Suprajit Engineering Limited (SUPRAJIT) Q3 FY23 Earnings Concall Transcript

Suprajit Engineering Limited (NSE:SUPRAJIT) Q3 FY23 Earnings Concall dated Feb. 14, 2023.

Corporate Participants:

Ajith Rai — Executive Chairman

N.S. Mohan — Managing Director & Group Chief Executive Officer

Akhilesh Rai — Chief Strategy Officer & Director

Medappa Gowda — Chief Financial Officer and Company Secretary

Analysts:

Vijay Sarthy — Anand Rathi Shares & Stock Brokers Limited — Analyst

Aashin Modi — Equirus Securities — Analyst

Mumuksh Mandlesha — Emkay Global Financial Services Ltd. — Analyst

Ravi Purohit — Securities Investment Management Private Limited — Analyst

Abhishek Jain — Dolat Capital — Analyst

Deeksha Chugh — Premji Investment — Analyst

Gokul Maheshwari — Awriga Capital — Analyst

Resham Jain — DSP Investment Managers — Analyst

Rakesh — Axis Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Suprajit Engineering Q3 FY ’23 Investors Call hosted by Anand Rathi Shares & Stock Brokers Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Vijay Sarthy from Anand Rathi Shares & Stock Brokers Limited. Thank you and over to you, sir.

Vijay Sarthy — Anand Rathi Shares & Stock Brokers Limited — Analyst

Thanks, Dorvin. On behalf of Anand Rathi Shares & Stock Brokers, I welcome you all to the Q3 FY ’23 conference call of Suprajit Engineering. I thank the management for taking time out of this call. From the management side, we have Mr. Ajith Kumar Rai, the Founder and Chairman; Mr. N.S. Mohan, MD and Group CEO; Mr. Akhilesh Rai, Director and Chief Strategy Officer; and Mr. Medappa Gowda, CFO and Company Secretary.

I request Mr. Ajith to give an introduction review about the results and then follow it up with Q&A. Over to you, sir.

Ajith Rai — Executive Chairman

Good morning to you all. Thank you, Vijay. I appreciate all of you joining our Q3 results conference call. Thanks to Anand Rathi and the team. They have been able to interact with you over the years and that continues.

As usual, I would request our team to make a short presentation on the results of Q3 and three quarters. And then, I will give a short — few wrap-up points and then we will allow the questions to come in. With that, I will first hand over to Mohan, who will talk about all the businesses except LDC and STC which will be done by Akhilesh. Medappa will cover the financial side of the presentation before they hand over to me. Over to Mohan.

N.S. Mohan — Managing Director & Group Chief Executive Officer

Yeah, thank you very much. Good morning, everybody. As usual, what I’ll do is I’ll start with an overall assessment of the market situation. And then I will move on to each one of the divisions.

Well, generally speaking, October-December quarter, we generally get hit by the year-end stock corrections by the OEMs, because they are closing their accounts at the end of their calendar year. And this is also accompanied by Christmas and year-end closures. Therefore, this is generally a kind of a quarter which is not great. However, moving on specifically to Indian market, Indian market has shown some resilience. The urban market has picked up and this is borne by the fact that the passenger car vehicles really went up very smartly. However, the entry-level segment of two-wheelers did not do well but the non entry-level segments of two-wheelers had done very, very well. That’s primarily because of some rural stress, probably. And also that we are also seeing some liquidity tightness in the market.

Moving on to China, China has come out of the COVID cold. Hello?

Ajith Rai — Executive Chairman

Yeah, go ahead, Mohan.

N.S. Mohan — Managing Director & Group Chief Executive Officer

Okay. Sorry. China came out of the COVID cold and it has started warming up a bit. It’s still plagued by supply chain issue. And particularly the Ukraine war fallout in China has also happened. This is particularly affecting the European OEMs in China like BMW, etc. Europe is reeling under inflationary pressure, coupled with high energy costs and overall general uncertainty due to war. So that’s what we’ve seen in Europe. U.S. market is hit by, we all know, unprecedented levels of inflation in the recent times and raising interest rates which they are trying to tame the inflation with, has deflating effect on the consumption. And we have seen that happening pronounced in the amount [Phonetic] of business in that market.

Now I’ll take you through each one of our business divisions. At DCD or the Domestic Cable Division, despite the muted two-wheeler growth, which incidentally hasn’t crossed the pre-COVID levels, our growth was strong. This is both on the revenue front and also on the margin front, we were pretty robust. We have been seeing some benign commodity prices but rather strangely in the last month, we have started seeing an upward swing again and I hope this will not turn into a trend. Our aftermarket fulfillment center, which is the comprehensive cable aftermarket operations and warehousing, this we are going to start operations later this month.

Moving on to the cable exports, the clouds of war, winter, energy, this has started affecting our overall business scenario. However, our consolidated sales and margin improvements is heartening. This is primarily because we have been able to get from our customers to compensate for the increased material cost. And this is coupled with also lowered shipping and container costs. So, together with this, I would like to say that our business pipeline has been pretty robust here.

Moving on to SENA or the non-automotive segment. The impact of inflation in the U.S. market, high-interest rates, tepid housing market, all these things have not helped. This slowdown is expected to continue whatever way we look at it. At Phoenix Lamps Division, the margins smartly bounced back. We clocked a double-digit EBITDA margin. We — as you know, we were testing the pricing elasticity in the Indian aftermarket, which I had been talking about it in the last few calls. And I think that has started yielding results. We have been making a few in-flight corrections which were both responsive and proactive in the marketplace. And I think we had to show this agility which we have done. This has been coupled with a laser-sharp focused cost-reduction measures at the operations and that has continued to yield that result.

We focused our attention and actions on streamlining and making our overseas subsidiaries in PLD more leaner and cost manageable. As you all know that we had two warehouses, one at Trifa and one at Luxlite and that we consolidated into one at Luxlite. We thinned down the staff at Trifa in line with the business. Now we are in the process of voluntarily winding down Trifa and these, of course, are subject to statutory and other necessary approvals. So in effect, the restructuring at Europe for PLD has gathered momentum. These restructuring actions will, in my opinion, right-size our business and also the infrastructure in Europe, and of course, bring the cost down on a long run.

So this gives you an overview as to what’s happening in our traditional business and I would want Akhilesh to fill in on the LDC and STC. Over to you, Akhilesh.

Akhilesh Rai — Chief Strategy Officer & Director

Thank you, Mohan. In LDC updates, dated 25 July 2022 and 14 November 2022, we projected improvements in profitability despite significant headwinds in Europe, U.S. and China. Despite further unforeseeable headwinds of COVID, as Mohan mentioned, and related issues in China, we have still delivered our commitment of positive LDC EBITDA in Q3. This improvement was based on operational improvements, integration synergies and share price adjustments from customers.

On an operational level, LDC in Q1 was negative a 4.5% EBITDA and in Q3, we showed a positive 3.7% EBITDA. This 8.2% improvement is significant in the automotive context and is a very impressive work from the team there. In China, we had some severe disruptions in Q3 due to the China — the COVID resurgence there, which led to a challenging environment for our Shanghai Lonestar plant. The team has done well to overcome these challenges, but we continue to see softer demand in China.

In Siofok, Hungary, the team are doing well despite the continued slowdown in the automotive market there and inflationary trends in both labor and power costs. The operations have shown improvement but select customer pricing discussions in the region are continuing into Q4. We expect these issues to be closed in this quarter. And Mr. Mohan had visited these customers in Q3 to help bring discussions to a conclusion.

In Matamoros, Mexico, the team has architected a remarkable turnaround. Both operational new improvements, group synergies and more timely customer pricing closures in the U.S. supported the team there. A strong pipeline of business is seen and the team are highly motivated to improve the business further.

At our tech center, STC, the focus has been to commercialize some of the innovative products we have developed over the last few years. Our participation at the Auto Expo showed Suprajit in a very different light to our current customers and attracted many new customers as well. The market got a clear message that while we continue to focus on our core competence of control cables, we have a strong appetite of growth beyond cable as an R&D and innovation focused organization, be it into mechatronics, mechanical systems, braking systems or electronics.

Finally, our electronics facility is scaling up production with most of the products focused on the EV segment and with the majority of India’s leading EV customers. This facility is expected to be a material contributor in Suprajit’s organic growth and profitability in years to come.

Thank you. And with that, I hand it back over to Chairman.

Ajith Rai — Executive Chairman

Medappa?

Medappa Gowda — Chief Financial Officer and Company Secretary

Thank you, sir. Good morning, everyone. The consolidated revenue, including the LDC, for the nine months ended 31 December, 2022 was at INR2,053 crores as against INR1,335 crores, previous year, recording a growth of 54%. The consolidated operational EBITDA for the nine months ended 31 December, 2022 was at INR223 crores against INR190 crores for the corresponding previous year with a growth of 17%.

The consolidated revenue, excluding LDC, for the nine months ended December 2022 was at INR1,545 crores against INR1,335 crores last year recording a growth of 16%. The consolidated operational EBITDA for the nine months ended 31 December, 2022 was INR225 crores against INR190 crores for the corresponding previous year, recording a growth of 18%.

The standalone revenue for the nine months ended 31 December, 2022 was INR1,092 crores against INR915 crores previous year, recording a growth of 19%. The standalone operational EBITDA for the nine months ended 31 December, 2022 was INR187 crores against INR157 crores last year, recording a growth of 19%.

The total Group debt level was INR604 crores against — as on 31 December, 2022, and we have a surplus cash of INR343 crores as on 31 December, 2022 in certain mutual funds. The Board has declared an interim dividend of 105% for the year 2022-’23. For further query, if any [Phonetic], you can approach me anytime as usual. Thank you. Thank you very much.

Ajith Rai — Executive Chairman

Thank you, Medappa. I think overall, what I would like to conclude is to say that we had a solid and good Q3 with solid improvements across our divisions within the Group. For the first time in many quarters, PLD has done a double-digit EBITDA margin, which has been very heartening. Domestic Cable Division has done nearly 19%, again one of the best in recent times. Suprajit Automotive plus Suprajit Europe, our original export group has done a good improvement in margins and also improvement in sales. SENA has been — LDC, as Akhilesh has mentioned, it has become EBITDA-positive in the third quarter. Overall, I would say we had a good growth and a very good improvement in margin in Q3 despite Mohan and others talking about the gloom and doom. Despite that, I think we have turned out an excellent performance. The Q4 is also expected to be fairly steady and good. We have made the comments on — in our business update.

With that. I will now let the questions to come so that we can specifically answer any of the questions that you may have. So I’ll hand over to Dorvin, the moderator, to start the questions to come in. Dorvin?

Questions and Answers:

Operator

Thank you very much, sir. [Operator Instructions] The first question is from the line of Aashin Modi from Equirus. Please go ahead.

Aashin Modi — Equirus Securities — Analyst

Thanks for the opportunity and congratulations for a decent margin performance. So sir, my first question is regarding PLD margins. So, sir, we have talked about that the gross margin over here were improved [Phonetic] by high gas prices. So if you could help us understand where are the gas prices now. And secondly, also help us understand margins of Trifa and Luxlite in the last two, three quarters and how…

Ajith Rai — Executive Chairman

Sorry, I am missing on the Luxlite. What is the question on Luxlite?

Aashin Modi — Equirus Securities — Analyst

Yeah, so I’m saying…

Ajith Rai — Executive Chairman

Hello?

Operator

Sir, the participant in the queue currently has dropped from the queue, sir.

Ajith Rai — Executive Chairman

Okay. I will answer for the purpose of others. I didn’t understand the second question on Luxlite. The gas prices have come down, but it has not gone back to the historic levels. But what our operational team has done an excellent work was improve the efficiencies within the plant to get a better margin out of the entire operations. And also, of course, we have been able to pass on some of the price increases and that’s the reason why the margins at PLD has improved. So you can go to the next question.

Operator

We have the next question from the line of Mumuksh Mandlesha from Emkay Global. Please go ahead.

Mumuksh Mandlesha — Emkay Global Financial Services Ltd. — Analyst

Hi, sir, congratulations on turnaround in LDC and Lamps margin, sir, and thanks for giving the opportunity. So we visited the Suprajit pavilion in the auto component expo and where you’ve showcased your wide range of new products such as mechanical disc brake system, electronic throttles, actuators, speedometers and seeder gearboxes. Can you highlight how has been the response to the new products, and particularly on the mechanical disc brake systems which make use of sensors and it’s 30% cheaper than a disc brake system?

Ajith Rai — Executive Chairman

Well, I think you’re right, we — in our Auto Expo, we have displayed our STC products. As I think Akhilesh was mentioning, there has been a very good response from the OEMs, both IC and EV side of it. Specifically, whether it is, MDBS, mechanical disc brake or the other products, there have been many discussions that have started now as well, some discussions were going on. All I can say is, with couple of customers, our products are under testing at this moment. So these new product development is a totally new concept and also it’s a patented concept and it takes little time, but all I’m saying is that there has been an excellent reception for MDBS, as well as other products that you mentioned. And we’re all discussing at this moment with various customers.

Mumuksh Mandlesha — Emkay Global Financial Services Ltd. — Analyst

If possible, can you share what has been the revenues from these new products this year and what is the expectation for next year with the products such as seeder gearbox exports starting soon?

Ajith Rai — Executive Chairman

See, seeder gearbox is under final tests with the customer in Brazil. So it goes through a seasonal testing. So, I think we’ll have to wait for the season to be over. I don’t really know when the season is ending, but our products are under the final round of tests in the field at the moment. That’s the ultimate decision-maker. So we are expecting certainly next financial year, the products to come into production. The volumes will depend because there are existing supplier also, how the customer will share the business is something that we are yet to negotiate. So we are now in that final stage of product approval. In terms of commercialization and the value of it, I think we will wait for some time to comment on the electronics division and our new division’s specific product revenue. All I can say is that things like digital clusters, electronic actuators and sensors are under production. There are certain levels of business, we’re still scaling up more at the moment. So, I think the next — I mean, I would say this year will go in our commercial operations to stabilize. I think then only we would like to give a comment on the numbers, so probably in the next quarterly update. But the — all I can say is that the response has been pretty good and we — as Akhilesh mentioned, it will be one of the good organic growth prospects within our Group in terms of revenue growth for the coming year.

Mumuksh Mandlesha — Emkay Global Financial Services Ltd. — Analyst

Thank you. And, sir, on the non-auto cable performance, it has been weak this quarter. Can you guide the performance expected in coming quarters? And also can you provide an update on the traction for the newer segments in the non-auto, which the company was focusing on?

Ajith Rai — Executive Chairman

Sorry, what is the next — second question?

Mumuksh Mandlesha — Emkay Global Financial Services Ltd. — Analyst

On the new segments like the power sports, medical, marine.

Ajith Rai — Executive Chairman

Okay, within the non-automotive.

Mumuksh Mandlesha — Emkay Global Financial Services Ltd. — Analyst

Non-auto, yes.

Ajith Rai — Executive Chairman

Yes, Q3 has been slightly weak. Again, this business is all for the North American business under SENA, so there has been a slight de-growth as you would see in the — for the quarter compared to last year’s quarter. I mean, U.S. markets is going through a kind of a recession. The offtake from customers have come back. We’ve been able to have a flat — more or less a flat business in the Q3, thanks to some of the new business, otherwise it would have been a significant drop in volume. But that didn’t happen. So, in essence, we are sort of managing that thing. So how will be the fourth quarter? As I said, I think also mentioned in our business update, Q4 also is likely to be slightly weak for SENA. So, I think hopefully from Q1 of next year, things should start looking better.

Mumuksh Mandlesha — Emkay Global Financial Services Ltd. — Analyst

Right, sir. Just a last question on interest costs. Any reason for the interest costs going up sequentially, sir?

Ajith Rai — Executive Chairman

See, interest rates, my friend, I think it is affecting everybody. The interest rates have gone up almost by 200 basis point compared to last year and also on a sequential basis. So that’s basically the reason.

Mumuksh Mandlesha — Emkay Global Financial Services Ltd. — Analyst

Thanks, sir. Thank you so much for the opportunity.

Ajith Rai — Executive Chairman

Thank you.

Operator

Thank you. We have the next question from the line of Ravi Purohit from Securities Investment Management Private Limited. Please go ahead.

Ravi Purohit — Securities Investment Management Private Limited — Analyst

Yeah, hi, thanks for giving me this opportunity, and congratulations on a good set of numbers. Sir, I think if you could just spend a little more time on some of the newer projects or products that we’ve been talking about and I think you just mentioned that it will be difficult for us to kind of give what kind of revenue or how much contribution they can provide next year. But if you could just kind of give us some color as to — so for example, on the current businesses, where we are doing our cables, right, a typical two-wheeler will fetch us like INR250, INR300 per vehicle from a contribution from per-vehicle point of view. Similarly, a four-wheeler will probably fetch us like INR700, INR800 per — from cables contribution. But this newer products that we are working on, what kind of change in realizations per vehicle can it kind of give us? So, in essence, does it expand our addressable market substantially from what it is today? And how does LDCs product portfolio kind of fit into that? So if you could just elaborate a little bit, it will be very helpful for us to kind of understand all these things.

Ajith Rai — Executive Chairman

Yeah, thank you, Ravi. Understood the point. I think one of the statements we have been making the last couple of quarters is that the intent of STC electronics division, all the new products, not just electronics, but also mechanical products is with the clear intent that in the next three, five years time, our content per vehicle, I’m talking about the two-wheelers whether it is EV or otherwise, will increase from the current position. The current, as you rightly said, let’s say there are INR200 four or five cables in a two-wheeler, our intent is that in next three to five years that content per vehicle should increase, that will only come from the new products.

Now just to give a comparative number, I mean, just for the sake of giving some idea, a typical, let’s say, digital cluster will cost anywhere from INR600 to INR2,000 in a EV or in a IC engine vehicles. So, even if, let us say, one or two cables come down and we have a electronics cluster or let us say a actuation lock — lock actuator in a two-wheeler which is all required in the EV, it’s like every vehicle will have it, each one of those — just actuator will be INR150 or, say, INR200. So, the MDBS is in a different league altogether, it’s much higher priced. So, these products that we are currently working on, which is commercialized, whether it is a sensor, thumb throttles, they’re all anywhere from INR250 to INR600, INR800, so each one of those products. They are much more than the collective four or five cable’s cost. So, I think that should give you the idea as to what these products will do to us in a longer-term.

In terms of what LDC brings to the table, it’s certainly on the electromechanical actuators. I think we have been working with them both ways, how we can make it, let’s say, more economically in India for them and how we can bring those technologies to India. We have been also in discussion with one or two customers both in EV space and the automotive space, how we can work with them to introduce them in the Indian ecosystem of automotive business. So that’s an ongoing process. I think it probably will take some time, but those products are very exciting for Indian markets also.

Ravi Purohit — Securities Investment Management Private Limited — Analyst

Fair point. Thank you sir. Sir, other point was, I think, Akhilesh, during his starting — in your opening remarks, mentioned about some of these products being patented. So if you could just share some insights as to when you speak of patent, is it like patents that we have registered in India, but we have — the products were from LDC or we’ve actually developed them in-house and we are kind of — so if you could just spend some time on explaining what has been our R&D progress and what kind of patents are we working towards and, over a period of time, what kind of returns you would envisage these efforts to kind of bring.

Ajith Rai — Executive Chairman

On the patent scenario, I think I’ll ask Akhilesh to answer. Akhilesh, will you give some kind of a brief on the patent situation with — at the STC?

Akhilesh Rai — Chief Strategy Officer & Director

Yeah, sure. So the STC team is now 43 — 40-plus engineers that are completely focused on R&D development. And in terms of patents, most of the products developed by STC have been developed [Technical Issues].

Operator

Sorry to intervene, sir…

Ajith Rai — Executive Chairman

I think, Akhilesh, you are breaking. We can’t hear you. Akhilesh? No, you’re breaking.

Akhilesh Rai — Chief Strategy Officer & Director

Okay, better now?

Ajith Rai — Executive Chairman

Little better, but I think still you are breaking, your…

Akhilesh Rai — Chief Strategy Officer & Director

Hello?

Ajith Rai — Executive Chairman

Maybe Mohan can give some feedback. Mohan?

N.S. Mohan — Managing Director & Group Chief Executive Officer

Yes, sir.

Ajith Rai — Executive Chairman

Yeah, please go ahead, I think Akhilesh is somewhere weak, on the STC and patent situation.

N.S. Mohan — Managing Director & Group Chief Executive Officer

No, no, not a problem. Okay, there are two portions to the question. One is on the current patents, is it LDC, or is it STC-based. Most of the patents that we — Akhilesh talked about has been completely developed in-house here in Bangalore at STC. So these are the patents that we are talking about. That I think answers the first part of the question. Second part of the question was in terms of — what was the second part? I think I missed it out. Can you repeat it?

Ravi Purohit — Securities Investment Management Private Limited — Analyst

Yeah, basically, how — over what period of time can we see benefits coming out of these — some of these patented products or some of the things that you’ve developed, right? In essence, what I’m trying to understand is, how have we kind of gone about developing these products? Is it because the customer came to us with a problem and we solve [Phonetic] them? Or we kind of developed them in-house by looking at the various products that we have already?

N.S. Mohan — Managing Director & Group Chief Executive Officer

Yeah, got it. See, it’s a mixture of both, to answer your question. There have been certain things, for example, let us say, the gearbox, where we have taken a patent on the way it is mounted and the way it is connected, etc. Now, this was an existing product and there were some issues from what was posed by the customer, therefore we addressed those issues, came up with solutions. And therefore, we took a patent on those solutions that we have provided. So that’s one category. The second category is where that kind of a product does not exist at all. It’s a complete grounds-up idea at STC telling, okay, why don’t we make something in this direction and why don’t we produce something — a product or an application in this way? So in the first one, it is obvious because it’s directed by the customer who throws a challenge at you and you come up with a solution, therefore, it becomes easy. Whereas in the second portion, taking it to the customer involves selling the concept itself, it is not selling a product. Therefore, first, you need to demonstrate your concept then proof-of-concept then go in for showing them a proto, etc. So, I think we are upping the game here within Suprajit world and I would say it’s a learning exercise as we go forward and it evolves. But we have been moderately successful in the second one already, I would say.

Ajith Rai — Executive Chairman

Yeah. I think just to add on to what Mohan said, I think for example, our mechanical disc brake is in that second segment where we thought that, okay, why can’t we come out with a mechanical disc brake system instead of hydraulic one? So that’s an entirely — our thought process is, it has been done, it has been established, it has been presented, so it has been tried out by more than few customers already. So there are both ways of looking at it, yes. Thank you.

Ravi Purohit — Securities Investment Management Private Limited — Analyst

Okay, thanks, Mohan [Phonetic], I’ll get back in the queue. Thank you.

Operator

Thank you. The next question is from the line of Abhishek from Dolat Capital. Please go ahead.

Abhishek Jain — Dolat Capital — Analyst

Thanks for opportunity and congrats for decent set of numbers despite tough quarters. Sir, first question is the cable division. So first question is from cable division.

Ajith Rai — Executive Chairman

Yeah.

Abhishek Jain — Dolat Capital — Analyst

So where margin was the same despite slowdown in the two-wheelers because of the price hike in European cable operation or fall in the RM prices? Or — and is it sustainable, as going ahead, you need to pass on the benefit of the fall in RM prices to the clients?

Ajith Rai — Executive Chairman

We hope we can be able to maintain it, but you are right to say that these price increases and material cost increases and decreases are kind of a pass-through mechanism. So certainly, we had some tailwind on that in the last quarter, but there would be some amount of saving that we’ll be able to continue to hold on and some we’ll have to pass on. Having said that, one should not go by, again, just a one quarter performance. But if you really — even if you look at the nine month performance, we are generally ahead of the previous year in terms of margin in the cable [Technical Issues]. We are hoping to maintain it. Let’s see how it goes.

Abhishek Jain — Dolat Capital — Analyst

And sir, in automotive cable business, how was the mix for the two-wheelers versus four-wheelers? And how do we see improvements in the four-wheeler business in the coming quarter?

Ajith Rai — Executive Chairman

Yeah. I think purely from an Indian perspective, the four-wheeler business side of our business has improved quite a bit because obviously, passenger vehicles have done well, whereas the two-wheeler markets have — the OEM market has not been doing all that greatly which we all are aware of. That has been offset by our ability to push more in the aftermarket segment. So that’s why the reason for growth is one is passenger vehicle and also secondly, due to aftermarket as well, where we had a very good and robust business. Globally, I think all our business is more or less is in the passenger vehicle, so that has, I believe — as Mohan was saying, it has had its own challenges. Despite that, LDC has done a decent job. So, LDC business and SAL, SEU business also has grown, which all is because of the new businesses we had. But the current business on the existing platform, the volumes have come down, but the new businesses which we have been able to commercialize is responsible for the increase in business volume and also improved margins.

Abhishek Jain — Dolat Capital — Analyst

So in global business, as the supply side issue is easing off and order backlog is very much strong in the passenger vehicle segments, so how do you see growth in the coming quarter because the most of the companies have increased their guidelines for the production in 4Q? So can you throw some more light there?

Ajith Rai — Executive Chairman

India business — passenger vehicle business is solid, there’s no question, everybody knows about it. Globally, I don’t know if anybody has really said that they’re going to increase their volumes. I think, as we know, there has been probably a minor uptick, but it is nothing material as we see it. It is still — the growth compared to, let us say, previous year in Europe and U.S. and also in China, for example, China has had a — not a very good quarter and also didn’t have a good January. So the volumes are not really growing. I don’t know whether anybody has said that it is otherwise.

Abhishek Jain — Dolat Capital — Analyst

Okay, sir. And sir, my next question is the SENA division. So, is the top line was impacted due to the inventory corrections in this quarter?

Ajith Rai — Executive Chairman

No, SENA division, as I just was explaining, I mean we had more or less a flat quarter compared to the previous year. It’s largely because the volumes have come down with some of the non-automotive customers, because generally these are all North American, U.S. intensive businesses where when there is a downtick in, let us say, home sales or whatever, whether it is the lawn mower or whether it is the tractor sales in the business in agri, they all have had some hits in the quarter and even things like power sport vehicles, which is more like in — for fun, people use it. Those offtakes have come down in U.S. and that is the reason the volumes have been more or less flat and that’s — the situation, as we said, will continue probably in this quarter and hopefully if the — if there is a clear intent — a very clear indication to the market that the interest-rate cycles have now stabilized or not likely to go up further, hopefully it will slowly recover for the next year. So, that part of the business, there is some challenges, but we have also won some new contracts. So we are saying that we still will grow next year also.

Abhishek Jain — Dolat Capital — Analyst

So as you mentioned that SENA revenue will be weak in the quarter-on-quarter basis, weak in Q4 as well. Is it Y-on-Y or quarter-on-quarter, because SENA revenue is always strong in the fourth — 4Q?

Ajith Rai — Executive Chairman

I think on a year-on-year so far in the SENA division, we had some 10%, 12% growth. End of the year also, there will be some growth, but on a quarter-to-quarter basis, there may be a flat quarter. But on a year-on-year, there will be growth and which is what we expect to continue in the next year also.

Abhishek Jain — Dolat Capital — Analyst

Thank you, sir. That’s all from my side.

Operator

Thank you. The next question is from the line of Deeksha Chugh from Premji Investment. Please go ahead.

Deeksha Chugh — Premji Investment — Analyst

Hi, can you hear me?

Ajith Rai — Executive Chairman

Yeah.

Deeksha Chugh — Premji Investment — Analyst

Right. Thank you, sir, for taking my questions. And enthused to see the turnaround in LDC as well. I sort of had two questions, one is on the commodity prices uptake. I think that was mentioned in the opening comments, that you’re now seeing some uptick there. So if you could elaborate on that one. Second is, in terms of SENA, I think the way that sort of we were looking at it is that the opportunity size is very large. So because the revenue has come down, I think that is — if you could explain that one a little bit more. The reason is, like I said that, if opportunity size is so large, the revenue should not have fallen as such.

Ajith Rai — Executive Chairman

Yeah, on the commodity price, I think till December, I think there was a peak about six months ago or whatever couple of quarters ago that had come down a little bit and it had sort of stabilized in January-February. But what we’re seeing in — sorry, in November-December. What we have been seeing in January is there seem to be some uptick in the market, particularly on the steel side of the market and also some of the other commodities like zinc, copper, etc. Is it a trend? I don’t know, honestly. We are just thinking that it is one-off things that we’re seeing and that it will stabilize. So it’s very difficult to predict the commodity prices. At the moment, we feel comfortable about it, there is a one-monthly small uptick we have seen in some specific commodities, particularly steel in last month. But we don’t know whether it will continue or whether it is a trend yet.

With regard to SENA, I think, yes, the market segments are many and we have had a running business of certain level and at least three or four of our customers’ offtakes have been significantly reduced in the last quarter, despite some of the new businesses that we have won which has come into the kitty. But the existing customers’ businesses have been dropped, in some cases, 20%, 30%, 40%. So that’s why the overall business volume has sort of stagnated or tapered off a little bit. It is — the new businesses will get into — not every quarter, I mean, we had some inputs in new business intakes, but the drop in some of the existing business have been quite significant, I think. So, overall, it has been a quarter where there has been some lower volumes compared to the previous year. I think, as I said, it probably will continue for one more quarter.

Deeksha Chugh — Premji Investment — Analyst

Sure, sir. And just last question on the China bit. I think, so January, of course, the sales have faltered. But until December, the data that we were tracking on the insurance bit from China were showing that there has been an uptick seen in December due to the COVID guidelines becoming softer there. So which is what — so I was also tracking the European auto stocks, they have also sort of performed well because of China reopening expectations and then the fact that they could do more sales there. It was interesting that you mentioned that China sales have been softer. Is it more of backward-looking or is it more like a guidance that you’re seeing that from — for at least next quarter, it won’t be as good?

Ajith Rai — Executive Chairman

I think I need to give little clarity on this. If you look at purely at China, China business, it has had reasonable numbers, I think, but there has also been exports out of China. See, people make certain products in China using our products and then export to Europe. And one particular customer, without going into the names, was producing a significant volume of a non-automotive product which was actually exports to Europe and also to Ukraine and Russia. So now that had been — had a major shift in the last three, four months. So that has had its own effects on us, to be very — more specific. And also. I think from January onwards, there has been some tempering of China volumes, whether it is a trend, I don’t know. So having said all this, I think January has been a weak month because also in January, we have this Chinese New Year, so nearly 10 days everything gets shut down. So January per se was weak, but we feel that February-March should recover reasonably well. So it is not really — we’re not giving a guidance, it is just that the position we are in, there it had some patches of this. But overall China business has been actually one of our most margin-accretive businesses amongst the LDC entities.

Deeksha Chugh — Premji Investment — Analyst

Sure, sir, thank you.

Operator

Thank you. The next question is from the line of Aashin Modi from Equirus. Please go ahead.

Aashin Modi — Equirus Securities — Analyst

Yeah. Thanks again for the opportunity. So sir, my call dropped. So, sir can you repeat, I mean, at first I wanted to understand a bit more on the PLD margins. So was it because of gross RM prices, especially cash [Phonetic] prices coming down? And also if you can throw some light on losses in the Trifa and Luxlite business, how have they been and what sort of a margin do we expect in this business?

Ajith Rai — Executive Chairman

Mohan, will you answer the PLD part of it, where we have been able to make improvements and margins have improved?

N.S. Mohan — Managing Director & Group Chief Executive Officer

Sure. Definitely, on some of the commodities, the prices kind of stabilized, but as the stabilization was happening, because it had become very expensive, we started running very focused cost-reduction programs, so wage-based reductions and those kind of stuff. Therefore, we tightened the belt to a great extent on the costs front. However, we did not keep quiet on that. We said that we should also tackle it from the price because the commodity prices have gone up. Therefore, we went to the market, be it at the OEM level or be it at the aftermarket or at, what we call as the OLM, other label manufacturers. And we requested for a price increase and we did get the price increase. Therefore it’s a — as people talk about a double engine growth, so probably this is one of the double engines.

Ajith Rai — Executive Chairman

And to talk about Luxlite and Trifa, I think we need a presence in Europe, but not at the level we had in the past or we currently have. I think lot of the packing and storing can be done out of India and shipped also. So there have been multiple internal discussion as to how to bring the cost down in the European operations. So what we have done, as Mohan was mentioning earlier, we cut down one warehouse and then we said, okay, let’s look at a year and see how the cost work out. It did bring down the cost fairly good way, we shrunk Trifa last year and I think we now look at it as a more like a front-end that is required in the Europe and that most of the things can be done here and delivered from here and with a — probably even a smaller warehouse than what we have. So with that thought process is what we have now initiated that just one entity is sufficient for us to deal with European requirements and that’s what we are trying to execute in the next one year or so, which will — certainly will bring the cost down because it will also help in reducing the number of people there, it will help in stocking and warehousing costs and things like that. So, given a year’s time, once this, what I would call as probably a final round of restructuring is done, I think that will add additional margin improvements for the overall operations of Phoenix Lamps Division.

Aashin Modi — Equirus Securities — Analyst

Okay, sir, thanks. That’s quite helpful. Sir, my next question is on Wescon. So we have offset the industry de-growth by winning new businesses. So are these new businesses margins are at a similar level? And what — I mean, if you see a U.S. inflation, if you see that impacting, so is that a pressure of operating deleverage impacting margins in Wescon?

Ajith Rai — Executive Chairman

I sort of missed your question. Can you just sort of…

Aashin Modi — Equirus Securities — Analyst

Sir, my question is regarding Wescon margins. So these new businesses which we have won, are these at similar levels? And also, if the volume is impacted in Wescon going forward, do we see pressure on margins in this business?

Ajith Rai — Executive Chairman

Not really, no, no, no. One is, yes, the new businesses are typically won at what we expect as a current decent margin for the Wescon or SENA operations. Will the reduced volume will bring the margins down? I don’t really think so. I think it’s not that there is going to be some 20% drop in the sales or something like that. We still will have a decent number. All I can say is that probably we’ll still have a double-digit margin by end of the year. I don’t see any problems in that.

Aashin Modi — Equirus Securities — Analyst

Okay, thanks, sir. And sir, my third question is regarding the order book in LDC. So, sir, what sort of a delta do we expect apart from the industry, especially in the Europe and U.S. business of LDC, considering our current order book?

Ajith Rai — Executive Chairman

See, the order book is — technically, order book based on the original estimates given by the customer should have been very, very strong, but what is happening now is that either the projects are taking off later, like for example, the launches are getting delayed, number one. So although we have won the business, but we’ve not really started the production. We should have started, let’s say, six months ago that is one side of it, and those existing businesses where the volumes have come down. Now, going forward, we still — if you remember, in the beginning of the year when we got into the driving seat of LDC, we had given certain guidances saying that we will still do about 100 million [Phonetic] or so of business next year and hopefully, end of the year, we will do a double-digit margin by at least the Q4 of next year. I think those guidelines still hold good. I don’t think we’re changing it, although, from the time when we made that comment and today, the scenario has been much worse, thanks to COVID in China, thanks to Ukraine war, and thanks to slowdown in U.S., which we didn’t really expect. But we still are holding that, that guidance is possible to achieve for the next year.

Aashin Modi — Equirus Securities — Analyst

Okay. Thanks a lot.

Ajith Rai — Executive Chairman

That is because we have won some decent new order and we are hoping that we’ll commercialize it soon enough. And some of the contract, which should have been in the pipe, we should’ve probably started now or in the next few months, will go into the production at least next year. So we are still hopeful that next year would be a good year for LDC in terms of sales, as well as margin, of course.

Aashin Modi — Equirus Securities — Analyst

Okay. And sir, lastly on the LDC margins.

Ajith Rai — Executive Chairman

Sorry?

Aashin Modi — Equirus Securities — Analyst

LDC margins improvement journey which we are there, so, sir, we — so there’s two levels, one was pricing correction and there was process improvement. So what sort of improvement can come going ahead because of pricing correction? And what sort of a journey in LDC margin do we see going forward, given that volumes could remain under pressure?

Ajith Rai — Executive Chairman

Yeah, I think in our first update, we had said, the first two, three quarters will be a negative quarters and that slowly will get into positive and go ahead and in the last quarter of next year, we will be — that has been [Phonetic] sort of — we’ll be in double-digit, that is the kind of guidance we have given. In the first three quarters, we have been declaring quarterly numbers, as Akhilesh was mentioning, from minus whatever 4.5%, we have gone to plus whatever 3.5%, a net gain of 8%, which is I think a commendable job by the team in terms of operational improvement, number one. Number two, price increases as well, that has also been responsible.

But some of the price increases, what has happened is that as I probably have said this three quarters ago that the previous management never went to the customers for a price increase. We had to start fresh after we took over. It was a bit late because commodity prices had started tapering off. So there has been and continues to be some reluctance from customers to give price increase. So some of them are still outstanding. We are still impressing on them to do it and I think once that’s all in place and the further improvements in operational efficiency has happened. And of course, hopefully, the commodity prices are slowly either stay where it is or hopefully will stay a little better or lower.

I think — the journey, we are not on a sprint race, I would say. We are on a marathon on this LDC, it’s a two-year marathon. I think so far our journey has been good. We’ve seen — despite worsening economic condition, I think our progress has been quite satisfactory.

Aashin Modi — Equirus Securities — Analyst

Thanks a lot, sir. I’ll join back the queue.

Ajith Rai — Executive Chairman

Thank you.

Operator

Thank you. The next question is from the line of Gokul Maheshwari from Awriga Capital. Please go ahead.

Gokul Maheshwari — Awriga Capital — Analyst

Yeah, thank you for the opportunity. My question is more on the medium-term. Given the portfolio now we have of the number of facilities and also LDC coming into the fold, what are the kind of discussions and engagements you’re having with the customers in order to get more business with them and how are they responding, given you have now a fairly good global presence? So if you could just give some examples and how do you see these engagements going forward in the next couple of years.

Ajith Rai — Executive Chairman

Yeah. Thank you, Gokul. I think very apt question, I would say. What has happened since the acquisition of LDC, Suprajit standalone in the past was a good cable maker, but didn’t have the, what I would call as a, global wherewithal in terms of, let us say, geographic footprint. I think with the LDC coming, we got both manufacturing, R&D, engineering and business development wherewithal. Together, I think we are a strong force. I think, Jim, our President has visited multiple customers, Mohan was there recently in Europe. He has visited multiple customers and our, of course, vice presidents of our business divisions have visited customers at various places. What has been felt very strongly by us after all these interactions is very clear. Customer wants a supplier who is financially strong, who has got the right global footprint and who has got the capability to deliver both the right engineering solutions at the right prices at multiple locations. I think when we look at that kind of a requirement from customers and it’s been the view of some of the customers who have very openly expressed is that today LDC plus Suprajit is much more than LDC separately and Suprajit separately. So they are much more comfortable with us.

Of course, pricing is an issue that they will always benchmark with multiple people and try to get the best out of everybody. But having said that, I think our ability to today to convince customers to give more business is quite easy, and I think we have been in that process now, presenting customers multiple options of deliveries, not just one plant, one customer. We have got multiple options that we can ask them to use based on their comfort or they want to derisk some country or they want to derisk a region, they want to go to a low cost, they want to get it close at home, we have all the solutions for these customers. I think that has been our strength with the LDC plus Suprajit. And I’m pretty sure that once these economic, so-called, uncertainties and wars and the COVIDs are behind us, I think we are very confident that the business momentum will pick up very significantly.

Gokul Maheshwari — Awriga Capital — Analyst

Great, sir. This is very elaborate and thank you so much. All the best.

Ajith Rai — Executive Chairman

Thank you.

Operator

Thank you. The next question is from the line of Resham Jain from DSP Investment Managers. Please go ahead.

Resham Jain — DSP Investment Managers — Analyst

Yeah, hi, good morning, sir.

Ajith Rai — Executive Chairman

Good morning, Resham.

Resham Jain — DSP Investment Managers — Analyst

Hi, sir. So sir, my question is on Phoenix. We have seen margin improvement there, but on the growth part, how are we looking at this division going forward? And what kind of utilizations we have currently? Is there a capacity constraint to go beyond certain level and how are we planning to do that?

Ajith Rai — Executive Chairman

There’s no capacity constraint. I think we have got enough capacity. As you know, the OEM side of the halogen lamp is coming down, whereas the aftermarket side of the Phoenix Lamps is improving. I don’t know whether you were in the last call, but when we took over, we had 30% OEMs, something like 70% — sorry, 30% aftermarket and 70% or 65%, 70% as OE business. That has almost flipped now. It is 70% aftermarket and 30% OEM. So the aftermarket is still strong, but of course, there is competition. There are still [Indecipherable] players from China, from Korea and, of course, domestic one or two of them who are trying to get into this market. So overall, I would say, it is now a game where we have been able to establish ourselves as a strong player, quality-conscious, capable of delivering to customers not just aftermarket, but also the OLM and direct exports. So we expect a volume growth next year for sure. How it is — it’s a market where it’s perennially dynamically changing, the OEMs are coming down, aftermarket is increasing and aftermarket has delivered a strong performance again.

So, I would say we have a situation where we are now considered a strong player, not just in India, globally. The last man standing philosophy that we adopted a couple of years is now panning out well. We are one of the last man standing strongly in this market and that had, of course, had dented some of our margins because of the competition and excess capacities in the market. Some of them has gone away, some of them are still there, some of them will go away in the next year or so. So overall, it’s a dynamic market. All I can say is that today we are lot more comfortable to say that PLD has gone through the worst times and I think we are in a fairly decent wicket going forward with a decent margin and reasonable growth. I mean growth may or may not be there or may not be great, but still I think the margin will protect us for the next few years.

Resham Jain — DSP Investment Managers — Analyst

Okay, understood, sir. Sir, the second question is on the point which you have discussed a while back on the overall organization level. So from sales perspective, I think each sales person or a business development guy can sell multiple products. So from a sales organization standpoint now, how are you — is there any change and are you relooking at the overall sales, because there can be lot of cross-selling opportunities of the strength of each of the plants globally as well as within India? You highlighted that, but just from sales perspective I was just thinking, is there any reorganization there.

Ajith Rai — Executive Chairman

Yeah. I think — Mohan, would you like to answer? I’ll also probably add on in the end.

N.S. Mohan — Managing Director & Group Chief Executive Officer

Sure. When we talk about sales, let’s bifurcate it into two portions or rather I would say three portions. One portion is the aftermarket. The second portion is the OE sales. And the third is the exports. So let me answer each one of them separately. When you talk about aftermarket, when you talk about, let’s say, cable division or electronics or Phoenix Lamps Division, the addressable market and the people — the players in these markets, by and large, are different. Therefore, when you’re talking to a dealer who is delivering cables, it may be that he’s also selling bulbs, but the high probability is he’s being soft [Phonetic], because there’s a mechanical component and a electrical component. Therefore, the kind of dealership, distributorship that you’re addressing is different. Therefore to that extent, we have kept the sales organization separate for aftermarket and it will continue to do so.

Now, I come to OEM. OEM, when you talk about it at a gross level, what you say is right, there is a cross-selling opportunity at the gross level. But when it comes to the buyer level, the commodity buyers are separate, for each one of these areas would be separate. Therefore, we will not be able to really mix it up and talk about it.

Exports is a completely different ball game and we have a separate way of handling it. Now, when you talk about cross-selling, where it matters is a strategic relationship where we, particularly at the OEM level I’m talking about, where we need to engage the top level management of the customer and then show them the bouquet of products that we have and also the potential that we have to come out with new products, jointly working with them or on our own. Now that is being addressed separately by the top management itself. Akhilesh — many a times, Akhilesh Rai, many a times, visits the customer, I visit the customer and then we engage the customers at that level and based on the requirements, we will channelize the division and the divisional sales people to go and start approaching. This is the way we are handling it and I think going forward, we need to have that right balance of having the divisional focus and hence the product focus at the OEM, but at the same time, addressing at a strategic level with the OEM customers. Aftermarket, I’ve already explained.

Ajith Rai — Executive Chairman

I think just to add to what Mohan has said, Resham, on a global level, again we have this automotive customers and non-automotive customers. We have also bifurcated that as two separate segments as there is a Head of Business Development for automotive, there’s a Head of Business Development for non-automotive, they drive under — within their own managers that they have into different segments of customers. Maybe one business manager under automotive will deal with two, three OEMs. Similarly, one manager under non-automotive guy will deal with two, three customers. And then, there will be a engineering support for them to present the case for each one of these divisions. So it’s a well structured system. We have been able to pitch it well.

And to add again to what Mohan has said, I think one of the things that we are starting to do now is to do some tech shows with some of our Indian OEMs. After seeing our tech center and our experience center and seeing our products in Auto Expo, a lot of them have showed interest in us to have a Tech Day in their campus. So one of the things that will happen in the next three, four months is that we’ll go pitching for a day with their engineering center or R&D center with our tech shows to showcase our products and let all their engineers working on different, different — as Mohan said, different engineers work in different products, even the customers, they will come during the day and see our products, what interests them and our people will be there to explain to them. That is the other way we are trying to sell our products as well, for which a lot of customers have started giving dates and we are in the process of doing these roadshows also.

Resham Jain — DSP Investment Managers — Analyst

Okay. Great, sir. Sir, the last one is on cable business. How are you seeing growth for the next two — couple of years? From where we think growth possibilities are there? Two-wheeler obviously is at cyclical low today, but is there anything else other than two-wheeler which will drive growth in the core cable business going forward? That’s it from my side.

Ajith Rai — Executive Chairman

Well, all I would say is that the cable side, as you know now, that our dependence on two-wheelers is whatever 25%, 27% from higher-90s, 10, 15 years ago. So the dependence itself has come down. So what we are driving now is how do we drive our growth in the non two-wheeler side in terms of automotive, in terms of non-automotive, in terms of aftermarket. I think that is where the cable division will drive its business, not just in India, globally. That is one-side effect. And within OEM, as we have said, there could be — my view is that — I may be wrong and I hope I’m wrong, that the numbers that we saw some 2018, ’19, whatever 23 million, 24 million, 25 million two-wheeler may never be produced in India for a long time. So we have foreseen this five years, seven years ago and we have been derisking that — our business from two-wheelers and we’ve done it successfully. So now within the two-wheeler which is, let us say, 25% of our business, how do we further do a derisk? That’s where STC and our electronics division and our — some of the new products are coming into picture.

So overall, we are quite confident that the cable division will grow nicely not just for two, three years, much more than that because the kind of traction we see in LDC or in the non-automotive space or automotive space of our own Suprajit Automotive and Suprajit Europe is pretty, pretty strong. So, global customers, OEMs have accepted us as a true global supply chain partner. There is nobody else of that stature in the past, they didn’t have the comfort and confidence. I think we have been able to deliver that to them. So, I would see a good uptick in our volumes in cable business itself. And of course, the rest of it will follow as we go forward.

Resham Jain — DSP Investment Managers — Analyst

Okay, sir, thank you, all the best.

Ajith Rai — Executive Chairman

Thank you. And I think, moderator, I think it’s already 12 O’ clock, we’ll take maybe another one question.

Operator

Sure, sir. We have one participant in queue at the moment. We have Mr. Rakesh from Axis Capital. Please go ahead, sir.

Rakesh — Axis Capital — Analyst

Hi, thank you so much for taking my question. Sir, just one or two bookkeeping questions I had. So what is the reason for your other income declining this quarter? I know it was high in last two quarters, but was there any one-off which you can highlight here?

Ajith Rai — Executive Chairman

Medappa, can you explain other income coming down?

Medappa Gowda — Chief Financial Officer and Company Secretary

Other income for the quarter?

Ajith Rai — Executive Chairman

Other income has come down, he’s saying. Is it ForEx or is there something else?

Medappa Gowda — Chief Financial Officer and Company Secretary

It’s basically ForEx, yes.

Ajith Rai — Executive Chairman

Yeah. I think it’s the ForEx. We have mark-to-market. This is what is the reason I think.

Medappa Gowda — Chief Financial Officer and Company Secretary

On forward contracts.

Rakesh — Axis Capital — Analyst

What would be the quantum of it? I mean the ForEx loss?

Ajith Rai — Executive Chairman

Medappa, you have a number? Or you can tell them offline.

Medappa Gowda — Chief Financial Officer and Company Secretary

We’ll provide later on.

Ajith Rai — Executive Chairman

Yeah, you can contact Medappa. I think that is basically on the forward contract hit I think.

Rakesh — Axis Capital — Analyst

Okay, okay and just one more question, sir. If I look at your consol minus standalone numbers, your other expenses have also moved up sharply, Q-o-Q itself like 16%. So is it largely due to energy prices or anything — any color over here?

Ajith Rai — Executive Chairman

Yes, power in Europe has gone up, so has in the U.S. also I think. But there could be some other — I won’t be able to answer clearly. I think maybe Medappa can clarify later on, but certainly power is one of the cause.

Rakesh — Axis Capital — Analyst

Okay, sir, thank you, sir. Thank you so much.

Ajith Rai — Executive Chairman

Thank you. Thank you, all. I think, from us, that would be the last question we’ll take. I’ll hand over and once again, thank you for the interest in Suprajit. We appreciate. If there’s any more questions that you may have, you can always contact Medappa or our secretarial department and we’ll be able to — happy to answer any of them. With that, I’ll give it back to the moderator and thank Anand Rathi once again for hosting this con-call. Thank you.

Operator

[Operator Closing Remarks]