Key takeaways of the call

The operations at all factories of the company have started in a phased manner during May and June with all the requisite safety protocols being adhered to in a stringent manner. In May 2020, the capacity utilisation was about 40-50% and it has now increased to 60% in June 2020. Average capacity utilisation before COVID was about 70-75% and at this 70-75% normal the company is operating at 70-75% capacity. Expect things to get better from middle of Q2FY21 and this is from interaction from OEMs. But it is very difficult to give guidance for FY21.

About 14.7% fall in revenue for Q4FY20 to Rs 132.3 crore was mainly on account slower economic activities combined with lockdown announced during the last week of March and lower demand across key businesses of wire & cables and building segment.

As a result of the nation-wide lockdown declared in March 2020, the net sales in the last ten days of the fourth quarter and of the year were lower than the same period last year. Revenue lost in Q4FY20 due to Covid lockdown was about Rs 18-20 crore.

Modest growth in Industrial switchgear for Q4FY20 was due to higher exports even though the domestic demand was weak. But the 19.4%yoy fall in revenue of Wires & Cables in Q4FY20 was on account of low demand in domestic market. Building Products, which is the only B2C business of the company reported a sharp 30.2% fall in sales for the quarter was largely due to sluggish demand in domestic real estate industry.

Contribution from Exports in Q4FY20 stood increased to 18.1% (as against 9.5% in the corresponding previous period) driven by high margin Industrial Switchgear products and increase in exports primarily to USA and European markets. For FY20 the contribution from exports was 17.2%.

Exports for FY20 was about Rs 97 crore compared to Rs 85 crore in FY19. About 90% of exports are industrial switchgears.

Breakup of Q4FY20 revenue: 46.5% from Industrial Switchgear; 45.7% from Wires & Cables; 5.6% from Buildings Products and 2.2% from Energy Management.

The company has completed work on land cable plant and the trial production is already started. The company is getting enquiries from both domestic and export for this product.

The company do see lot of enquiries from North America, Australia and Middle East. Though potential customers think to lower the reliance of China how much of current enquiries due to that is not known as the company is getting enquiries starting from Dec 2019/Jan 2020.

Real Estate accounts only for about 10-15% of the W&C sales and about 60% of sales is from Agri. The weak agri demand only hit W&C segment in FY20.

Successfully completed acquisition of 74.91% equity shares of Kaycee Industries. The company not intend to merge Kaycee with the company. Kaycee is number two player in rotary switches after Salzer and have strong approvals in tenders with almost all government and government agencies. So it will operate as a separate entity. The company will leverage its distribution presence and brand recall. Kaycee can use the capacity of the company to manufacture its products.

The net margin of Kaycee will be at about 7-9% as they do not have many products.

Schneider Electric and GE are the top 2 customers of the company.

L&T buys and resells its products. L&T account for about 23-24% of revenue of the company. Many of the products are sold by L&T under Salzer brand itself but 15% of it in L&T brand especially Wires.

Order delivery cycle is typically 4 weeks so the order backlog will not be significant for the company.

In Energy Management the bids put before COVID will see finalisation by end of Q2 or Q3 of FY21.

Not expect any increase in long term debt and the shorterm loans to be in the range of Rs 150-160 crore.

Without any major capex the company can reach Rs 1000 crore topline. The target of the company is to double the revenue every 4 years.