Syrma SGS Technology Ltd

NSE:SYRMA

Q1-2026 Earnings Call

[Operator]

Ladies and gentlemen, good day, and welcome to Syrma SGS Q1 FY '26 Earnings Conference Call, hosted by Nuvama Institutional Equities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Achal Lohade. Thank you, and over to Mr. Lohade.

[Achalkumar Lohade, analyst]

Yes, thank you. Good morning, everyone. On behalf of Nuvama Institutional Equities, we welcome you all to the Q1 FY '26 earnings call of Syrma SGS. Today, we have with us the senior management team of Syrma SGS.

I will now hand over the call to Nikhil to take the call forward. Over to you, Nikhil.

[Nikhil Gupta, executive]

Yes. Thank you, Achal. Hi, a very good morning to you all. Welcome to Syrma SGS Quarter 1 Financial Year 2026 Earnings Call. We have with us today Mr. J.S. Gujral, Managing Director; Mr. Jayesh Doshi, Director; Mr. Satendra Singh, Chief Executive Officer; and Mr. Bijay Agrawal, Chief Financial Officer Syrma SGS, to discuss the performance of the company during the first quarter of the financial year 2026, followed by a detailed question-and-answer session.

During this call, certain statements that will be made are forward looking, which involve several risks, uncertainty assumptions and other factors that can cause results to differ materially from those in such forward-looking statements. We request you to kindly refer the disclaimer statement as presented in the earnings release for the same.

With this, I now hand over the call to Mr. J.S. Gujral, Managing Director, for his opening remarks on the performance. Thank you.

[JasbirGujral, executive]

Thank you, Nikhil. A warm welcome, ladies and gentlemen, to the Q1 FY '26 earnings call of Syrma SGS. It's my pleasure to share with you that the quarter gone by has been a good quarter and all the vital parameters of the company has shown significant positive improvement. Our EBITDA margins are up from 5.2% of Q1 last year to over 10% in this year. My gross material margin is also up from 15% to 24%.

Now if we see on a landscape of 2-year period, which we normally look at, and we don't focus on quarter-to-quarter, what do we see? We see a revenue growth of 25%, EBITDA growth of 50%, PBT growth of 27% and a PAT growth of 32%. So the recalibration of the strategy, which the management cautiously started executing from Q2 of last year has panned out as we had planned. And we now believe that we are best curve of the growth and encashing on this platform, which we have built over the last 4 quarters.

It's also very heartening to note that my exports during this quarter have gone up from [ INR 180 crores ] of Q1 FY '25 to [ INR 232 crores ] in Q1 of FY '26, registering a 29% growth. This despite the looming uncertainty of the tariff war being waged by the U.S. government. So as the things pan out and settle down, I'm very confident that going forward, we would be able to grow on this solid platform, which we have built now.

I'm also happy to share with you that we have entered into a joint venture agreement for manufacturing of PCBs. So the PCB industry in India, in our considered opinion, is right for entry of organized players. The market is estimated at about $5 billion, 90% of which is imported approximately and only 10% is made in India. Out of that 10%, 30% is contributed by one single company. Another 40% by 8 or 9 other organized companies and companies and balance 30% are in the unorganized sector, the small scale industry sector. We believe there is a vacuum for an organized player to come in, and we have decided to come in with a very strong technology partner to encash in on the emerging requirements of PCBs in India. These are being facilitated by antidumping duties and the PLI scheme. So I believe that we have exciting times ahead in this particular vertical.

We are now manufacturing large-format box build products for exports and for Indian market. And we have added significant out of a -- significant number of customers which give us the confidence that the growth in the coming quarters will be more than what we have thus far seen. Another very qualitative improvement is that the high-margin verticals of automotive, industrial have all shown significant growth. Automotive in Q1 of last year accounted for 16%. This year, it accounts for about 24%. Industrial in Q1 of last year was 19%. This year, it's about 30%. And significantly, consumer, which is a low margin business has shown a planned decline from 53% to 34% of my revenue. Health care has also shown a bump from 55% to 7%. IT and railways is a bit muted, but we expect this to pick up in the coming quarters.

On an overall basis, I think it has been a satisfying quarter and there is a catch-up in the revenue, we are very confident that we'll be able to do it in the remaining 3 quarters so that we are able to meet the guidance shared with you.

Thank you very much, and I now hand you over to Bijay for a detailed drill down on the financial numbers.

[BijayAgrawal, executive]

Thank you, Jasbir. Good morning, everyone. I'll now take you through the brief financial performance for the quarter ending March 2025.

Starting with the revenue numbers. Our consolidated total revenue for the quarter is approximately INR 960-odd crores as against INR 947 crores in the previous quarter. We have been able to see good demand growth in the Auto and Industrial segment, primarily from a year-on-year basis. The growth has been contributed through strong demand across multiple sectors also.

Our export revenue for the quarter is approximately INR 233 crores, which is again 25% of our total operating revenue for the quarter. Our ODM revenue for the quarter is about 12-odd-percent. Coming to gross margin. The gross margin for the quarter is 25% as against 15.5% for the Q1 of last year. And the margin improvement is mainly led by healthy business mix, lower consumer and IT business, which is a relatively lower margin business. And again, our continuous efforts on operational efficiency improvement.

Our operating EBITDA for the quarter stood at healthy INR 96-odd crores with a year-on-year growth of 75% and an operating EBITDA margin of 10%. Coming to PBT for the quarter, it is INR 67.1 crores against strong year-on-year growth of 128% with a PBT margin of 7%. Our PAT for the quarter is INR 50 crores, 145% year-on-year growth versus Q1 of the last year with a PAT margin of 5%.

Coming to our working capital performance. For the quarter, we are currently at 69 days of net working capital investment, which is largely the same as the position it was there one quarter back also. But again, there is a continuous internal focus on reduction of the net working capital days, and we are confident of reducing or maybe bringing it below 65 days in the next few quarters.

Moving to our net debt position. We have a total gross debt of approximately INR 780 crores. As against the same, we also hold a healthy treasury balance of INR 467 crores. With this, my net debt position as on 30th June 2025 is INR 314 crores. During this quarter, we have spent approximately INR 35 crores of CapEx towards stopping the plant and machineries into my existing facilities, largely.

Coming to ROC's performance of the quarter. This is around 14.5%, when we calculate on the adjusted basis and the adjustments are primarily IPO unutilized money and goodwill. We expect this to further improve over the year as we expect a higher capacity utilization or maybe the revenue growth as Mr. Gujral has also guided during the call. Once again, we reiterate the fact that we continue to focus on high-margin vertical, operational efficiency, overall cash flow improvement, net working capital improvement. And with this, we are very much confident on delivering the guidance which we have been given so far.

With it, thank you very much. I will hand over this call to Mr. Satendra Singh now.

[Satendra Singh, executive]

Thank you, Bijay, and thank you Gujral ji. But most importantly, thank you to all our customers who have posed their trust in us over the last several decades. We are looking forward to serving you day after day, quarter after quarter and year after year. And thanks to my colleagues as well, who are working every day to ensure that the demands of our customers are satisfied.

As you heard from Gujral ji and Bijay, we have made very, very strong progress. The results speak to the fact that our strategy, which we built over the last couple of years has been the right one and the results are in line with our strategy. The focus from our perspective is customers, obsessed with the customers. We are listening to our customers every day. We are adapting our processes. We are lifting our capability and ensuring that we are ready for our customers' requirement before the requirements come to us. We are continuously investing in our people. Leadership team is built already. We are working -- we have been working through our processes, which we have improved over the last 18 to 24 months. And we continue to build capacity. As we speak, we have Bangalore plant under construction, which we have talked about in last quarter as well. And it's in line -- it will go on stream end of this year, early next year -- calendar year.

In terms of business strategy, I think you already heard about one comment that we are recalibrating our business mix. And we are seeing strong growth in the segments which are our focus, which is auto and industrials as well as on exports. All in all, I think, a very good quarter. And with the efforts we have made with the processes we have set with the capabilities we have in our team, I'm looking forward to exciting times ahead and serving our customers to the best of our ability and to their expectations in the end delighting them. Thank you, everyone, and to you -- back to you, Nikhil.

[Nikhil Gupta, executive]

Yes. Thank you, Satendra. We are open for our Q&A session. Thank you.

[Operator]

[Operator Instructions] The first question comes from the line of Ankur with HDFC Life.

[Ankur Sharma, analyst]

A few questions. One, if you could just help me with the order book as of end Q1 '26 and also the mix within that order book, the context being just trying to understand the share of industrial auto, et cetera, and therefore, trying to get a sense of how the revenue journey will pan out over '26?

[BijayAgrawal, executive]

Sure. So the order book position as on quarter end June '25 is approximately INR 5,400 crores, INR 5,500 crores, of which, if I give you the breakup, auto segment comprises 35% to 40%. Consumer segment is 25% to 27% as of now. Industrial is again 25%, 27%. Healthcare is 6% to 8%, which includes MedTech business also and balance is IT and railways.

[Ankur Sharma, analyst]

Okay. That's helpful. And if you could just help us again with your guidance for the full year, both on top line also on margins [indiscernible]?

[BijayAgrawal, executive]

Top line sales, we are expecting we should be, again, get a good growth of 30%, 35% over the previous year numbers. And margins somewhere -- we are saying it should be somewhere in the range of 8.5% to 9% EBITDA margin, operating EBITDA margin is what we are saying.

[Ankur Sharma, analyst]

This is excluding other income, right, so it will be operating margin.

[BijayAgrawal, executive]

Excluding other income, but it should improve by any foreign exchange impact, at the rate of...

[Ankur Sharma, analyst]

Okay. Thirdly, sir, just on the consumer business and we're seeing some positive signs of the way you kind of trying to restrict growth there. But is this still even in Q1 is still sizable, right, almost 30%, 35% of overall mix. So do you believe in absolute terms, you did about INR 320 crores. So is this where it kind of stays and gets better? Or do you think while in percentage terms, it may come lower? So just trying to understand from a full year perspective and also how you see the consumer business kind of shaping up?

[JasbirGujral, executive]

You see, we have guided in the FY '25 earnings call, Q4 earnings call that our endeavor would be to bring down the consumer of vertical business to 30% of the total revenues. And on an annualized basis, we believe that we are on track to achieve that. Now this consumer vertical, when we classify, it includes a low margin, high-volume as well as my ODM, which is high margin and low volume. So we believe that going forward, 33% quarter-on-quarter, it could be 1%, 2% here and there. But on an annualized basis, we are confident that we should be able to achieve the 30% mark, which we had set out for us at the beginning of the year. And if my own ODM high-margin, low-volume consumer business picks up, so way it's a margin-accretive business. What we are concentrating on is to bring down the low-margin, high-volume consumer business within this particular bucket.

[Ankur Sharma, analyst]

Sure. Okay. And just one last bit on the PCB manufacturing JV that we're proposing set up. If you could just give us more details whatever you can share in terms of CapEx by when do you expect this plant to come up? What kind of sales margin, ROE you believe could be made also on the customer side? Whatever details you can share would be very helpful?

[JasbirGujral, executive]

You see, we have planned out this PCB plant, which would be a multilayer and single-year plant with the capacity of about -- once it's fully set up of about 1.5 million to 2 million square meters per annum. The CapEx plan in the Phase 1, which will be spent not in a bullet way, but over the next 3 to 4 years is $91 million. PCB business typically is a positive 15% -- 12% to 15% EBITDA margin business. We believe that is a world-class plant, and a high-technology plant, we would be able to drive yield efficiencies, which would enable us to achieve these EBITDA margins. In PCB, the yield because it's a chemical process of very, very critical. And we have a very solid technology partner.

The I think the beauty of this venture is that we have a very solid technology partner, which will help us to address a very huge potential domestic demand. which is not available any player outside China. If we scan the world, the PCB demand other than China is all limited. So India offers a virgin territory. And if we have a solid technology partner, it opens up great whispers of growth for the coming years. So $91 million is approximately the CapEx and this will be entitled to a PLI.

EBITDA margin, 15%, 18%, once the whole process stabilizes and once we move into the high layer margin business, because here also, as the layers go up, the margin also goes up. So we expect that once the plant is mature, we should be able to earn the 20%, 18%, 20%, 20% EBITDA margin and the ROCE of about the same percentage around 20%. And this CapEx is also entitled to state government subsidies, which are under negotiation which could vary from 35%, 40% to 60% of the CapEx. These will not be bullet payments. These will be payments staggered as we execute the project and because there is some form of GST fund and there's electricity subsidy and all those things, employment subsidy and all those things. So -- but even if on a conservative basis, we say we get about a 40% subsidy, so about 90 million. And so 36 million will be subsidized by the potential states who are wanting to get this project in their state. And balance 60% will be by us. If we get 60%, it will be 40%. So are taking on a conservative basis. Bijay, anything you want to add?

[BijayAgrawal, executive]

There will be additional components PLI driven benefit, which will be a revenue benefit, that will be overall -- but the margins which we are expecting that should include all the benefits.

[Ankur Sharma, analyst]

Sure. And then typically, 1x asset turns is what we should build in, right, once the plant is fully utilized?

[JasbirGujral, executive]

It depends upon which kind of product which we are manufacturing here. Asset terms, we expect it should be somewhere between 1.2x to 2x also.

[Operator]

[Operator Instructions] Next question comes from the line of Kishore Kumar with Unifi Capital.

[Kishore Kumar, analyst]

I just have a small query on the JV. What is the time line that we are looking at it?

[JasbirGujral, executive]

See, the JV we have already...

[Nikhil Gupta, executive]

Speak a little louder, please. You want time line?

[Kishore Kumar, analyst]

Yes, sir. time line, yes.

[JasbirGujral, executive]

So the JV agreement has been signed. The application has been filed with the central government for the PLI scheme, and we understand terminal date for the PLI application is 31st July. And in the month of August, these applications will be taken up for scrutiny and approval. So assuming we expect the approval to come in somewhere in August to September. We have already applied to the various -- in talks with the various state governments. So during the period when the application has been scrutinized, PLI applications, we expect to get approvals from the state government with a final set of incentives.

Lands have already been -- potential land have been identified at a couple of places. So I think by about Q2, end of Q2 by September '25, we should be in a position to sort of start the execution of the project. The intervening period of approximately 45-odd days, we would also use for making of blueprint drawings and all those back-end work so that we don't lose time once we get the approval through the government. The project on aggressive basis should go on stream somewhere around Diwali next year on a conservative basis between Q4 of FY '26 or end of December '26, yes.

[BijayAgrawal, executive]

Q4 of FY '27.

[JasbirGujral, executive]

Yes.

[BijayAgrawal, executive]

The commercial production, we expect it should start sometime towards Q4 of FY '27 or first quarter of FY '28.

[JasbirGujral, executive]

So 18, 21 months is what we are targeting for the whole thing.

[Operator]

We'll take the next, Mr. Uttham Kumar from Avendus Spark.

[Uttham Kumar R., analyst]

Congrats on a good set of numbers. Sir, 2 questions from my end. Firstly, on the gross margins. We are seeing that the gross margins have improved because of the consumer business mix going down. At the same time, I would also like to understand, are we seeing some kind of a margin shaping up upwards when it comes to automotive and industrial category? Are there any positive mix which is happening? Is the gross margin trending higher? Or is there any scope for the mix to increase going forward in these 2 sectors?

[JasbirGujral, executive]

See, in the automotive sector, the margins vary if we are a Tier 1 supplier or a Tier 2 supplier vendor. And in the EV space, we are primarily a Tier 1 supplier, which gives us incremental margins. The margin profile over the coming quarters and years would improve apart from the above 2 factors by more efficient, more cost-effective purchasing. As our purchase spend goes up, we should be able to negotiate better prices. That's number one. In the industrial segment, the margins are higher in exports, lower in domestic. But by and large, they are much better than the consumer. And we have not seen any depreciation of margins in each of the verticals. Only we are seeing improvements. And we don't expect them to depreciate in the coming quarters and years.

[Uttham Kumar R., analyst]

Got it, sir. Sir, the second question is on exports. So could you give us more flavor on -- again, when you said industrial category is where you are doing exports. Is there any other categories where we are seeing traction? And which of the geographies which are doing well, including U.S. and other geographies, can you give some mix split and where we can see traction improving going forward? And eventually, over the next 2 to 3 years, where can we look at this export mix being for the company?

[JasbirGujral, executive]

Exports, we are primarily doing to Western Europe and U.S.A. Mix, I think Bijay will share between the 2 geographies. But on an overall basis, as we see, neither Western Europe nor America is growing at the pace at which our exports have grown, which is about 22%, I think, in Q1 at INR 233 crores. They are in line. The tariff uncertainty is definitely holding back customers from receiving large orders. hopefully, within this quarter, that's between now and September, this uncertainty would sort of be a thing of the past. And then we can expect more aggressive stance from our customers for going ahead with purchasing from India or other countries. Currently, they are slightly holding back because they don't know what the tariff thing will pan out. But by all discussions with the Chambers of Commerce and general thing, we don't believe that India will be placed at a disadvantage compared to its competing countries. At worst, it could be at par, but we expect that India will be favorably placed compared to the competing countries.

[BijayAgrawal, executive]

Our export to U.S. is somewhere between 5.5% to 6% and rest is all Europe plus other regions there. That's the broader mix. And on the expectation side, again, we have guided we should be doing about 24% to 27% of export. And for the quarter, it is about 24.5% as of now.

[JasbirGujral, executive]

So in line with our annual budgets and targets.

[Operator]

Next question comes from the line of [indiscernible] with Morgan Stanley.

[Unknown Analyst]

I have 2 questions on the bareboard PCB manufacturing that we are foring into. One is if you could add more color in terms of the capability of the tech partner right now that we are dealing with? And what is their ballpark mix in terms of the end applications? And number two would be what working capital cycle do we expect in the PCB manufacturing?

[JasbirGujral, executive]

See, as far as the industries to be serviced by us, we would be venturing into multilayer double layer PCBs, and we will find application in industrial, automotive, consumer also. We are currently not venturing into HDI flex PCBs, so mobile phones and all that, we would not be sort of tapping to it in the current phase.

As far as the technology competence of the partner is concerned, it's one of the oldest companies in Korea, and they have a deep domain expertise of more than 3.5 decades in PCB manufacturing. And if we go to the PCB manufacturing per se, it is the process control, which is the most critical factor. And in process control, it's the inputs, which are the chemicals, the substrates and other things which go, which have to be of top-class quality with variation in parameters. Rest will be putting a world-class plant with the latest equipment, and these equipments are very, very rugged. Once you set the process, it really doesn't change. If you control the process chemicals which go into it, if you control the environment which goes into it, then it becomes a comparatively -- I wouldn't call an easy ride, but comparatively comfortable ride. The inputs and the parameters are more critical and the machines are capable of delivering the desired output.

So I don't see any challenge in meeting these requirements. And our technical partner, the collaborator would also bring -- give us access to his existing customer logos, which he is servicing out of Korea. So if he is servicing a company X in Korea and that company also has a manufacturing operation in India, we sort of get a door opening and then we have to only ensure that our process capabilities meet the requirements. So we are very confident on that, and we don't see a challenge on that. On the working capital requirement, I'll hand it over to Bijay.

[BijayAgrawal, executive]

So working capital side, we expect initially the investment could be in the range of 60 to 75 days of net working capital investment for this business.

[Unknown Analyst]

Sure, sir. That is helpful. And one last question in terms of, is there any change in terms of the guidance we would have for our CapEx for this year and next year in the EMS business?

[BijayAgrawal, executive]

In the EMS, yes, the guidance remains same. Full year CapEx will be less than INR 100-odd crores for this year.

[Operator]

Next question comes from the line of Bhavik Mehta with JPMorgan.

[Bhavik Mehta, analyst]

Just one question. If I look at your revenue guidance of 30% to 35% for full year and with consumer slowing down from 36% of share to 30% share, it means that the rest of the business has to really grow at more like 40% and we haven't seen that kind of growth ex consumer in 1Q. So what gives us confidence that we can see the growth accelerating to 40% plus over the next few quarters? Do we have that order book already in the bag from a visibility perspective?

[JasbirGujral, executive]

We have the confidence based on the order book and the discussions which we have had with our customers. When you recalibrate a strategy in EMS business, it is not sort of a fast food joint reaction that we dispenses one business and the next business comes immediately. We have to work on it. And what working we have been doing for the last 4 quarters on it would start yielding results in the coming quarters. We are very confident of achieving our revenues, especially on the EBITDA margin.

[BijayAgrawal, executive]

Also, if you see the order book breakup, which we have already given here, you can see the auto segment composition of the order book is about 35% plus, while the current auto segment in the quarter 1 actual revenue is 24% here. So you can see we are expecting the auto sector should grow at a faster pace, definitely.

[Operator]

Next question comes from the line of Keshav Lahoti with HDFC Securities.

[Keshav Lahoti, analyst]

Sir, firstly, can you give us some idea how is your current segmental margin, how it was 2 years back? And possibly, what are your plans to take it 2 years down the line? How do you see the company shaping up?

[JasbirGujral, executive]

See, the segmental margins, as I shared in one of the earlier comments, we have not seen any depreciation in the segmental margins and the margin profile of each vertical which we service, which is either the automotive, the EV, the industrial, exports, MedTech and all that, they are holding. And in fact, they are showing marginal incremental increases because of more efficient buying and operational efficiency. We don't see a challenge in maintaining the gross material margin of each vertical as they stand today. We expect them to only improve in the coming quarters and years.

[Keshav Lahoti, analyst]

Understood. And sir, what is the idea of letting go of the low-margin consumer business is it they're not good ROE business? Or how should we see or is it more like possibly the demand slowdown is there?

[JasbirGujral, executive]

See, it was a conscious call of the management to recalibrate the strategy, and this was based on various factors. A low-margin business has a positive spin-off on the net working capital. But end of the day, we have to see where we want to position the company. The growth in the low-margin business was high. But in isolation, it was still a very small pie when we see the consumer business per se as it's available in the landscape -- market landscape. The opportunities in industrial, in automotive, MedTech and others were also emerging. And we should always be mindful that none of these verticals got compromised because of the consumer business. Consumer business was very low in the earlier part of '23, '24 and then '24, '25, and it sort of skewed the whole thing.

So it's a cautious decision of the management to, in a calibrated way, move away from the low-margin business. And then this low-margin business is also dictated -- the top line of the low-margin business is also dictated by the PLI limits. So if my PLI limits dictate a certain value of consumer business, I have to limit it to that because above that, it doesn't make sense. Hence, it was a combination of factors.

[Keshav Lahoti, analyst]

Understood. Got it. Got it. What was the smart meter revenue for this quarter? And what is your target for this year?

[JasbirGujral, executive]

The smart meters -- I have it. I'll just answer it. I don't have it off hand. I'll just get back to you.

[Operator]

Next question comes from the line of Keyur Pandya with ICICI Prudential Life Insurance Company Limited.

[Keyur Pandya, analyst]

Just the first question is on the revenue growth for, say, FY '27. I mean with just less than INR 100 crores of CapEx this year, how do you see the growth in '27? I think in the past, you have mentioned about 5x kind of fixed asset turn, which at current level would basically would suffice to feed your FY '26 growth. So if you can just reconcile this or give outlook for '27 as well, that would be helpful. That is the first question.

[JasbirGujral, executive]

See, I'll just answer the first question, which was asked by the earlier gentlemen. My smart metering revenue for the first quarter is approximately INR 55 crores to INR 60 crores. And it's in line with what we had expected that it should be anything between INR 250 crores to INR 300 crores this year along that. So that's the figure. Can you please repeat the question?

[Keyur Pandya, analyst]

So with the current gross block, which was there in FY '25 end and you have passed the guidance of 5x kind of fixed asset turn, you can achieve FY '26 revenue. But then with less than INR 100 crores of CapEx, how do you see growth for FY '27? You would have enough capacity to feed that growth?

[JasbirGujral, executive]

Yes. You see at the end of the day, we expect that once -- even now if we take current year, some of the plants are working at less than 50%, the new plants which have been commissioned are working at less than 50%, 40% of the capacity. So we believe that once the plants mature and the businesses flow into the new plants, we should be able to achieve not only this year's revenue, but with some marginal investments every year, we should be able to achieve the next year's revenue also.

[Keyur Pandya, analyst]

And what is the steady-state fixed asset?

[JasbirGujral, executive]

My replacement and my balancing CapEx every year would be to the tune of.

[BijayAgrawal, executive]

INR 80 crores to INR 100-odd crores.

[JasbirGujral, executive]

INR 80 crores to INR 100 crores will be my annual CapEx spend, whether it is on balancing equipment, some replacement and all that. So I think with that, we should be able to -- and as our industries mature, as the products mature, the efficiencies would come in.

[BijayAgrawal, executive]

Also, when we see 5 lakh asset tons for this year, we will be at around 65% to 70% of our total capacity utilization. So we have enough space to grow on the same better capacity utilization, the similar CapEx without any further larger additions here. And the asset tons may move up 6%, 6.5x plus also together at full capacity utilization.

[Keyur Pandya, analyst]

Okay. Second question, on the margin side, as you mentioned that the order book for automobile or industrial is higher than what is Q1's revenue share. Does that mean that margin should go up in subsequent quarters of the year?

[JasbirGujral, executive]

Well, we believe that with what we have achieved in Q1, we would be able to deliver an EBITDA margin of 8.5% to 9% this year. What we had guided earlier was approximately 8%. So we are believing that based on our Q1 performance, the order book which we have and the execution schedules which we have, we should be able to deliver an EBITDA of 8.5% to 9% this year.

[Operator]

Next question comes from the line of Arshia Khosla with Nirmal Bang Institutional Equities.

[Arshia Khosla, analyst]

Sir, I just want to understand, I mean, now the exports form 25% of our top line. So what will be your guidance for FY '26? And any new geographies that are adding on to this growth?

[JasbirGujral, executive]

So you said the top line guidance and the geographies which are adding to the growth, are these 2 legs of your question?

[Arshia Khosla, analyst]

Sir, on the exports part of the business.

[JasbirGujral, executive]

On the export, we expect that we should be able to cross the INR 1,000 crore mark, which we had earlier guided for '25, FY '25, we will fell short of it because of delayed release of orders and approvals by the customers. We are on track. We've already achieved INR 233 crores export in the first quarter. And typically, as we progress the quarter, the revenues go up. And these will primarily be coming in from Western Europe and North America. Primarily these 2 geographies will be contributing to the export bucket of the company.

[BijayAgrawal, executive]

Mexico.

[JasbirGujral, executive]

Mexico, yes. North America.

[Arshia Khosla, analyst]

Understood, sir. Sir, and on the IT and railway side part of the business, I mean that segment, how are we seeing growth in that part of the business?

[JasbirGujral, executive]

See, IT has been a bit muted in Q1. We have the visibility what -- for the remaining 9 months. And I think it's in line with what we had guided for the full FY '26. Railways is still a lumpy business. We have done about INR 20-odd crores of INR 21 crores of railway business. We have orders in hand. And I expect that this year, it should be between INR 80 crores and INR 100 crores of railway business. And next year, we are in negotiation with some big sort of RFQs. If those materialize, next year should be a better year for railways. You see these are long-term driven contracts and the initial approvals take a lot of time, not only with the customer, but with the RDSO and other things. So -- and RDSO has its own pace to move. So whether you can make an elephant dance or not, I don't know. But that's the thing. We expect next year to be better.

[Operator]

Next question comes from the line of Anupam Goswami with SUD Life.

[Anupam Goswami, analyst]

A little follow-up on the previous question. When you said about auto and industrial going at 40%, that sort of order book we have, I want to know, sir, what sort of products, are we adding new products? Are we adding new customers in this vertical? And if you can give a little broader picture, where is the market size and how much we can do in a little longer period of time?

[BijayAgrawal, executive]

So I'll just clarify first on the order book side. When we say auto is about 35% to 40-odd percent, but industrial is somewhere in the range of 25%, 27% as a part of order book. Now coming to your next question on that, which are the new customers. So like customers or product side, we have introduced some -- one more very large products like the fuel injection system. There are a few more customers, which like we are -- auto side, airbag system is also which we are currently exploring.

[JasbirGujral, executive]

See, okay, I'll just dwell on the segments. Let's take the industrial. Industrial smart metering and utility metering is one segment, which is both domestic and export. Fuel dispensing is another. Large build format for power charging, vehicle charging is another thing. We have got some orders which we are exporting to Africa. Then we have the large telecom antennas projects, which will see -- start seeing the light of the day in the coming next 2 quarters, September onwards. On the automotive front, it's addition of new customers and new products from the same customers. And Satendra can add more details on that.

[Satendra Singh, executive]

I think you covered pretty comprehensive, Gujral ji. But what we are doing is we are going deeper into the automotive supply chain. We are working with our existing customers and focusing on some of the new things which are coming in, things around safety systems, things around driver assistance systems. So those are a couple of areas wherein the changes in the regulation are kind of promoting more electronics coming into the vehicles. So working with existing customers on some of these things.

In parallel, we are exploring the export opportunities with some of our customers to Europe and U.S. So these are the 2 drivers for growth in automotive. And we are, of course, on industrial, we are exploring lots of export opportunities, which will take some time to mature, but they should give us a significant fill in the next financial year.

[Anupam Goswami, analyst]

How much is our ODM content at the moment? And for our capacity, are we -- how much of an utilization in space-wise or assembly line-wise, how much capacity has been utilized till now?

[BijayAgrawal, executive]

So ODM is approximately 10% of my total business for this quarter. And capacity utilization is what we are expecting for the full year. This year, we would be at around 65% to 70% of our total gross capacity utilization. That includes the new capacities developed just like Pune plant and maybe incremental brownfield expansion in my Bawal and Chennai locations, everything put together.

[Operator]

Next question comes from the line of Vineet with Investec.

[Unknown Analyst]

Sir, just wanted -- sorry to harp on this revenue growth bit again. Now when we are speaking about 30%, 35% sort of revenue growth, that implies a fairly steep ask for the remainder of the year. And considering consumer business will remain capped at, let's say, 30%, 32% of our revenues, then the ask rate for other segments is even higher. So what gives you confidence? Or is it a case wherein we'll have to run at full throttle to be able to get there?

[JasbirGujral, executive]

See, in the coming quarters, this quarter, the IT has been muted. The IT will go up in the remaining 9 months or 8.5, 9 months. My MedTech business is typically reloaded, that will be an incremental thing to it. And then my exports also. So overall, yes, there would be a significant bump from the current whatever thing is to about 38%, 40% quarter-on-quarter growth we have to show in the remaining 3 quarters. Based on the orders in hand, which Bijay has shared and the 2 key factors which I have just enumerated, the IT, the MedTech and some other large contracts which we are executing, we believe we are in position to achieve the 30% growth rate, which we have guided.

Which means that we have to do approximately -- we have done about INR 900-odd crores this year. So we have to do about INR 44,000 -- INR 4,100 crores, INR 3,900 crores to INR 4,100 crores in the remaining 3 quarters, which translates to about INR 1,300 crores per quarter on an average basis. It will not be an average basis. Based on the holistic thing which we have seen, we are confident that we should be there about what we have guided.

[BijayAgrawal, executive]

Also, if you see the seasonality, normally, quarter 1 is like 20%, 22% of the full year revenue there. So if you are targeting somewhere around INR 4,800 crores to INR 5,000 crores kind of revenue for the full year. So quarter 1 is in line with that thing about 20-odd percent. And generally, it's like this 20%, 22% moving to 23%, 25% quarter 2 and gradually then the early moves. And generally, that's the trend we see with H1 is about 40%, 45% of the full year and H2 is like 50%, 55%. That's what the trend is.

[Unknown Analyst]

Understood. Understood. Sir, and the second question on working capital. Now while we were expecting some improvement this quarter, which hasn't come through. And now we are honestly back to where we were, let's say, a couple of years back as far as the working capital was concerned. While we had the aspirations of getting it down to 60% at one point in time, now we are speaking about more like a 65 days of working capital levels now. So what has really changed? Is it purely the mix impact wherein the consumer has gone down, which has hurt us here?

[BijayAgrawal, executive]

So first of all, I think we are exactly at the similar level where we were in the previous quarter also, 69 days of working capital where we were at March and right now also we are seeing we are at 69 days of working capital. And when we have guided for the full year, we'll be bringing it around 5 to 7 days of efficiency. That's actually for the full year. It may not reflect exactly in the quarter 1 or maybe in a proportionate way 2 days every quarter, that may not happen. And we are very clear on this thing. It's like quarter-on-quarter, you can see the benefits here. And we are confident and there is nothing like nothing much has changed. We are confident we should be able to bring it below 65 days. Now how much below 65, can we achieve 60 or 62 or 63, that is something we are yet to see.

[JasbirGujral, executive]

And another factor which I think we should all be mindful of is in the sector which we service. Consumer sector has a quick turnaround, shorter gestation period. Industrial and all that when we are building up new customers, new models and all that, we have to stack the inventory. And you can't buy for 10 pieces and make 10 pieces. You have to buy for a minimum order quantity and maybe supply the 10, 15, 20, 50 prototype pieces and then the series production commences later on. So quarter-on-quarter, we would love to do it, but it's not possible. But for the year as a whole, based again on whatever visibility we have got on the order executions and all those things, with the same level of inventory, if my revenues go up and they have gone up in the past, it automatically comes down as number of days.

So it's a play of absolute figure of inventory, which a minimum has to be carried and how fast you execute them. So when you're executing new orders, they take time. There's a prototyping, there is a, as they call it, the first thing series. The series production starts 2, 3 months down the line. So on an overall basis, I think we should be nearer to what we had guided, which is 60 days. In fact, we have guided below 60 days, but I think it should be around 60 days.

[Unknown Analyst]

Below 65.

[JasbirGujral, executive]

65, 60 days. I think it's possible, and you will see it in the coming quarters.

[Operator]

Next question comes from the line of Sonali Salgaonkar with Jefferies India.

[Sonali Salgaonkar, analyst]

Sir, my question remains on CapEx. So you did talk about $90 million of PCB manufacturing CapEx, of which about 40% you are expecting from state subsidy. Maybe check what is the CapEx guidance for FY '26, '27? And how much do you think would the central government subsidy in terms of PLI scheme also accrue to this subsidy part?

[JasbirGujral, executive]

Okay. Now you see the CapEx, which is $91 million, it is for the Phase 1 of the project, which may spread over 3 to 5 years. I personally believe that in the next 12 to 18 months, when we start the plant with a certain capacity, initial capacity should be about 1/3 of the total, which should be about $30 million to $35 million. Once those capacities go on stream, then we'll modularly keep adding additional capacities. The understanding with the state government, which the policies of various governments are in public domain is that they disburse the incentive once you cross a certain milestone. And typically, it is done on an annualized basis. So whatever we spend in, say, '25, '26, we may get a subsidy in '26, '27. So there could be a year, 1.5 years lag between the dispensing of the expenditure and receipt of subsidies from the government.

[BijayAgrawal, executive]

On the PLI piece, we expect it will be around 5% to 7% of the revenue number.

[Sonali Salgaonkar, analyst]

I understand. Sir, what is the effective CapEx for FY '26, '27 outlook?

[BijayAgrawal, executive]

So excluding this PCB, it should be around INR 80 crores to INR 100 crores. Including this PCB, there will be another $30 million of CapEx.

[Sonali Salgaonkar, analyst]

Spread over the next 2 years, right?

[BijayAgrawal, executive]

Yes.

[Sonali Salgaonkar, analyst]

Understood. And my second question is regarding the exports. Now you did mention that 5% to 6% goes into U.S. and the rest into Europe. So in the U.S., I understand there is tariff uncertainty. But should the hypothesis be that we will stick to the 26% tariff which has been imposed earlier, do you think it will be a pass on which will be done from the end users? Or do you think that there could be a margin impact for us for the export business?

[JasbirGujral, executive]

See, on the tariff part, what you are referring to, end of the day, it's a game of dance. And there are 3 players who will have to absorb this. It's either the ultimate consumer or my customer or me. There is no fourth player who is going to absorb this tariff cost. These things will pan out and stabilize. And for us to say that it will be impacting only the end consumer and not me or not my customer, it's very difficult to predict. So it's a deep negotiation with the customers, which will happen. And then it will be there.

Bulk of it in my opinion, bulk of -- because a tariff will be common to almost all the -- my customers. So if it is a common factor to all my customers or customers of my competitors, then logically, bulk of the tariff should be passed on to the end consumer. The residual part will be a sort of bone of contention between me and my customer or my competitor and his customer how it pans out. If the tariff was only unique to me, then passing it on to the consumer would be tough. But it will be a global sort of so-called pan-national America scenario. And I don't think India will be placed at a disadvantage vis-a-vis our competing countries.

[Sonali Salgaonkar, analyst]

Understood. So as of now, the shipments are on track to the U.S., right?

[JasbirGujral, executive]

We have grown by 22-odd percent or whatever. The shipments are on track. The volume could have been even higher, but for this what you call uncertainty. Satendra, you would like to add anything?

[Satendra Singh, executive]

Yes. I think the one thing we need to be aware of. First is our export growth has been good, and we have guided for a certain number is about INR 1,000 crores. So we see that on track. Important thing is, given the uncertainty around the tariff situation, we are discussing very closely with our customers. We are working with them plans to ensure that they are supported. And based on the current understanding, the tariff, everyone in the industry is expecting it to be either neutral or favorable to India. And that -- if it turns out to be favorable, I would expect that it would help us grow our exports even further.

[JasbirGujral, executive]

And in fact, we see tariff as a big opportunity for India, not only for Syrma SGS, but for India to start playing a bigger role in the export markets.

[Sonali Salgaonkar, analyst]

Got it. Sir, under ECMS apart from PCB, any other categories you would be interested or evaluate right now to apply for?

[JasbirGujral, executive]

We have not applied for currently, but there will be some mechanical and nonpassive component, but they're small. There would be more for backward integration and all that. They are not significant in terms of CapEx requirements and even in terms of revenue. But we may apply for sort of inductors on components all that. But they're not the game changer for us in this all scheme of things. Hence, we have not alluded to that in our comments.

[Sonali Salgaonkar, analyst]

Got it. And just one last question from my side. The PCB manufacturing, when do you expect it to start yielding revenues for you, from which quarter? And probably the initial utilization, is it fair to understand will be sub 20%, 30% in the first half?

[JasbirGujral, executive]

See, we expect that trial production of it could start by Q3 of FY '27, which is October to December of calendar '26. It all depends upon when the approvals from the government come in. If the government delays the approvals of the PLI scheme, by 3 months, then obviously, the project gets delayed by some more time, maybe not exactly 3 months, but it will definitely get pushed out. So it all depends on -- if we were to get the scheme sort of approvals in, say, 30, 40 days by September and we are able to get the thing, then we are working backwards and we are working on the drawing board to ensure that we have the production out in Q4 of FY '27, which is January to March '27, and we'll have a full year of production in '27, '28.

[Operator]

Next question comes from the line of Praveen Sahay with PL Capital.

[Praveen Sahay, analyst]

So first question is related to the working capital loan, which has increased on the sequential basis by around 33%. Is it because of your mix changes towards a higher working capital, and that's the reason this working capital loan has increased?

[BijayAgrawal, executive]

Yes, gross debt has increased, but you can see simultaneously treasury has also increased. So net debt basis, there is only an increase of INR 50 crores, and that is mainly on account of incremental working capital requirements.

[Praveen Sahay, analyst]

So the question is, is that going to normalize in the coming quarters or it will be at the elevated level because the mix is changing?

[BijayAgrawal, executive]

No, it is like mix is like -- it's broadly in line what we are expecting there. What we see going forward, we should be -- this should normalize or maybe this should maybe reduce like a bit going forward towards the end of the year.

[Praveen Sahay, analyst]

And the next is the PLI incentive for a quarter, if you can guess?

[BijayAgrawal, executive]

That is somewhere around -- should be in the range of around INR 4 crores to INR 6 crores.

[Operator]

Last question comes from the line of Kishore Kumar with Unifi Capital.

[Kishore Kumar, analyst]

Sir, my line was cut last time. I'm sorry about that. Sir, I just have a small query on the laptop business with MSI and Dynabook. What is the current monthly or quarterly run rate? And where do we see the full year revenues actually for this business?

[JasbirGujral, executive]

See, on the Dyna laptops, we are just starting the production. It would start this month or maybe in the month of August. On the MSI thing, we make small quantities currently, which is only for the Indian market. Now we are in negotiation with the company that we should also be supplying for the global market. The current revenue projection, which we have given, I think with the products which we are making with Dyna and the MSI, we should be able to achieve the targets for the full year. On the quantities per se, we are guided by some confidentiality agreements, and we can't share the absolute number figures. But based on whatever offtake we have -- they have given us, we are confident of achieving our sales guidance in the IT segment for this year.

It could see a significant bump. I again repeat, it could see a significant bump if we were to go back into the manufacturing of motherboards and all that because that would make us eligible for the PLI. Current laptop assembly is not making us eligible for PLI incentives. So we are in talks with the customers. It's a chicken and egg story. The volumes of the Indian market don't justify making of the boards in India. They are yet to sort of take a call on the servicing of export markets from India once the tariff sort of uncertainty settles down. So that's the holistic view on the IT business.

[Operator]

Next question comes from the line of Rajesh Kothari with AlfAccurate Advisors.

[Rajesh Kothari, analyst]

Great set of numbers. Just 2 questions from my side. You have created a number of subsidiaries. So just trying to understand which company basically take what kind of role each of these company will play. That's number one. And number two, apart from PCB, are you looking at any other components because there are a lot of new things which has happened in the last 3 months, particularly, for example, on the defense side and within electronics as well because of this -- the China constraints on the rare earth minerals and so on and so forth. So are you exploring any further options where you think your competence can match for further make in India kind of an attempt?

[JasbirGujral, executive]

Okay. On the number of subsidiaries and there, I think Bijay will answer that, but I'll take up your first question -- the second question. We are always looking out for opportunities to grow and manufacture. And defense is also one of the opportunities. We are supplying some very small parts to government companies in defense, which is negligible. But we are very actively pursuing to see where we can fit in, in the whole thing. And defense, unlike other industries requires a deep domain expertise and a solution or a module to the end user.

So defense sector plays out in 2 parts. One is I become an EMS partner to one of the big defense players, and I do a vanilla EMS bill for him, whether I become it at Boeing or XYZ at any of the defense contractors, I just build products for them. That will be a vanilla EMS. The real meat and the stickiness of the business lies in providing solutions. So build up on a module which is available with one of the technology providers and build a solution, whether it is a communication solution, whether it's a radar solution, whether it's an ammunition jamming solution, whatever to the end user, which could be the paramilitary forces, which could be the armed forces or which could be the defense labs and the defense companies of the government of India.

This vertical is a vertical of interest to us. And as I have always been sharing for the last maybe 8 quarters, we are mindful of what we will be entering into. And we are evaluating this vertical seriously because we believe it serves the twin objectives of made in India and it gives us a new vertical business. Defense business would be a lumpy business. It would not be a regular constant quarter-on-quarter business. You win tenders, you could see a big bump in your revenues and they could be followed by a certain amount of sort of slowness. And then there could be again another thick. On the companies, I think Bijay will answer that question.

[BijayAgrawal, executive]

On the new subsidiaries incorporation, we have incorporated 2 new subsidiaries in the last quarter, which is Syrma Components Private Limited and Syrma Elecomp Private Limited, both. Primarily, if you ask about the use, these are something that Mr. Gujral has already explained, we are exploring a few of these businesses on the component side and maybe -- and we are not very much sure whether somewhere there is some kind of a technology association is required, we may use these subsidiaries to get those technology partnerships executed in a way. That is why these are kind of enabling subsidiaries have been created to be in place. And as we progress on our business strategies, we may use it for the relevant businesses.

[Rajesh Kothari, analyst]

Understood. One question, follow-up question. In terms of the total CapEx, which also -- and as well, probably you might also look for maybe M&A acquisition. I'm not too sure the tuck-in acquisitions, whether you are looking for anything actively or not. So in terms of the total capital raising, how do you look at this business? Because one, your organic business is growing fast. And of course, you might have some working capital requirement. Second, your PCB business, which is a new venture. Third is your -- maybe some tuck-in acquisition in case if you are looking for it. So what kind of total capital raising you think you might need over the next 2 years or so?

[JasbirGujral, executive]

See, detail will be answered by Bijay, but on a global -- on a sort of holistic basis, we don't believe that we require a capital infusion for our organic business with the profit which we earn, the cash profit which we earn and a tighter working capital cycle management, we are well placed to fund our organic growth from the internal accruals. And we are almost a 0 debt company. So we have the leverage of utilizing that, which is a post-tax expense in any case. The usage of the fund raise whenever it happens would essentially be for acquisition of in verticals where we are not present, and I've been sharing this every time and for any other greenfield expansion project. Bijay can then walk you the...

[BijayAgrawal, executive]

Fund need side, yes, we already have some internal accruals treasury already in place with us, INR 400 crores-plus. But you are right, if we happen to at least close something on a good sizable kind of inorganic acquisitions or something maybe large CapEx just like PCB or anything like that, we may go for a fundraise, and that is why that is how we have already taken an [ absolute ] resolution for this QIP raise of INR 1,000-odd crores. As and when they need, depending upon the funding usage, we will go for those fundraises. And accordingly, the exact usage will be decided at that point of time.

[Rajesh Kothari, analyst]

So PCB will required fundraising, am I right?

[JasbirGujral, executive]

No. You see end of the day, PCB, it would require some money when we spend $91 million over the 3 to 5 years period, the initial expenditure we said is about $30 million. $30 million could be funded by our own equity, maybe some individual partner or for fund raise. And then we get back 40%, 50% from the government. So it's only a bridge financing which is required. So it's a thing which we'll decide once we start rolling out the plans. But one thing is reasonably clear that fundraise for organic growth may not be required in the coming years. We have enough cash on bank, I think. We are a 0 debt company, almost a 0 debt company. And we have internal cash accruals. This, coupled with more efficient working capital management, I think, gives us ample room for organic growth without infusion of external funds.

[Operator]

Ladies and gentlemen, due to time constraints, we have reached the end of question-and-answer session. I would now like to hand the conference over to Mr. Gujral for closing comments.

[JasbirGujral, executive]

Thank you, gentlemen, for -- ladies and gentlemen, for sparing time and having a very honest and interesting exchange of ideas. I close with the comment that we in Syrma SGS, the team and everyone is very confident based on our performance for the last 4 quarters, and we are very confident that we'll continue to grow with superior margins and make India -- contribute a little bit of making India a hub for electronics manufacturing. Export continues to be one of our focused areas. And other than the mobile companies, we are one of the dominant players in export market of electronics.

This, coupled with our sort of very cautious effort on corporate social responsibility, ESG compliance we are building our organization. And I'm happy to share with you that there is a global platform EcoVadis. And we have been listed, we have gone through the survey and everything, and we have come in the top 35% companies globally scoring more than 75 percentile points, which means we are among the top 35% global companies, which are adhering to the global ESG norms. So we are very conscious of that. And all our design efforts and everything is all aimed at designing products with energy conservation in mind.

So I think exciting time. It's been almost 3 years since we listed. It has been a good drive, and we are thankful to all the investors for the confidence they have reposed in us. And we can assure you that the management will leave no stone unturned to make Syrma SGS a great valuable company. Thank you.

[Operator]

Thank you. On behalf of Nuvama Institutional Equities, that concludes this conference. Thank you for joining us. You may now disconnect your lines.