Rajesh Doraiswamy, Jt. Managing Director of the company addressed the call:

Since Salzer's incorporation in 1985 as a single product manufacturer it has now evolved to offer complete customized electrical solutions to customers. All products are internationally certified and it sells in over 40 countries

Though it operates under the electrical and electronics product group, for ease of analysis, it has classified businesses into four different segments viz., the industrial switchgear businesses, the copper business, the building segment business and the energy management business.

It has five manufacturing facilities, four located in Coimbatore and one in Himachal.

It also has in-house R&D labs in Coimbatore recognized by Government of India, Ministry of Science Technology.

The revenues from the operations stood at Rs 99 crore in March 2016 quarter as against Rs 78 crore, up 28%.

Switchgear business contributed 41% of the total revenues during the quarter and reported a y-o-y decline of 4% and on a sequential quarter the decline of 7%. This decline in revenues is mainly because of delay in getting new project businesses that it is working with various OEMs.

The building product segment, which is still a very small segment, contributed 4% of the total revenues and witnessed a year-on-year growth of 6% and a 3% growth on sequential quarter basis.

The copper business consisting of copper wires and cables was the largest contributor with 45% of the total revenues of the company during the quarter with a year-on-year growth of 39% and a quarter-on-quarter growth of 34% on account of increased volumes.

The Energy Management business, which is basically order book driven business, contributed 10% of the total revenues with a year-on-year growth of 488%. The very high percentage is because the last year the company did not have this full-fledged business.

EBITDA margins were at 10% as against 12% in the corresponding quarter last year. This decline of almost 2.5% is basically because of two reasons. The first one being the change in product mix wherein the wire and cable contributed to higher than the expected percentage to the revenue and also lower realization of energy saver income to the tune of approximately Rs 7 crore due to the incompletion of the third party audit. However, the company has incurred most of the expenses towards that.

For FY 2016 revenues stood at Rs 361 crore against Rs 283 crore, up 28% growth. Exports contributed 22% of the revenues in the full year with a growth of 18%.

The revenues have grown in line with its expectation especially from the profitable segments industrial switchgear business.

In FY 2016 industrial Switch Gear business contributed 47%, up 16%. The Building segment product business contributed to 4% to the total revenues with a year-on-year growth of 9%.

The Energy Management business contributed 12% to the total revenues with a y-o-y growth of 600%.

The copper business, consisting wire and cables contributed 37% to the total revenue with a yearly growth of 15%.

FY 2016 EBITDA was Rs.43 crore against Rs 36 crore, up 21%.

EBITDA margin was at 12% and remained flat compared to last year.

PAT was at Rs 17 crores against Rs 12 crore, up 42%.

Net worth stood at Rs 196 crore as against Rs 107 crore last year.

The total debt is at Rs 99 crore as against Rs 93 crore.

The net working capital decreased to 134 days from 151 days. The management is continuously working to bring this down to below 120 days level going forward.

As mentioned in the past, its plans going forward is to add more specialized products in the Industrial Switch Gear business segment and focus more on the profitable growth. In line with this, the company has added more products in its basket and have added more customized solutions to customers. It has increased exports. Currently it exports to more than 40 countries worldwide including the most advanced nation like US and Europe.

Salzer has signed a distinguished agreement with a company called IPD group limited in Australia. IPD is a leading distributor and a wholesaler in Australia for electrical products and they will be marketing Salzer branded electrical products for solar photovoltaic applications in Australia and New Zealand. This agreement opens in new large market for Salzer.

It has also entered into an agreement with a Croatian customer for distribution in Croatia.

CRISIL has revised rating outlook with A- positive from A- stable for long term and A2+ from CRISIL to A1 for short term.

The management is confident of a double digit growth in the range of 18% - 20% for FY 2017 on the revenues with higher contribution coming from Industrial Switch Gears business which is relatively higher business margin in portfolio and going forward its focus and concentration is going to be on this segment.

In FY 2017 the wire and cable is expected to continue to grow around 15% - 16% and the switchgear segments is expected to grow at 20% - 25%.

Energy Management is basically a project driven, tender-driven business. So as of now the management is not able to give guidance for the revenue growth from this. The company is working on various tenders but is not confident of giving a number on this. So its growth projections are excluding Energy Management business.

18%-20% sales growth guidance for FY 2017 projections is excluding the Energy Management business. This is because this division will be starting straight away minus Rs.30 crore for FY 2017 because in FY 2016 it has realized revenue of Rs 42 crore from Energy Management business whereas for FY 2017 it will be realizing only Rs 10 crore to Rs.12 crore in that business. So this division will already have sales of Rs 30 crore less.

For FY 2017, it is looking at first year revenues from Australian company alone between Rs.7 crore and Rs.8 crore. The first shipment is about to go first week of June 2016. This order is for a very special solar photovoltaic switch. This order has margins of 14% - 16%.

The company is looking at OPM range of 12.5% - 13% for FY 2017.

For FY2017, the company is looking at capex of Rs.20 – 25 crore and for FY2018 it is going to be a normal maintenance capex between Rs.8 crore and Rs.9 crore.

All the capex growth plans will be in the Industrial Switchgear business segment only.

In the second half of FY 2017, the company will start realizing the revenues from its new project, the three phase Toroidal Transformers wherein it has signed a joint venture with Austrian company. That project will be on stream from second half of FY 2017. From this project the company expects a minimum of Rs.12 – 15 crore sales in six months of this year.

The industrial switchgear business did sales of Rs 170 crore approximately. Rotary switches and Toroidal transformers contributed Rs.37 crore each. Then the next biggest two products was cable duct and isolators. These four would have contributed approximately 75% of its total switchgear revenues.

Long-term debt is only Rs.17 crore which is for a period of five years. However, the management intends to repay it much quickly once it starts realizing the payment from the Energy saver business.

Receivables have increased y-o-y. Receivables should have been around Rs.86 crore to Rs.88 crore but it has gone to Rs.99 crore due to Energy Management business. There is Rs 11.5 or Rs.12 crore outstanding in that. So, once the company realizes that, it will have normal outstanding. The management expects this to happen in Q1 of FY 2017.

In quarter and FY 2016, other income includes foreign exchange gain of Rs 65 lakh (against Rs 12 lakh) which is one off.

Gross debt stands at Rs 99 crore.

The management is looking at sales of approximately Rs.750 crore in FY 2019. To achieve that it is trying to bring in new projects like it did with the Austrian company. The company is looking at the switchgear business segment growing and bringing in high margin products.

The promoters stake will rise back to 30% once the warrants are converted. The promoters will increase their stake further over the next three to four years.

For Railways the company is already supplying rotary switches and a couple of new products for this signaling division called the fuse change over and the track field battery changeovers. The total revenues that it gets from Railways are approximately Rs.6 – 7 crores including the supplies to RCF, ICF and all the workshops.

The company has been working with the RDSO on a very new technology for an unmanned Railway processing signaling, or warning for the unmanned Railway gates. The company has implemented the proto in a couple of places and RDSO has inspected and approved it. It is waiting for the next step wherein the 17 zones of Railway will order for more trial, which it has to implement. Six months from then the Railways will include this as a part of their normal tender process and the business should go on.

The management expects that there are 3500 unmanned railway crossings to be monitored and approximate potential business it is looking is Rs.600-700 crore, which it will be competing.

The company hopes to see some trial orders from all these 17 zones this year.

RDSO is very active in getting new technologies. They are very interested and things are moving a little faster under Railways Minister Suresh Prabhu. Normal approval period for RDSO is between three and five years but the company was able to get this project installed and tested within one, one-and-a-half years. So definitely there is a speed in decision making.

The management is very optimistic on Indian market, in general Indian Power, Indian capital goods market but unfortunately it has not really grown as expected. But the management feels that it is seeing the bottom of the curve and definitely there should growth from this point. So it is going to be a good growth story for the country across all sectors.