Thanks, team. On behalf of Anand Rathi Shares and Stock Brokers, I welcome you all to the Suprajit Engineering Q3 FY '26 conference call.

I thank the management for taking time out for this call. From the management side, we have Mr.

Ajith Kumar Rai, the Founder and Chairman; Mr. N.

S. Mohan, MD and Group CEO; Mr.

Akhilesh Rai, Director and Chief Strategy Officer; and Mr. Medappa Gowda J., CFO and Company Secretary.

Request Ajith sir and team to give an introductory review about the results, and then we can follow up with the Q&A session. Over to you, sir.

Thank you, Mumukshu. Good morning, everybody, and welcome to you all for the Q3 conference call of Suprajit.

Apologies. I think we have been a few minutes delayed.

There has been some technical hitch to connect the Chorus with our system, apologies for the delay. I welcome you all.

I will give a short brief and then hand over to our team one by one to cover areas as we always do. Overall, the turnaround globally continues, particularly at SES.

There has been certain, of course, both expected and unexpected costs at Controls Division, which has led to certain one-time costs, which has outweighed the performance. However, the underlying performance has been pretty solid.

The latest announcement of India trade framework is an added positive for all of us, and we are awaiting further details. With this background, the board has declared an interim dividend of 150%, that is ₹1.5 per share, up from the 125% last year, that in a sense reflecting our confidence in the turnaround and the global trade.

As usual, we'll start with Medappa followed by Mohan and then Akhilesh to give certain updates, I'll hand over to Medappa. Medappa?

Yeah. Thank you, sir.

Good morning, everyone. The consolidated revenue excluding SES for the nine months ended 31st December 2025 was 2,464 crores, as against 2,290 crores for the corresponding previous year, recording a growth of 8%.

The consolidated operational EBITDA for the nine months ended 31st December 2025 was 327 crores, against 295 crores for the corresponding previous year, recording a growth of 11%. The standalone revenue for the nine months ended 31st December 2025 was 1,371 crores, as against 1,283 crores for the corresponding previous year, recording a growth of 7%.

The standalone operational EBITDA for the nine months ended 31st December 2025 was 234 crores, against 226 crores for the corresponding previous year, recording a growth of 4%. The total debt level was 723 crores as on 31st December 2025.

The surplus cash balance invested in the mutual funds was 206 crores as on 31st December 2025. Thank you.

You can approach me for any further queries later after the call, even after the investor call. Thank you very much.

Mohan?

Thank you very much. Very good morning, everybody.

I'll, as usual, take you first through the Indian automotive industry. Presume that you already know about what's happening.

We have got a general growth of around 9%, out of which passenger car vehicles and two-wheelers are in a ballpark of around 8.7, 8.8%. However, the global auto volumes have remained largely flat, we would say.

In terms of company, our consolidated revenue went up by seven and a 7.6%, and EBITDA grew by 11%. Of course, this is excluding the SES and which has performed the global industry.

Moving on to the global platform, I would say that conditions remain challenging. Still the geopolitical risks are there.

Trade uncertainties are there. Yes, of course, the US-India tariff agreement has provided a kind of a directional comfort.

Of course, we need to wait for the implementation details because always the devil is in the details. Starting with the Suprajit Controls Division, and I am talking about excluding SES, because SES will be covered by Akhilesh later.

Our operational revenue grew well by 13.7% with the new program launches, et cetera. Operational EBITDA declined by 10.5%.

Primarily, there are a couple of reasons. One is we shut down, and we relocated from Juárez to Matamoros.

We consolidated, so that was one primary reason. The second one is, at Matamoros, we are changing the overall labor structure.

We are moving from a 40-hours to 48-hours structure. In the process, we are making redundant the 40-hour structure of people.

Therefore, there are certain I would say redundancy costs coming in there. Overall, because of that, we had certain issues in realizing the sales, the severance costs, and there were overtime because of Juárez moving over to Matamoros, and we had to do some expedited shipments.

Moving on to the tariffs, which has been a popular baby of recent months, it is largely a pass-through, but what happens is the cash recovery is delayed by a few months. Therefore, it is a strain on the working capital, but to that extent that we are covered in terms of tariffs.

What happens is the terms of accounting, we'll have to record the impact in the current quarter, but we expect that positive impact upon recovery from the customer later. Good news is, with the tariff uncertainty easing in US, I think the new business wins will start accelerating now.

Very important to highlight that our Matamoros plant received the Ford Q1 award. This indicates our operational stability and particularly post-transition after we have taken over.

There is a supply offer which has begun with a large Chinese EV OEM, and they have also given additional RFQs that we have on hand which we are responding to, which is very good news for us. Moving over to the Domestic Cable Division, the revenue grew by 9%.

That was in line with the domestic industry. EBITDA margins remain strong.

The beyond cable initiatives including braking has gained traction. The highlight, of course, was the aftermarket performance, which was very, very strong.

Another thing that is a moment of pride for us is that both our Chakan and Pantnagar plants won the JIPM TPM Excellence Award from Japan, JIPM. I think there have been some images which has been posted.

This reinforces our kind of world-class operational discipline at our plants. Moving on to the Phoenix Lamps Division, quarter remained very muted.

This is driven by a sharp reduction in the exports to Middle East. This happened both in terms of our Trifa brand exports and also the direct export sales.

Indian aftermarket also took some amount of hit, and we had seen a lot of counterfeit products and also low-cost Chinese imports. We are working aggressively to overcome these things.

The silver lining, of course, is the special-purpose machines and automation projects that are progressing well, which is being manufactured at our Phoenix Lamps Division, but it is being used for our Cables Division. With this, I'm going to hand it over to Akhilesh for SED, SES, and STC updates.

Over to you.

Thank you, Mohan, and good morning, everyone. I'll start with Suprajit Electronics Division, which had a good, robust growth of nearly 20%.

It reflects our strong traction in our electronics programs, especially our clusters and throttles. EBITDA also had a positive increase of almost 160% with margins now in strong double-digit territory of 11.2%.

I'm also quite happy with the kind of order pipeline that we are seeing at the Electronics Division. Memory chip shortages remain a risk.

I think you know about the Xperia challenges also. We're also facing them, but mitigation actions are underway including sourcing diversification, et cetera.

Over to Stahlschmidt Cable Systems, SCS, the latest acquisition of assets from the insolvent SCS Germany. As this is complete, and now this is where we're seeing a full quarter of the earnings of the complete SCS business.

Key restructuring actions have already been completed. Especially in this quarter, we completed a tool room relocation from Germany to Morocco.

We have ramped up the new Hungary warehouse completely to support the SCS operations, and we have done the final headcount reduction or right-sizing in Germany, which was scheduled for December. All of these are now complete.

As we continue to integrate SCS into SED in the future, we are also consolidating the leadership. Friedemann Faber, who has done a good work for us for the last few years, is now exiting as MD of SGG, or Suprajit Germany.

Our current European operations head, Mr. Neil Collis, he will start to lead all European operations including SCS from April onwards.

New business wins have also started at SCS. This is very positive because of the kind of issues we were facing.

Now customers are seeing that all those issues are resolved, and they see SCS as a strategic location we thought it would be, and we're seeing a lot of good, renewed customer confidence in the Morocco facility. Coming to Suprajit Technology Centre, STC continues to support our new program launches across multiple divisions.

There's a lot of focus on homegrown products, and right now there's a lot of collaboration happening with our ABS partner in Italy and for sunroof cables with our partner in Germany. Initial prototypes of ABS are already under testing and progressing as planned.

Some updates are in the presentation in terms of some pictures that you can have a look at. There's a strong development pipeline in clusters, throttle grips, and actuators.

In fact, some throttle grips are even going to China from India. We've seen multiple OEM visits getting a lot of positive feedback from the market.

Other general updates: we completed the €1 million strategic investment in Blubrake, Italy, which is our ABS partner with a very new and innovative ABS technology. This is alongside our licensing agreement that we had already concluded earlier.

We participated in multiple global trade shows and customer tech shows, and this has supported a lot of good customer engagement. In the coming quarter, 16 DCD plants will be going on to SAP in April, and this will improve our global integration.

In terms of the JV with Chuo, I'm happy to inform everyone that we have got multiple RFQs from our key Japanese OEMs in India. We're also getting multiple RFQs for exports, the RFQ pipeline at the JV is also strong.

It will take some time to commercialize, but the pipeline is very good. Over to Chairman for closing remarks.

Yeah. Thank you all.

I would like to conclude by saying that majority of the restructuring post the SCS acquisition is substantially complete by end of December. SCS is progressing pretty well towards the positive EBITDA that we had committed by end of this quarter the current quarter, that is as has been projected by us in the beginning of this acquisition.

With the tariff clarity improving, while need to still see the fine print as to exactly what is the tariff for the various tariff codes, the customers are expected now to at least resume strategic purchasing globally, and I think with our kind of footprint and strategic positioning, we should be It should be all very positive for us for the newer business wins. With this, I will hand it back to the to the moderator, and we're happy to answer questions.

Over to the moderator, please.

Hi, good morning, sir. Sir, a few questions.

One on SED side, what is the normalized EBITDA margin you reported this quarter, sir? It's possible to quantify the one-time hit we had [this session?]

?

I think in our press release we have mentioned that is more or less, I would say, normalized EBITDA for the quarter, which is at about 9.5%. The one-offs for the quarter is about I would say, this is a rough number at this moment, is about $2 million USD, that's about, let's say, 15 18 18 million or so, 18 crores or so.

In this figure, this is only for [could become question?]

Sorry, I can't hear you, please.

Is this only for this quarter, or it has spillover for the next quarter?

Yes, what I mentioned is only for this quarter. Earlier quarters in the respective quarters, all the restructuring costs have been booked in respective quarters.

It is reflected in the EY-signed-off document as a full cost, whereas in our press release, we have normalized as operating expenses by adjusting these one-offs back into the system.

Okay. Okay.

Okay. On the SED side, if you can sir talk about more because the growth is reasonably good this time also.

What were the kind of new customers we got in, if you can just highlight more on that?

I think we have been, as we have been telling in all our earlier press releases as well as our investor calls, we have been winning significant new contracts. Those contracts are now slowly and steadily coming into SOP, that is start of production.

Typically the cycle in automotive industry is that every five or seven years, the existing projects drop off the table and the new projects keep coming on. We have been winning more new contracts than the orders that is coming to end of life.

I think this is clear indication that the customers are placing larger and more significant and strategic businesses with us, which is getting into production. That's why, for the quarter, Controls Division had a 13% growth where the global business has not grown.

I think that's what we have always been saying that we'll outperform the automotive world's growth.

Interesting. Sir, just last question on SES side, is it fair to say Q4 would be the break-even quarter for us in terms of EBITDA margin?

I think we have said in the beginning of the year when we did the acquisition by end of this financial year, we will turn the corner and will be EBITDA-positive. As you have seen, in fact we have declared all our last I think seven-quarter numbers in this press release.

The direction is pretty clear, and as we are still standing by that. Yes.

There is no one-time cost which can come in Q4?

This is a process of consolidation. There'll be some costs, but having said that, I think we are still standing by those statements.

I'll come back in the queue, sir. Thank you for this.

Hi. Thanks for the opportunity.

Couple of questions. First is on this one-off.

If I have to look at nine months, would it be right to think that we would have incurred more than 35, 40 crores in form of one-off restructuring expenses? The related question is if I have to look at next one year for SED and SES, then what will drive a normalized margins for the business?

For SES and SED, you mean?

What will drive the path to the normalized margin? Because in SES, I think earlier quarters, you talked about

Okay. Viraj, let me put this way.

I think I just mentioned just in this quarter, we have booked nearly 2 million one-offs. Okay?

You're talking about nine months. It's actually more than the number that I think you mentioned, actually.

I'm talking about complete restructuring between SES and SED. It's probably more than that, but we normally don't give those numbers.

In this quarter itself, on Controls Division, for various issues that I will just mention and also in the PR, we have booked about 2 million one-offs. That's first answer.

Now next year onwards, as we have said earlier, once we expect SES to turn around the end of this quarter, there is so much of integration is happening amongst Wescon, LDC, SCS, SAL, SEU. The entire operations will be reported as Suprajit Controls Division.

That is our international business, and I have always said this that globally the autocomponent industry operate between 6% to 10%. Right now, SED is at that 10%, but with the SES adding on for next year, it will take little more time to stabilize, but I think it will be in that range, and the aspiration is certainly reach 10% over a period of time.

Got it. Second question is, sir, if I look at the DCD business, we talked about a very strong growth in aftermarket and there is good scale-up of Beyond Cables also.

If you adjust for these two elements, growth in DCD seems to be much lower than what we've seen for the industry, two-wheeler or PV industry in India. I'm just trying to understand why is that the case.

Have you lost any market share?

No, I think in DCD, if you're looking at it, the growth is close to double digit, whereas industry growth is at about 8%. It is in line with that.

You must also understand that other than Beyond Cables the base is pretty small. Although the percentage looks interesting, but the base is still very small.

I think you need to keep that in mind. Beyond that, I don't see any other issues there, actually.

Because if I

Of course, having said that, let me also qualify that some of the EV products the number of cables have come down, which we have already said in the earlier PRs earlier calls as well.

Because if I look at the reported

In terms of the market share with each customer, we are absolutely at the same levels. As I said, the number of cables in certain segments, particularly in the EV, has come down in some cases.

I think that's probably the answer for your question.

Okay. Just two more questions.

One is on the JV for transmission cables. Can you give some color, what is the opportunity landscape both in India and even for exports, how big is the market and for export, is it more driven by the captive business of JV partner or it's more of us directly approaching?

Any color if you can give on the landscape and how we're approaching this over next three, five years?

I think you're talking about Chuo JV.

Yeah.

I think I will let Akhilesh to answer the basic question, but I'll also add on a few points. Akhilesh?

I think the way the Japanese work are generally very slow and this is also well, I wouldn't say slow, but let's say cautious and careful. This is a very technical product, and this is why Suprajit had never gotten into shifter cables for even being world leaders in cables.

Shifter cables for automotive was not an area that we had gotten into because of the high technical nature of it. It has taken almost a year and a half of close work to develop a product here which is matching the OEM's expectations.

We've worked very closely with the two largest Japanese OEMs here in India. Right now they have reached a point where they're very happy with the technical capability of our team.

That's why they've given the RFQ, but it will take time, I would say at least a year before it commercializes into any business. At the same time, the Chuo Group, we have a clear policy that we now are focusing on the East, and the Chuo team and the Chuo Group in Japan are very comfortable to work with us, and that's why even before any business has started, they're already working on multiple export orders to support us in India with it through the JV.

Chairman, you wanted to add something?

I think correctly Akhilesh said, Japanese are very cautious and they're really long-term. It has taken some time to come to the current stage, and we must also keep in mind the two Japanese the leading Japanese customers, OEMs passenger vehicle in India have already got multiple suppliers for these products.

They've also been little cautious, but I think we have broken that ice. I think we now are starting to receive RFQs.

The interesting part of that is, of course, it will take some time again, it will be probably the future platform of this OEM, so that means the launch time will be later. What is interesting is the confidence of Chuo.

I think they are asking us to quote for their global requirements, because they obviously have seen that we have got some cost-competitiveness here. I think those are the things, Viraj, but I would suggest that don't pencil in any numbers for this for the next year.

I think even if it is, it will be very small, but it's really a long-term association that we are looking at as Chuo is also a part of Toyota Group, so that's what is more important for us.

Just last question, I'll come back in queue. What is the thinking behind not utilizing deferred tax from losses in subs to drive down the effective taxes?

It's more a conservative approach, Viraj, because we have always been very conservative in such matters. We are very confident of how it will pan out when it pans out.

At this mere moment, we have taken a prudent and conservative view on this. I think in a year or so, these things will completely change.

I'm assuming you're talking about subsidiaries reverting to a normal profit margin, right? The kind of tax offset opportunity you have, you're kind of letting that go.

That is what

No, I don't think so. You can talk offline with Medappa.

There is no tax opportunities that is let go. No.

It's ultimately individual units taxation because individually they are independent units, and they flow into the consolidation, whereas the deferred tax matter on those loss-making units are taken on a conservative basis. That's all.

Fine. I'll come back.

Thank you. Thank you.

Yes, thank you for the opportunity. Sir, just on the gross margins front, sequentially they have come down in the Q3 sorry, Q2 versus Q3 by around 200 basis points.

What is the particular reason why the gross margins have come down?

Gross margin in standalone or in consolidated, you're saying?

I'm talking consolidated.

I think that's basically on the Controls Division numbers, right? It's because of that.

Okay. Is this because that the raw material cost has gone up or is it because of some tariff issue, which is a more pass-through?

Okay. I think you're right.

One of those points, we talked about one-off, you also mentioned about the timing of the tariff. What is happening, the way the tariff works in the US is that we invoice as per the customer prices.

The tariff part of it is separately invoiced with all the supporting documents: the import duty paid, the invoices of the freight forwarder, the import tariff paid proof. It gets uploaded into the system of the customers, and then we get into the queue for the payment.

Once the duty is changed from 25 to 50% in the last quarter, suddenly this amount became significant. As far as the auditor is concerned, until the money is received, they're not going to recognize it.

In the number as announced, there is been a significant hit of that tariff amount, although we have a written confirmation from customers that they will pay. It's a timing issue.

Which means that, sir, the next quarter or whenever the tariff amount is come, will it be your sales without any corresponding cost for it?

Yes. Yes.

You're correct.

Which is resulting in normalization of gross margins.

I think it will normalize the gross margin. Then when you look at for the period, whatever, then I think they will look fair.

Correct.

Okay. Great.

Just on the braking business, sir, the braking systems, have we started this business for any of the OEMs?

No, but I'll ask Akhilesh to give a status update.

In terms of braking, I think we do multiple braking products in production, in terms of we supply lever and combi-brake systems to multiple ICE OEMs and EV OEMs. That started only in the last year where we displaced multiple current vendors where showing the kind of confidence customers have with us.

We also do a lot of braking products for, let's say parking brake for JCB or parking brake release systems for Metro. We do multiple braking systems which are in production.

We are constantly working on, let's say, the next braking technologies that we want to bring in, and that specific technology is hydraulic brake systems and ABS. That is now under testing at multiple OEMs, and we're hoping that we can commercialize those in this year in the coming financial year.

Nothing on the mechanical brakes where we've got any business from any of the OEM?

No, on that mechanical brake system that you've seen in our, let's say, our tech shows and experience center, that mechanical brake system was actually meant to substitute hydraulic brake, but because of the ABS mandate, unfortunately, the ABS can only work on hydraulics, this option becomes something that they're not looking for. We are actually converting that into a new product which is now in discussion with OEM, but I think it's little bit far from commercialization to discuss right now.

Great. Just last clarification on the tax rates, once these subsidiaries were to turn profitable, in that case the deferred tax assets will be, again, as you're not prudently using that, will be used, and hence our tax rates were to normalize in the mid-20s levels?

Yes, I think so. You are correct.

That will be over a period of time, yes.

Okay. Okay.

Is this something which will happen in FY '27, or this normalization of tax rate will take more time?

I think it will take probably more than a year, I would say. Next year may not be the year itself, but it all depends.

It's a question of how the numbers look for us and for us to present to our own auditors to see that whether they are fine to make those reversals. We are at this moment taking a very prudent course.

Great. Just one more question on SCS.

You've done very well in terms of sales, and the quarterly run rate is clocking well, and now this division is going to be reported under SED from next financial year onwards. Would this division be able to grow double digits for FY '27 based on the order book and the demand scenario which you are receiving from your OEM customers?

All I would say is that SCS is shaping up pretty well. Despite being in insolvency, within the year after we've taken over, now customer visits have started happening to assess us from these facilities, whether it is from Morocco or from China and from, of course, even for our Canada, as a optimal route for their supply chain.

That has been happening. In fact, we have been also awarded recently some business at Morocco as well, in addition to what we have.

All I would say is that with this complete restructuring done, SED, Suprajit Controls Division, will present a united front for all these entities. Where the business will be placed, whether a European business will be placed in Hungary, Morocco, or China, or India, which are all different parts of our acquisitions, it's up to the customers.

It is difficult to say whether SCS will grow. The point is, will Controls Division grow?

The answer is certainly yes.

Perfect. Great.

Thank you and all the best, sir.

Thank you.

Hi, sir. Thanks for the opportunity.

Sir, one strategy question from the four- to five-years view. How much percentage of consol revenue comes from the mechanical cables and Beyond Cables, and how do you see this mix by FY '30, and which products you see as a star in the next five years?

Amit, knowing us for so many years, we don't give a five-year outlook. All I would like to say is that of course, once Electronics Division came to certain level, we made it as a separate division.

Similarly, when we get some reasonable milestones within the Braking Division in terms of our existing current products, what Akhilesh just spoke, or with the hydraulic or ABS, we will segregate it into a separate division. Obviously, and then, of course, Actuator is another area where we are having a very strong belief and significant progress in terms of developments in STC, as China is happening.

I think once they're also in the pipeline, I would say that with these divisions, that means with these two additional divisions of course, STC is working with the Electronics Division on multiple other electronic products. All of them put together, we will have a basket of highly de-risked businesses from a point of view of cables.

How much of that cable percentage will be there for five years into the future, we don't really forecast. Suffice to say that each one of our divisions will have a reasonable size and a very good profitability.

Understood. Sir, secondly, on the ABS side, if you can help us understand, as this is a more of a safety component, hence, getting the new orders could be looking a little tough due to the competitive reasons.

Any edge we have, and, further if you can also help us, when we can see an SOP and revenue target for the next five years for this?

Since Akhilesh has already spoken to ABS for a little bit like that, I let Mohan to answer this question.

Uh-huh. Thank you.

See, let me just give you a overall strategy, what we are trying to do as against the competition, because that's what basically what your question is, what is our USP, right? If I look at it today, I am a biker myself, I understand this better.

When you're braking, it's a very haptic feedback that you get, and person to person, it varies. There are multiple things that you're looking for: the bite in the brake, the noise levels, the stopping distance, obvious care, the performance parameter.

Therefore, there are multiple things that you look at. Now today, if you look at in the industry, somebody is supplying the lever, somebody is supplying the hydraulic portion, somebody is supplying the caliper, somebody is supplying the hose, somebody is supplying the brake shoes, somebody is supplying the rotor.

Therefore, the integration of this whole thing as a system, braking system, falls in the domain of the OEM. Therefore, let us say I get a squeal noise, just to give you an example, or I'm getting a very mushy feeling when I apply brake, then whom do I go to?

Do I go to the lever guy? Do I go to the hydraulic guy?

Do I go to the caliper guy? Do I go to the brake shoes guy?

This is where the issue what we feel is a sweet spot. Therefore, what we want to position ourselves is that we are going to be a systems provider.

If you look at automotive industry, particularly the passenger car industry, you have module providers or systems providers. Therefore, if you can move in the direction of becoming a module provider or you can move in the direction of becoming a systems provider.

For us, the sweet spot that we look at is that we are a systems provider. That's how we are projecting ourselves to the OEM, telling that we take the complete responsibility, be it in terms of feel, haptics, feedback, be it in terms of the performance of stopping distance or the wear-outs or other areas like squeal and noise.

We take the complete responsibility. I think that is the USP.

Thank you, Mohan. Akhilesh, you want to add anything?

Just on the specific ABS component, like Mohan said, it forms a part of a larger portfolio which we have complete experience from the lever to the friction material all in-house. On the ABS product itself, it is a new patented product in terms of the type of platform that it gives us.

It is fully localized, we won't have any import restrictions. We won't have any imports, whereas the current ABS products have some imported components, mechanical components.

I think these are the sort of the other USPs. I think we also have a different type of feel that we will be bringing, which we hope will be an advantage.

Like Mohan said, I think it forms part of a full brake system package that we're giving the OEMs.

All right. This is helpful.

Thank you so much. Just last one quick question on the PLD Division.

Sir, here, since many quarters, the quarterly run rate is averaging around 96, 98 crores. Have you guys started receiving any order especially from the Europe where you have a competitor bankruptcy reported, and any aspirations also to improve the PLD's margin or this number looks sustainable?

Mohan, will you answer that?

Sure. Yes, the answer is what you said is right.

When some of the people are going bust in some areas, obviously those customers where we had I would say lost in between are coming back to us. Therefore, we are gaining traction there.

Another big-ticket item that has happened is in not Europe, but in Americas. One of the big boxes has tested us out, and we have passed all the audits.

We have already started supplying it to them, and we have started realizing revenues out of this big box in US also. Therefore, as the consolidation happens and the big players just move out of this, we will stand to gain.

Therefore, with our strategy of being the last man standing, I think we stand to gain here.

I think to add to what Mohan rightly said, last man standing, I would also like to add here very clearly that this year has been a sort of an exceptional year in that sense because Middle East, one of our big markets had significant setback, some of our big, big distributors didn't buy from us, and in the last couple of quarters, there has been some issues relating to the Indian aftermarket. Having said that, what you mentioned yourself, the insolvency is happening, consolidation is the key, and I think we are actually getting so many new inquiries in the last quarter onwards.

I think the outlook for actually Phoenix Lamps for the next year looks far more brighter than what it is today.

Perfect, sir. Thank you so much.

All the best.

Thank you.

Thanks for the opportunity. Hope I'm audible.

Yes.

Sir, first question is with respect to this India-US FTA and also India-EU FTA, if you can elaborate, how does an auto component industry benefit in general, and more specifically Suprajit? Because different products would have different supplier base in terms of different countries would be supplying.

If there are no major caveats that come, as you said, devil lies in detail kind of thing, assuming there is no major surprise. If you can elaborate how Suprajit benefits from this given that you are present in multiple ways today?

Yeah. It's a very interesting question, but I don't have full answers to you, Chirag, because we're still awaiting a lot of details.

I can give some clarity, particularly India-EU, European Union, we have I think something like a 3% duty now. From my understanding, when it's actually implemented, it has to go through the legislation, I think that would likely to be probably more towards zero.

To that extent, I think that is positive. The US tariff, it all depends upon the classification and the HSN codes.

There are multiple codes on which we do the deliveries in US, and there are multiple tariff structures. Although the headline says 18%, there is some of them which are at zero, some of them at higher, some of them are in between.

There's also, to add the twist to the tail, as they say, there is also what they call as a tariff-related quota, TRQ, I think. Certain what they considered as I don't know, national security or whatever, certain parts comes under this and comes into a much lower tariff all the way up to 0%.

When I see, it's too early to talk, but I think our importing agents in US are yet to give us a full clarity, because they themselves have not received the notifications from the government yet. The 25% is gone, effectively.

The other 25%, we don't know when is the date and what are the fine print. I think we will wait for another couple of weeks, and if you get any clarification, we'll probably send a press update once we're clear about this.

No, let me rephrase the question. I fairly understand this point.

Is that let's assume even at 18%, is China our key competitor or which region is our key competitor where if our peer set is also at around 20%, then the incentive for US customer to shift may not be there. I was more coming from that way.

From that point of view, I think seeing by what the number is, at 18%, we in Asia, Southeast Asia, including China, we become the cheapest. I'm assuming that it is 18%.

Then these 2%, 5% variations while have some cost advantages or disadvantages, customer also looks from the strategic point, I think. For example, Morocco has only 10%.

Doesn't mean that customer has come running and lined up to buy from Morocco. It's all a strategy of the customer.

All I am saying is that we have footprint in all the places where tariff regimen is favorable also, like Morocco. Now India is becoming probably a little more favorable.

We will utilize based on the customer. That's why we made a comment also in our press release saying that some amount of this tariff confusion is going behind us, and once this clarity comes in a month or so, I think the supply chain managers will start working on new projects.

I think that's when we will get certain advantages to position ourselves.

Is China key peer country for us or not really?

What is that?

Is China key competitive country for us in US and Europe or not really?

Not really. Not necessarily.

Of course, there is a China competition. There are a couple of suppliers from China, and I think they probably have a slight disadvantage.

Then, we'll have to wait and see.

Fair point. Sir, the second question was if I heard it correctly, you said that there was a $2 million charge in SED division, right, because of this In this quarter, yes, you are correct.

in this quarter. That basically means around 4.5% of margins for the quarter?

Maybe. It's for the quarter.

You must also understand some of them would have been charged in the Q3, which is partly was actually incurred in Q2, right? You have to actually look at the total period.

These one-offs may not be one-off of the quarter. It may be a result of the previous quarter also.

I'm just giving a general explanation.

For our clarity, if you look at for the period, then I think it is a fair point, whatever the difference, yes. What would be for nine months if Medappa sir remember or recollect broadly?

How should we look at going forward next year? There would be any more startup costs because some of these assets will get transferred, so that would be some similar one-time cost of different nature that would come next year?

What I'm saying is that the kind of restructuring costs that we have incurred this year is only for this year. Will there be some costs next year?

There is always, we're an organization which will keep on optimizing our operations. In the process, some costs will be incurred, but they will be nowhere near what we have been incurring in this year.

That is the point.

Sir, if it's possible if you can call out what was then in nine months, your point is valid, we should look at a whole period. It would be helpful, or at least when you give the next Q4 results for the full year what is the amount if you could call out, it would be helpful.

We will keep that in mind, Chirag. Let's see whether we could sort of give a rough outline on the overall one-offs that we talked about.

Yeah. One question, if I can squeeze in, the last question from my side.

The Chuo JV that you spoke about, the Japanese JV that you did, what is our equity in that, that's question one. How should we look at the ramp-up of that?

You have earlier articulated, but '27 will we see, or it's more about '28, '29 where we can see some revenue flowing over there?

I think, Chirag, you know how the time taken with the Japanese customers, particularly they already having existing customers. They want us to be there, but then it will be all for probably the new projects that will be launched, not necessarily in '27, maybe even in '28.

We are in discussion, it is difficult to say which project will be awarded. We don't want to make a comment at this moment.

To us it is a wonderful joint venture. It's a Toyota supplier, Toyota-owned supplier.

It's a relationship we will really look forward to capitalizing over a longer period, not for an immediate return as such.

In that case, can you summarize new programs that are likely to start in '27, because there would be some somewhere in EU, somewhere in As Akhilesh said earlier, we are at the RFQ stage. Unless we win, we cannot comment.

No, not for this JV, as a company as a whole. As a company as a whole in '27, any new programs that are likely to start or You mean for Suprajit?

Suprajit, yes. For Suprajit as a whole.

Oh, Suprajit, there are so many new contracts. I don't know from where to start.

I think some of the interesting ones that we just started delivering to US is on certain seat and door cables where the underlying condition that even our tier 1, tier 2 should not be Chinese. That means to say how the mindset of, I'm just talking about one customer placing an order of, let's say, 50 CR a month 50 CR a year kind of a thing.

There are quite a few significant businesses, but you must also understand once in five, seven years, existing programs also go off the table. If you see the quarter number at 13% growth for Suprajit Controls Division, not just in India, everywhere there is a surge in the business volume.

I think that is very important to understand, I think. Okay.

Thank you very much and all the best.

Yes, hi. Good afternoon, and thank you for giving me the opportunity.

Sir, actually to sort of continue on pretty much what has been the tone of the call, I think we would greatly appreciate some more sort of clarity on the restructuring and the one-offs, because the last 12 months have been absolutely transformative for the business, and we appreciate that with SES, consolidation of LDC, some smaller things like SAP implementation and things, and all of these are very cost-heavy activities, but with long-term benefits. I think we would greatly appreciate sort of further details on where we start next year in terms of our cost base and where the sort of growth in earnings comes from.

Just one suggestion and one question from my side.

I understand that, Saurabh. I think it's a well-said point.

I think this year-end, I think we'll be complete. There'll be some ongoing stuff in this quarter.

By end of the year, I think when we come out with our final number, I will ask our finance team to put together some kind of a data. I don't know how much we can actually disclose or not disclose, but we'll certainly make an effort to give some kind of a color to this concern that you have.

I appreciate that and understand it.

That will be great, sir. One final question from my side.

We are now employing about 150 engineers at STC. They're obviously working across multiple lines and product divisions.

If perhaps we could sort of understand that they are obviously today maybe not contributing to revenue in a very big way. Maybe in the actuators they've had some sort of progress where products have moved ahead, but brakes is essentially still in a developmental phase or approval stage.

If maybe even that could be called out, because, in essence, at least the way we view it as investors, this is an R&D expense for the company. If we could perhaps also just call that out, again, it helps us to understand where the business is going two, three years down the road when some of these activities fructify and the products come to market, right, just in terms of the return on investment over the last five, six years that we have been seeding STC and building the team out.

We will see how we can elaborate more on the STC activities and in terms of maybe the team sizes and what they are up to and where they are contributing so that, for example, there is an Electronics Division which is responsible for the Electronics Division of ours. Similarly, there is a braking team which is responsible for the Braking Division.

There is an actuator team which is responsible to the actuator team. Some kind of a color we could possibly give in the next PR, yeah.

That will be greatly appreciated. Thank you, sir.

Thank you.

After this question, we'll take one more from anybody else in the queue. It's already 12:05.

We have started 7 minutes late. We'll take from two more persons, Jinel, you can start, please.

Thank you.

Good afternoon, Ajith sir and the Suprajit team. Just touching base from Saurabh's point of the employee costs.

If you were to see from 2018 until 2022, our employee costs as a percentage of sales has averaged roughly around 18.5%, which is currently around 22% plus. Obviously, this includes investments that we've done as we've already spoken about that.

Just trying to understand that as businesses start to fructify, as our investments start to pay out, would we see that alpha coming from this employee cost, which can go back to that around 18% or so, because of a lot of that is already into investment. Just trying to understand that point.

You're talking on the consolidated basis?

Yes. Yes.

Yes.

Yeah. In the consolidated piece, let's also understand, five years ago, our international exposure was less.

It is a lot more now. The employee cost, as we all very well know, overseas or internationally at a much higher level, and I think that will remain the same.

The point here is that between then and now, the size of our STC has increased to that extent, the employee cost also has gone up. From the point of view of this coming down, I think our aim will always be to come down.

Ultimately, in business, what we see is that how do we benchmark with our direct competition? Are we better off?

If they are 30 and we're at 22.5, then we are great. If they are at 18 and we're at 22, then we are in trouble.

I think we do this benchmarking exercises internally and try to understand whether we stand ourselves as a competitive supplier in the market. I think our benchmarking exercises so far have clearly led to us to believe that we are fairly competitive.

Now whether 22% can come to 22 or 21, I think that is possible because we continue to grow our business. As the top line grows, these numbers on an average as a percentage will come down.

Also, we have done this restructuring exercises. Once that is done, there would be some tailwind of that into the employee cost.

Will there be some positivity? Then, five years ago, seven years ago, we are only 35% international business.

Today, as you see in our press release, we are 58%. Those businesses are run at a much higher employee cost, which is the norm of the day, whether you run an operation in North America or in Europe or even in China today.

They are at a different level. I think, to some extent, these costs are going to be sticky to change, but some improvement is possible.

I get what you're saying. It's just that the point is that we've had, obviously, we've gone up on R&D costs, we've had a lot of other operating costs related to the acquisition.

It's just trying to see that, and especially also when the global auto industry kind of turns around, which has really not grown, and some possible operating leverage. You kind of think about it an overall lens point of view that there is possible operating leverage somewhere or the other, which kind of helps you on that margin front, right, where Yeah, true.

Let me give a little larger answer to that. I think the operating lever improvement is certainly there in employee cost, number one.

That is also there in the material cost, because, as we become global scale, our ability to purchase more competitively also becomes an issue. I think that is also giving us some advantages.

The reason today if you look at any global player in cables, if you're able to squeeze out some numbers, nobody has the kind of margins that we're generating. That becomes our operating performances have been pretty good.

Certainly there'll be some improvements, even other expenses. For example, once this year is done with all the kind of air freights and special freights and things like that that we have done is coming down, even that there is an opportunity to tighten our belt.

It's a continuing process in Suprajit. I think each divisional heads are given annual targets to improve such costs, with not just employee costs, on multiple levels.

I think that is where we monitor our divisions to further improve their operating efficiencies and improve their margins. I think it's an ongoing effort.

I think there would be some improvements as we go forward.

Perfect. Thanks for that.

Lastly, everybody's touched upon this, I'll keep it short. On the restructuring costs, obviously, there was some negative surprise there, but should we expect any other negative surprises in the coming quarter or going forward?

I think as we said, by end of this that means I'm talking about the Q4, we would be all done with it. I don't really see anything significant in the quarter at least at this moment or so far in this quarter.

I think most of our restructuring is complete. Some ongoing and some of the let's say, work done last quarter an invoice may come.

That is possible. I don't see the kind of hits we have it was a known hits.

It's nothing new, because large reduction in Europe and in Mexico and all that stuff, apart from the movement of Juárez to Matamoros and the SAP-related issues and all that, they've all happened sort of, sometimes it's Murphy's Law, it happens in one place at one time. I don't really see that in this quarter, actually.

Okay. Thank you and good luck to the team and Ajith sir.

Thank you. We'll take one last question if there is.

Yes. Hi, sir.

Am I audible?

Yes.

Yes. Hi.

Congratulations on a great set of numbers. Just one small question.

On the SED division that is the global division ex of SES, we've seen an acceleration in the revenue growth. Now, would it be possible to quantify if there is any benefit from the rupee depreciation or bulk of this is due to the underlying organic growth that we're seeing?

There will be some, yes. There will be some rupee growth, rupee advantage.

I think maybe 2%, 3% may be there, but I think that's about it. Rest is actually we had a good quarter and the consolidation You must realize when the insolvency happened the of the SES entities, there has been some customers we lost because they thought that this company will go bust.

Some of those things have also come back. That's why if you look at SES, there has been a strong momentum, too.

Overall, if you look at the two together, I think the growth has been much ahead of the global industry. That's all I would like to say.

Great, sir. Sir, just one small question of clarification.

In the last quarter, I think you had called out about 12% to 14% EBITDA margins for the SED division, I think ex of SES. Would we still stand by that given you would have some benefit from the tariff also coming in in Q4 without any equivalent cost?

No, the 12% to 14% that I have said was the consolidated total business excluding SES, which has been even now in the same range. It's I think 13.

something. We're still in that range of 12% to 14% with the consolidated excluding SES.

On Controls Division, we have always said that the international business operates between 6% to 10%. Our aim is to be at the top end of it, which is 10%.

I think we are there, and in fact for the period we're just about 10%. I think we are very much there, actually.

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

Thank you. I think with that, moderator, I would like to thank Anand Rathi and Chorus Call guys to organize this call.

I would like to thank all of you for participating this call. If there's any more clarification, you can connect with Medappa in normal channel, and I would like to continue to thank you for your continued interest in Suprajit.

Thank you very much. I hand over to the moderator, please.