are in active discussions.

Right, sir. Thank you, sir.

If I can just squeeze in one question about the acquisition. Largely we're looking at a geography, a particular technology

Hi, good morning, Mr. Joseph, Mr.

Thapar, and the team. My question one was on exports.

Now this is the second quarter where we have seen a very strong momentum. Given the global uncertainties, what is the outlook or the confidence that you can give, or the visibility that you have that this momentum sustains for the next two to three years based on your feedback you're getting from the customers or the inquiries or the products that are in pipeline?

Some sense on that would be very helpful.

As I've said earlier, these products that we supply are not just a replacement of a part supplied by a European or an American supplier, these are new technology parts that underwent validation for one year before they approved this. We own the badging, I'm talking specifically of Stellantis, we own the badging for the whole vehicle, and it is not so easy to disrupt it.

They did their own diligence in terms of what is the value that SGS brings to the table, both as a new technology provider and the cost and the delivery capabilities that we demonstrate. We see this, we started supplies now for almost 4-5 months.

We see that more and more plants are on stream to start introducing these parts. At the moment, we don't see any hiccup at all, and we should continue as normal supplying to them across the globe.

As I said, it's North America, Europe, and Latin America, and those markets continue to perform. We are adding Europe, specially in the background of, we were not waiting for the trade deal to be done with the EU, but on our own we've said that once we've had success with a global OEM in global markets for products that we have very strong capabilities on, it is, I think, fairly certain that we should be able to make inroads into other OEMs also, global OEMs, so that we can supply to platforms across the world.

We will continue to drive on that strategy, and I think all these challenges that we see in terms of volatility are temporary. We have a sustainable advantage, we are very confident of that, and we will continue to drive exports.

I maintain that 14 to 15% of our top line in FY28 should come out of exports, and we are reasonably confident that we should be able to do that.

Great, sir. That was very helpful.

Sir, my second question is for Mr. Mahendra ji.

Sir, last year when we announced capex programs, we were sort of expecting a slight pressure on the margins about 50 to 100 bps when these capacities come online, they ramp up. Would it be fair to now assume that the margins that we are posting today captures these cost, or these costs are still yet to come in going forward?

How do you see it?

Regarding the margin when we start the new capex, yes, there will be some pressure, but at the same time we are improving our operational efficiencies and covering this cost. We hopeful that we will maintain the same margin between 28-29% in the coming period.

Have they flowed in this quarter's results, or in nine months' results? Have they come in, or they are yet to come in?

Sorry, come again?

The cost of capex, the operational cost of the capex, have come in this nine months or they are yet to come in?

They are yet to come in.

They are yet to come in. Okay.

That's it from my side. Thank you so much, sir.

Thank you.

Hi, team. A couple of questions from my end.

Just on this cover glass opportunity, right? Just wanted to understand that when you say you will ship your first product sometime in FY28, we are talking about the cover glass part of it, right?

Everything else we will assemble, right? To just help us understand when you say you'll ship your first product, what exactly are you going to ship and where are you going to add value in the entire display unit, right?

You also mentioned that you are thinking about backward integration and localization of cover glass manufacturing as well, which maybe so far is imported. Is this also something which is going to be possible sometime in FY28, or this is slightly a medium-term target?

Last thing on the cover glass is that the current tie-up that we have done, right? In the past, we also used to work very closely with one of our customers, right, which is Visteon.

How does that tie-up and this tie-up, how are they different? Is that going to be any conflict because of this tie-up with some of our existing customers who might already be in this business?

This is the question on the display part. I'll come back to the second question once I get the answer of this.

Let me clarify that the display project that we are setting up will do two things: it will make the cover glass, it will also do optical bonding of the display, which consists of three parts, which is the cover glass, the TFT screen, and the backlight unit. This is what the product mix of this new plant is going to be.

Now your question on that we've tied up with BOE, which is a very, very strong global player, and our initial discussions with Visteon. I just want to take you a little back for you to understand this a little better.

When we started our journey, we had no ambitions to get into a display. We wanted to leverage our printing capabilities and aesthetic parts capabilities to supply, instead of a dial, a cover glass to the instrument cluster manufacturers.

Now Visteon happens to be one of them, there are other global companies like Continental, like Marelli, and some Indian companies which do this. We wanted a transition.

Then a lot of customers came to us to say that, "Sir, in addition to this cover glass, can you do the complete display bonding because not everybody will set up facilities to do display, even though they own the infotainment and the driver information system for the vehicle?" We said, "Let us re-look at that," because the investment in the plant for a cover glass or a display was a little different based on the dust-free capabilities that you need to build in that plant.

We took a pause for about 6 months, as I've said earlier in my previous calls, and we said, "We don't want to reinvent the wheel, that we invest something and say that okay, now our ambition has changed, maybe we need to do new capex." We just put it on pause, and what we've done in the meantime is that we found a technology partner for the optical display, which is BOE.

The cover glass bit remains intact, our ambition to supply cover glass to Visteon and to all the other instrument cluster manufacturers remains intact. That's what I've said, this plant will do cover glass, and it could possibly supply cover glass to everybody who does displays in India.

That's our ambition, that we want to supply to as many display manufacturers as possible. In addition to that, we will do for a few customers, we will do the complete optical bonding of the display, that is the cover glass, the TFT screen, and the backlight unit.

This plant will do both these things. As far as your question on what revenues will come out of this plant in FY28 or '20 yes, '28, we said that we will possibly do both.

We will do our first lot of display screens as well, and we will do cover glass. Our ambition is to do both by that time.

That is what we are targeting, and we are ordering equipment for the new facility that we have.

That is very clear. Thank you so much for that.

The second question would be again on the M&A part and the technology tie-up that you did, right, with BOE. Between these two, right, which are the levers which you will want to press going forward for the next 2 to 3 years?

Within M&A as well, right, you have mentioned that you don't want to buy just for the sake of revenue, there should be some gap within your existing offering. Can you just highlight which are these gaps, and what you did with Hero was help out maybe an OEM when the vendor was not going through its best of the time.

Are such opportunities available in the market where vendor is not going through a great time, plus it helps us fill a gap that we do not have right now? At the same time, how do you think about the technology partnership like what you did with BOE?

Do we hear more of those also going forward together with M&A?

Let me clarify, currently we don't see any gap. We are a end-to-end design-to-delivery solution provider.

For the aesthetic and the human-machine interface parts that we have, we are fairly comfortable with the product portfolio we have. The inorganic opportunity is not for filling any gap, it's primarily for faster access to markets.

If I can expand my customer base, leveraging the capability that I have, and use that inorganic acquisition as a gateway to sell more of my products because I have the widest range of aesthetic products in the world. We produce close to about 14 different technologies, not many companies do that.

If I acquire a company that does product one and two, there are another maybe five, seven products that I can sell through the same channel because we're talking about the consumer business, or we're talking about the automotive business. That leveraging can happen best in terms of accelerated penetration in a market, and that is the reason for looking at an acquisition.

That's answering one part of your question. I'm sorry, I lost out.

What are the other questions you had?

The technology tie-up.

Technology, BOE, our ambition to get into displays, because this was a new business for us, we had no know-how, we needed a partner who could teach us how to do it. That is what we found in BOE, and they also have global scale, they have close to about 20% of the global market share.

I'm sure we can tap into their buying efficiencies and in terms of their expertise and experience that they have to do the right thing first. We don't have to reinvent the wheel by experimentation.

That's the reason why we did the technology tie-up with BOE specifically for the display business, because that was new for us. For the other areas, printing, etc., we have more than 3 decades of 4 decades of expertise now, and we're quite confident of our capabilities, and that's what makes us globally competitive.

Thank you so much for the answers. All the best.

Thank you.

Thank you, sir, for the opportunity. Sir, my question was on to the margin side.

Sir, as you explained to one of the participant that the sustainable margins are around 29%. Today, sir, we are standing on

28 28, 29 is what we said. Sorry, just wanted to correct it.

There's a range, 28, 29, I can't pinpoint at 29, right? It could be 28, it could be 29, but directionally yes, that's the margins we are aiming at.

Yes, sir, correct.

Sir,

my question was on to that, sir, when we look at the business, SGS standalone and Decoplast are still operating at around 70-75% utilization level. There is room for volume growth from here on.

Considering this capacities when they ramp up to peak, the fixed cost absorption would be quite higher. There should be an incremental run-up in the margins from here on.

From the optical displays and from the cover glass and automotive displays, are you witnessing some margin deceleration so we can come up to that 28-29% margin figure?

No, no. We still have to start revenues for the display business, and as I said, here the benchmark is the landed cost of imported parts, and if we localize, we see that there's an arbitrage there which we could play on.

Coming back to your question that what we are benefiting from is operating leverage. All the management structure that we have remains the same as we accelerate sales, and we see a lot of momentum, the absorption of fixed costs, as you say, will be better and better, of this operating leverage at play.

The reason that I've grown from 24% EBITDA to 30% EBITDA last quarter is primarily a result of better product mix, more new technology, new generation products coming in, so that leads to higher margins. Today about 23% of my revenues come from new generation products.

We are benefiting from the operating leverage, and that is what we clearly see in the margin profile of the company. We continue to maintain a robust outlook for what EBITDA growth for the company is going to be, and we have a very clear path to how will we achieve our profit goals as a company for the next three, four years.

Sir, my question was, considering there is room for volume growth and operating leverage further, why are we not stating that margin guidance upwards of 30%? Why it is only at 28-29%?

As a company we are very conservative, you can see that from how shy we are of taking loans. We focus very clearly on how can we generate free cash on our own to invest, unlike the philosophy that other companies would have.

We would like to perform or deliver what we commit. That's I think how you should think of us as SGS, that these are guys who honor their promises and deliver what they set out to do.

That's what we aim at. It's not to get any accolades in terms of what margin threshold we have, so that's a byproduct.

If we work hard at our job and we declare or continue our war on waste, we will hope to let's say enrich margins for the company. That's the way forward here, I can't give any other answer.

Sir, and one last question. Sir, excluding the Whirlpool and the Stellantis order, core exports geographies, how have they performed and how much it contributed to the top line?

Excluding this Whirlpool and the Stellantis order.

Why are you excluding Whirlpool, Stellantis? They are part of the export universe, right?

They continue to grow. Look, the way the export business runs is that Whirlpool, Stellantis has not just one plant.

We've won Whirlpool business at one plant, we've won business with Stellantis across the world, they are lighting up plants one by one. As a customer, they are at different locations which are buying from us, we continue to grow that.

As I said, the most important question to ask is that are the products of this company globally accepted? I can answer that in a strong yes.

We are very confident, as I've said maybe three years ago when we started this journey, when people did not understand what are aesthetic parts. Basically we are very focused on creating that lasting competitive advantage, because printing is a back-mode operation.

Skill, expertise that we've built over the years is not easy to replicate, and specially the inspection of these aesthetic parts, they have very, very stringent aesthetic requirements, there are natural barriers to entry. We continue to benefit from that, and globally, I think we are a well-recognized company for its quality and its reliability in terms of supplies and quick development.

We will continue to focus on that to grow business, and the business is growing. Apart from Whirlpool and Stellantis, we are winning businesses.

We announced Nissan that we've broken into, and now we hope to break into more Western European OEMs. That's a story that will continue.

Got it, sir. Thank you.

Thank you.

Thank you. Thank you, everyone, for joining the call.

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