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Ladies and gentlemen, good day, and welcome to the Dixon Technologies Limited Q4 and FY '21 Earnings Conference Call, hosted by DAM Capital Advisors. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Ms. Bhoomika Nair from DAM Capital. Thank you, and over to you, ma'am.
Yes. Good evening, everyone, and a warm welcome to the Q4 FY '25 earnings call of Dixon Technologies India Limited. We have the management today being represented by Mr. Atul Lall, Managing Director and Vice Chairman; and Mr. Saurabh Gupta, Chief Financial Officer. At this point, I'll hand over the floor to Mr. Lall for his initial remarks, post which we'll open up the floor for Q&A. Thank you, and over to you, sir.
Thank you, Bhoomika. Good afternoon, ladies and gentlemen. This is Atul Lall, and we have on the call today, our CFO, Saurabh Gupta.
Good evening, everybody.
Thank you very much for joining the earnings call for the quarter ended March 2025. Despite a dynamic and challenging macroeconomic environment, the company has delivered another quarter of robust performance. Our diversified revenue streams have insulated us from segmental volatility. The key highlights for the quarter are as below: Consolidated revenues for the quarter ended March 31, 2025, was INR 10,304 crores against INR 4,675 crores in the same period last year, which is a growth of 120%. Consolidated EBITDA for the quarter was INR 454 crores against INR 199 crores in the same period last year, which is a growth of 128%.
Consolidated PAT for the quarter was INR 401 crores as against INR 95 crores in the same period last year, which is a growth of 322%. This includes fair revenue gain of INR 250 crores in the value of Dixons stake of 6.5% in Aditya Infotech Limited. Excluded this gain, the adjusted PAT for the quarter was INR 185 crores, which is a growth of 95%.
Besides leveraging industry tailwinds, we're scaling up across all segments by taking higher share of customers' wallet, new customer additions and driving margin expansion through operational efficiencies, value engineering and manufacturing accidents. The company's strategy to deepen the level of manufacturing and by getting into components will further lead to margin expansion.
With our unwavering commitment to financial improvements, we continue to demonstrate exceptional discipline in managing our working capital cycle, which has stood at negative 5 days, healthy balance sheet with cash and cash equivalent balance of INR 264 crores and no gross debt-to-equity ratio of 0.07 as of March 31 '25.
This near 0 debt position, along with adequate credit line gives us significant financial resilience to fund our current and future growth requirements. Improvement of ROCE to 48.5% and ROE up to 32.5% as on 31st March '25, which is well ahead of industrial benchmark was driven by high asset turnover, operating leverage and optimize capital allocation, underlining the quality of our earnings, consistent focus on value-accretive growth and structural efficiency of our business model.
ROCE and ROE will always remain key guiding parameters in a strategic investment decisions. We continue to invest in our capacities, backward integration and diversify into new product categories to support long-term growth opportunities with huge focus on quality, manufacturing excellence and consistently meeting the needs of our principal customers and strengthen our position as a key player in the industry.
We see ECMS, that's Electronics Component Manufacturing Scheme, scheme launched on 8th of April by the Government of India as a strong enabler for backward integration, cost efficiency and low value -- long-term value creation and have committed to leverage the scheme to enhance capabilities and contribute to India's goal of becoming a global hub for electronic manufacturing. They have already rolled out our project for display modules, they're evaluating various of the component categories like camera modules, mechanical enclosures and lithium-ion batteries and will be actively participating under the ECMS.
Now I will share with you the business performance and insights in each of the segments. Mobile phones, revenue for the quarter from mobile business was INR 902 crores, growth of 194% year-on-year and operating profit of INR 349 crores, with a growth of 232% with an operating margin of 3.8%. Out of this revenue for telecom, hearables and wearables were INR 1,288 crores and INR 196 crores, respectively.
Our collaborations with leading global smartphone brands has gone deeper, reinforcing our standing as a reliable and respected partner in mobile manufacturings. We're expanding capacity by 50% from our current levels for our anchor customers to meet their increased order book. A large part of it will be on account of exposure in North America in light of the evolving geopolitical scenario.
We expect a strong growth in the volume for Longcheer and order books for Xiaomi looks decent. For Compal, the volumes are expected to increase for large U.S. brand and potential opportunities for exports. Ismartu is having a strong order book from the brands like itel, Infinix and Tecno and also Nothing. With export order book to African markets where Transsion Group are leaders is almost 80% market share and also increasing focus with the deepening available of manufacturing by getting into components in the JV with them.
We have started manufacturing for a new partner NxtCell to manufacture a smartphone for French brand Alcatel and have a decent order book. We are in the process of filing our PM3 application for FDA approvals for our JV with Vivo and simultaneously working on closing the definitive agreements. Construction is underway for the display module facilities in partnership with HKC, focusing on mobile phones and IT hardware products in the first phase with mass production expected to commence by end of this fiscal, with capacity of 2 million displays per month, which will be further enhanced to 4 million display and also we will have the capacity of 2 million laptop displays in this phase.
We're constructing a new factory of almost 1 million square feet in Noida for our mobile manufacturing. With the announcement of component PLI, we are in active discussions with our prospective technology partners for camera modules, lithium-ion batteries and enclosures. Consumer electronics, which comprises of LED TVs and refrigerators, revenue for the quarter was INR 689 crores with an operating profit and margin of INR 42 crores and 6.1%, respectively.
Out of this revenue for refrigerator business is INR 197 crores. Segment margins expanded to 70 points, primarily driven by strong profitability in our refrigerator operations on account of ramp-up and stabilization of operations leading to normalized margins. LED TVs, the global TV industry is witnessing subdued demand, primarily due to structural challenges and a significant shift in consumer preference. We're increasingly offering customized solutions to our customers and are now working closely with Amazon Fire TV solutions and LG, webOS, which is expected to be rolled out by Q1 of current fiscal.
In addition to interactive flat panel display TV, we have now starting manufacturing digital signage solutions from 65 to 100 inches and have a decent order book. Further, we plan to invest in CKD and set up a robotic panels assembly line for these product categories. We're also in discussions for partnerships for manufacturing for industrial institution and automotive display and exploring opportunities in both B2B and institutional sales.
Refrigerators, within the first year of operations, we have been able to capture around 8% in Indian market and 48% of OEM addressable market in direct food category. We've onboarded more than 15 customers in a year in direct food category, owing to the trust shown by our brands for our execution and quality. We're also expanding our capacity in direct food categories to 2 million per annum, from 1.2 million per annum along with foraying into new products in the cooling division, like 2 to upholstery side-by-side minibar, deep freezer and mini coolers. Order book for '25-'26 looks very healthy, and we expect a growth of 50% in the current fiscal.
Home appliances. Revenue for the quarter was INR 302 crores. Operating profit was INR 37 crores, a growth of 23% year-on-year with an operating margin of 12.2%. Margin expansion will mainly -- supported by scale-driven efficiencies, value engineering, cost optimization, focus on innovation and value-added offerings to our customers. We are further expanding our manufacturing capacity in our Tirupati plant in order to meet the increased order book for our clients.
In the coming fiscal, we'll also be launching semi-automatic washing machine in 16 and 18 kg capacity category, which will be the first across the industry. We have already started working on the front-load washing machine, robotics vacuum cleaners, initiated many new designs to our ODM solutions in both the categories, which is expected to be launched by Q2 of '25-'26.
Lighting, revenue for the quarter was INR 200 crores with an operating profit of INR 15 crores with a margin of 7.3%. Our 50-50 JV, Signify is expected to commence operations from Q2 of the current fiscal following the signing of difinitive agreements, which are anticipated to close by end of May 2025.
The JV is expected to generate operating leverage through synergies expanding into new categories, including high-end or lighting products, professional lighting, unlocking with -- along with unlocking export opportunities. During the quarter, we operationalized a backward integration facilities for extrusions used in patents, which is expected to enhance cost efficiency and contribute to margin improvement.
Telecom and networking products. Revenue in this segment for the quarter was INR 1,288 crores, which is almost 5x growth year-on-year along with superior operating margin and robust balance sheet. Our new Noida facility in Q3 of this fiscal is now operating on optimal level to meet the increased order book for our anchor customer, leveraging the rapidly increasing home broadband penetration in India, we have doubled the capacity of 5G fixed wireless access devices to cater to the demand of our anchor customer. Our first model of IPTV boxes has ramped up, another model will kick in Q2 of this current fiscal for our anchor customer.
In line with the strategy of backward integration, we have localized certain components like casting molding, adapters and working on localizing more components like mechanical, connectors, et cetera, with a solid order book for our anchor customer export prospects to allow ODM, this vertical is set to play a pivotal role in Dixon's growth.
We are now deeply exploring to manufacture noncustomer premise equipment and low-volume high-mix products like radio access networks, ethernet switches, network transport equipment, laptops and tablets, that is IT hardware products, our dedicated IT hardware product manufacturing unit in Chennai has completed the pilot run and mass production has already commenced and will significantly ramp up in coming months for both HP and ASUS. Production for Lenovo has ramped up to almost 30,000 units per month with healthy order book for the coming period. We are entering into 60-40 JV with Inventec Corporation. It's one of the world's top 5 IT products ODM, from manufacturing of notebooks, PC products, servers, desktop PC, including its components like SSDs, memory, power supply in India and in process of finalizing the manufacturing facility in Chennai adjusting to our current facility.
We are also exploring opportunities for localizing mechanical enclosures for IT hardware under ECMS. Wearables and hearables, revenue for the segment was INR 196 crores for the quarter with healthy operating margin and extremely good ROCE. We have a strong order book in this business. We are in discussions to expand product portfolio with addition of new brands with focus also on backward integration and localization.
Rexxam-Dixon electronics, the JV with Dixon achieved revenue of INR 121 crores in the quarter with healthy margin superior ROCE. We have finalized a new manufacturing location in Chennai, Tamil Nadu for meeting the increased order book for our anchor customer. I would like to stop and I and Saurabh are there for you to address any questions that you may have. Thank you.
[Operator Instructions]
We have a first question from the line of Aditya Bhartia from Investec.
Sir, my first question is on the mobile phone side. Just wanted to understand how are we thinking about the ramp-up in volumes from here on? And like this particular quarter was more like a flattish quarter. So from here -- on a sequential basis, of course, so from here on, how should one think about volumes ramping up?
And my second question is on the consumer electronics business, wherein the TV revenues appear to have fallen quite sharply and it's been fourth or fifth consecutive quarter that that's happening. Just wanted to understand how much of this is the overall market phenomenon? And how much of this could be on account of maybe some market share loss.
So, Aditya, so responding to first part of your question, the smartphone order book from the current quarter is looking very healthy. From our anchor customer, the order book is very, very good because we have really ramped up our exports to North America. And the order book from both Xiaomi and also Longcheer has increased significantly from the current quarter.
Also the numbers of Ismartu, wherein we do for itel, Tecno, Infinix and also nothing looks very good. So the order business is very, very healthy. From -- in the current quarter, the combined volume would be somewhere in the range of around $3.3 million to $3.5 million per month.
This volume that you mentioned, sir, $3.3 million to $3.5 million per month, this is the volume that we did in fourth quarter for smartphones.
No, no, no, no.
This is the current quarter.
Monthly order book. Responding to your second part of the question. Yes, TV is under pressure. There is an overall decline. There is a structural issue with the category as such. And also, we have lost a bit of market share. So that business is under pressure, that I humbly accept.
And sir, do we have the flexibility of maybe lowering the margins a bit and trying to regain market share? Or is it a scenario that customers want to be little more broad-based in terms of their vendors and therefore, are deliberately looking for an alternative?
So we are working on various brands, Aditya. One is expanding the product portfolio. So we have already started the IFPD. We are looking at digital signages and also educational TV. We have gone into more backward integration. We have optimized our cost structure. We are migrating more and more to ODM where the margin profile is better. We are then launching new operating systems. So we are on Amazon Fire TV, which will be launched shortly and also LG webOS.
It's slightly premature. We are also looking at large strategic relationships in this business. Please give us some time. I'm fairly confident that it's going to materialize. So various actions have been taken to bring this business back on track.
[Operator Instructions] We have our next question from the line of Ankit (sic) [ Ankur ] from HDFC Life.
So it's Ankur. So my first question, again on the cell phone side and more so on upcoming competition in the cell phone business, also in context of our PLI, actually, not just for us, everybody kind of going away in FY '26. So if you could just help us understand how you're seeing competition coming up here, how do we retain and more so continue growing the way we have on the cell phone side.
So Ankur, you see we have a large share of the outsourcing opportunity of mobile business. And just looking at the numbers, the total market of 150-odd million. Out of that 150 million, Android space is around 135 million, 140 million.
Various brands are manufacturing in-house and outsourcing opportunity is around 90 million. And including our new tie-up with Vivo, we are targeting for around 60 million, 65 million by next year. That's the number we are talking about. Questions that you have raised are very pertinent. The first point is that how do we respond to the competition? And second, the PLI is getting over in '25, '26, this is the last year.
So on the first part, please appreciate, we have deep strategic relationships. So our largest customer, Motorola, which has really done well and now we have a large export opportunity with them. This relationship is very deeply entrenched and for anybody to be very candid to catch up is not an easy task at all.
The second is our large relationship with Transsion and that's our JV. And the third -- so that means all the brands like Infinix, itel, Vivo, are -- itel and Tecno are with us and nothing is with us. Similarly, our forthcoming JV with Vivo is a strategic relationship wherein, as per the binding term sheet, a very large percentage has to happen in JV only.
And, of course, the market is open, but we have to deliver. So the competition will be on deliverables. But we strongly feel that we have the first mover advantage in this business. We also have a large scale with an operating leverage.
And also, we'll have the first-mover advantage of backward integrating into components, wherein, we will generate fairly good blended margin to control this market. And also the backward integration play plus the operating leverage generated through the large scale and also significant investments in automation and enhancing the operational efficiency, we feel that we should be ahead of our competition. But we respect competition, and we are paranoid about competition. So we have to be on our toes. But I'm sharing with you very transparently and candidly, the direction and the work that we're doing internally.
That's very helpful. And sir, just on Vivo, are we broadly on track to commence production by Q2 -- I think Q2 was what we probably mentioned earlier.
No, no. In our budget this year, we have taken some part of it in Q4.
And just last one if you could -- you or Saurabh could share the volume numbers for the full year for our segment, the way we share them and that's all.
So our smartphone numbers was 28 million last year. 28.3 million. And in '23, '24, it was 6.4 million. So it's a growth of 338%.
And similar numbers for other segments as well? TV and lighting, as well and appliances?
So TV, there is a decline from 3 million to 2.4 million. In LED bulb, there is a growth and in other lighting products also, there is a significant volume growth. In washing machines, in semi-automatic, it's flattish. But in fully automatic, top loading there's an 81% growth from 1.6 billion to 2.9 billion.
In feature phone as a category is declining, and Jio order has come to an end. So there is a decline. In TWS and all, there is a significant growth of almost 47% from 16 million to 23.7 million. And similarly in both hearables business, it's grown from 10 million to 13 million, 36% growth in setup boxes, there is a growth from 2 million to 4 million and telecom products there's a growth from 3.5 million to 7 million.
In refrigerators, of course, it was our first year. So we dropped a volume of INR 8.6 lakhs, which is almost 8% of the Indian market and 40% of the outsourcing opportunity. So I think volume numbers, largely, except for TV have been very good for us.
We have our next question from line of Hitarth Kapadia from ValueQuest Investment.
First question is on this minority interest of INR 64 crores has come in this quarter which business is driving this? And how will this move going forward because there's a significant increase.
Yes. So minority interest is coming on account of our Califonix business, which is basically the wearables, hearables business, which we have with Boat. It's also on account of the telecom business, where we have a 49% shareholder at itel. And so these are the 2 businesses where we have a minority today. And even the Ismartu business, whereby the 49.9% shareholding of our Ismartu entity is -- so we have a 51% shareholding there.
And second question on the components business, what will be the economics of it, say, a payback period, ROCEs, asset turns, the working capital in that sense?
So each category is different. Display modules is different. Saurabh can share with you separately in the financial metrics of that. For camera modules enclosures and lithium-ion batteries, the teams are working upon it. So it's slightly premature to share those numbers. But it's a -- we feel and we have that confidence that once we get into it, our blended margins should significantly improve.
[Operator Instructions] We have our next question from the line of Renu Baid from IIFL Capital Services.
So for the first question is on Ismartu. We had a minimum assured PAT offtake for this year. So have they delivered on the 2 billion plus number? Where are they, if you can share some input there on the financial matrices for Ismartu?
Second, also on the mobile phones, you did mention 60 million, 65 million units are targeted. This is for fiscal '27, right? And for fiscal '26, what kind of volume numbers are we targeting overall for the year. Given certain JVs are expected to start contributing the numbers towards the mid of the year?
So Renu responding to the first part of the question, Ismartu has delivered on the committed PAT in this fiscal as per our agreement. On the second part of the question, yes, we are building a capacity of almost 60 million, 65 million, and that's the targeted volume that we are aspiring for in '26-'27. Our '25, '26 volume number for the smartphone is around 45...
Somewhere -- depending on the -- so I think it should be closer to 40 million to 43 million.
43 million, 44 million, Renu.
And the payout to Ismartu, you will happen now in fiscal '26 or what are the time lines there?
Sorry.
There was a payout, which was due to Ismartu on achievement of...
So basically, we have agreed for the next 3 years based on the achievement of committed -- based on the achievement of their committed PAT to us, I think so, yes, there will be further payout for the next couple of years.
We have our next question from the line of Madhav from Fidelity.
My question, again, on the smartphone business, once the PLI program ends at the end of FY '26, just wanted to understand that it's a, let's say, a 3%, 4% margin business where there was about 4% to 5% incentive from the government, which obviously we retain some of it, pass some of it to our customers as well.
But once this sort of goes away next year, I just want to understand -- I mean -- and you already have a large market share, like you said, in the outsourced portion. If you look at 60 million, 65 million out of 90 million, do you see any chances of either market share pressure for us into FY '27 or any price pressure to retain the volume in case some competitors get a bit more aggressive? We may have to give some price discount to customers to retain the business. Do you anticipate either of these happening into FY '27?
You see extremely important there is that we, in Dixon have to really enhance our operational efficiency, much ahead of our peers and also deliver on our foray to components. Now with the kind of volume and the relationship that we have, definitely, we need -- we will be generating an operating leverage. Please appreciate the PLI contribution to our margin is around 0.6%, 0.7%.
We see that the initiatives that we are taking on automation, increasing our efficiency, a large scale and also our foray into the components and the ECMS, the benefits and gains for us are going to be much, much more.
There can be some time lag here and there. But on an overall basis, I think we're sitting on a much more healthier and comfortable position post PLI.
Do you think the PLI contributed 0.6%, 0.7% to our mobile margin business or the EMS division?
Yes, yes, it's 0.6%, 0.5%...
0.6% of our margin is our share of PLI income, which has been booked.
Sir, basically, if we had 4% to 5% of sales coming at PLI incentives, which means the balance was getting passed on to the customer, right? I mean if we were taking 0.6%, balance 3.4% was being passed on. Is that right?
Large line share, yes.
So sir, that's the crux of my question was that if you were passing on, let's say, 3%, 4%, margin business to the customer, now that, that incentive is not there next year, obviously -- can competition come in? That's what my question was that because there'll be a 3% price advantage.
Other than -- there is no PLI for anybody after the gap of 1 year. So whoever is the...
That's exactly my point actually.
Whoever has a large scale, better operational efficiency, who is able to offer them at a lower cost structure because -- and that can only happen once you are more backward integrated, once you have a large scale, once you are more focused on driving operational efficiencies, once you have a -- once who has a better management team, better balance sheet, I think so we'll be able to drive a larger share of the...
Also please appreciate, this is the reason very deeply, we have been engaging with the customers to forge strategic relationships. Transsion is our brand. Our brand in the sense that this is a strategic relationship through JV. Same is the case with Vivo. And Motorola relationship is almost at a similar level.
Yes.
We have a next question from the line of Keyur from ICICI Prudential Life Insurance.
Sir, just a question -- first question on the IT hardware/laptop side. This Inventec JV, and even otherwise, with our MOUs, what kind of, say, volume profitability and revenue we should assume, say, over next 2 years, both FY -- basically, how -- what would be the ramp-up path over the next 2 years, including FY '26, that is first question.
Inventec JV, we have 60% and Inventec we have 40%. Inventec is one of the top -- in the top 5 ODMs in the IT sector. They have large relationships with brands like HP and ASUS.
And they also have a large presence in the server market. So we feel that the JV should be no operational in Q4 of the current fiscal. There's a factory being set up adjacent to our campus in Chennai. Initially, this will be focused on PCBA because we will be leveraging the IT PLI 2 also. And they're going to be bringing in here their large relationships into this JV.
And also, they'll be facilitating our entry into the component side to further leverage our IT PLI 2 because if you see the structure of IT PLI 2, the incentives keep expanding as we keep on localizing more. Now the revenues we feel in the year 2 can be somewhere in the range of around INR 2,000-odd crores. But the opportunity for this is immense because they bring in a lot of strength and a lot of deep relationships, lot of technology, the high value-added products like servers to our relationship.
Sir, just one follow-up. So the left -- basically, our IT hardware segment revenue would be INR 2,000 crores in FY '27. Is that a correct understanding?
No, no, no. See, there are 2 parts to it. One is Dixon's owned factory in -- under the IT PLI 2, it's a separate revenue. And then we are talking about the revenue on the JV. So yes, these are 2 separate entities. In the JV, there will be 2 parts to it. One is the final product being built, it is going to be built to the end customer directly.
And the second is going to be PCB and components being done in JV and being built to Dixon IT PLI unit. So there are 2 separate revenue streams. A part of it is going to be subsumed in Dixon and balance is going to be an independent revenue. We feel that in a couple of years, we should be generating almost INR 4,000-odd crores of revenues in both the entities.
Okay. Understood. And second question on the time line for our component JV for display modules. So when should we expect commercialization and a significant billing or contribution to the revenue/EBITDA?
So we feel this factory should be ready by Q3 of the current fiscal, that is in October, December quarter. Trial should start sometime in January to March and the actual revenue generation should happen from '26-'27.
We have our next question from the line of Vipraw Srivastava from PhillipCapital.
So first on the laptop side. So what kind of revenue you are expecting based on your budgeting for FY '26 for the facility coming up in Chennai for laptops?
So we are effecting somewhere between INR 1,200 crore to INR 1,500 crores in the current fiscal.
And sir, secondly, the kind of volume growth you have given which is around 40 million, 45 million. By any chance, will it be possible to tell how much would be coming from Motorola out of this on volume terms?
We don't want to share any brand wise, just all the 3 -- just for your numbers, all the 4 brands largely. So Motorola, of course, will be a large growth. And even there will be growth in Xiaomi, Longcheer, which is OPPO and Realme, and also for a Transsion brand and also the large global U.S. brand as well through our partnership with Compal. So all the 5 would grow.
Lastly, on the component PLI, so obviously, the government has given a window of 4 months to apply for this. So what's the status from the JV partner for camera modules? I mean, any thoughts on that? And what's the status there?
Time line given is 90 days, and we are working on it.
We have our next question from the line of Anupam Goswami from SUD Life.
Sir, first question is on the camera and module that you're talking about, you said about component of Q3 FY '26 trial should start. Is it going to be camera and display module, both? And if what is the bill of material are we looking in this overall? And what kind of volume should we start with? We have a relation with all the brands, how the process takes place and expand overall, that is all, sir.
So what we referred to and what we stated was that in Phase 1, we are looking at display module for mobile. And the capacity being set up is 2 million. And the teams are now working and trying to get engaged with the prospective customers, which are largely captive for getting the solution approved, so they can start supplying to them.
So here, what we refer to as display module from mobile and in Phase 2, this is going to be doubled to 4 million and parallelly, in Phase 1, we are setting up a display module line for laptops. That's the thing. For camera modules, I'm not able to share with you any detail as such as of now.
And sir, 2 million as in 2 million units display? And how do we, sir, this process, if you can explain how the customer engaged, what's the time line and when can we ramp up to our, let's say, mobile volumes, should we, in the long run, see both in tandem?
Sorry, I didn't get to the last part of your question, please?
In the long run, what sort of volume should we see how we have ramped up the mobile, should we expect similar line of growth in that -- in the module display?
See, first -- responding to first part of your question, when mobile -- when a smartphone is designed, that's where the camera module -- sorry, the display module is finalized and aligned with the design in the POC stage. So it's a 6- to 8-month cycle for development of those solutions.
And that's where the company and the teams have started working upon. And as I told you initially, it's 2 million -- see, we are targeting 43 million, 44 million which we plan to take it up to 60 million, 65 million. So we feel that a large part of what we produce, first 2 million, that is 24 million and then 48 million to be captive, a part of it might be sold outside. That's the plan.
We have our next question from the line of Abhishek Ghosh from DSP Mutual Fund.
Sir, in terms of the mobile landscape, you spoke about INR 13.5 crores of Android phones market, and about INR 9 crores is something which is outsourced. So for the residual INR 4 crores, INR 4.5 crores, is that likely to be in-house only? Or is there a point at which that can also be outsourced? Is that something which should be looked at from a 3- to 5-year perspective? Any thoughts on that, sir?
So Abhishek, basically, there are 3 brands which are doing in-house. It is Samsung, and in Samsung, we already have a large relationship wherein we are doing IT hardware. So let's say, Samsung does around 40-odd million. We are doing 12 million in-house but that's a different relationship. And that I'm not counting in this number. Then it's OPPO, so with OPPO, we already have a large relationship and I hope that, that will keep on enhancing and deepening.
And third is Vivo. So Vivo, we have already finalized the strategic relationship. So these are the things, so I don't think Samsung is an outsourcing opportunity. I don't think so...
So essentially, sir, you are saying you will go up to x of exports, you will do something like INR 5 crore to INR 5.5 crores out of the total INR 9 crore opportunity. That's the way to look at it in India.
No, no. So what we feel is that in the current year, we're targeting to do 44 million. So out of this $44 million, I feel almost $10 million to $12 million is going to be export. Because for our anchor customer, the order book for exports from North America is extremely healthy and also for Transsion brand, we have started exporting to Africa.
Please appreciate in Africa, we have share in many markets, we have a share as high as 80%. So we already started exporting we feel in the current year, we should do almost 2 million exports. So I feel on an overall basis, almost 10 million to 12 million is going to be export for us, which we are very deeply working that these quantities should expand significantly '26, '27.
Because that is what we want to crack and that our cost competitiveness is globally comparable so that the global market now after acquiring a very large share of domestic market, we are attempting to get into. That's what we are aspiring.
Okay. So sir, in the INR 6 crores to INR 6.5 crores range that you have given, export is something not explicitly built in to the extent you would have wanted. I'm saying if that comes in, is there an upside to that number of INR 6 crores, INR 6.5 crores, if export kind of works out the way you are expecting it to?
Yes, Abhishek. That can be an upside. You see if we're able to track it, then it can be a big upside.
So not in '27, but at least in '28, you will have growth coming in from the exports. That's the way I want to look at it.
See, that is the trajectory for Dixon's growth.
We have our next question from the line of Siddhartha Bera from Nomura.
Sir, on this new deal with Alcatel, do you have some targets in mind about how much are they also looking to sort of produce for the next couple of years?
We have just started the relationship. I think let's give it some time. I think it will not be fair for me to put in the number there. Commercial product has just started in the current month.
And secondly, sir, on this profitability on your consumer electronics and home appliance segment for the quarter. Because some of these improvements, which you talked about are sort of continuous process. So will it be fair to assume that part of it will sort of sustain going ahead and at an annual level also, you would want to target some of these numbers or there is some one-off which we should normalize going ahead?
So you're talking about...
So basically, Siddharth, as far as the refrigerator business is concerned, so clearly, we have a very strong order book, and we've further expanded our capacity from 1.2 million to 2 million and we're getting into other categories, which was mentioned by sir in his opening remarks.
And we are expecting a 50% growth in that category. And please understand that's a 100% ODM business for us. The margin profile will be around somewhere closer to 9.5%, 1.5% kind of range. So clearly, that order book, that growth, that margin profile is clearly sustainable.
Now TVs, we mentioned, yes, there are challenges, but we are trying to get into new categories, trying to do more ODM. We have really worked on the cost optimization here, cost controls here. But let's see how the TV industry pans out, but yes, probably -- sorry, refrigerators is concerned, we should take it in as a broadly sustainable. In fact, that should be a growing vertical for us in this segment.
And sir, what about the home appliance segment?
Home appliances also, yes, we continue to do well as far as the fully automatic top loaders is concerned. The numbers are now -- we are doing a steady state of decent volumes every month. And of course, the margin expansion has happened on account of more value-added offerings, innovation and as well as the value leading efforts.
And we mentioned that we will now get into other categories, it's fully automatic, front loaders as well, robotic vacuum cleaners. Now all of that will be done in the same facility. So that should also lead to more utilization of that capacity infrastructure. So margin wise as well as the revenue growth wise, it should be sustainable. In fact, there should be also growth in that category in this year.
Got it. So very helpful. Sir, lastly, on the...
Sorry to interrupt, Mr. Siddhartha, may I please request you to rejoin the queue.
We have our next question from the line of Achal Lohade from Nuvama Institutional Equities.
Sir, first is on mobile. I just wanted to check what's our yield in mobile segment in terms of the recovery rate or rejection rate, if you could highlight? And how does it stack up versus globally or Chinese players?
Recovery rate, meaning you're talking about the in-process rejection or?
Yes, in-process rejection, sir.
So the in-process rejection across different brand is slightly different. I don't want to give the specific numbers pertaining to brands, it is between 0.2%, 0.3% to 0.5%, 0.6%.
Broadly to answer...
It's at a global level.
It's at a global. So some of the best companies which are manufacturing mobile today, we are gone at a similar level. And we have the same infrastructure -- we have the same machineries, the same throughput of these machineries. And so clearly, we are probably at the same level.
And the second question I had with respect to the PLI. If you could help us understand for FY '25, what is the gross and the net number? And how much does it pertain to the mobile segment? And I remember we had certain claim with respect to the unclaimed PLI, any update on the same answer as well, sir?
Yes. As so sir mentioned sometime back that whatever mobile revenues we have around 0.6 percentage of those mobile revenue is the PLI share of income, which is our share of income which has been booked into this profitability. So broadly, you can calculate those numbers.
Overall, yes, as far as the status is concerned, mobile, we have got our PLI until December 2024 and January to March '25 -- so we have got our PLI until December 2023, January to March '24 is expected to come any time. And then we will file a claim -- we already filed our claim for part of this financial -- current financial year as well, and the government will take that claim as well.
As far as other PLIs are concerned, which is on telecom side, lighting side, as well as our AC, inverter, controller, both, we have got a claim until last financial year, and we have now filed a claim for the current financial year, the '24, '25 as well, because it's mostly done on the achievement of the revenues at the year-end level. And the IT hardware we have just started, so we have to the CapEx. And as and when the revenues come into the system, we will file our claims for IT hardware revenues as well.
We have our next question from the line of Indrajit Agarwal from CLSA.
One question on the realization for mobile phones. As we ramp up our volumes from 28 to 42 and then, let's say, to 60 plus, given the brand mix that you see, do you think there is a scope for realizations rising as well or those remain broadly stable?
Yes, we feel confident that the realization would keep going up on account of the mix change. If you look at this, some of the brand -- the large U.S. global brand that we have, the realization is much, much higher than the realization that we have across the other 3 large brands. And even as you get into the export markets, there also the realization of the smartphones is much higher. So clearly...
You also -- the whole market and demand is migrating from 4G to 5G. Whereas the unit value is significantly higher. So unit sales realization will increase.
In fact, it has been going up in the last couple of years. It will further go up into '25, '26.
And my second question is on the new business, let's say on industrial EMS. Any update on that? Where are we? What kind of targets that you have over the next 3 to 5 years?
So industrial EMS, our first hopefully venture is going to be on the charging. We have tied up with a start-up for charging stations. In our Tirupati plant, we are targeting to start production for this particular venture. That's the first opportunity that we are pursuing.
We have our next question from the line of Girish from Morgan Stanley.
Sorry, I joined a bit late if I have missed this. Historically, you've spoken about over 150 basis points of margin expansion, good to see the component PLI that you're doing on a blended basis, does that number still hold? Or given the reassessment, is that number raised up or down? And the second one, I wanted to understand is the CapEx that you expect to incur for FY '26 and '27, given the large customer onboarding and volumes that you expect across verticals like mobile and IT and telecom?
So to answer your second question, Girish, the CapEx intensity, the '24, '25, we did a CapEx of almost INR 900-odd crores. And my sense is...
See that '24 -- '25, '26, CapEx should be in a similar range of around INR 900 crores to INR 1,000 crores, which we have adequate cash flows and great lines to support. On the first part of your question, yes, there is going to be a significant -- the margin profile for the component business is significantly higher. I don't want to share the specific numbers at this stage. But let me assure the house that the margin profile of the component business is significantly higher.
And also our own internal efforts on efficiency or more automation. So that should lead to margin expansion and also the operating leverage and also higher contribution of our ODM business like refrigerators and also telecom business.
Of course, telecom is not an ODM business, but that's also -- we have an order book, and we have a decent margin there. So combination of all that put together. And -- but large part of that will be driven through this backward integration strategy.
These 4 components that we have narrowed down. We've already done our numbers for camera modules and displays. Another 2, we are, of course, will be doing our numbers. But broadly to all the components generally comes at a very good margin profile, and that should lead to a significant margin expansion at the company level.
And sorry if I missed this business again, on display fab where is the discussion with the government on ISM 2.0, and as far as our partnership is concerned or our thought process on that CapEx is concerned, is there an update on that, please?
So we are awaiting the ISM 2 to be rolled out. We are not very sure of the time lines for that. So that's where it is. We are waiting for ISM 2 because that particular foray is hinging upon the rollout of ISM 2 and what that policy framework is going to be like.
We have our next question from the line of Bharat Shah from ASK Investment Managers.
Just one question. The Vivo relationship, the joint venture, we -- it is in works for almost 5, 6 months now. Is it -- why is it getting delayed so far?
See, we have already signed the binding term sheet with them. The teams are working upon the definitive agreement. And very shortly, we will be filing our applications for PN3 waiver. Now this PN3 waiver in the government, it is a long process. It involves a huge interministerial effort. So what we have targeted is that these approvals should come sometime in next 5 to 6 months. And we have taken some small portion in our current fiscal budget for the last quarter of January to March.
Out of 65 million that we are talking about?
No, no. Here, I'm talking about the current fiscal plan of 43 million, 44 million.
No, no, I understand. But out of -- sorry, what is the Vivo outlook expected to be?
So Vivo output, just fully will come in '26, '27, and that can be broadly anywhere between...
I think somewhere 15 million to 16 million.
No, sorry, Atulji, I didn't get it. How much is Vivo at a full level expected output to be?
Total output of waiver is around 28 million to 30 million. As per our last term sheet, 67% has to be done in JV. So we are expecting around 18 million to 20 million to come in the JV.
And that model is fully should come in '26, '27.
That's what.
And a part of it in the last quarter of the current year?
That's right.
But per se, that is on track, right? But for the procedures and all that.
That's right. Subject to the approval, sir.
Okay. And one last thing, Saurabh, you said the margin on the mobile phones, 0.6-odd percent addition due to PLI. Assuming the PLI scheme does indeed get vacated, our effort to mitigate that margin impact, partly due to operating leverage, partly due to other efficiencies and all the other cost initiatives that we are taking.
So purely on mobile phone, that impact of the PLI margin of 0.6% for the year in entirety of '26, '27, we should be able to mitigate for that 0.6%?
We are quite confident.
We have confidence and it will be largely driven by backward integration and also the efforts on the efficiency, the automation, and we are working towards it, sir. We are really working towards it. And we think...
We are fairly confident on that.
We have our next question from the line of Neel Mehta from Equirus Securities.
So sir, I just wanted to understand that Xiaomi is alluding -- losing somewhere a bit of market share, so not the exact, but the ballpark level, can you just guide the volume number that possibly Xiaomi has done for the FY '25 and similarly for the Motorola as well?
Yes. We can't share any specific numbers. See, please understand we are an EMS company. And some -- so that is the reason why it is important that we should have multiple customers. That's a big derisking strategy for us. That is a continuous and the most critical process for us.
So Xiaomi, for some reason, has loss market share, then, of course, others are gaining market shares, and we happen to work with most of the customers in the Android ecosystem. So at a broad level, we are still -- we end up gaining an overall -- we end up gaining an overall -- large share in the overall market here.
Thank you. Ladies and gentlemen, that would be the last question for today. And I now hand the conference over to Ms. Bhoomika Nair from DAM Capital for closing comments. Over to you, ma'am.
Yes, I would like to thank all the participants and particularly the management for answering all the queries and giving us an opportunity to host the call. Thank you very much, sir, and wish you all the very best.
Thank you, Bhoomika.
Thank you, Bhoomika and thanks, everyone. Thanks, everybody. Thank you. Really appreciate it.
Thank you. On behalf of DAM Capital Advisory, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.