Shivalik Bimetal Controls Limited (SBCL) Q2 2027 Earnings Call Transcript

So ladies and gentlemen, good afternoon, everybody. Warm welcome to Shivalik Bimetal Controls Limited's Q2 and H1 FY27 earnings webinar produced by LVs. So I'm Shankini. I'm the director of investor relations at Dickinson, and I'll be moderating our call today. So joining us from the Shivalik management team are Mr. Sumer Ghurman, he's the full-time director, and Mr. Kabir Ghurman, managing director. A note to all our participants, please note that this conference is being recorded and that some statements in this call may be forward-looking, based on current expectations and subject to risk that could cause results to differ materially. You can all download Shivalik's investor presentation and press release for H1FY27 from the company website or the MSC. Great. So I'll now hand the conference over to Mr. Kabir Ghoman, MD of Shivalik, to begin with opening remarks. Let's get started.

Thank you, Shakini. Good afternoon, everyone, and thank you for joining us. At Shivalik, we believe enduring growth comes from making our expertise increasingly valuable to our customers. That principle guides our progression from specialized materials and components towards integrated solutions that deepen our role in the customer programs. Our first-hour performance of FY27 strengthens the foundation of this journey. Consolidated revenue grew by approximately 39%, while EBITDA increased 48%, and profit after tax rose 40%. These results give us confidence in our ability to grow while strengthening profitability. India provides an expanding domestic base, complemented by long-standing international customer relationships. And across these markets, our opportunity lies in applying our materials and process knowledge to a broader range of customer needs and applications. As we extend and expand our capabilities, we will commit capital and resources where customer demand supports growth and the economics offer attractive returns. Our ambition is to earn a deeper role in our customers' business and translate that position into sustained value for our shareholders. Thanks, Shakhine.

Thanks, Kabir. So we'll be getting into the Q&A session now. So just a note to all our participants, to ask a question, you'll have to raise your hand. Quick reminder on how to raise your hand. If you're on desktop or laptop, look for the reactions button at the bottom of your Zoom window. Click on it, then select to raise hand from the options. Your name should appear in the queue. If you're on mobile or tablet, tap on the more dot dot dot button at the bottom right of your screen, then select raise hand from the menu. Great. So we'll get started with the first question. We'll take the first question from the line of Bhavya Nahar. Hi, Bhavya. You can go ahead and unmute yourself and ask your questions.

Hi, Kabir. I just have one question. Could you help us understand how much of the inventory buildup is driven by planned business growth or anticipated demand versus stocking up due to pricing expectations or, you know, geopolitical uncertainty?

Hi, Raviyar. So, See, the inventory buildup is actually, there are multiple reasons for that. So one is, as we've been discussing in past calls, and you must have also taken note of that, that there's active conversion into different programs where, you know, initially we were talking about just direct strip supplies, where we've gone into assemblies or finished components. And in those cases, the, you know, the supply chain cycles have slightly shifted, which are still stabilizing, where certain programs require multiple validation cycles. And, you know, there's quick reaction in terms of design changes. So there, there has been a little bit of an impact. When it comes to that, then there's also the other business verticals, you know, specifically in terms of the bus bar assemblies and PCBA activity that's going on, which also, you know, demands a slightly higher inventory. But we are working, and I think Sumay can also shed some light on this, we are working on certain programs to actively reduce this cycle as well.

So, basically, this is more of a temporary phenomenon because of the excess development work that's going on. So, it's usually, you know, when a lot of developments are going on, like we were saying, a lot of, you know, inventory gets built up, but it's as that business converts more and more into a regular business, then the development converts into regular business, we will see that easing off. Other than that, we are already actively pursuing two, three programs to work on reducing inventory cycles, which, you know, obviously have a phase-wise implementation. So we understand that that's anyway an issue, even if this temporary buildup was not there. It's an issue that we need to address and try to rationalize it as much as possible.

Got it. Thank you so much.

Thanks, Bhavya. We'll take the next question from the line of Dhawal Shah. Hi, Dhawal, you can go ahead and unmute yourself and ask your question.

Yeah, hi, hi, Sumeran, hi, Kabir. Very good set of numbers. Am I audible?

Yes, thanks. Thanks, Dhawal.

Yes, yes. Okay, so my first question is that... As I understand, your business takes time to, you know, get approved by the customer, and once it's approved, the stakiness of the business is high. So, is it safe to assume that, you know, the current run rate is something which is at least, you know, We can foresee this quarter's revenue to sustain for the, you know, it becomes a base and then you grow from here. And the second question is, with respect to the end market segment, what has led to this so much growth? Even quarter on quarter, we have grown very well. Innocent Busbar Assembly, I think, should be the big growth driver. And along that, your American customer is coming back and you are forward integrating their most scope of work. So if you can just elaborate more, how is the demand scenario you're looking at? What sort of outlook would you like to share with investors? Yeah, these are the two questions.

So, some part of your second question, I think, got answered by what you said initially. See, the development takes time, but once a business starts, it's usually there to stay because a lot of time and investment, both from customers as well as our end, has gone into that development. So, it's very rare that something, some business will start and, you know, disappear in a shorter period of time or for some reason, you know, go away. Okay. So, of course, it's sustainable. In fact, usually when business starts, it starts in a slightly staggered way. So, in a way, you know, one can see once business starts, you can not only see it as sustainable, you can possibly see it as a, you know, a few, you know, longer period of growth as well.

So, there could be an acceleration of earnings. I mean, the business grows once you start, as you said, staggered manner?

Yes, so what we are seeing now, you know, a lot of the growth, the main driver behind this growth and to answer that question will answer this part also. The main driver this time has actually not been the PCBs, the PCB assemblies or the CCS that we are working on. Some part of it has been there, but it is still a very minor number because those are still, you know, things that we have started doing maybe one or two, one month or so of the last quarter. We had more increased quantities, but as we go along, now that's turning in the current quarter and the coming quarters is converting into much larger volume. But in this quarter that is under discussion, it only had a very small role to play, much more than the previous quarter before that, but still small relative. So then where is this, where does the growth come from? A lot of the, you know, if you've been following last about seven or eight quarters, we've been talking about multiple developments happening with customers. And those are not for assemblies. Those are for our core principal core components that we make. A lot of those developments have materialized into regular business. They were at sampling stages or pilot lot stages. And now they are regular businesses. And then one or two of our larger customers, you know, their designs have changed and those have started materializing now into business. So, what's interesting to see is that not only are those changes adding to the top line, but they are adding very positively to the bottom line because we were expecting that to happen because a vast majority of those developments were a higher value add. So what we look forward to now is at least a few more quarters of, you know, such value-added kind of growth, which is exactly the kind of growth that we like as a company, because we feel that, you know, of course, there is a higher value-added, there is a reason behind why something is higher value-added or why a customer pays a higher value-add, because it's usually typically a difficult product to make, which also means threat of competition is less. Yes. So, having said that, you know, of course, we know that in the foreseeable future, very soon, we'll have a larger percentage of our total revenue coming from the assembly business, which we acknowledge and know that, you know, as a percentage margin might be lower, but the scale is much, much bigger. So, you know, it may kind of makes up for it. So, this is the direction that you're going in. But again, to answer the first part of your question, the main driver behind this growth is coming from the core products at this point and not the forward integration. Got it.

So in terms of, see, we already almost running at 30% plus kind of revenue growth for the current year. So then for the next year, a similar sort of growth, how do you see your conversation? If he simply...

If we simply look at it from a customer point of view and a potential point of view, we feel that that, you know, doing those kind of growth numbers is possible. But, of course, there's a lot of ifs and buts, like, you know, like we were talking earlier, just you mentioned a little while ago that, you know, it takes time, development takes time. So, sometimes it's very difficult to say that a new set of developments happening with a bunch of customers, whether it will materialize as expected or maybe it will take a longer, slightly longer time. So, that's why we sometimes have these ups and downs. However, the scope is there, the market, the opportunity exists. If we handle it correctly and if we do everything right, then definitely this is a sustainable growth possibility, not just for a few quarters, but for a few years.

Okay. And lastly, would you like to share any updates on the new developments, new products, which you mentioned in the last call with respect to widening our TAM, getting into new products?

Yes, so as of now again, we are still, you know, we are in a deeper stage of analyzing this. What I can shed more light is that most of these products that we are analyzing or working on or let's say, you know, even to some extent technically invested in are related to special materials that go into some sort of electronic application or the other. So, broadly speaking, we are very interested in expanding into certain types of special materials, metals that go into electronic applications. So, if you see, most electronic applications use some kind of specialized metals and that may involve some sort of specialized joining or may not involve, but it could be a specialized or a very special thickness or a dimension of a material which is very hard typically for somebody to make. So those are the things that we are working on. And, you know, at this stage, again, it is probably not the right time for us to publicly disclose it. Once we have finalized and decided to go ahead with it, and we feel that it's the right time to make this information public, we will certainly be talking about it. But there is quite a lot of depth. We've gone down quite deep into this development and something will be happening in this area very, very soon.

Okay. Thank you. Thank you. I will be back in the queue.

Thanks, Tava. We'll take the next question from the line of Dhruv Jain. Hi, Dhruv. You can go ahead and mute your line and ask your questions.

Hi, Dhruv.

You can go ahead. Looks like Dhruv's caught up for the moment. We'll move on to the next participant. Our next participant asking a question will be from the line of Vivek Ganguly. Hi Vivek, you can go ahead and mute yourself and go ahead with your questions.

Thank you, Sanshini. My question will be partly answered. What I wanted to understand is assembly, busbar, and PCBA, as and when they become a substantial more of the revenue proportion in terms of proportion, will they be shown separately or will busbar be part of either your shunt or your contact and PCBA part of your, you know, some other segment of the existing tree?

No, it will be, see, basically, it's a forward integration of the resistor business, but we foresee that it has a massive scaling possibility, so it will be shown as a separate vertical within the core business.

Okay.

Yeah, it's not a, it's not a standalone subsidiary or it's part of the parent organization.

Right. So, you until, so right now you're on show, you know, you're on divide your revenue in three buckets. So, this will be the fourth bucket.

This would be the fourth bucket. Now, one of our, of course, one of our verticals happens to be a subsidiary because, you know, it's a separate entity because it was a joint venture at one point and then it happens to be a subsidiary. But other than that, you know, we now treat it as another product vertical within the same.

It's just legally a separate entity. Great. That's all from Vine. Thank you.

Thanks, Vivek. Our next participant asking a question is from the line of Mahek Talati. Hi, Mahek. You can go ahead and ask your questions.

Yeah. Hi, sir. I'm an autism. Yeah. So, thank you so much for your opportunity. Congratulations on a great set of numbers. So, as I can see, there has been a significant decline in the shunt volume by close to 16%. But our overall top line has grown by close to 36% from the shunt business. So, two questions. Number one, what is the reason behind a significant drop in the volume? Number one. And number two was how much of this value growth is due to commodity pricing and how much is due to forward integration towards components.

Right. So, it's a very valid question, and it's, you know, it can, there is, when you look at just the output volume of shunts, it can be a little bit confusing. So, what is happening is that shunts, a lot of the shunt businesses converting from, a lot of the volume came from wide and thicker strip materials, which was being purchased by some of our customers as raw material to further make resistors. That has gone down drastically, and we are making more and more every quarter of the final resistor. So, as a result, we are shipping out lesser material in kilograms, but with a much higher number of processes added to it, and as a result, value add, and as a result, you know, improved bottom line added to it. So, even though our volume may be going down, because that was going as thicker and wider material as I said, So, you know, looking at absolutely the output in kgs is a little bit misleading. This is actually a very ideal situation for us to be in, wherein we are sending less of material and more of value add, shipping out more of value add, and that is also reflecting in our increase or improving profitability.

Okay. So, it's more or less related to forward integration rather than accommodating pricing. Should that be a correct understanding?

No. So, that's a separate matter. So, the output going down, that part is what I gave an answer to right now. But to answer your other question, which you're talking about, you know, material, the metal prices or the impact of commodity prices. So see, first of all, our pricing works in such a way that we, in most cases, or a vast majority of materials are sort of a pass-through. So any increase or decrease has very minimal impact on our bottom line. That is why even if commodity prices go up drastically, and it has in the case of, let's say, copper, even silver, but copper has been a bigger impact. If you see that even then, you know, even though those numbers have gone up, our profitability has still remained in a similar ballpark. So even if materials go down similarly, it will have very minimal impact on the bottom line. And as far as revenue is concerned, yes, some part of the growth, even in the last call I had mentioned, some part of the growth is contributed by material value going up. Good thing is, like I said, it's not affecting the bottom line, but... So if we were to segregate it, you know, it's very difficult to put a standard number to it because there are many different commodities involved. But if we were to segregate and say that, let's say if you're talking of, you know, this quarter compared to last quarter, this half year compared to last year's half year, and if all material values or commodity values for the both could be considered to be the same, we would still be at a 25-26% pure growth level. If you just look at it simply from the amount of. Uh, components that we shift. So there is growth, but of course, if you add factor in the materials there, that growth looks like a little bit larger, uh, higher number.

I think also I'll just add here, and I think this will probably answer any future questions also, that, you know, this also puts us in a far more favorable position in the supply chain, because generally speaking, specifically from an automotive application standpoint, the likelihood of a potential replacement at a component level mid-cycle during a program is very, very low as compared to the likelihood of changing the input material, which we were doing in the previous models, for example, where, you know, input strip material is going, which has been converted by somebody else into a finished part. Switching that part of the supply chain is easier for customers rather than switching the end component because that, at that level, if a component has to be chained on a board level at an automotive application, then that has to go through complete validation cycles, and that has to be a very strong reason for somebody to go down that route. So if you secure a business at a finished part or an assembly level, That's, you know, essentially virtually locked in for the life of that program.

Understood. Thank you for the detailed answer. Second question was related to the CCS business. So, we have already started supplying to one customer. And I guess in the previous couple, you mentioned that you are in touch with further two, three customers. So, where are we in the qualification stage? Can we, given the volume increase in the EV2 wheelers, do we expect a quick turnaround and we can start sublending to them in, let's say, Q4 or Q1 or so?

So here, at least two other programs, two or three other programs are actually in advanced stages now, where initial prototyping is already done. There are some that are undergoing testing. You have to understand that this is also a, you know, slightly... We have a new supply chain within India, because before this, a lot of this material was being imported from China directly. So very little design work or R&D work was happening at the OEM levels and at the supply chain level. So, you know, these cycles of validation, fine-tuning, they take a little longer than they will maybe in a year's time. Obviously, these things will rapidly improve. So, having said that, at least two or three other programs are now at advanced stages along with the one that is running in mass production, and of course, talks are going on with other players as well.

Okay, thank you. Thank you so much.

This question is from the line of Anjali Parmar.

Hi, Anjali, you can go ahead and unmute your line and ask your questions.

Hi, good evening, sir. Thank you for the opportunity, and congratulations on the good set of numbers. I just had two questions costly. Earlier, you had indicated that you were evaluating a few inorganic growth opportunities. However, with the recent dividend announcement, should we assume any change in capital allocation of priorities or how should we look at these opportunities going forward?

Uh, no. So since this, this, uh, the dividend announcement is not, um, it does not have a major impact on our, on our, uh, availability of funds. So, uh, that is why we, we planned it like that. And, uh, we still have, you know, there's enough availability of, of a free reserve or free cash sitting with the business that, uh, see none of our projects that we are looking at require an immediate, uh, capital allocation. So, we are not looking at, let's say, an immediate acquisition kind of an opportunity or something like that where we need a large amount of funds at the same time. It's usually, it comes in a more staggered way. So, we start step by step. So, there's enough time to plan for funding. That is why we felt that at this point of time, it would be better to, it is okay for us to propose this.

Okay, okay. And secondly, given the growing India opportunity globally, how should we look at the opportunity for SBCL in India compared to international markets? And like over the next two to three years, how do you expect the domestic versus export contribution to evolve?

Uh, domestic, you know, uh, like, uh, going back to one, the, the answer Kabir was just giving before this, um, a lot of new developments in India are taking place, which we had actually not anticipated that will happen quickly because the whole ecosystem has advanced faster or is advancing faster than we had anticipated. So we feel that what was earlier a more export. Thank you. Because earlier, a lot of the complete packs or complete battery packs or complete assemblies of, we say, BMSs, etc. were being imported. And now, they have, you know, Slowly being assembled here, then the component supply chain is being formed here. So we see a great opportunity now, not just for export, but for domestic as well.

Okay, so thank you.

Thanks, Anjali. Our next participant asking a question is from Dhruv Jain. Hi, Dhruv, you can go ahead and ask your questions.

Hi, hi, hi, Sumir, hi, Kabir, hi, Shubhini. Thanks for the opportunity. So, my first question is, you know, a little bit on this water. So, you know, what we have seen is that the US shunt volume's revenue has actually declined. And if we look at, say, one of your larger customers' book to bill, it seems like their order books are rising. So, if you could just clarify that, and if it's just a one-quarter thing, and if things will normalize in the next quarter. So, that's the first question. And related to that, if you can also talk a little bit about, you know, the Europe business actually doing pretty well for you on the shunt side.

Um, can you just repeat the first question again? You said that the volume, are you asking about the volume?

No, sir, I, no, sir, man, I was actually talking about the U.S. shunt Oh, you'll be climbing. Right. Yeah, so I just want to understand, you know, why that has happened, because if you look at, say, someone like a Vishay's order book.

Yeah, got it. So what's happening basically is a lot of the conversion of our existing customers in the US that we have done recently, a lot of that is under an arrangement wherein we are supplying directly no longer to the US and a lot of this development happened. Due to the tariff issue that happened last year, so that accelerated this development. A lot of those resistors are used outside the US. So a lot of those shipments no longer go through the US. So what you'll see as a decline is partly part of that decline is coming coming from there. Now, there is a there is certain developments that have taken place with our existing customers in the US which which has started in materializing into business more towards, you know, the last two or three months. So some part only some part of that business came into the previous quarter or the quarter or two, basically. So that is why it is showing as a decline. But then some of it has been compensated in other regions. But going to a US customer, but going directly to a different region.

Got it. So basically, it will be classified in, say, India or Europe going forward.

Mostly Asia, actually. If you see a lot of that conversion or a lot of that diversion has actually happened to Asia. So it will show up in the Asia geographic side.

Got it. Answer the second question, you know, on the biometal side. So, we've seen a very sharp uptick in the India biometal number, right? So, just want to understand what really changed because we've seen a sluggish sort of a time, you know, sluggish sort of numbers in that vertical for some times.

So, I think a lot of what at least what we get to know from our customers is more driven for retail demand or by retail demand or by, let's say, real estate or new constructions or new infrastructure projects, a lot of that demand. I think there had been a time in between where a lot of over-inventorization and also because, you know, the market in India was kind of flat for the demand for these products. So I think a lot of inventory had accumulated, and that sort of carried on for a few quarters. And now that demand is again beginning to pick up. To sort of meet the actual demand. And what we are being, or at least, you know, coming from looking at the switchgear background and of course thermostatic biometall is affected only by one portion of the switchgear market. So what, at least what information, what we have from our customers as well as whatever research we do, that the outlook generally in India now for the next two or three quarters for medium and low voltage switchgear is looking good.

Okay. Okay. That's fair. And just, you know, one question, if you can just give some guidance with respect to both passbar and overall numbers for Shivalik for say FI 27, FI 28, how are you looking at margins and top line both in the current context of the plans that you have?

In 27-28, we expect that the kind of developments that we have in the assembly business, right? Let's start with the assembly business. There's a, again, which parts translate into business or materialize into business that is, you know, dependent on many, many factors. But the opportunities that are out there, which we can go and grab and those, when we look at that, we can anywhere between 100 to 200 crores, somewhere in between that number can be looked at for from just that assembly business. Now, when we look at that kind of a business, that business also, you know, expected comes with a expected lower EBITDA margin of maybe 15-16% as opposed to, you know, maybe 26-27% on those lines. So, we expect that if, say, on the higher side, even 200 crores comes with that low margin, and looking at that number, as well as, you know, what growth anticipation we have, what outlook that we have from our customers for shunts and all the other, the legacy, the product lines, and the expected growth in contact, which is also a 15-16% EBITDA margin business, we can possibly see that if we can maybe, you know, maintain a similar, this 30-40%, 30-35%, 40%, If assuming that, you know, a lot of these things fall into place, we can expect that in that year, maybe our total profitability, of course, profit goes up, but, you know, our margin comes down maybe from a, maybe by two or maybe one and a half to two and a half percent, somewhere in the range because of the addition of revenue coming in from these 15-16% EBITDA margins, margin businesses. So, that is the kind of profile we see that we could be going in that direction, but that also means that there could be a good sustainable revenue growth. So, we could be somewhere in maintaining a balance in between the two.

All right. So basically, you know, just to conclude, I think 30-35% top-line growth over the next two years is sustainable. Margins could dip, but that's a function of mix, basically.

Right. And that, yes. And if that, of course, that dip comes from some of the newer products being added. As far as the standalone product verticals, the legacy product verticals are concerned, there, in fact, we don't see any reason why margins should dip. In fact, the margin should only, as a result of further improvement in volumes, should further continue to improve, which could further, as a percentage, compensate for some of the lower margin business in the foreseeable future.

Got it. Thanks a lot, Sumer. Thanks a lot, Kabir, and best wishes for Diwali to you and the team. Thank you, and same to you.

Thanks, Dhruv. We'll take the next question from the line of Naushad Chaudhary. Hi, Naushad, you can go ahead and unmute yourself and proceed with your question.

Yeah, hi. Thank you for the opportunity and congrats to the team on a good set of numbers. First, from a leadership perspective, Where are the gaps currently we see in the organization, and what are the critical hires we are evaluating now to take it to the next league of growth?

So, thanks, Noshad. Basically, of course, other than the key positions that we recently had become vacant, those are already in line, and to begin with, in the leadership role, our new CFO should be with us, and all finalized should be with us by the end of December. So... That is one area. Other than that, we are actively at this point of time pursuing a position, a good candidate for a position of a CEO. We may call him or her. Something else, but the primary function would be that of a CEO. And part of the reason, you know, where we got these foreseen, a lot of Shivalik's future growth story, other than streamlining all our existing businesses, is these are these new verticals that we will be going into and working on. And with Kabir's availability becoming more and more important for those projects, it is very, very important that we have a very efficient and a person in that position who can take over that role from Kabir. And that is the ethos that we are following in a lot of other areas in the company as well, that we have a leadership team complete that takes care of all of the operational matters And where in my role and Kabir's role in this business can be then more and more related to the strategic decisions. Regarding expanding into other product particles, because the real key to actual future growth of the business lies there. So in those areas, we are looking at hiring. We are actively searching for some key people, head of R&D, who we've already got some new people in R&D, but we are looking also for, depending on what projects we go for, another senior position in R&D. And so we are also looking at a very senior marketing and salesperson or as marketing as well as a salesperson, specifically with an experience in electronics. So since we are a company that is turning more from metal work, specialized components more towards metal components for electronics, you know, that that changes that profile a little bit because that ecosystem is different. So these are the few leadership roles that we are looking at at this point.

Sure, Samir, and last, Abelis.

Hi, Noshad, your line isn't very clear.

We'll come back to you, Naushat. We'll proceed with the next participant while Naushad gets on a better line. We'll go ahead with the next question from the line of Prateek Srivastava. Hi, Prateek. You can go ahead and mute yourself and ask your questions.

Hi. Can you guys hear me?

Yes, Prateek. Go ahead.

Yeah, hi. Again, congratulations on a great set of numbers, both Sumer and Kabir. My question in general is more about, I think Sumer, you mentioned that, yes, you know, you are seeing much faster growth in the end market mix, right? Could you share more light on that? Because we are in multiple different market, right? We are in two-wheeler EV, four-wheelers, switch gears, industrials, smart meters. How do you see these end markets evolving in future? And what would be your, I would say, more focused area? And then the second related one, of course, is more around this, you know, the data center opportunities and also energy storage opportunities. Are we evaluating something for these end business verticals as well?

I think the second part of the question regarding the data centers and the battery BESS applications. So, in both cases, for the data centers, you see, data centers also require multiple switchgear applications. They also require battery management systems. So, in both cases, indirectly, we are seeing demand increase at the component level for those parts. But more interestingly, on the BESS, we are seeing some applications, which brings me back to my earlier conversation where we were working on some of the other CCS and busbar applications, where there are some that are directly related to the BESS packs. So there is work going on in that front as well. It's very early stages, like as was the case with the two-wheeler EVs. This is a, you know, India in general is undergoing a shift where reliance on China for complete battery packs is, you know, exponentially decreasing. So that will only fuel the growth rate or at least the speed of development in India.

Got it. And on this EV, I think on the deck we mentioned that you know that for the EV versus ice, right, either in you know it is growing it is like 2x per shunt value and 3 times the ice time, right, for the EV segment. So, how many shunts per vehicle and how are we increasing We are using content per vehicle for EVs.

So, you see, it depends. If you talk about shunts per vehicle, it significantly changes depending on the category or the class of the vehicle that we're talking about. So, lower-end EVs or, you know, modern ICE engines also now could see somewhere between 30 to, let's say, 50, 55 shunts, depending on the OEM, depending on their design and feature list. Whereas something at the higher end of the spectrum, you know, top-end vehicles that you see on the road from the top two, three brands, their marquee levels will probably have over, you know, 200, 250 shunts per vehicle. But obviously, these are not all large shunts. These are much smaller SMDs, but shunts nevertheless. So it varies from case to case. Now, um... With our conversion, which we spoke about in the beginning of the call, conversion into finished parts, a lot of this is also going into end OEM automotive applications. So as we push forward to manufacture more parts, have a stable quality, have a good track record in the market, obviously our sales and marketing team are pushing harder to get a bigger market share of the final pie, so to speak. And you can also understand that it was quite a challenge, which is why it took this long also for this conversion is because for a new player to come in and replace, let's say, a German or an American supplier who's been supplying the finish chance for the automotive applications for years was, you know, definitely something that took a while and a lot of fine tuning in the process and quality controls to get that level of accuracy.

Got it, got it. And one last question, just on the blended margins moving forward, what sort of blended margins do we expect, let's say, for FI27 moving into FI28?

So, you know, if we, let's say, I mean, let's. For a second, go even beyond that. Let's say in a three-year horizon, where we see, you know, the direction where the company is going, it could be a possibility that we could be, you know, eventually in a 50-50 situation in our total revenue between sort of a 26-27% EBITDA kind of business and the other being a 15-16%. So, which means a blended margin of somewhere in between that. is, is what we feel that eventually at, you know, maybe three times of, of, let's say what revenue we could foresee this year, maybe three times of that revenue, we could be in a situation where we are at a, let's say at 20, 21 percent EBITDA margin level, or maybe 22. I don't, I don't know, depending on factors, but somewhere in the middle of this 15, 16 category, because we see the, the business eventually going into that. And then we would plan to, you know, treat these two or three different segments in a different way. Of course, when we do choose to go with a product vertical with a lower than what we use, low margin that what we are used to or what we normally go for, usually it would have bring in some added advantage which strengthens the core business of ours and is related to it in some way or is strategically important to it. So, yeah, to simply answer your question, we expect that at three to four times the revenue of today, we could be in a, you know, somewhere between the 15-16% to 25-26% number.

Got it, everyone. Thank you. Thank you, Sumir, and thank you, Kabeer, and all the best to you guys. Thank you.

Thanks, Pratik. We'll take the next question from the line of Nirali Gophani. Hi, Nirali. You can go ahead and... Yeah, hi. And proceed with your questions.

Hi, Nirali. Hi, hi. Thank you for the opportunity. Congratulations on a great set of results. Maybe a little repetitive, but a little bit on the growth side. So, Sumer, when you say that, you know, next year, bus bar itself is supposed to deliver 200 crores of revenue, and this year, if we replicate H1 and H2, we are around somewhere around 750 crores of revenue. So, this 25-30% growth will be driven only by bus bars. So, then your outlook on how will shunts perform or buy metal perform, largely from the perspective that the strips to component shift will largely be done in this year. So, what is your outlook on that side?

Sumer, I think you're on mute.

Yeah, sorry. I think there may be a little bit of confusion in what you may have understood. If we are looking at this year, or let's say if we are looking at next year of, you know, and what I had mentioned was that there isn't these opportunities of these assembly businesses of that revenue are there, they are available, whether we are able to get a lot of that business or we are not, that is separate. So it's not exactly like that we will definitely be getting that business. The opportunity exists. We are creating the ecosystem to have that on board. So if all goes well, yes, that is a possibility, probably even more than that is a possibility. And then at that time, including that year, we also continue, would continue to probably see in our existing product verticals a decent amount of growth. So, when we look at the end, towards the end of 2028 or towards the end of financial years, 2728, we would be in a situation where even at a 200 or a 250 crore value of the PCB business, it will still probably not be more than maybe, you know, 15 to 18% of total revenue. So, that margin business should not overall because if the other businesses were not expected to grow or we were not foreseeing growth in there, then yes, your understanding would probably be correct. But that is not the case since there are a lot of developments that we've been talking of since this call started related to a lot of the existing products. See, I think, and I have mentioned this before, and I think for everybody's benefit, I would like to mention it again. We do not foresee or we do not look at any of our PCBA assemblies, PCBA business or PCBA assembly businesses or as. This is becoming a core product of ours. This is a product that we are making assemblies of A for what the customer requires, B because it has to be sold like that. So if our cladded components or if our EV welded components must go in that form, they have to go as an assembly. So it is basically an extension of our product and cannot simply be looked at as something we would be doing otherwise. Why? It is a very, very important extension of what we already do in the shunt resistor business. Now, the moment you look at it like that, your understanding of that product will be slightly different. But as we are getting deeper into it, we realize that it is a massive scale-up opportunity. And I think it's probably a great thing for Shivalik because that is exactly the kind of scale-up that a business like ours needs. You see, our business is such that years of development may bring a very highly profitable 20 crore business to our top line. And it's a cause of celebration for us. But when you look at it as an outside investor, you may not even notice it because, you know. 20 crores added to the top line with a decent margin may not show up to in a standalone way in the numbers. So having a mix of those as well as this kind of scaling opportunity, these are very important things. But primary reason will always be it is that it is an extension of our existing core product.

No, very clear. And secondly, on the CAPEX, what kind of CAPEX are we planning for this year, and where do we plan to, you know, work on that? Like, which areas are we planning to expand?

I think Kabir will shed some light on the, the, the, the CapEx.

Yeah. So, you see that the core focus moving forward will be, A, in capacity enhancement on downstream processes, because as we've discussed in the past also, you know, the core, if you talk about the core product categories where it comes to the actual diffusion or the, or the merging of the metals for either of the business verticals, that Principal processes have sufficient capacity, but as in when required, depending on the demand from the market or the order book, there is enhancement that has to happen on the downstream processes, which is a fairly quick cycle to enhance. So there will be there will be some expenditure on, you know, expanding capacities on downstream processes at parts level, assembly level. The other area where we are, you know, even the last. Two quarters, and going forward, also, we are going to be heavily working on is the automation for end-of-line calibration testing. As we go further into, you know, integrated assemblies, the complexity and the criticality of these tests and calibration systems also goes up. So, there's going to be some CAPEX involved there, which is ongoing. Then, of course, for the PCB and PCBA type of parts, we are also planning certain expansions and capex expenditure there as well.

Perfect, perfect.

And lastly, on the bus bar, so currently we are working for a two-wheeler and you know, you said that you are in talks with other customers also and you said that there is an opportunity for four-wheelers also. So, any thoughts there, are we getting nearer or any of the talks are with four-wheeler OEMs or like on that side or anything on that part?

In early stages at this point, there is a faster traction and a faster growth or activity that we're seeing on the two-wheeler side. Um, we, you know, you must be following the news where I think last month or last last month, almost 40% of two wheelers sold were electric or 30-35% were electric. So that those kind of numbers are, you know, it's nowhere close when you talk about the four wheeler market. So there is, you know, it's directly proportional to that activity that we are seeing in terms of registration of new vehicles versus the activity that we are seeing in the supply chain from two wheelers versus four wheelers. So, there are talks going on, but the acceleration rate for adoption is faster on the two-wheeler Perfect.

Yeah.

That's it. Thank you so much for answering. My pleasure.

Thanks, Nirali. Our next question will be from the line of Ajay Surya. Hi, Ajay. You can go ahead and ask your questions.

Thanks for the opportunity, and congratulations on the performance, sir. Sir, my question is, like, I've divided, first question, sir, I want to understand on the electrical contact. So, sir, like, we expanded capacity, maybe, couple of quarters back. So, just wanted to understand, like, sir, like, what would be the current capacity utilization in our contact business, and, like, when, when do we expect this to, maybe, run at full capacity, because also, sir, like, again, I am sure like you have explained in the past, but again silver prices have corrected even this quarter, but our business both in terms of revenue and margins have held up. I am sure like it is also because volumes are growing or maybe some kind of pass through, but if you can maybe give some more color on the volume growth which we should expect in this business, and should we expect maybe this quarter's margin as some kind of some sustainable benchmark going forward? For our electrical contacts business.

So I'll start with the second part of your question first, because that's connected to the first part. You know, what we have been doing generally as a, you know, our decisions a few years ago, we wanted to move away more and more from high silver consumption components because we decided at one point that we don't want to get into the silver manufacturing business because that is not our specialization. Dealing with Boolean comes with its own set of complications, and it's not our core business. Our core business is a good quality of joining between complicated materials and making very complicated components for which toolings are difficult to make and tool designs are difficult to make. So why go away from that core competency? And we also saw that there was a void in the market. Now, as a result, we focused on making the components and not go down the route of silver. That is why you'll see over the years, impact of silver prices has been minimal on us. Surely, sometimes in case of revenue, it can show, especially when the jumps are too high. But it doesn't affect our margins as deeply. There is a slight impact when there'll be too much of a rise in silver, for example. In one quarter last year, for example, silver went from 1.5 lakhs to 3.5 lakhs. When that kind of a jump comes, and we all know that that is a very rare situation, Thank you. And even then, it will only have an impact to a limited extent because vast majority of our profitability comes from the manufacturing process, which remains the same in either case. So, of course, the overall revenue may look different. Now, coming to today, when we speak of silver versus, let's say, the same corresponding quarter last year, you know, there is a maybe silver is still double the value. And if 64 or 65% of all materials that are being used, there is going to be some impact. So if we see that our contacts business has grown nearly, you know, more than I think 100% or so, out of which 40 to 50% is only because of materials and the other balance is actually because of customer-related growth and customer development as well as actual product increase. So we are in a very favorable situation that alongside the silver jump over the last one year, we have also really substantially grown in business. If we had not done that, then our entire top-line growth was only coming because of silver, then it would have been a cause of worry. And now, as you correctly pointed out that, you know, we started our shifting to the new facility two quarters ago, and by July this year or June end or early July this year, that facility was fully functional. Uh, the impact of that added capacity, uh, is, is now showing up in some of our numbers because a lot of, a lot of our existing customers wanted to give us increased wallet shares and they, wallet share, and so, so as a result, you know, we are seeing a further increase in, in growth. So we, we anticipate until we reach a certain point, uh, with our customers or as well as new development, we anticipate this kind of a growth trajectory to continue. And frankly, for us as a company, since we are not into silver manufacturing, for us, silver prices going up or down is not a major concern. And of course, learning from specifically from what has happened last, in the last one year, we have ensured that it doesn't have an impact on us or has minimal impact on us. Coming to the point related to the capacities. So, within the contact business, we have four or five different, you know, product types. And they are very similar to thermostatic biometal manufacturing, wherein there is a core process, and then there's some eight or nine, you know, down the line or before the preparatory processes. So, it's very difficult to say what the capacity is, but we typically calculate our total capacity on the core process, because those are the ones that are difficult or costly to add in a short notice. Down-the-line processing and finishing can be added in a shorter notice. So they can always be increased or decreased. So as far as core processes are concerned, we are, you know, for one of our product types, which is nearly 50% of total revenue, that business is currently running at a 50-60% capacity after adding this revenue. So let's say we take 50% of the overall revenue that we expect this year from contact business and say that, you know, that is running at half. So it has the potential of doubling. So half of that revenue that we're expecting has the potential of doubling without any added capex. And similarly, in the other areas, we are running in one of our processes, we are running at maybe around a 30% capacity. And if you take out a mix, sort of, you know, there's no point going into these details. But if you take out a mix, I think we would, it would be safe to say that we are running at about already at about 50 to 655-60%. We had originally at this CAPEX set up this plant at approximately a 300-350 crore revenue potential, but that was calculated at half the silver value. So, let's say at this silver value, that number would translate to about 400 crores. We possibly expect that we should be crossing about 45, somewhere between 50 to 60% of that number this year alone. So, by the end of this year, we should probably be at around. You know, 55% capacity utilization to answer your question.

Sir, thanks for the detailed explanation, that very well explains this part. Sir, one question on, sir, just one question on our standalone business. So, sir, was there any contribution from our, maybe the PCV or CCS business which was included in the standalone business, if you can clarify? Why?

Very minimal. It was not more than, I think, if you look at the standalone business, it was probably not more than. Six or seven, not even that, but maybe somewhere around, maybe, let's say five to seven, somewhere in that room.

My question was more on, like, if I look at the standalone margins particularly, like, it has grown, like, now to more close to 30%, and I believe, like, from past calls, we can make out, like, it has been because of the shift of shunts from, maybe, strip to assembly. But sir, can you give maybe any percentage like what portion of our shunt volumes today would be like in strip form versus assembly form and like where it could reach in maybe a couple of years going forward like because that would help us explain the growth maybe which we expect in shunts and like can you also shift this model of maybe maybe selling only strip to maybe a set or assembly.

It has happened actually with most of the larger portion of the customer base. You see, there was only a very limited, not in terms of volume, but there was only a limited set of customers with whom we had that kind of an arrangement, which more or less is all gone now. You know, part of the reason, to give you some history, part of the reason behind why that was the case is because we were experts at making that script. Not specifically all sorts of the complicated components. So specifically, the high value added components is something that has been more of our recent technical addition. And as a recent means 2019 or 2020 onwards, we started building the capability of me being able to make such complicated components which come with these kind of margins. So so, of course, you know, that may seem like a long time to everybody. But again, you know, where it takes two or three years to develop a customer, the cyber Six-year period from that perspective is not much. So this is a more recent thing for us. That is why originally a lot of the resistor business started as STRIP. So as we have developed the capability of making these kind of smaller components, most of our new developments are already in that form. And a vast majority of our old existing business is already converted. So, so, so, what? I still agree with what you are saying, what you are suggesting, that this ideology can be applied in some other ways as well. We have to always look at what we can do, whether it's in thermostatic biometal or whether it's in shunts, what we can do to go one step forward to get a higher value from the same product. And we are actively working on that as well. Because, you know, we are as a company, we have changed our point of view about how we look at, you know, revenue or profitability and what these numbers mean. This is from a few years ago when we focused more on the product. Our focus on the product still remains the same. But we have also started looking at our strategy related to these things. If we can add better value by going forward and as well as, you know, get more business as a result, then why not?

Thanks, Sumer, and thanks, Ajay, for your questions. We'll be happy to take up your follow-ups at a different time. We'll take the last question, just looking at the time. We'll take the last question from participant Harsh Mulchandhani. Hi, Harsh. You can go ahead and ask your questions.

Yes, I'm audible. Hello. Thank you for the opportunity. I wanted to understand that we lost some revenues in US with respect to Shun's business in the PPT. So, I wanted to just understand, are we losing market share or, you know, there is some dynamics with respect to particular market and we can again, you know, gain those volumes going forward with respect to Shun's business in America.

So, Harsh, a lot of this, actually, this is coming from, you see, a vast major couple of customers of ours with whom we have now, you know, an arrangement of instead of supplying what we were earlier, just before this, talking with Ajay, regarding, you know, We've converted some strip business with some major business accounts into components. Now, a lot of those components and in some cases, 70-80% of those components are used outside the United States. So what has happened as a result is, and we as part of an arrangement with those customers, we are supplying directly now to their end users of those parts. So, what's showing up as the US numbers going down is actually going to a US customer, but directly to its final user outside the US. In most cases, that is actually Asia. That is why you'll see that Asian quantities have also increased. Disproportionately. So a lot of the US business is actually now showing up as Asia.

Okay, got it. Thank you. And just one more question on the CAPEX side. So, you know, there is a 1300 crore number mentioned with respect to capacity. So, you know, if we continue to grow at this rate, maybe, you know, we could be closer to those numbers. And you mentioned that we are doing additional CAPEX. So, just wanted to understand if you could just help me understand where do we see the capacities in the coming couple of years and a bit on the utilization which we are targeting.

So, some areas have grown faster than others. So, there we have already done a little bit more capex on capacity enhancement, as Kabir mentioned in one of the earlier questions. So, capacity enhancement, you see, our products work in such a way, it's not that something that happens in a typical manufacturing business where you have X amount of capacity and X amount of revenue, you know, connected to each other. Our business works in a slightly different way. So, some components may increase in volume, and as a result, some process may need to be added, whereas the core process may not need to be added. So, it's not as simple a calculation, but we understand that we need to come out with some average number. So, some capacity enhancement is already done. It would be safe to say that that 1300 crore number will probably be a little bit different now. It will be on higher side than that. And we also keep in mind whichever product vertical or whichever area we are already reaching a sort of a tightness in capacity, we already have plans to increase that. Having said that, most of the capacity enhancement that requires a heavy capex or a heavy capex is basically that is where we have enough room available. So the capacity enhancement which we can do in a short period of time at a lower cost is where some enhancement may be required. So we have, you know... In a very safe place to ensure that before we reach any over or utilization of capacity, we are in the right place to or the right position to enhance it at the right time. Got it.

Thank you so much.

Thanks, Harsh, and thanks, Kabir and Sumer. I can see there's a couple more participants with their hands raised, so please do feel free to reach out to the IR team. We'll make sure you get concrete answers from the management. We'd also like to let you know we are setting up some meetings in Mumbai soon, so please do reach out to us, and we can take your consideration. So, we'll conclude this call for this afternoon. I'll hand over back to Sumerh for closing remarks.

Thanks. Thanks, Samkini. Thank you for your time and thoughtful questions. We enter the second half with a stronger earnings base and a clear set of priorities. As we mentioned in our discussions, our focus is on sustaining core profitability, improving cash conversion, and progressing new programs through customer adoption. We remain confident in the opportunities ahead and will pursue them with discipline in execution and capital allocation. Thank you for your continued trust in Shivalik.

Thanks, Sumer. Thanks, Kabir.

Thank you, everyone.

And thanks to everybody for spending their afternoon with us. Looking forward to the next step of chapter growth for Shivalik. Cheers, everybody.

Thank you. Bye-bye.

We can disconnect now. Thanks. Bye-bye.