PERMANENT MAGNETS LTD (PERMAGN) Q4 FY23 Earnings Concall Transcript

PERMANENT MAGNETS LTD (NSE:PERMAGN) Q4 FY23 Earnings Concall dated May. 19, 2023.

Corporate Participants:

Sharad Taparia — Managing Director

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

Unidentified Speaker —

Analysts:

Sayam Pokarna — TIL Advisors Private Limited — Analyst

Ananth Shenoy — — Analyst

Pritesh Chheda — Lucky Investment Managers — Analyst

Pratik Jain — Solidarity Investment Managers — Analyst

Dhwanil Desai — Turtle Capitals — Analyst

Aman Vij — Astute Investment Management — Analyst

Manan Poladia — MKP Securities. — Analyst

Unidentified Participant — — Analyst

Sanjay Kumar — iThought PMS — Analyst

Ankit Gupta — Bamboo Capital — Analyst

Analyst — — Analyst

Keshav Kumar — RakSan Investors — Analyst

Ashit Kothi — Almondz Global Securities — Analyst

Rahul Jain — Credence Wealth Management — Analyst

Vaibhav Badjatya — Honesty and Integrity Investment — Analyst

Nagraj Chandrasekar — — Analyst

Raman Gupta — S Fintech — Analyst

Rajat Setiya — iThought PMS — Analyst

Vikram Sharma — Niveshaay Investment Advisory — Analyst

Vinay Bagri — GD Bagri — Analyst

Vivek Gautam — GS Investments — Analyst

Rohit Balakrishnan — iThought PMS — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Permanent Magnets Limited Q4 and FY23 Earnings Conference Call. [Operator Instructions]. Please note this conference is being recorded.

I now hand the conference over to Mr. Sayam Pokarna from TIL Advisors Private Limited. Thank you and over to you Mr. Pokarna.

Sayam Pokarna — TIL Advisors Private Limited — Analyst

Thanks a lot, Vikram. Good afternoon everyone and a very warm welcome to each and every one of you. Thanks for joining the maiden earnings conference call of Permanent Magnets Limited. The investor updates and presentation have been already submitted to the Stock Exchange, in case someone wants to be added to the mailing list. Please feel free-to reach-out to us.

To take us through today’s results we have from the management team Mr. Sharad Taparia, Managing Director; Mr. Sukhmal Jain, Senior Vice-President and Chief Financial Officer. We will be starting with a brief overview on the company’s performance for the quarter and for the whole year. Followed by answers to some pre-registered questions received from the participants and the Q&A session. I would like to remind you all that, anything and everything that is said on this call that can be — that represents any outlook for the future, which can be construed as a forward-looking statement must be viewed in conjunction with the risks and uncertainties that we face. These risks and uncertainties have been detailed in our annual report.

Over to you, Sharad sir.

Sharad Taparia — Managing Director

Yes, Thank you, Sayam. Good afternoon and I welcome you all to the Quarter Four and Financial Year 2023 earnings call of Permanent Magnets Limited. Thank you all for taking out the time to attend this call. It is a pleasure to address you all today and [Technical Issues] you through our performance for the quarter and for the full financial year. As you would have already seen from the financial performance, Financial year ’23 has been a good year for the company. We reported our highest-ever top-line for the year, which stands at INR188 crores. It is up by 41% as compared to the previous year. The profit-after-tax stood at INR30 crores which is an increase of 56% over the previous year.

On the balance sheet front, we did witness some increase in the working capital cycle primarily on account of higher inventories and receivables and this was mainly due to the higher lead times for raw-material and a few overdue amounts by our customers as on March end. We now come to the operational updates. There have been two primary reasons for the growth in financial year ’23. In our electricity meter operations, we were able to secure higher wallet share in one of the decent sized product categories from one of our existing customers.

Secondly, we saw good demand scale up on the automotive front. We added some new customers on the EV platform, while demand from the existing customers also scaled up. Coming to upcoming manufacturing facility, we — things have been a little slow there, mainly due to the delays in-land acquisition. We are now expecting a closure on this front in a few months post which we will begin the civil construction work at the site.

Nonetheless, the company has been investing in-plant and machinery at the current location, which we intend to ship to the new plant once it is setup. We expect that the upcoming facility will take about two years from today but we are geared to cater to the increase in customer demand from our existing facility, and if need be we will lease-out additional space nearby to the existing operations. So this delay I understand will not have any impact on our ability to service the growth opportunity that we are getting.

We also signed a nonbinding MOU with Quadrant International. And at this stage, I can say that the opportunity we are exploring is quite interesting and it has the potential to be an alternate supply-chain globally, which many companies are looking for. Going forward the company continues to work on it’s laid out strategic priorities including adding manufacturing and technological capabilities, working towards moving some components, towards modules in some product categories and exploring additional growth drivers.

Now I would like to open the floor for questions.

Questions and Answers:

Operator

[Operator Instructions]. We also got questions on email, sir, would you like to read-out the questions and answer them initially and then we’ll take the online questions.

Sharad Taparia — Managing Director

Yes, yes. First, regarding a question from Mr. Anand Shenoy. And I will read-out is he there on the call. I will read-out is questions and the answers.

Operator

Yes sir, please go ahead, Mr. Shenoy is listening to the call. Thank you.

Sharad Taparia — Managing Director

All right. So the first question is, can you please update about your key segments energy maker automotive gas meters on FY 23 and Q1, and what was the growth driver in financial ’23? How is this mix likely to change in the next few years?

Our growth driver for financial ’23 was both in automotive and energy meters both segments we have uploaded a presentation and as you can see FY23, 32% of the sales came from automotive segment which was 25% last year and 45% of the sales came from energy meters, which was 38% last year. So both the segments have grown. In the next two-three years, it really depends on the product mix, how this will move, but we do expect EV segment to grow more since worldwide this segment is growing pretty fast.

And then next question was how much sales in the EV –in the automotive is EV versus non EV. Approximately 85% to 90% of the sale is towards EV’s in the automotive segment.

And the next question is about the client acquisition over last one year. How many new clients the company added. We’ve added approximately 15 to 20 new clients, among these three are larger — companies which are larger in size. Next question is, how do you see visibility in automotive segment over next two -three years. How are the existing relationships scaling. So business in this segment will grow existing relationships are scaling well, I can say.

The next question is, can you please talk about new key products we have developed in the automotive space and potentially. Mostly all our products are customer designed products. Once the customer share the design, we give inputs to improve that design based on the manufacturing requirements and this alteration goes back-and-forth a few times, so answer to that question is most products are customer designed. We are also exploring possibilities in alloy business, which can be a growth driver for future.

Next question is — you have mentioned in the past GM, that some of the orders could be larger in size in this segment. Since we have not executed large size projects, what preparations are you making in terms of team size, process, hiring, manufacturing so that we can sail through an execution of large projects. I can say that we are routing the suitable resources to execute large projects, we do not — we don’t see a problem in providing resources or larger projects also. There is no bottleneck as well. Yeah we are doing the suitable hiring. already new plant we are doing work on that. The required capex is being planned. So based on project-to-project, we are planning that. Next question, you had mentioned in the past that our pipeline is strong and once the product goes commercial, we could see growth. How is the pipeline now? The pipeline is growing well. We have now a system in-place to track each project and each stage and the pipeline as a whole. So based on this we are now able to track each project very well and the pipeline at each stage very well. And it is giving us a better visibility and the pipeline is growing well. Next question is how many products— projects, do we have in the pipeline? I would now like to say any particular number here but that number has increased substantially compared to last year. Next question, last year you mentioned about 200 projects in the pipeline. How was this change up? So this I would not like to again give any number, it has increased substantially. Next question. what is your expectation visibility of a few projects going commercial in FY24, ’25, ’26. Each of our project has a different start-off project given by the customers. Some are two years, some are one year and depending on project-to-project. So few projects will go commercial in these coming three years, that is our expectation. What are the forward integration plans of company to modules and plans for integration of new products? So the company is showing these — the capability of manufacturing modules to our customers. And so, therefore, hopefully we will get more business from modules in future. Our plan — already we are doing forward integration into modules. So we are in that direction. Next question is, have modules sales started for the company? How much sales of modules in the last year? So we have done INR2 crore of sales in FY23, it is still a very small amount of sales. Once we have larger projects there, the sales will increase. Next question is how do we see this in FY24 – ’25? I can say it is expected to increase, but I cannot give you any particular numbers. What is the opportunity size in the module that we have developed? So see different modules have different values, if it’s a large-size module, it has a bigger value. So it depends on the complexity and the application. So we cannot give an overall total opportunity size of the modules. Next question what are the pipeline projects in modules? There are multiple projects of modules and we are going along. We are getting more-and-more inquiries for modules. It is a forward integration for our company. Next question, what is the competitive landscape in our product range? Who are the key competitors in domestic and global markets? Given that there is good demand for our products, have you seen any new competition come up? Our products are mainly customized products, it’s not a single product. Each product that we make we supply to a single customer. We don’t supply one product, which is made for one customer to another customer. Because we are bound by agreements. So there are no fixed competitors in this business, but the few companies that are there, would not like to name them, but they are mainly located — mainly they are located in China, Europe and USA. So the next question automotive export versus domestic sales mix in financial year 2023. It was about 35% domestic and 66% exports. Automotive,

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

Yeah.

Sharad Taparia — Managing Director

Next question, you mentioned you are supplying parts also transformers used in charging stations. Can you talk about success in this project? Last year, you mentioned about this project, how has this changed?

This application is in research and development phase. We have not done any sales for this. Our customers are also developing and we are helping them to do this development. Maybe this year some production — some projects may materialized and we may start some sales.

Next question, last year you had mentioned that Hi-Perm is 50% and Shunt 30% magnet assembly put together 20%. Can you talk about applications of these, which segment each technology goes into?

So, revenue-wise, the percentage is almost similar as last year. And applications are again in the same automotive and

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

Energy meter

Sharad Taparia — Managing Director

Energy meter rather are the biggest.

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

Two applications

Sharad Taparia — Managing Director

Next question. Can you talk about new capabilities over the last years?

Mainly, the new capabilities that we have developed is casting related technologies. We have developed, stator and rotor manufacturing, which is — it goes into a motor. It’s a heart of motor. We also developed capabilities in high-speed stamping which are parts required in the motor and laminations.

Next question, how much revenue comes from CT Technology? What are the applications? Approximately INR10 crores and the main applications are as LTCT, energy meters, these are the main applications.

And the next question, 30% of sales is coming from shunt, how is it different from what Shivalik Bimetal does? How are — they are suppliers? Can you please explain the supply chain in shunts?

Shivalik Bimetal is our supplier and we use their material, and we make assemblies, which are customized as per customer requirements from the shunts.

Next question, how is our relationship with MagLab scaling up, given that they’re taken over by another company?

This relationship has been growing well. MagLab got acquired by another company called CTS.

Then next question, the smart meter, how does the growth look over the next two, three years? Any signal in additional customers we have done in the past three years? Earlier, we had issue with chip shortage, now with that resolved, how do you see it going forward?

Here, the business is mainly coming from existing customers for different type of products. Chip shortage overall it seems to be easing out. It is still not fully resolved, but it is easing out. Outlook is good according to us.

Next question, any new customer addition, any new products or smart meters?

Yeah, there are some complementary products that we are developing. We are mainly doing current sensing, but now some more complementary products we are developing.

How is the relationship with Itron scaling, are we developing any new products for them?

So PML is — has been selected as the preferred supplier to Itron and we are getting many other inquiries for some other products from them.

Smart meter side, export versus domestic?

So 80% is export and 20% is domestic.

And there are questions about gas meters. We had earlier supplying parts to electromechanical gas meters. And we are developing parts of electronic gas meters, any successes on this? We don’t have any success yet on the electronic gas meter parts. And currently we don’t have any visibility, we are working towards getting some opportunities there.

Next question is about — next question is about aerospace. So there are two projects going on in aerospace, but volumes are still not very big.

And last year — there are some questions about renewable aerospace, I’ve already answered that. And there are some questions about margins. So margins depend on the product mix, each product has a different margin depending on complexity, but overall, we expect it to remain the same.

Then there are some questions about facilities, which I’ve already answered that. We will not have any downtime due to shifting of the new facility. We will plan it well to shift and there is capacity utilization question for that. For us, the capacity is not a constraint, we can add capacity very quickly because each line is a customized line. And capacity is different for different products.

And there are some questions, one question was relating to Central Excise loan, it is still pending with Government of India.

There is a question about the revenue growth for the coming year and for FY24. We expect about — at this time, we expect about to 25% growth. So that’s our visibility today.

So this answered most of questions of Mr. Shenoy. Hope you are satisfied and let other participants also get time to ask question

Ananth Shenoy — — Analyst

Yeah.

Operator

Thank you, sir. We take the question from the line of Pritesh Chheda from Lucky Investment Managers.

Pritesh Chheda — Lucky Investment Managers — Analyst

Yes, sir. I am first time to the conference call. Just one or two basic questions. On the ferrite magnet side, usually, what is the content per car and how much do we supply car and two-wheeler?

Sharad Taparia — Managing Director

We don’t supply anything in ferrite magnets. We supply — our main magnet businesses is for alnico magnets. We don’t supply anything in the ferrite magnet segment.

Pritesh Chheda — Lucky Investment Managers — Analyst

And how much would be the content there?

Sharad Taparia — Managing Director

You are asking about content of ferrite magnet in the car?

Pritesh Chheda — Lucky Investment Managers — Analyst

Yeah, content in the car and in a two-wheeler?

Sharad Taparia — Managing Director

In the — so in the electric two-wheeler, there is practically no content, I believe. In the — generally, the motors are made out of neodymium magnets and not ferrite magnets to keep the weight very low. And in the car also, I think the ferrite magnets are not used much. I’m talking about EV segment.

Pritesh Chheda — Lucky Investment Managers — Analyst

So our supply of magnets in the car and two-wheeler is where then?

Sharad Taparia — Managing Director

No, we are not supplying any magnets. The main application that we supply for current sensing devices. Not magnets. Currently, we are — our magnet supply for automotive is quite less.

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay. The other question is, sir, you — someone asked you on the asset utilization part. Let’s say this INR33 crores gross profit that we have on the balance sheet today, INR9 crores, which you have invested for further this year, what kind of asset turn is possible on that block?

Sharad Taparia — Managing Director

Asset turn. Now, each product has a different — each product has a different capex line, so I can’t give you a general answer on the total capex. This capex whatever we have done is for various machinery, for various products. Each — some products have a much higher asset turn and some are longer. I can’t give you a general answer on that.

Pritesh Chheda — Lucky Investment Managers — Analyst

But this particular INR33 crores of gross profit is there on balance sheet can support what kind of revenues, INR300, less than that?

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

It is sufficient to cater to the near-future growth and as and when it is required, we keep on adding our capacity.

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay.

Sharad Taparia — Managing Director

Generally, generally —

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

We’re not very-high capex company.

Sharad Taparia — Managing Director

Generally, our ROCEs — I mean the asset turns generally are pretty good.

Pritesh Chheda — Lucky Investment Managers — Analyst

No problem, sir.

Sharad Taparia — Managing Director

We can’t say exactly about how many turns it can do. It depends on the material price, many other things.

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

But we recover very fast.

Pritesh Chheda — Lucky Investment Managers — Analyst

No problem, sir. And the new capex side and that MoU, so what is the new capex, the greenfield that you are trying to do, what is the spend there? And now…

Sharad Taparia — Managing Director

[Speech Overlap] Right now, we are just exploring a possibility of setting up a joint venture for neodymium facility. Depending on the size of the facility, we will have a number on how much capex we will have to do that. But that we have not arrived at a confirmed number as of now, right now exploring with them and we will soon decide on that.

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

And the land that you’re seeking, where you want to shift your plants, what is the capex there? The total capex we expect on land around INR10 crores and facility creation around INR20 – INR15 crores to INR20 crores. So total capex will be around INR25 crores to INR30 crores.

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay, sir. And my last question is on the cash-flow side. Last three years, I see a continuous deterioration in the cash-flow generation of the company, especially the EBITDA-to-cash flow conversion, because of the working capital. There is a continuous increase. First of all, why is it so that back-to-back three years it’s happening and what is the rectification or solution for it?

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

[Indecipherable] raw materials, we are very big lead times, and so all imported, so, very big lead times. Sometimes, if our customer postponed their deliver, we end up with inventory. So this we have now focused on reducing inventory and we hope current year, we will be able to achieve our target.

Sharad Taparia — Managing Director

We also in the last few years, also due to COVID there are uncertainties, and we also decided to increase that because of the high lead times.

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

And disturbance and [Technical Issues] logistics.

Sharad Taparia — Managing Director

Some of our supplies are high value items are mainly produced by very selected few companies in the world. So the lead times are very, very high.

Pritesh Chheda — Lucky Investment Managers — Analyst

This was valid even —

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

Yes.

Operator

Sir, I’m sorry to interrupt. Kindly come back in the question queue. Thank you. [Operator Instructions] We’ll take the next question from the line of Viraj Mehta from Equirus PMS. Please go ahead. Viraj Mehta, your line is unmuted. Please go ahead and ask your questions. As we’re unable to hear from the line from Mr. Viraj Mehta. We move to the next question. For the next question from the line of Pratik Jain from Solidarity Investment Managers. Please go ahead.

Pratik Jain — Solidarity Investment Managers — Analyst

Yeah, hi am I audible?

Operator

Yes, you are. Please go ahead.

Pratik Jain — Solidarity Investment Managers — Analyst

Yeah, sir my question is mostly around the shunt part, can you please help me understand specifically in two-wheeler, four-wheeler do we supply shunts just for BMS or whole as bikes, wherever it is required?

Sharad Taparia — Managing Director

No, shunts, we are supplying has as for the customer design and for BMS, right now, we are trying to enter into a module as a whole, BMS whole module, but right now it’s only shunt is a very less — the quantity of shunts for the EV application is less.

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

We are supplying to only customer.

Pratik Jain — Solidarity Investment Managers — Analyst

Can you quantify the number, how many shunt goes in two-wheeler and four-wheeler.

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

We are supplying to four-wheeler which is very less, maybe 3000 in a year.

Sharad Taparia — Managing Director

Generally, the shunt number per car will be only one probably that is what we know at this moment. Depending on the — I mean, electronics may use another, some more shunts, but the main current sensing shunt maybe less, it may not be used also depending on the customer design. It depends on the [Indecipherable].

Pratik Jain — Solidarity Investment Managers — Analyst

Sir, can I assume that it might be in the range of one-two.

Sharad Taparia — Managing Director

Maybe.

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

Maybe.

Pratik Jain — Solidarity Investment Managers — Analyst

Okay and can you help me what kind of — realization of this, like what cost do you charge?

Sharad Taparia — Managing Director

That is depending on the current carrying capacity of the shunt, if it is large, for example, a four-wheeler will require a bigger shunt and two-wheeler may require a smaller shunt. So that really depends on the size.

Pratik Jain — Solidarity Investment Managers — Analyst

All right. Any average average number you have in your mind the cost per shunt?

Unidentified Speaker —

[Technical Issues]

Sharad Taparia — Managing Director

I think maybe INR200 approximately for a four-wheeler roughly.

Pratik Jain — Solidarity Investment Managers — Analyst

Okay, and is the realization higher in export markets, international markets.

Sharad Taparia — Managing Director

You’re talking about shunt or what are you talking about.

Pratik Jain — Solidarity Investment Managers — Analyst

Shunt, shunt — just talking about shunt.

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

There is no difference.

Unidentified Speaker —

Shunt assembly that we supply for energy meters, it is higher in the — generally realization is higher in the export market.

Pratik Jain — Solidarity Investment Managers — Analyst

If possible, can you just quantify the delta. How much it will be higher?

Sharad Taparia — Managing Director

Different, different factors of shunt it is depending on meter to meter, I can’t quantify that.

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

Maybe starting from 10 rupees to 100 rupees.

Pratik Jain — Solidarity Investment Managers — Analyst

Okay, okay thanks a lot.

Operator

Thank you. Over to the next questions is from the line of Dhwanil Desai from Turtle Capital. Please go ahead.

Dhwanil Desai — Turtle Capitals — Analyst

Hi, good afternoon Sharad ji and Sukhmal Ji. So my first question is. So I think we did around INR68 crores revenue on automotive side. And if I understand you have added new clients from that segment in last two-three years, some of them are scaling up and some of them are yet to scale up, so how to we see revenue from automotive segment in next two to three years, can we — can we cross INR100 crore now given the pipeline and commercialization of the product that you already [Indecipherable].

Sharad Taparia — Managing Director

The potential is there to cross INR100 crores. How fast it can be done depends — it depends on the commercialization of the projects and start of the project given by the customer. Generally automotive customers are, they work many years in advance, so some different projects are there different pipeline.

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

We are likely to cross 100 crores in automotives.

Dhwanil Desai — Turtle Capitals — Analyst

Okay. Okay. I think you said that you are putting up a system in place to monitor the pipeline and kind of gain some visibility on the revenue side of it. So, can you at least give us sense as to — how many projects are at very early-stage, how many have gone to RFQ stage and discussion — commercial discussions and how many prototype, we can then commercialize later, at least percentage wise not accurate number.

Sharad Taparia — Managing Director

Percent — there are many number of projects and I can’t give you exact percentage but they are in various, various — various stages, so some are in lead stage, we have received RFQs, some are in price approved, some are in we are getting prototype samples, some are in designing stage, some are already won, we have already got starting — the business is starting to give you exact percentages on the pipeline.

Dhwanil Desai — Turtle Capitals — Analyst

Sir, one more question is I think on the electricity meter side, that’s been a mature and steady business for us. But you mentioned that with one of the largest customers, we are kind of exploring opportunities on lot more products. And also there is a potential of doing modules from this side. And even domestic retail side, if you can give some sense for all put together can this segment grow at 15% to 20% for next two-three years. How are you looking at that segment.

Sharad Taparia — Managing Director

Energy meter segment is growing well and PML has been perceived as a good supplier for this segment by our customers. The top three customers in the world, they are already PMLs customers. So I expect the growth to be good on the energy meter side.

Dhwanil Desai — Turtle Capitals — Analyst

And sir, last question, so I think we did this MoU with Quadrant, so, can you also — how is it that PML — I mean, the Quadrant is a reasonably a large size company, how did they approach PML, what capabilities we — they think will bring to the table and what I was reading that alternative and supply-chain that we’re talking about, but still are the — all rare earth materials and the e-shunt focus is controlled by China so how will we address that problem at the JV, if at all that happens.

Sharad Taparia — Managing Director

Firstly, Quadrant, we have a relationship for some time now. We — also they were looking for a company in India with magnetic understanding who has a magnetic understanding. So PML is well placed there. And. So they processed and we signed this MoU. Regarding the supply-chain, India has a reserve for rare earth. And but there is no — currently nobody producing the metal. We will not — our dream is to have a supply-chain from India. But we will not restrict ourselves for raw-material only from India. We will develop India also, as fully — full supply-chain right from the ore to magnets. That is the plan.

Dhwanil Desai — Turtle Capitals — Analyst

Okay. Thanks. If I have more questions, I will come back.

Operator

Thank you. We take the next question is from the line of Aman Vij from Astute Investment Management. Please go ahead.

Aman Vij — Astute Investment Management — Analyst

Good afternoon, sir. My first question was you mentioned, CT division contribution is around 5% in the sale. What was the contribution from Hi-Perm and Shunt division for this year as well as last year, roughly?

Sharad Taparia — Managing Director

For Hi-Perm, that is about — that is the same as almost the same as last year some Hi-Perm division is around what

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

Total now sales?

Sharad Taparia — Managing Director

Yeah.

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

Total sales of around 50% from Hi-Perm division and rest is from all other business.

Aman Vij — Astute Investment Management — Analyst

Sorry, Hi-Perm is specifically and [Indecipherable]

Sharad Taparia — Managing Director

Sorry, I can’t really [Indecipherable]

Aman Vij — Astute Investment Management — Analyst

Sorry — you said Hi-Perm is 50% and shunt dividend is how much.

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

Hi-Perm is 50% and shunt is 30%.

Aman Vij — Astute Investment Management — Analyst

Okay, sir and last year, the number was similar 50%/30% only. Sorry, I couldn’t hear you.

Sharad Taparia — Managing Director

Sorry, I’m not — can you repeat that.

Aman Vij — Astute Investment Management — Analyst

This year is 50%/30% Hi-Perm and shunt. What was it last year, the contribution?

Sharad Taparia — Managing Director

Similar

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

Similar last year.

Aman Vij — Astute Investment Management — Analyst

Similar okay. Sure, and if we divide it in different way like you have nicely explained it you have five revenue product platform, magnetic sensing, current sensing, assemblies alloys, and the Zamak Die-Casting, what is the mix now and versus last year?

Sharad Taparia — Managing Director

Yeah, we are not dividing the mix in terms of revenue percentage there, we are dividing in terms of applications, which is automotive, we have — and energy meters, mainly. We have not divided.

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

Mostly goes into current sensing.

Sharad Taparia — Managing Director

Yeah, current sensing, but the majority sale is in current sensing.

Aman Vij — Astute Investment Management — Analyst

And is it safe to say 60% plus is current sensing? Or 40%?

Sharad Taparia — Managing Director

Yeah, more than 60%.

Aman Vij — Astute Investment Management — Analyst

Sure sure. And sir this — the two new divisions are like alloys and Zamak Die-Casting it’s relatively newer division. So, how are these going in, where do you see this new divisions as a percentage of our sales in next three-four year?

Sharad Taparia — Managing Director

Very-very I’m quite optimistic about these divisions.

Aman Vij — Astute Investment Management — Analyst

Okay, okay. And the application that these are going to, which segment do you think will be the main growth driver in these two divisions alloys and Remark Die-casting?

Sharad Taparia — Managing Director

Alloys will be mainly –mainly special alloys, which require nickel, cobalt, these types of alloys, which are special application for tooling for Aerospace and these type of applications where people really pure Alloys.

Aman Vij — Astute Investment Management — Analyst

Sure, sir. and Zamak?

Sharad Taparia — Managing Director

Zomac has multiple applications, including automotive also consumer applications. So Zomac is an alloy zinc and aluminum. And it will it has multiple applications, not restricted to one.

Operator

Thank you we take next question from the line of Manan from MKB Securities, please go-ahead.

Manan Poladia — MKP Securities. — Analyst

Hello. Sir, am I audible?

Operator

Yes, you are. Please go ahead.

Manan Poladia — MKP Securities. — Analyst

So first of all congratulations on posting great set of numbers. Question is regarding the components to modules slides that I think your 20th slide in the investor presentation. I wanted to understand this whole product stage one-two three-four nice bifurcation that you’ve given. Could you please put some more color on that and explain where we are currently in that whole product stage cycle?

Sharad Taparia — Managing Director

See, we are moving towards modules. So what is– I am sorry, I did not understand your question exactly, what do you want to understand?

Manan Poladia — MKP Securities. — Analyst

What I want to understand, sir, currently are we just applying the Shunt assemblies, or are we at shunt plus wires or are we at shunt plus wire plus PCBL platforms [Indecipherable] — where are we in that stage and how soon do we get to — hope to get to the next-stage?

Sharad Taparia — Managing Director

So we are in the mostly in-product stage one and two and we are moving towards three and four, but in different products, we are in different stages. Some customers are already talking to us about product stage three and four. So it is not a general one single-product. For different there is different stages.

Manan Poladia — MKP Securities. — Analyst

Understandable sir. Sir, my second question is on the MoU with Quadrant International about exploring the neodymium magnets needs, so is that just go into catering to automotive, or is that going to be catering to something else as well, since there is a slide where you have written about white goods and wind turbines, ITV, ATV. I wanted to understand what we are targeting as our consumer applications?

Sharad Taparia — Managing Director

Wind turbines and electronics in the automotive are the biggest three application worldwide globally. But we are targeting currently automotive and electronics. These two are the products.

Manan Poladia — MKP Securities. — Analyst

Also sir, just one last follow-up on that, you’ve written about the global demand estimates for neodymium magnets for 2030 and 2050. We did a 119,000 tonnes in 2020, what is the current demand as well as what is the current supply if you are aware, what is the current market size?

Sharad Taparia — Managing Director

Market size, you are talking about neodymium?

Manan Poladia — MKP Securities. — Analyst

Yes, neodymium.

Sharad Taparia — Managing Director

Well, that is already are given that in the slide I think is 100 — that is about total size is about 120,000 tonnes roughly, which is going increase based on the number of EV’s. In China for example, EV penetration is much more higher and that’s going to replicate in India.

Manan Poladia — MKP Securities. — Analyst

So I meant not the demand, but what is the current supply of neodymium magnets. Is there like the supply-demand mismatch or supply equivalent to current demand?

Sharad Taparia — Managing Director

Supply is equivalent to current demand, mostly being catered by China only.

Manan Poladia — MKP Securities. — Analyst

Actually, most of capacities are at full utilization in China, would you say or is that not fair to assume?

Sharad Taparia — Managing Director

[Technical Issues] again.

Unidentified Participant — — Analyst

So I was asking sir, are the capacities in China, are the supply that is coming out of China, would you assume that their capacities are at full utilization or would you assume that they are at partial utilization and they still have space to supply them?

Sharad Taparia — Managing Director

I would assume that they are at full — near to full only utilization.

Manan Poladia — MKP Securities. — Analyst

I understood, sir. Thank you so much.

Sharad Taparia — Managing Director

They set-up quickly if they want to set-up.

Manan Poladia — MKP Securities. — Analyst

Fantastic. Thank you so much sir. [Technical Issues]

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

[Technical Issues]

Operator

Thank you. We’ll take our next question from the line of Sanjay Kumar from Ithought PMS. Please go ahead.

Sanjay Kumar — iThought PMS — Analyst

Hi sir, thanks for the opportunity. I have three questions on modules progression because some exports data you seem to be selling mostly cores and machines, if I’m right. I mean, so why are we not started selling our IoT or can modules that — although I think we have had capability since 2019 itself. I mean can you compete with someone like Melexis and become Tire-1 supplier by replacing Melexis or even CTS. Do we — you mentioned that in we sold INR2 crores of modules in FY23, can you mentioned which OEM was it. And if you want to become a Tire-1, will it affect our existing relationships with — Tire-1 relationships that we have?

Sharad Taparia — Managing Director

We are so — we are moving towards module, it takes time for the customer to test and to develop and to commercially start buying. We — Melexis, for example, Melexis is a complementary product to us, we will not be competing with Melexis. And modules each customer has a customized module, so they will, once they give us the design we have to make as per that design. So in future, I expect that we will go — we will move towards the modules and more-and-more customers will buy modules. I don’t see — see any competition from Tier-1, Tier-1 companies are making bigger assemblies and supply to main OEMs.

Sanjay Kumar — iThought PMS — Analyst

Okay can you mention that OEM that we did INR2 crores?

Sharad Taparia — Managing Director

No I would not like to name.

Sanjay Kumar — iThought PMS — Analyst

Okay, okay. Second question, sir. In FY22 annual report, you have mentioned joining material using ultrasonic welding as part of our R&D carried out. Very good news because welding was one capability that you didn’t have. Does it mean, can — we can make our own stunts and how is ultrasonic different from electron beam laser welding that Shivalik uses for its shunts?

Sharad Taparia — Managing Director

So electron beam welding is the process used to join the split together to make the strip copper magnet and copper – ultrasonic welding is a process, which is used for fowler plastics to weld plastic together. So it is two different technologies, not connected to each other.

Sanjay Kumar — iThought PMS — Analyst

But can we do that electronic beams ourselves? Can we make the shunts [Indecipherable]?

Sharad Taparia — Managing Director

No we are not doing it at the moment, we are buying the strips right now and forward integrating. It’s always an option in future, to do it, but right now, we have not done it.

Sanjay Kumar — iThought PMS — Analyst

Okay, and third question I can also see rotor and stator assemblies as a new capability in our, let’s say, does this mean we can make the complete BLDC motors or is it only subcomponents. Do we have any LOA for these motors or components? Are we close to commercialization?

Sharad Taparia — Managing Director

This is a part of the motor, but the main part of the motor and stator and rotor. It has to go into a housing, then it has to be — a PCB has to be added with software to make it work for the full motor. Right now, we are not doing the full motor, that our customer is doing. So we are pretty much supplying the main heart of the motor for — this started recently and we expect it to grow.

Sanjay Kumar — iThought PMS — Analyst

Okay, can you talk about the EV motor scenario, because I know we are looking on BLDC but someone like Sona is working on SRM,l even PMSM. My understanding is BLDC is used only for EV two-wheelers, but companies are focusing on SRM, because it doesn’t have magnet — extending magnets, so any color on EV motor situation currently?

Sharad Taparia — Managing Director

You see AC motor which do not require magnet at all. And some companies are using, but there are certain advantages to having motors with magnets, they are more — some companies that designs are more efficient, more cost-efficient that way. I think it really depends on customer to customers, but some companies don’t use motors with Magnets because they want to move away from magnets.

Operator

Thank you. We’ll take our next question from the line of Ankit Gupta from Bamboo Capital. Please go ahead.

Ankit Gupta — Bamboo Capital — Analyst

Thank you for the opportunity and congratulations for good set of numbers. Sir, my first question was on we have been telling that our product pipeline does have some projects which have an ability to turn do $5 million to $10 million kind of projects. So are we close to commercializing any of these projects in a year or so?

Sharad Taparia — Managing Director

I can’t say year, but really — some of them are pretty at a good stage. But that depends on the start of the project. Initially when it starts, it will start with low-volume and then mature over next one, two, three years, there goes higher-volume. So I can’t say that whereas this year itself we will have one big project.

Ankit Gupta — Bamboo Capital — Analyst

But there are a few projects who can scale up to $5 million – $10 million kind of sales over two, three years, which we are currently doing?

Sharad Taparia — Managing Director

There are multiple opportunities like that.

Analyst — — Analyst

Sure, the second question was on this the possibility of a JV with Quadrant International. So you spoke about mining this rare earth products, like what will we do exactly in this JV? And like what will be the capital outlay for this project, how big will this be? And related to that, we understand that there is a huge push from the U.S. government to move away from China for this particular neodymium magnets and assemblies. So like a lot of companies including Quadrant are exploring opportunities outside of China to reduce their dependence. So, any view on that and the question on the capex and what kind of investment will be required if we enter into a JV with them?

Sharad Taparia — Managing Director

Yeah, we are never — we are not going to do mining, that’s not the plan. We will do — we will buy the processed raw material and then start making metal, and then all the further processes. That is the final idea once it is done. It has to be done phase-wise, we can’t do everything in one-shot. So that is the broad thinking at the moment.

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

As we start with assemblies, neodymium magnets, then go phase wise.

Sharad Taparia — Managing Director

And then the investment capex also depends on the size of the project on how many tonnes capacity that we want to set up. We would like to start up with a smaller capacity, see the — get the feel of the market and then grow bigger from there. So it really depends on the size of the project.

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

We are [Technical Issues] to decide.

Operator

Thank you. We’ll take our next question from the line of Keshav from RakSan Investors. Please go ahead.

Keshav Kumar — RakSan Investors — Analyst

Hi, sir. Sir, you had mentioned in the past that our customers would want to stick to a single supplier like PML, because of criticality of the products and strict tolerances, performance related. So is that only valid for products where we supply magnets or magnet-based assemblies, or does that equally apply to shunt-based current sensing products, where we are procuring shunts from outside?

Sharad Taparia — Managing Director

It mostly applies to the soft magnetic materials, where it is very sensitive. The readings that they generate from current sensing devices. So it is mainly, they would not like to shift and change to multiple sources. So, mostly related to soft magnetic materials.

Keshav Kumar — RakSan Investors — Analyst

Okay. And for the shunt-based current sensing products, we might have secondary, tertiary suppliers?

Sharad Taparia — Managing Director

Yeah, that is generally — but in our line of business, we find that as we go along, we generally are okay with one single supplier. Even for shunts.

Keshav Kumar — RakSan Investors — Analyst

Okay. Sir, secondly, so we are working horizontally with many customers and we keep adding more to improve our odds of success and say, currently 90% to 95% of the business is non-commercial supplies, [Indecipherable] which is low volume, and we have very high ROCs on the current business. So, in another two to three years, say, some percentage of commercial business comes, so this higher-volume commercial business will come with better ROCs or at least in line with the current base business?

Sharad Taparia — Managing Director

[Technical Issues] line, so that we can pick and choose products, which are of good and we can have a best possible ROC. So, currently, we don’t see any, major change happening in the ROC. We are moving towards keeping it same or maybe improving, that’s the idea.

Keshav Kumar — RakSan Investors — Analyst

Sure sir, thank you and all the best, sir.

Operator

Thank you. We’ll take our next question from the line of Ashit Kothi from Almondz Global Securities. Please go ahead.

Ashit Kothi — Almondz Global Securities — Analyst

[Foreign Speech] Good afternoon, and thanks for the opportunity and congratulations to the management on good set of numbers. Also, we want to know, I think this has been our first earning release. So going forward, we hope that this would continue. And only one question which I have is, while we are exporting to China majorly, 80% of automotive parts goes towards China, if I have understood it rightly. Then that dependency can create any issue?

Sharad Taparia — Managing Director

No 80% is — of automotive is not go into China. Some of the volume is going to China, but 80%, major supplies is to Europe and USA and the final customers are mostly in Europe and USA. They may ask us to supply to some Chinese integrators. Final customers are in Europe and U.S.

Ashit Kothi — Almondz Global Securities — Analyst

Okay.

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

[Indecipherable]

Ashit Kothi — Almondz Global Securities — Analyst

So if we have to divide ever exports region-wise, Europe. U.S. and China, then how do we —

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

Region-wise, Americas, we have around 29%, Europe, we have around 25%, Asia, including India, at 46%. Out of this 46%, China, we have around 10%.

Ashit Kothi — Almondz Global Securities — Analyst

Okay, thank you sir.

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

Thank you.

Operator

Thank you. We’ll take our next question from the line of Rahul Jain from Credence Wealth. Please go ahead.

Rahul Jain — Credence Wealth Management — Analyst

Thanks for the opportunity. Am I audible, sir?

Operator

Yes, you are. Please go ahead.

Rahul Jain — Credence Wealth Management — Analyst

Sure. Thanks. Congratulations, Sharad ji and Sukhmal ji for a wonderful year, a great performance for the year and look forward to much better times ahead. I have three questions. Sir, firstly on the business side in terms of the time, like we have been observing and we have worked very hard for last 10 years and we have got into some very marquee customers on the auto as well as energy side. As typically, what we have observed on the auto side is the customer addition in last few years or last I would say last four years has been pretty good, newer customers have been added practically every year. So have we reached an inflection point where the scale-up of this customers can be really — some of these customers can really become large customers, to the extent of say what $500 million or better, how do we look at it, sir? You have alluded to this fact in our earlier interactions also and one of the previous participants also you mentioned about it.

Sharad Taparia — Managing Director

There are — the customers that we have added, they are mostly very, very big size customers, some of them. So more than $5 billion, $10 billion companies also. So a scale-up can be quite big, depending on what kind of opportunities we get with them. Even if we, even if we let’s say do not add many more new customers, even these customers have the potential to give us large businesses.

Rahul Jain — Credence Wealth Management — Analyst

So based on your discussion and the scale-up, which you have done till now, do you feel [Foreign Speech] customers can really become $5 million to $10 million in the next two years?

Sharad Taparia — Managing Director

Yeah, of course, I mean already we have some very large customers also. It is possible. It’s possible.

Rahul Jain — Credence Wealth Management — Analyst

Sure. And sir, with regards to the module, we have done INR2 crores business this year. Commercial suppliers have been done, which is commendable because we started talking about module about two years back. So from here on, how do we see the scale up? Then next year [Foreign Speech] then 20 something like that, because that initial network and initial time takes lot of time, but once you’re starting supplies, can we expect a sharp jump in the module revenues?

Sharad Taparia — Managing Director

I’m optimistic about that. I can’t give you any numbers, how much revenue we can generate, but once it starts, it will be a good business.

Rahul Jain — Credence Wealth Management — Analyst

So I’m not asking [Foreign Speech] [Foreign Speech] possibilities, there right? Hello? Hello?

Sharad Taparia — Managing Director

Yes, you’re able to hear me?

Rahul Jain — Credence Wealth Management — Analyst

Right, I was asking, I’m not seeing the revenue number for this year, but I was just trying to understand see whether this kind of scale-up from two to 10 and 20 something of this nature will happen in this kind of business?

Sharad Taparia — Managing Director

Yeah, it is possible to scale-up. That kind of number jumps because INR2 crore is nothing, a very small number.

Operator

Thank you sir, ladies and gentlemen. Given the volume of questions we will extend the conference by 15 more minutes. Please limit to two questions per participants, so that everyone gets chance. We take the next question from the line of Vaibhav Badjatya from honesty and integrity investments. Please go ahead.

Vaibhav Badjatya — Honesty and Integrity Investment — Analyst

Yeah, hi sir. So in terms of number of employees, both permanent and contractually, can you give me the number for last year basically close of FY22, close of FY23 and what we are planning to do in FY24?

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

In 22′ we had around 120 permanent employee. This increased to around 135 in FY23. And we are expecting to add depending on the opportunity around maybe around 20-25 permanent employee in current year.

Vaibhav Badjatya — Honesty and Integrity Investment — Analyst

And contractual? I mean, I’m sure most of the shop floor workers will be contractual?

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

And 350 in FY23 and we may have around — we add around 50 more in FY24.

Vaibhav Badjatya — Honesty and Integrity Investment — Analyst

Sorry FY22, how much is that. I missed the number.

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

FY22 from contractual was around 300.

Vaibhav Badjatya — Honesty and Integrity Investment — Analyst

Okay, got it. And sir, secondly just talk about moving from components to modules. So, are we I mean, I understand in electric meters — in electric meter we are supplying to the metering company so I am sure metering companies are not making modules, they have been making the whole meter but in other segment, are we competing in one-way, with our customers itself or how is going to work becasuse I am sure we’re eating into somebody else pies, so I just want to know where the pie is coming?

Sharad Taparia — Managing Director

Well, generally when the customers are designing these modules are they give us a design, we make as per that. So we are not – not necessarily that we are competing with our customers. These have come — the final customer gives us the design and we are supposed to supply our integrators. Integrator is not really our customer — customer is the final company which gives us a design. We are not competing with them.

Operator

Thank you. We take our next question from the line of Nagraj Chandrasekar from Emerge Capital, please go ahead.

Nagraj Chandrasekar — — Analyst

My questions have been answered. Thank you.

Operator

The next question is from the line of Raman Gupta from S FinTech. Please go-ahead. Raman Gupta your line is unmuted, please go ahead and ask your question.

Raman Gupta — S Fintech — Analyst

Am I audible?

Operator

You are. Please go ahead.

Raman Gupta — S Fintech — Analyst

Yeah, my question is on the two sides, one is the risk side as we are getting the magnets from Shivalik Bimetals, right. So in case, now Shivalik Bimetal itself is in a big demand right. So in case they are not able to supply the magnets to us what will be — will be our scope then? So how good we are placed. And second question is, what is the margin diversification from India as well as from the foreign, Europe or U.S. rights, so I have two questions on that part.

Sharad Taparia — Managing Director

So Shivalik does not make magnets, they supply us raw material.

Raman Gupta — S Fintech — Analyst

Sorry, Bimetal. Sorry. Sorry, sorry, the shunt [Technical Issues].

Sharad Taparia — Managing Director

Yeah, yeah. They supply us Bimetals. So what they do is they join the two metals together. There are other suppliers also for that. So we don’t have a risk. But if they don’t supply, we will not be able to make.

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

We already have identified suppliers in other countries. So there is no risk.

Raman Gupta — S Fintech — Analyst

Okay. And what about the margins from Europe, US and India?

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

Sir in Europe and America higher than India. ‘

Raman Gupta — S Fintech — Analyst

So what is the margin diversification, how much margins we are taking from the foreign countries and how much we are from domestic market?

Sharad Taparia — Managing Director

The exact margin, but those are dependent on product-to-product and complexity. Some products which are more complex have higher-margin because difficult to do and difficult to manufacture and some which are more simpler have low-margin.

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

But certainly the margins are higher in those and low in domestic.

Raman Gupta — S Fintech — Analyst

Ok sir. Thank you very much.

Operator

Thank you. We will take the next question from the line of Rajat Setiya from iThought PMS. Please go ahead.

Rajat Setiya — iThought PMS — Analyst

Hi, thanks for the opportunity. Sir, with regards to the gross margin that we had in this year — and if you look at over the last three-four years our margins have ranged from high range 47%, gross margin I’m talking about 47% to 55%, if you can just help us understand how is the outlook from here on the gross margin? and what is the expected growth?

Sharad Taparia — Managing Director

We expect the gross margins remain the same, with this kind of product mix going-forward suppose we got a very-high value — a bigger volume of product which which has more raw-material content, then those margins

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

Be less.

Sharad Taparia — Managing Director

Be less on that particular product, but generally we do not expect a major change in the margins.

Rajat Setiya — iThought PMS — Analyst

Okay sir last year, mid 50%, so you expect margins to be in that same range?

Sharad Taparia — Managing Director

The 50% is roughly the raw material cost, there is also manufacturing cost there. So the gross margin is not 50%.

Rajat Setiya — iThought PMS — Analyst

Yeah, actually I was just looking at sales minus raw-material only so yeah.

Sharad Taparia — Managing Director

Raw material is roughly 50% — around 50%.

Rajat Setiya — iThought PMS — Analyst

Okay, so you expect it would be in the similar range?

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

Maybe 1% or 2% here and there.

Sharad Taparia — Managing Director

Given our current product mix. If it’s a similar product mix similarly to be at the same level mostly.

Rajat Setiya — iThought PMS — Analyst

Sure sir. Sure, and last year I think, not sure if we had — there was one or two products, which we’re seeing decline in revenue. They are on declining trend. Do we still have those products in our portfolio, which were in structural decline, or they are completely out-of-the portfolio now?

Sharad Taparia — Managing Director

No,there is still a little bit of sale is going on for those products. For each product, that is our nature of business, each product will have an end-of-life because they are all customized products. So in the coming year also we will have some products which will go out of business and some products, new products will come in, that is the nature of this business.

Operator

Thank you. We’ll take our next question from the line of Vikram from Niveshaay. Please go ahead.

Vikram Sharma — Niveshaay Investment Advisory — Analyst

Hello.

Operator

Please go ahead, sir.

Vikram Sharma — Niveshaay Investment Advisory — Analyst

Sir, My question is I wanted to know the opportunity for smart meter like to what revenue we can earn for smart meter.

Sharad Taparia — Managing Director

Smart meter is going well, and the customers are giving us opportunities there with the new components, the products that they are developing. But it really depends on how fast they implement how quickly the chips — chips shortage situation is solved, and it depends on that. Overall the outlook is good.

Vikram Sharma — Niveshaay Investment Advisory — Analyst

And what is the value for smart meter, like any value you can give for like INR300 – INR400.

Sharad Taparia — Managing Director

No-no we are selling components for the smart meter, smart meter companies — smart meter manufacturers are our customers.

Vikram Sharma — Niveshaay Investment Advisory — Analyst

Yeah, so sir how is the domestic demand maybe regarding domestic demand is?

Sharad Taparia — Managing Director

Domestic demand currently is good sir.

Vikram Sharma — Niveshaay Investment Advisory — Analyst

And what is total opportunities size in smart meter like Indian government is targeting INR25 crores smart meters so any broad number on total opportunity size?

Sharad Taparia — Managing Director

No. We do not have any particular number. That is all published numbers of the government, government is targeting to quickly installed smart meters, but there are challenges in terms of speed of installation and the utilities, how fast they can order. And then our customers how far they can supply, but government is pushing that.

Vikram Sharma — Niveshaay Investment Advisory — Analyst

That is all that. Thanks.

Operator

Thank you. We take the next question from the line of Vinay Bagri from GD Bagri Securities, please go ahead.

Vinay Bagri — GD Bagri — Analyst

Hi Sharad, good afternoon. Thank you to Permanent Magnet team, in order to create how much money for its shareholders. I had a question in connection with your Quadrant tie-up. Can you guys hear me?

Operator

Yes, please go ahead.

Vinay Bagri — GD Bagri — Analyst

Yeah, hi, yeah, yeah, so regarding the Quadrant tie-up while I know it’s MoU. Just wanted to understand what the structure will be, you know that permanent will be the holding company and these guys will be majority partners or will Quadrant, majority partner, has there been any discussion on that?

Sharad Taparia — Managing Director

Right now, we are still under discussion. We have not decided on anything. So I can’t comment anything on that. So this evaluating the feasibility of setting up the JV, that’s our plan.

Vinay Bagri — GD Bagri — Analyst

Okay, okay, but the JV, will it be at the promoter level or will it be at a company-level or will it be a combination.

Sharad Taparia — Managing Director

We are talking only about company-level.

Vinay Bagri — GD Bagri — Analyst

Okay, great. I also wanted to understand whether Quadrant, currently continued to have the client of the company. And in case there is a JV, will that business move-out of PML you to the subsidiary or to the JV company in the sense?

Sharad Taparia — Managing Director

Right now they are not our customers. We have just been talking to them about this JV setup. We will set up a subsidiary company for this purpose. And then talk about converting it to JV if needed.

Operator

Thank you. We’ll take our next question from the line of Bhaskar from Univesto Capital. Lost the line sir for Mr. Bhaskar. We take the next question from the line of Vivek Gautam from GS Investments. Please go ahead.

Vivek Gautam — GS Investments — Analyst

Yeah, am I audible.

Operator

You are sir. Please go ahead.

Vivek Gautam — GS Investments — Analyst

Yes, sir. I have recently started tracking the company and my question, basically, this company used to be once owned by our ex-Prime Minister Morarji Desai you and his son Kanti Desai if I remember correctly. So that means a very old company, listed company and what have been the reasons, since market that didn’t move since then for such an old Company. So what has been the recent triggers behind the improvement of the company performance and the sustainability of the same. And so [Indecipherable] and second question is about the opportunity size and the CAGR that we expect? Thank you.

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

Yeah, the company was basically found by Kantilal Morarji Desai in 1960s. And then, Thaparia family took over from them in 1965.

Sharad Taparia — Managing Director

The main change has been that earlier, the company was focused on the product and now we are focused on the capability related to that product. So with that capability focus company can do many-many more products, many different areas, many different product lines that has been the main change and that is why you are seeing good growth and that is our plan to continue to increase our capability. CAGR I think I have answered earlier.

Vivek Gautam — GS Investments — Analyst

Opportunity side if you can give some highlight on that part also sir?

Sharad Taparia — Managing Director

Opportunities — so once we are increasing the capability, the opportunity I mean, the market size, we are targeting a much much larger market which we cannot even estimate the size we are a very small portion of that its worldwide market. So I can’t give a number to the market size. Because we are in a single-product, we are having multiple product portfolios all related to capabilities.

Vivek Gautam — GS Investments — Analyst

Yeah. This concall was really good sir. Please keep it on a regular basis. Lot of interesting things happen.

Sharad Taparia — Managing Director

Yes, sorry. Thank you so much.

Operator

Thank you. We’ll take our next question from the line of Rohit from Ithought PMF. Please go ahead.

Rohit Balakrishnan — iThought PMS — Analyst

Yeah. Hello. Am I audible sir.

Operator

You are. Please go ahead, sir.

Rohit Balakrishnan — iThought PMS — Analyst

Yeah. So most of the questions have been answered. Just couple of questions. So, sir, you talked about a lot of things going for us. So what are the key risks that you see from your on in your view, I mean, what are the things that can derail the things there are really going on for us, if you can just maybe highlight that. And my second question is you highlighted that you expect 20% to 25% growth even for this year. So as we scaling with that kind of growth you see possibility of margins going up from the current levels due to operating leverage?

Sharad Taparia — Managing Director

The first question the risk is mostly the global situation and global recessionary trends, if that happens, that is a risk. That [Indecipherable], other than that regular risk like ForEx, movements these are the other issues, but generally

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

We are naturally hedged — fortunately, we have[Indecipherable] and so on —

Sharad Taparia — Managing Director

Yeah. So naturally hedged position we have and other than that we don’t see any other risks.

Rohit Balakrishnan — iThought PMS — Analyst

So even in that just to sort of follow-up on that part. So we are in areas, which is — which are growing overall in terms of, like for example [Indecipherable] or even other segments like — even in segments that you’re growing you’re gaining wallet share, so filing even if the recession comes due that have been have a big impact on us? I’m sure it will have an impact, but in terms of structurally, these things are very long-term trends for our company, so I just wanted to I wanted to get a view from you.

Sharad Taparia — Managing Director

We do not expect any recession in the EV segment, if at all it happens, it may happen overall, but earlier recession we had experienced that customers delayed our purchases. They hold-on and that is what impacts the company at that time. So that risk is always there.

Rohit Balakrishnan — iThought PMS — Analyst

Sure, and the second question on operating leverage. The answer.

Sharad Taparia — Managing Director

From margin we are expecting to remain the same, with this kind of product mix. We — the whole idea of building the pipeline is to pick and choose projects which are having a reasonably good margin. I don’t expect that it’s going to increase or decrease very shortly. Mostly, my expectation is to remain at similar level.

Rohit Balakrishnan — iThought PMS — Analyst

Sure, yes. Thank you very much and all the very best. Congrats on the great numbers. Thanks.

Operator

Thank you, ladies and gentlemen, that was the last question. I now hand the conference back over to Mr. Sharad Thaparia, for closing comments. Over to you sir.

Sharad Taparia — Managing Director

Thank you all everyone for participating in the call and for your good wishes to the company. Your questions are very important to us and we as transparent as possible for our investors and we try to do our best our investor communications. If there are any unanswered questions, please do get-in touch with our Investor Relations team and they can take it forward. We hope to continue these calls every quarter or on every half year depending on timeframe, yeah. Thank you so much.

Sukhmal M. Jain — Senior Vice President, Chief Financial Officer

Thank you so much.

Operator

[Operator Closing Remarks]