Amber Enterprises India Limited (NSE:AMBER) Q3 FY23 Earnings Concall dated Jan. 24, 2023.
Corporate Participants:
Jasbir Singh — Chairman and Chief Executive Officer
Sudhir Goyal — Chief Financial Officer
Analysts:
Dhananjai Bagrodia — ASK Investments — Analyst
Dhruv Jain — Ambit Capital — Analyst
Aditya Bhartia — Investec — Analyst
Sonali Salgaonkar — Jefferies India — Analyst
Nitin Dharmawat — Aurum Capital — Analyst
Aniruddha Joshi — ICICI Securities — Analyst
Sandeep Tulsiyan — JM Financial — Analyst
Madhav Marda — Fidelity International — Analyst
Keyur Pandya — ICICI Prudential — Analyst
Rakesh Wadhwani — from Monarch AIF — Analyst
Praveen Sahay — Prabhudas Lilladher — Analyst
Abhishek Ghosh — DSP Investments — Analyst
Sandeep Dixit — Arjav Partners — Analyst
Ronak Vora — AUM Fund Advisors — Analyst
Aakash Javeri — Perpetual Investment Advisors — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Q3 and Nine Months FY ’23 Earnings Conference Call hosted by Amber Enterprises India Limited. [Operator Instructions].
I now hand the conference over to Mr. Jasbir Singh, Chairman and Chief Executive Officer. Thank you and over to you, sir.
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
Hello and good morning everyone. On the call, I am joined by Mr. Daljit Singh, Managing Director; Mr. Sudhir Goyal, our CFO, Mr. Sachin Gupta, CEO of RAC and CAC Division; and SGA, our Investor Relations Advisors. We have uploaded our result presentation on the exchanges, and I hope everybody had an opportunity to go through the same.
I hope that you all must be aware that Amber was a pure room AC play when it got listed in January 2018, with revenue base of around INR2,100 crores and finished good RAC contributing significantly in its revenues. During these four years, out of which two being COVID years, Amber has successfully diversified into four business verticals, namely, room AC and components, electronics, mobility applications and motors. I’m glad to inform you that all four cylinders are firing well and are on strong growth trajectory. Today at a higher base of revenue, finished goods RAC contribution has substantially come down at consolidated revenue.
I would now brief you about each business vertical division wise performance, including its highlight and financial performance. Room AC and Components division; in 2022 calendar year, room AC industry witnessed a change in the manufacturing landscape, wherein some of the big brands shifted their strategy from outsourcing of RAC to in-house AC assembly, with varied level of backward integration, in order to take benefits from the PLI scheme. This change in strategy of brands of in-house assembly of AC, increased the requirement of components manufacturers, and Amber is one of the most preferred choice of customers for providing component solution, with its Pan India presence in vicinity to customers.
We at Amber anticipated this shift in the industry, and therefore scaled up our capabilities for components manufacturing, which includes facilities like Chennai, Supa, Pune; SriCity area and Pantnagar. Our components business grew by 109% in quarter three FY ’23 from INR545 crores in Q3 FY ’22 to INR1,137 crores in Q3 FY ’23. Share of RAC in total consolidated revenue is going down, with increasing share of components and we expect the trend to remain so in near future. Our strategy going forward, is to maintain share of 26% to 28% in the manufacturing footprint of room AC industry. Apart from the room AC and its components, this division is also gradually gaining its presence in other segments, such as components for refrigerators, washing machines, microwave ovens, water purifiers and fans.
At industry level, room AC industry in Q3 witnessed a muted quarter. October and November ’22 witnessed lowest sales, and we saw demand picking up from mid-December ’22 onwards. We expect the summer of 2023 to be buoyant, with a strong summer, driving pent up demand. We are bullish about good summer, which begins at the end of February and lasts till the end of June. In long-term, the Indian AC market is expected to grow at a double digit CAGR. The industry will continue to focus on a new innovative health and environment friendly products, changing lifestyle along with increased affordability will fuel market growth.
As far as financial performance of this division is concerned, RAC and components for nine months FY ’23, revenue stayed at INR2,822 crores versus INR1587 crores in nine months FY ’22, representing a growth of 78%. As far as quarter three FY ’23 is concerned, it has clocked the revenue of INR1025 crore versus INR685 crore in Q3 FY ’22, a 50% growth. The growth is fueled by a strong orderbook, new customer addition and expansion in newer geographies like Chennai, SriCity, Supa in Pune and Pantnagar areas. Components division include; this division actually includes Amber PR and Pravartaka also.
I will now take you through our electronic division highlights, which includes IL JIN and Ever. This division has successfully entered into two new verticals, which are hearable and wearable, and telecommunications. We have been able to onboard marquee customers in these two new verticals, and so we expect a growth of more than 50% in this division in FY ’24.
Electronic Division revenue for nine months FY ’23 stood at INR710 crores versus INR371 crores in nine months FY ’22, a growth of 91%. Operating EBITDA margin for nine months FY ’23 stood at 4.2% versus 3.2% in nine months FY ’22. We’re also expanding the manufacturing footprint of electronic division with new facility in South India. Commercial production of IL JIN Chennai commenced in December ’22 and expect to add four new customers in IL JIN Chennai plant. It has started with one large customer right now and we expect that four new customers will be added in FY ’24, in IL JIN, South India.
As far as Mobility Application division, which includes Sidwal, the revenues for nine month FY ’23 stood at INR310 crores versus INR206 crores in nine months FY ’22, with operating EBITDA growth of 49% on a year on year basis for nine month FY ’23. Government thrust on modernization of railways is providing positive traction for this division. In fact, we have gained orders for Vande Bharat Express and new RRTS, which is going to be Delhi-Meerut new category of trains, which are going to be launched very soon.
In Indian Railways business, this division added new pantry business as a new product category to increase our wallet share within existing customers. Apart from railways, all other segments of this Mobility Division, such as metros, defense, precision air conditioning for telecom, and bus air conditioners are on a growth path. Order book for this segment stands strong at more than INR700 crores.
As far as Motor division is concerned, it is rapidly growing and for nine month FY ’23, revenues for this division stood at INR202 crores versus INR156 crores in nine month FY ’22, representing a growth of 30%. Operating EBITDA margin for nine months FY ’23 stood at 12.8% versus 10.2% in nine months FY ’22. We have also received BLDC motor approvals from few customers, and further few are in process.
The strong order book with new product addition and geographical expansion gives us visibility of more than 30% growth for FY ’23 and FY ’24. Motor Division is gradually gaining confidence with export customers and expect its export business to grow by 30% to 40% in FY ’24.
I will now take you through the consolidated financial highlights; on the revenue base, for nine months FY ’23, the revenue stood at INR3,924 crores versus INR2270 crores in nine month FY ’22, marking a growth of 73%. For the quarter, Q3 FY ’23, revenue stood at INR1348 crores, versus INR975 crore, a growth of 38%. On operating EBITDA for nine month FY ’23, operating EBITDA stood at INR271 crore versus INR163 crores in nine month FY ’22, a growth of 67%. For Q3 FY ’23, operating EBITDA stood at INR89 crores versus INR74 crores in Q3 FY ’22.
Operating margin, EBITDA margins for nine month FY ’23 and Q3 FY ’22 stood at 6.9% and 6.6% respectively. Q3 FY ’23 and Q3 FY ’22 operating EBITDA is before impact of ESOP expense and other non-operating income and expenses.
On finance, cost and depreciation; finance costs and depreciation increased to INR29 crores and INR36 crores as compared to INR12 crores and INR27 crores in quarter three FY ’22 respectively. The increase in finance cost and depreciation is largely due to capex incurred during the period and increased interest rates. With the thrust on building domestic manufacturing capabilities through PLI schemes or promotion of domestic manufacturing of air conditioners and phased manufacturing programs, the industry expects not to be dependent in the coming years on the vagaries of foreign supply chains and dollar fluctuations that affect prices and operating margins.
Thank you everyone for joining on the call. With this, I shall open for the Q&A session.
Questions and Answers:
Operator
Thank you, sir. We will now begin the question answer session. [Operator Instructions] We have the first question on the line of Dhananjai Bagrodia from ASK Investments. Please go ahead.
Dhananjai Bagrodia — ASK Investments — Analyst
Hi sir, can you hear me? Hello.
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
Hi, good morning.
Dhananjai Bagrodia — ASK Investments — Analyst
Hi sir. Wanted to ask you how many units of room AC would have been sold in Q3 this year and versus how much would be last year?
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
Well, we are, we have stopped giving the volumes for the room air conditioners because the strategy is now value based proposition in the complete manufacturing footprint point of view. And in past we saw that this volume was picked up by our customers and it was treated as a very you know, tool to negotiate further. So this has become a company sensitive information and we will not be able to provide you any further information on this.
Dhananjai Bagrodia — ASK Investments — Analyst
Any breakup between room AC and room AC components?
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
Room AC and room AC components? Yes in nine months if you see, out of total INR2,822 crores, INR1,137 crore is the components.
Dhananjai Bagrodia — ASK Investments — Analyst
Sure. And sir your capex split for INR400 crores, what would that split be between?
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
Please say that again?
Dhananjai Bagrodia — ASK Investments — Analyst
For your capex of INR400 crores, what would the split be between which divisions?
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
No, no. Our capex will is not INR400 crores. In fact because of the strategical shift of brands going in-house, we took a very aggressive stand from the long term perspective and we increased our capex by putting up four new facilities in this year and the capex will be beyond INR600 crores, close to about INR625 crores to INR650 crores. This is because we have not only brought in a greenfield facility in SriCity, plus we have added three new plants in Chennai, Tamil Nadu, which was not anticipated earlier, that is for components of heat exchangers, injection molding machines, for copper tubings, electronics, PCBAs and crossflow fans and compressor parts for refrigerators. So all these new additions have been from the aggressive point of view and that’s why the capex will stand about to be — in tune of INR625 crores to INR650 crores range.
Dhananjai Bagrodia — ASK Investments — Analyst
Sure. And sir last question…
Operator
Mr. Bagrodia, we request you to kindly come in the queue for follow up questions.
Dhananjai Bagrodia — ASK Investments — Analyst
Okay, sure. Thank you.
Operator
Thank you. We have the next question from the line of Dhruv Jain from Ambit Capital. Please go ahead.
Dhruv Jain — Ambit Capital — Analyst
Thanks for taking my question, sir. Sir, I had a question on the standalone gross margin. So we’ve seen a very sharp decline there. So if you could just point out, you know, what’s the reason for that and how should we think about this going forward?
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
So the standalone margin is hit — in the percentage terms, it is hit by — because of our new facilities which have been onboarded within this year, due to the expenses which has come up. From quarter one onwards you will see it improving, because now the all the new plants have started commercial production.
Dhruv Jain — Ambit Capital — Analyst
But I was talking about the contribution margin specifically, is it because we’re doing a lot more components in the standalone business?
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
So there are three things which have got added. One is components of course we have added, and within the components we have also added subassembly businesses, which are at little less margins, because that is kind of a pass through entity where customers ask us to add on couple of more components and give us — it is like bought out items which are added on to our components and then sold to the customers. So that’s the reason where we don’t get complete 8% to 10% of EBITDAs on those kind of pass through things, that’s why the percentages will look a little bit lesser as compared to them. But as far as the components are concerned, we enjoy the range bound of 8% to 10% margins.
Dhruv Jain — Ambit Capital — Analyst
Sure and sir I had a question on…
Operator
Mr. Jain would request you to kindly come in the queue for follow up questions. We have the next question from the line of Aditya Bhartia from Investec. Please go ahead.
Aditya Bhartia — Investec — Analyst
Hi, good morning, sir. Sir my first question is on the electronic segment, wherein you mentioned that we are anticipating the over 50% growth next year, and within which we have added wearables and hearables variables as well as telecom. We just wanted to understand what proportion of growth is coming from AC business related electronics and how much is coming from telecom and wearables and hearables? And within that, would we be getting the benefit of telecom PLI theme and which are the customers that we are working on the telecom side?
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
Aditya, the AC contribution is growing at around about 25% to 30% in that division. We’ve successfully onboarded many customers from room air conditioners front, both in OEM as well as ODM category. In OEM we are assembling the PCBAs as per their design and in ODM we are giving our own designed PCBs. So both are both strategies are moving forward giving us a positive growth for the PCB assembly for ACs towards 25% to 30%.
As far as the telecom and hearable and wearable is concerned, we are — I think that that’s pretty much on the growth path. These are new customers which we have added — new business verticals. I believe the major chunk of growth will come from all the three factors, because not only air conditioners in consumer durable and home appliances, we have now onboarded the customers for fans, customers for microwave, refrigerators, washing machine. And on hearable and variables, we have started smartwatch assemblies plus the PCBAs for that. And telecom we are doing price equipments, such as OMPs and [Indecipherable]. So those are the kind of diversified portfolio electronic business has built up.
Aditya Bhartia — Investec — Analyst
And who could be the customer sir, for wearable, hearable? I remember your earlier spoken about…
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
Again, we will refrain giving any customers; name, because it’s a company sensitive information.
Aditya Bhartia — Investec — Analyst
Understood, understood.
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
These are large customers. I can only tell that.
Aditya Bhartia — Investec — Analyst
Okay, sure. And the idea is to deal with…
Operator
Mr. Bhartia, for follow up questions, request to kindly come back in the queue. Participants request you to kindly restrict your questions to two per participant.
We have the next question from the line of Sonali Salgaonkar from Jefferies India. Please go ahead.
Sonali Salgaonkar — Jefferies India — Analyst
Sir, thank you for the opportunity. Sir my first question is regarding the industry restocking level. What are the trends in restocking that you are looking at, after the implementation of the new BEE norms and what is the current channel inventory that we can talk about? Plus what is the price hike that we will be taking for the new models, and whether it will be margin accretive or not?
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
Well, as far as the price hike is concerned, all of the brands have already taken the price hikes in the market. You would have seen that the air conditioners’ prices were increased — have already got increased by INR1200 to INR1300 because of the BEE table change. And as far as the inventory levels are concerned, industry was quite optimistic for quarter three, which ended up to be a very, very muted quarter for industry. October and November, hardly any sales, and then mid of December onward we saw the sales coming up for finished goods room AC, and both primary and secondary.
Inventory levels is very — it is completely at a varied levels, with some of the brands sitting still at very high inventory levels, but some of the brands are not having that inventory and their sales is moving pretty well. So there’s no thumb rule which everybody is following, everybody is at a different level on the inventory side.
Sonali Salgaonkar — Jefferies India — Analyst
Understand. Sir my second question is, is regarding what is your net debt level as of December versus September and also about the capex, just wanted to clarify, the INR625 crores to INR650 crores you’re expecting in FY ’23, right, so what about your expectations in ’24?
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
So on the capex front, Sonali, we will be doing about INR625 crores to INR650 crores this year. But next year our capex is going to be around INR250 crores to INR275 crore maximum. As far as net debt levels are concerned, today we are sitting at about INR900 crores of net debt level. Whereas we expect to close the current financial year in approximately INR450 crores to INR500 crores range.
Sonali Salgaonkar — Jefferies India — Analyst
Okay. So how will you pay down the debt sir? I mean, is there seasonality to that or because that’s just one quarter…
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
So basically, because the season starts, and you know we start getting our payments from customers. Right now, because of the inventory built up, the debt looks high.
Sonali Salgaonkar — Jefferies India — Analyst
Got it. And this capex…
Operator
Ms. Salgaonkar, we request you to kindly come back in the queue for follow up questions.
We have the next question from the line of Nitin Dharmawat from Aurum Capital. Please go ahead.
Nitin Dharmawat — Aurum Capital — Analyst
Yeah. Thank you for the opportunity. Sir, you mentioned about you know telecom sector and some 5G equipment manufacturing. So can you elaborate that and if we have done any foreign collaboration for that? That is what first question. Second question is, what is the peak revenue that we are anticipating with the current capacities that we are having?
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
So in the telecom sector, we have not done any joint venture or transfer of technologies. This is a pure OEM play which we are offering, because we are a diversified PCB assembly. In telecom, you normally use multi layered PCB assemblies, and we have that capabilities and because of our geographical presence, in India we got this order because the customer wants it both South India and North India. And currently, we have started with the equipment such as BBU and RRH and you know some antennas plus VONT [Phonetic] devices. So these are all used in the 5G equipment, which is basically delivered by other big companies.
As far as the capacity of revenue is concerned, all the divisions are at different capacities. Today, if we see about the gross block, I think we can easily go to five times of the gross block of what we have today, as a peak kind of revenue base.
Nitin Dharmawat — Aurum Capital — Analyst
Okay. Thank you so much.
Operator
Thank you. We have the next question on the line of Aniruddha Joshi from ICICI Securities. Please go ahead.
Aniruddha Joshi — ICICI Securities — Analyst
Yeah, thanks for the opportunity. Sir on Ever and IL JIN, the margins are far lower than the PCBA players that we see, which are recently listed or otherwise in the market. So at current level of EBITDA margin of around 4% odd, and the working capital, do you see these businesses generating return ratios in excess of cost of capital? And when do we see the margins improving in this? Secondly, can you also elaborate a bit more on the export strategy, which you had spoken in earlier concall also, and any update on that? And lastly, the tax rate is higher than 25.5% in nine months, so what should be the guidance for tax rate for FY ’23 as well as FY ’24? Yeah, thanks.
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
The tax rate is basically because of the MAT. I think I’ll leave that question for Sudhir to answer and then I’ll answer your other two questions.
Sudhir Goyal — Chief Financial Officer
Yeah hi, so as you know that — earlier it was also discussed that we have a MAT credit available, because of which we are not moving to the new tax regime, which is at 25.17%. Actual cash tax outflow for the — Amber Enterprises on standalone, I’m talking, is around 17%, balance will be utilized through the MAT, and once we utilize the MAT Credit, which is to the tune of INR35 crores to INR43 crores, then we’ll go to the 25% tax rate.
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
And now answering your margins on the IL JIN and our subsidiaries we are in the range of 4%, 4.5% business. So we have businesses in this division from 3% to about 6.5%. Largely if you see the consumer durable and smart hearable and variables are in this range only. Even if the peers would be comparative. Auto and industrial and defense is at different level, which we are not into right now. So going forward in a long term strategy, yes, we do have plans to enter into those segments, which will help us to increase our margins. But however even at the lower margins of 4.5% odd EBITDA levels where we are, the return on capital employed of this division is above — close to about 23% right now. And it will enhance going forward because the capex requirement is not more, but whereas we are expecting a growth of more than 50% in this division.
As far as the export strategy is concerned, we have two from the export strategy, one is on the components and the second is for the finished goods. On components. As I highlighted during my call, that we are expecting in the motor division, which is already exporting right now. We expect the export business to grow by 30% to 40% by FY ’24. And for the finished goods, we are at the stage of almost approvals — getting approvals from some customers. First milestone was to get the products ready for those geographies. Second was to get the clearance of the BEE norms, because this is a regulated product by every country. So those two milestones in three basically finished goods category we have received and now we are endeavoring our foot in the door strategy. These customers have been buying from almost about 25, 30 years from China and Thailand. So first of all, we must have the foot in the door with small volumes, which we expect to demonstrate by FY ’24. And then the gradual share of business will start happening from FY ’25 onwards.
Aniruddha Joshi — ICICI Securities — Analyst
Okay. Thank you. Thank you sir.
Operator
Thank you. We have the next question from the line of Sandeep Tulsiyan from JM Financial. Please go ahead.
Sandeep Tulsiyan — JM Financial — Analyst
Yeah. Good morning. Sir, my first question is regarding all these new investments that we have done in the new capacities. What is the broader capacity or the average utilization at which we are operating, probably where you expect to end FY ’23 and where do you expect this capacity utilization to get ramped up by FY ’24?
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
Well, the new plants have just begun, so the capacity utilization will be somewhere in the tune of 25% to 30% only and by next year we should have about 50% of capacity utilizations in these new plants. All the divisions are at a different capacity utilization levels. So I think looking at the complete balance sheet of capacity utilization will not be a right approach, because electronics is at different capacity utilization, motors is at different — in motors case if I speak, we are sitting at right now 50% of capacity utilization in FY ’24. We have just shifted the motor plant to a new factory. So we have decent capacities there.
In Sidwal, we are sitting at a capacity utilization of almost 65% to 70%. And in room AC and components, as we have just begun, the new plants are at 25% to 30%, the old plants are running at 75% to 80%.
Sandeep Tulsiyan — JM Financial — Analyst
Got it. Second question is sir bookkeeping, if you could also share the gross debt number at the end of 3Q and also the forex loss and ESOP number if any in 3Q that you have provided?
Sudhir Goyal — Chief Financial Officer
Yeah, hi. So gross debt as in 31st December is INR1,350 crores. Total ESOPs extensive in the nine months is INR19.9 crores and there is a forex loss, which largely happened in the quarter one, but overall it is INR32 crores in the nine months at group level.
Sandeep Tulsiyan — JM Financial — Analyst
ESOP in 3Q was how much?
Sudhir Goyal — Chief Financial Officer
ESOP in the 3Q is INR7.32 crores.
Sandeep Tulsiyan — JM Financial — Analyst
Got it. Thank you so much.
Operator
We have the next question from the line of Madhav Marda from Fidelity International. Please go ahead.
Madhav Marda — Fidelity International — Analyst
Yeah, hi sir, good morning. Thank you so much for your time. Just wanted to understand, given we’ve added a lot of capacity recently, would it be fair to say that there is a lot of operating leverage from fixed cost in the next two to three years? Because INR650 crores for our business is a very, very large capex which we’ve incurred. So just trying to understand how that can play out and how much time do you expect to ramp up the new capacity to peak utilization level?
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
Well, Madhav, you are right, because you know we don’t need to do such large capex again. That’s the reason why we are guiding that next year it’s going to be in the range of INR250 crores to INR275 crores only. And as mentioned that capacity utilization of the new plants are only at 25%, 30%. So definitely the operational leverage will come, going forward and you will see the return on capital employed going up because of that operation leverage.
Madhav Marda — Fidelity International — Analyst
Okay. And the ESOP expenses, when does that start tapering off, is that a ’24 or ’25?
Sudhir Goyal — Chief Financial Officer
Sorry, come again please, Madhav?
Madhav Marda — Fidelity International — Analyst
The ESOP expense which we are incurring, does that start going down from FY ’24 itself or FY ’25 that will go away?
Sudhir Goyal — Chief Financial Officer
No, it will start going down from FY ’24 itself as well.
Madhav Marda — Fidelity International — Analyst
Okay.
Sudhir Goyal — Chief Financial Officer
So ESOP expense is always in the first year, it’s largest, then it’s falling down every year in next four years.
Madhav Marda — Fidelity International — Analyst
Got it. And did I hear right…
Operator
Mr. Madhav, request to kindly come back in queue for follow up questions. We have the next question from the line of Keyur from ICICI Prudential. Please go ahead.
Keyur Pandya — ICICI Prudential — Analyst
Thank you for the opportunity. Sir just want to understand — first of all on the standalone side, are gross margin and EBITDA margin. So on steady state basis, what kind of profitability should we expect and does it — I mean it depends on our price hikes or with lower commodity prices we should be able to get those steady state margins? That is my first question.
Sudhir Goyal — Chief Financial Officer
The price hike as explained in earlier quarters also, we have a price variation clause applicability with all customers. So it happens with the quarterly lag. Now like in Q3 also we took a price hike, but you know since the industry was muted so there was hardly any numbers on the components as well as this. So the range of — complete in percentage terms, you know it’s very difficult to tell, because we are now catering to various components which have various range of EBITDA margins. The finished goods range is very different and the subassembly range is very different. So it will be very difficult to predict what customer wants from us. You know they keep on changing their strategies from finished goods to components to subassemblies, or all the three together or just one of them. So it will be very difficult to say what number, in the percentage term is concerned.
As guided earlier, I would like to guide again that looking into our balance sheet on the percentage terms is not the appropriate way, because of the diversified business verticals we have from 4% to 20% plus EBITDA margin businesses. I think what we would like to guide again in this call is, that we will try to deliver a range bound of 30% plus absolute EBITDA number going forward.
Keyur Pandya — ICICI Prudential — Analyst
And that will be higher than your sales growth? So basically your EBITDA growth will be faster than sales growth, which [Phonetic] operating EBITDA with lot of capex and lot of opex already in the numbers?
Sudhir Goyal — Chief Financial Officer
Yeah, it’ll depend on what kind of revenue we get in case electronics starts moving very, on a high trajectory of 100% growth kind of thing, then definitely this statement is not correct. But in case it remains in the 25%, 30% range, yes, then the percentage of EBITDA and PAT will outnumber there.
Keyur Pandya — ICICI Prudential — Analyst
And the second question you have partially answered, but the similar guidance remains for FY ’24 as well?
Sudhir Goyal — Chief Financial Officer
Yes, I think similar guidelines for FY ’24 and ’25, that we will maintain that absolute growth of EBITDA.
Keyur Pandya — ICICI Prudential — Analyst
Okay. Thanks a lot. I will get back in the queue. All the best.
Operator
Thank you. We have the next question from the line of Rakesh Wadhwani from Monarch AIF. Please go ahead.
Rakesh Wadhwani — from Monarch AIF — Analyst
Hi, sir. Thank you for the opportunity. I have one question. First question is regarding component supply or supply chain because there were some articles because of the COVID prices in China, the factories have been shut down. So just want to understand, as — compressor or other component suppliers coming? And second thing, just wanted to confirm, you said INR2822 crore is a nine month sales from a RAC and component. So can you please just confirm the amount for the components and RAC. That will be great. Thank you.
Sudhir Goyal — Chief Financial Officer
So out of INR2,822 crores, INR1,137 crores is components, which is pure components, supplied to all the customers we have. On the on the supply chain due to the COVID in China, what we did is, we preplanned the shipments from China because of not that we knew that COVID is coming, but because of the Chinese New Year and that helped us to navigate out of this situation. So we were not affected because of COVID situation in China. But now that everything is opening up, so things are very streamlined right now.
Rakesh Wadhwani — from Monarch AIF — Analyst
Okay, sir. That was very helpful. Thank you.
Operator
We have the next question from the line of Praveen Sahay from Prabhudas Lilladher. Please go ahead.
Praveen Sahay — Prabhudas Lilladher — Analyst
Yeah. Thank you for taking my question. So sir, my question first related to the motor, as you had guided, there is order from BLDC motor and also the large order for export. Is that going to be a similar margin in that trajectory what we are reporting, in these orders? And the second question is related to Sidwal for this quarter has seen a deterioration in the margin. What’s the reason for that?
Sudhir Goyal — Chief Financial Officer
So in motors, basically export is similar margin to domestic manufacturing. But BLDC category is a slightly lesser margin, because of this product continues to be in the pressure due to the China supply chain. Chinese are still throwing it at a very cost price. But yes moving forward, as the sales come [Phonetic] in this category we will bring this — we expect that margins can be improved for this.
But overall PICL is doing well. PICL has already demonstrated its trajectory from 5% EBITDA company three years back to almost 10% to 12% right now. And as far as the Sidwal quarter three margins are concerned, that is purely because of the product mix and some delay in supply, where we got some LD clauses applicable. But if you see on the nine month’s case, I think we are maintaining the same kind of margin of 21% odd, as far as the full year is concerned. I think we expect that that FY ’23 will close by — in the same range as nine months number, percentage terms.
Praveen Sahay — Prabhudas Lilladher — Analyst
Thank you.
Operator
Thank you. We have the next question on the line of Abhishek Ghosh from DSP Investments. Please go ahead.
Abhishek Ghosh — DSP Investments — Analyst
Yeah. So thanks for the opportunity. Sir in terms of Sidwal, what will be your overall market share and given that there’s so much happening around railways, metros and other things, how do you expect the, you know, overall this business to be next two to three years, any thoughts sir?
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
Abhishek this business is pretty much on a decent growth trajectory because of the complete infrastructure and upgradation push and urbanization of transportation, which is required by Ministry of Urban Development. I think if you talk about the share of business in railways, HVAC systems, we will be almost about 50%. In metros in India, we will be about 60% share of business holder for the — all metros which we are catering to right now.
As far as other categories are concerned, buses, we are very less. In bus we still need to ramp up our share of business. We will be at about close to about 5% or 6% at the moment. Whereas in defense and precision air conditioning, I think that that is where we enjoy close to about 60% to 70% of the market share.
Abhishek Ghosh — DSP Investments — Analyst
Oh, thanks. Sir my second question is in this current quarter, we have seen you know, while Sidwal margins have been weaker, but both in PICL and in, your electronics part of it, you have seen healthy margin improvement. Are those sustainable? How should we look at it? And for the PCB part of it, will you also look at you know the industrial and the defense part of it, will you kind of look at — because since you have the basic capabilities, if you look to also diversify into that segment? These are my only questions.
Sudhir Goyal — Chief Financial Officer
Well, we keep on diversifying the — you know now since the divisional CEOs are navigating their divisions into growth trajectory, so definitely they have the diversification plans already. But these kind of businesses of defense and railways kind of applications, it takes time to onboard customers and get the approval. So it’s these are high entry barrier businesses. Yes, we will definitely try to attempt, but that will be in the — basically long term, not on the short term basis. As far as short term is concerned, the scale and efficiency at which we are going, we expect that we will be able to maintain that [Technical Issues]
Operator
Ladies and gentlemen, the line from Mr. Goyal has disconnected. Please stay connected as we connect the management.
Mr. Goyal, you are reconnected. You may go ahead.
Sudhir Goyal — Chief Financial Officer
Yeah. Thank you. So as far as the maintainability of the margins are concerned, in the percentage terms, it is very difficult to guide anything on the percentages. But again I would like to guide that on a consol basis, we will maintain what we have guided. So that’s the guidance we want to give. In each and every division, since we are now moving into a very diversified portfolio, it is very difficult to predict what kind of percentages we will be able to demonstrate. Yes though the endeavor is to grow the percentage of margins, but when you sit in the front of a customer, if sometimes you start on a low margins and then you increase on a — towards a higher trajectory, you have to take these calls.
So percentages of each division will continue to vary from quarter-to-quarter, but on a consol basis — on a yearly basis we will maintain what we have guided.
Abhishek Ghosh — DSP Investments — Analyst
Okay, sir. Thank you so much. Wish you all the best.
Operator
Thank you. We have the next question from the line of Sandeep Dixit from Arjav Partners. Please go ahead.
Sandeep Dixit — Arjav Partners — Analyst
Yeah, thanks for that. Just coming to your margins, your ESOP costs, why do you think they are one off? This is part of your operating expense, no?
Sudhir Goyal — Chief Financial Officer
Yeah, it’s part of the operating expense, but it’s a non-cash item and this is one-off because we are not very regular in giving the ESOPs. It is first time — two times only we have given the ESOPS, and that will be — the impact of the same will be over in next two to three years’ time.
Sandeep Dixit — Arjav Partners — Analyst
Second question is — my second question is you have mentioned that raw material costs have gone up 1.5%?
Sudhir Goyal — Chief Financial Officer
Right.
Sandeep Dixit — Arjav Partners — Analyst
And that’s the primary reason for the contraction in margins. When can we expect it to sort of come back to the 6%, 7% kind of range?
Sudhir Goyal — Chief Financial Officer
So like Mr. Jasbir sir has said that, we are not looking in the margins in the percentage terms. We are largely focused on that how we can improve our margins in the absolute term on each component and each product. So if there’s [Speech Overlap] a product is there, so percentage terms varies a lot. So that is why we focus on that, how we can get the better margin absolute amount.
Sandeep Dixit — Arjav Partners — Analyst
So I should stay focused on that 30% growth in EBITDA on an absolute number, rather than the margin, am I right?
Sudhir Goyal — Chief Financial Officer
Right. Absolutely.
Sandeep Dixit — Arjav Partners — Analyst
Thank you.
Operator
Thank you. We have the next question from the line of Ronak Vora from AUM Fund Advisors. Please go ahead.
Ronak Vora — AUM Fund Advisors — Analyst
Hello. Am I audible?
Operator
Yes, we can hear you.
Ronak Vora — AUM Fund Advisors — Analyst
Yeah. Sir, what was the operating cash flow in the first nine months? And I want to know the split in terms of term debt and working capital debt for INR1300 crore of gross debt?
Sudhir Goyal — Chief Financial Officer
So in the gross debt, the term debt is around INR600 crores. I don’t have the exact number, but it’s around INR600 crores on the term debt. And what was the other question?
Ronak Vora — AUM Fund Advisors — Analyst
Operating cash flow for the first nine months and for Q3.
Sudhir Goyal — Chief Financial Officer
Just a sec. Just give me one minute. I will give you that number in some time, you can continue with the other questions. Just give me one minute, I will just answer this question.
Ronak Vora — AUM Fund Advisors — Analyst
Okay. Sir my second question is, whenever we negotiate with a customer, you said that it’s okay for us to start with lower margins and then inch it up when the business is growing. So what is the baseline ROCE or return ratios that we look for when we negotiate with a customer?
Sudhir Goyal — Chief Financial Officer
Well, it’s a simple fundamental principle, that in case we are unable to get our money back in four to five years, we don’t go ahead. That’s the fundamental base. Percentages doesn’t matter. Sometimes you have to take a strategy calls with your customers and sometimes you have to support them, as being the long term association. And sometimes they support you. So it’s just like once you are a strategic partner to any customer, you have to move hand-in-hand with their situations and you need to take those calls.
But largely whenever we invest, even INR1 is invested, if any return is coming beyond four to five years range, we don’t invest.
Ronak Vora — AUM Fund Advisors — Analyst
Okay, sir.
Sudhir Goyal — Chief Financial Officer
[Speech Overlap]. Operating cash like you asked, operating cash is INR150 crores, including other income.
Ronak Vora — AUM Fund Advisors — Analyst
Okay.
Operator
Thank you. We have the next question from the line of Aakash Javeri from Perpetual Investment Advisors. Please go ahead.
Aakash Javeri — Perpetual Investment Advisors — Analyst
Good morning and thank you for the opportunity. My first question is with regard to BLDC for fans. So how big is the market — how do you see the penetration and who are we competing against and what would be the margins like?
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
We are not delivering products for BLDC for fans. What we are doing is, we are doing basically PCBAs for BLDC fans. Whereas in the BLDC motors we have created these products, developed these products for heating, ventilation, air conditioning applications. So we started with the BLDC for inverter splits and windows, as well as for VRV applications.
Aakash Javeri — Perpetual Investment Advisors — Analyst
Okay. Thank you so much. And so how are the existing motor manufacturers not being able to compete?
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
Well, that’s a very difficult question to answer on their front. But I think we are very focused in heating, ventilation, air conditioning and primarily because of our R&D capabilities as well as the complete Pan India presence which we have and the customer base which we have. This is a product that’s — it’s a functional component, and in functional components, the final products’ performance depends on the functionality of such kind of components. The validation assessments are pretty long. So no customer will give you approval without validating their product for at least two to three seasons. That is the first leg of entry barrier.
And second is, they do not give you 100% share of business on day one. They practically — gradually grow you from 5% then to 20% then to 30%, so it’s a trajectory of five to six years with each and every customer which we have traveled.
Aakash Javeri — Perpetual Investment Advisors — Analyst
Understood. And you mentioned about the export…
Operator
Mr. Javeri, request you to kindly come in the queue for follow up question.
Aakash Javeri — Perpetual Investment Advisors — Analyst
Yeah, sure. Sorry, I’ll come back.
Operator
Thank you. We have the next question from the line of the Dhananjai Bagrodia from ASK investments. Please go ahead. Mr. Dhananjai can you hear us?
Dhananjai Bagrodia — ASK Investments — Analyst
Hello, can you hear me?
Operator
Yes, your voice is a bit low, request you kindly come on the handset mode.
Dhananjai Bagrodia — ASK Investments — Analyst
Yeah. Is this better?
Operator
Yes, please go ahead.
Dhananjai Bagrodia — ASK Investments — Analyst
So with more of the players now with PLI — applying for PLI with their capacity is going to come on this year for components, would that have any impact on our component business, question one?
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
We haven’t seen — I mean the PLI basically was for only components, PLI was not for [Speech Overlap]. So any applicant who has applied, all of them are putting up components. So let us see. There were total 10 components, out of which copper, aluminum and compressor is not our foray. So that is not you know something which we should compare.
Then when it comes to other components like — Amber was the number was the biggest company — or the biggest PLI applicant basically in the component space, other than compressor and copper and aluminum, which it has applied in all categories. So we haven’t seen any such company which has applied in all such categories across Pan-India. So and we are eligible — the threshold limits are very much doable and you know we are very much on track for that PLI incentive.
But nothing has changed. In fact because of the PLI Amber has one lot of awards and contracts which you all are witnessing right now in the revenue stream for consolidated [art.
Dhananjai Bagrodia — ASK Investments — Analyst
But the question is, we’re not seeing anything from the other competitors yet in terms, because their factories have not started yet, operationalize?
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
No, first of all, let us see. I mean, you know the large PLI players are the brands. So they are there anyway putting up like — if you talk about Blue Star, their factory is ready. They’ve already started production. They will [Phonetic] have started production. Then Daikin factory is almost ready, they will be starting production soon. You know, Voltas Pantnagar has already started. Chennai, they will start by next year. So the shift has already happened and you know we are beneficiaries of this shift, because of our strategies of being into components and finished goods in both the categories. So I think probably the reason we benefited is, because of our Pan India plus the wide area of 70% of bill of material which we can address.
Some of the companies have gone for high backward integration. Some of the companies have chosen not to go for higher backward integration. So depending on their level of backward integration, we have entered into the component strategy.
Dhananjai Bagrodia — ASK Investments — Analyst
Okay. And sir, what would be your guidance for next year?
Operator
Mr. Bagrodia, we request you to kindly come in the queue for follow up questions.
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
Well, I will answer that question. Our guidance as mentioned on the call is that, we will try to maintain our share of business, of the manufacturing footprint of room AC industry towards 26% to 28%.
Dhananjai Bagrodia — ASK Investments — Analyst
Okay, sure.
Operator
Thank you. We have the next question on the line of Dhruv Jain from Ambit Capital. Please go ahead.
Dhruv Jain — Ambit Capital — Analyst
Thank you for my follow up. I had one question, actually two related to capex and fixed assets. So one is that, I think there has been a slight increase in your FY ’24 capex guidance. So if you could just let us know what’s changed there? And on the fixed asset part also, we’ve seen in the last two quarters or so you are booking an item called — I mean loss on sale of fixed assets. So if you could just throw some light what’s that? I know it’s a very small number, but if you could just let us know, that would be great? Thanks.
Sudhir Goyal — Chief Financial Officer
So it is normally like whatever assets are being written off and not usable and they are asking for more maintenance, so that we have sold off. So that is why there is a small amount of [Indecipherable]. Otherwise there is no big asset which is being sold off.
Dhruv Jain — Ambit Capital — Analyst
Also, about increasing the earlier guidance [Technical Issues]…
Operator
Mr. Jain, we are unable to hear you very clearly. Request you to go off the speakerphone?
Dhruv Jain — Ambit Capital — Analyst
And also, if you could let us know about the increase in capex? I think the earlier guidance for FY ’24 was about INR200 crores. So now you’re talking about INR250 crores to INR275 crores?
Sudhir Goyal — Chief Financial Officer
I don’t remember that we’ve given just INR200 crores of capex, because of 23 plants and plus the — our endeavor to continue our R&D initiatives. And some new opportunities which are with our subsidiaries, not Amber, but subsidiaries are having very good opportunities. That’s the reason why we are increasing this guidance. I don’t know if we have given on INR200 crores, but I think I remember giving this INR225 crores to INR250 crores of a guidance.
Dhruv Jain — Ambit Capital — Analyst
And so the RAC guidance doesn’t change, right, I think mid teens?
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
Yeah, that doesn’t change. So that the RAC is definitely we are now moving in tandem to the industry. So if we if we maintain our 26% to 28% share in the manufacturing footprint, I think that’s a pretty decent market share to have, whether it be finished good or whether it be components.
Dhruv Jain — Ambit Capital — Analyst
No, I was talking about the return on capital…
Operator
Mr. Jain, we request you to kindly come back and follow up in the queue for follow up questions. We have the next question line of Sandeep Tulsiyan from JM Financial. Please go ahead.
Sandeep Tulsiyan — JM Financial — Analyst
Yeah, I have a couple of follow up questions. Firstly, you mentioned in the margin, that of course finished goods as a share is coming down because brands are doing assembly in house. But at the same time, we have picked up some subassembly business, which is again lower margin business for us. So broadly if you could categorize in terms of your percentage of sales, how this mix was between finished goods components, and I’m assuming subassemblies was very low in the past and how this has changed and going to pan out? Probably where you are currently, if you can give it some broader sense to understand the margin.
Sudhir Goyal — Chief Financial Officer
Well, you see when we got listed in 2018, we were close to about 80%, 85% banking on room AC. And the revenue base at that time was INR2100 crores. Today revenue base has you know almost tripled and we, the RAC banking has come down to 40%. So other — 60% is the businesses of other divisions plus the component businesses. And it’s a diversified portfolio. It’s very difficult to say how in future it will be panning out. You never know how the customer shifts their strategies sometimes. If outsourcing starts again, the percentage will go up. But as far as two, three years are concerned, we see the horizon that RAC banking will be in the tune of 35% to 40% in the balance sheet, rest will be all components and subassemblies plus other divisions.
Sandeep Tulsiyan — JM Financial — Analyst
That was more to understand between the difference between subassemblies and components, because subassemblies is essentially what is pulling down the margins right?
Sudhir Goyal — Chief Financial Officer
No, he let us understand first that, subassembly. Are basically a component and then added the — on top of it, we add some bought out items. The 100% business is not subassembly. So we have businesses only for pure components sale also, which is at a higher margins. And when you are sitting with the customer, you can’t say no if we want to put up certain three or four more components on it, and give it — supply to them on just in time basis, and also maintain the inventory levels, plus deliver them the complete kit solutions. So that is a very added advantage to you, that by having that subassemblies, whether it is at lower margins, you are not putting any capex for that. There is hardly — and in fact you earn out of that complete — doing the subassembly work.
So we are not bothered about that lower margin percentage or something like that. I think that’s why I’m repeating again and again in past, also I would like to repeat it this time again, that please don’t look at balance sheet towards percentages of margins. Percentage of margin are function of product mix, component Mix, finished goods, subassemblies, everything will keep on changing from quarter to quarter. It’s very difficult to predict or forecast any kind of trend here, because it’s all customer driven. And it is also function of commodity and currencies. If commodities go up, the percentages will look down. So we would like to guide that, we will maintain that 30% plus EBITDA range for the next two to three years’ time, on the absolute number growth.
Operator
Thank you. That was the last question. I would now like to hand the conference over to Mr. Jasbir Singh for closing comments.
Jasbir Singh — Amber Enterprises Ltd. Chairman and Chief Executive Officer
Thank you everyone for joining on the call. I hope we have been able to address your queries well. For any further information, kindly get in touch with Manish or Strategic Growth Advisors, our Investor Relation Advisors. Thank you very much and have a good day ahead.
Operator
[Operator Closing Remarks]