Focus Lighting and Fixtures Ltd (FOCUS) Q4 FY23 Earnings Concall Transcript

Focus Lighting and Fixtures Ltd (NSE:FOCUS) Q4 FY23 Earnings Concall dated May. 05, 2023.

Corporate Participants:

Vastupal Shah — Associate Partner

Amit Sheth — Managing Director & Founder

Tarun Udeshi — Chief Financial Officer

Analysts:

Rahul Dani — Monarch Networth Capital Ltd — Analyst

Shubham Doultani — Hexagon Assets — Analyst

Devesh Shrimali — DS Investments — Analyst

Sameer Parekh — Greshma Shares & Stocks ltd — Analyst

Navin JR — Bellwether Capital Private Limited — Analyst

Ketan Karani — Ketan Karani Global Economic Research — Analyst

Sonal Minhas — Prescient Capital — Analyst

John George — Individual Investor — Analyst

Devdeep Sarkar — Individual Investor — Analyst

Divyam Gupta — Individual Investor — Analyst

Ashit Koti — Individual Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Focus Lighting & Fixtures Limited Q4 FY’23 Results Conference Call hosted by Kirin Advisors. [Operator Instructions] I now hand the conference over to Mr. Vastupal Shah from Kirin Advisors. Over to you, sir.

Vastupal Shah — Associate Partner

Thank you. Thank you, and good afternoon, everyone. Thank you for joining the conference call for Focus Lighting & Fixtures Limited. I would like to welcome Mr. Amit Sheth, Managing Director of the company and Mr. Tarun Udeshi, Chief Financial Officer of the company.

Tarun-ji, Amit-ji, over to you sir.

Amit Sheth — Managing Director & Founder

Very good afternoon to all of you, and thanks for joining this call. Yes, can we start?

Vastupal Shah — Associate Partner

Yes, we can.

Amit Sheth — Managing Director & Founder

Okay. So first of all, good afternoon to everybody. And we are happy to announce our results for the year-end 2023 and the results were extremely good for us. And it was very, very encouraging. Over the last quarter turnover, Tarun what was the last quarter?

Tarun Udeshi — Chief Financial Officer

INR40.89 crores.

Amit Sheth — Managing Director & Founder

Yes, our last turnover quarter was INR40.89 crores, and what was our net profit?

Tarun Udeshi — Chief Financial Officer

INR5.42 crores.

Amit Sheth — Managing Director & Founder

INR5.42 crores was the net profit as compared to last year, it was INR2.86 crores.

Tarun Udeshi — Chief Financial Officer

Correct.

Amit Sheth — Managing Director & Founder

For the same quarter ending. So overall, there is a total percentage of 57% growth and in terms of absolute value it is 90% growth. Compared to the year-on-year, our last year net profit was INR4.10 crores, total profit was INR410 crores. This year our total profit has come to INR23.6 crores. So that is a total percentage jump of 476%. Yes, please. So these are the results for this year.

If we can start with question-and-answers quickly, so that we can move further. Hello?

Questions and Answers:

Operator

Yes sir. Thank you very much. [Operator Instructions] Our first question is from the line of Rahul Dani from Monarch Networth. Please go ahead.

Rahul Dani — Monarch Networth Capital Ltd — Analyst

Yeah. Thank you, sir for the opportunity. Just couple of questions from my end. If you could give the revenue split between railways retails, and what is your outlook on the railway business. Now, what are the number of products we have been approved for?

Amit Sheth — Managing Director & Founder

Okay. So the details will be given by Tarun, I will just give you the outlook and the forecast what we have and what we are looking for.

Rahul Dani — Monarch Networth Capital Ltd — Analyst

Sure.

Amit Sheth — Managing Director & Founder

So you want to know particularly about railway, right?

Rahul Dani — Monarch Networth Capital Ltd — Analyst

Right.

Amit Sheth — Managing Director & Founder

So, railways, during the last one week also I had informed we have roughly 16 products, which have been approved by railways. And this month till-date we were under development vendor, now we’ll become from next month approved vendor. So till last year, we were only eligible for 20%. From next month, once the process is done, maybe there might be a month delay in the process, but once the process is done, we will be approved for 80% of the orders. Till railways is concerned, what we are trying to do is, railway, as I told last time also, there is an expedition that they want to take it to a international level, where they want to showcase the world that we are no less than European companies — European countries, sorry my bad. And this is what is happening with railways, so what we have done is we have taken an initiative to do first time our product designing also from Germany. Till now the lighting was not at par in terms of, as per the international standard. So first time we are taking an initiative we are giving them certain technologies, which the industry is not providing till-date. And we have started designing our first product for railway for Vande Bharat and that will be very, very similar to international lines, what is given for bullet trains internationally, same lights will be provided. But this is on a design-stage, and once they will be approved then we will be going further. So this is over and above what we are doing for railways. We’re also designing, yeah, sorry.

Rahul Dani — Monarch Networth Capital Ltd — Analyst

Sorry sir. You can continue.

Amit Sheth — Managing Director & Founder

Yeah, so we’re also designing some general lighting products for railway, and we are proposing them IOT for railways because what has happened is we had done some survey for railway and we were the only company rather to do it, wherein we realized that the intensity is very bright during night-time, if one passenger enters and if he switch ons one light also, it disturbs everybody. So what we have proposed is that they should go with IoT, which they have welcome this proposal from our side and this will help to dim the light if somebody enters late in the night also, it can dim the lights up to 5%, and so it does not disturb and it also saves on power and energy, that’s the whole idea. So that is also one initiative which we have taken, and also, we are working on the light pollution for railway, wherein the light is not spreading to the other side, which is currently happening. So it does not disturb other passengers. So we are going little technical with railway. It’s a lengthy process, but this is not — this is over and above the approved product what we have taken initiative from Focus. The idea is that we want to showcase them that, okay, what we can offer today in the industry in terms of technicality, in terms of quality, others cannot give, that’s the whole idea.

Rahul Dani — Monarch Networth Capital Ltd — Analyst

So sir, what could be the revenue potential, like the addressable market size, any kind of data which you would like to provide?

Amit Sheth — Managing Director & Founder

See, there are two areas for railway, one is the existing product, and one is an initiative which we are taking it by ourselves. So we are keeping the initiatives what we are taking it from our side, but for this year we are expecting a revenue somewhere around INR15 crores to INR20 crores from railways.

Rahul Dani — Monarch Networth Capital Ltd — Analyst

Okay.

Amit Sheth — Managing Director & Founder

Yeah, which will happen.

Rahul Dani — Monarch Networth Capital Ltd — Analyst

And sir, how has been the export markets? We recently had got some good orders from the export market. So if you could just throw some color on the export markets and what is the potential? And similarly in the retail space, if you could just give us some idea as to any new projects we are undertaking or any new — just some kind of order book for the retail business?

Amit Sheth — Managing Director & Founder

So I’ve been telling this in past, we don’t have order books, like ours is this month-on month or two months orders in advance, so we have the PO for two months and then there are renewal. How the system work is, with us is, till retail is concerned, I am talking about, the system is very clear. Once we are approved, we are assured that we are getting business for coming one or two years. But neither they know or neither we know how many sites they are going to execute at and how many sites we’re going to get or how many orders we are going to get, number one. Number two, till export is concerned, Middle East is booming for us, and Middle East is, we are investing very heavily in Middle East, we are all hearing about Saudi. And we have taken a conscious call that we will go to Saudi, we’ll open an office, and we’ll have our own office based in Saudi, because our highest revenue today is coming from Saudi, till retail is concerned. Till overall Middle East is concerned, Middle East is still a very, very lucrative business and we might go ahead and open an experience center, the way we have opened experience centers in India and the idea is to showcase our technology of what we can give to those companies. Till absolute values are concerned, Tarun, if you can just come in and give the absolute value of exports please?

Tarun Udeshi — Chief Financial Officer

Yeah, in Dubai, we have done — 11% of turnover comes from Dubai which is INR19 crores from the total turnover of INR168 crores.

Rahul Dani — Monarch Networth Capital Ltd — Analyst

And railways business would be how much?

Tarun Udeshi — Chief Financial Officer

Railway business as of in this financial year we have been INR1.18 crores.

Rahul Dani — Monarch Networth Capital Ltd — Analyst

INR1.18 crores. Okay sir. Thank you so much and all the best.

Tarun Udeshi — Chief Financial Officer

Thank you. Thank you so much sir.

Operator

Thank you. Our next question is from the line of Shubham Doultani from Hexagon Assets. Please go ahead.

Shubham Doultani — Hexagon Assets — Analyst

Hello, can you hear me.

Amit Sheth — Managing Director & Founder

Yeah, loud and clear.

Shubham Doultani — Hexagon Assets — Analyst

Yes, so I was just going to ask this about the trading income. So why is this so volatile, and can I get like general view of how will do in the upcoming quarters?

Amit Sheth — Managing Director & Founder

See, this point was discussed in last quarter also, and as I told in last quarter so but I’m repeating again. That is, we name it as trading, but I think Tarun can explain it better. It’s not 100%, we manufacture, number one. We brand it also, there are small OEMs who manufacture things for us. Okay, there are no companies in the world who manufactures 100% in-house, and that is something what we are taking our trading. Tarun, correct me if I’m wrong.

Tarun Udeshi — Chief Financial Officer

Yeah correct.

Amit Sheth — Managing Director & Founder

But everything is sold under our brand, and everything has been — this investment is from our side, the products are, whether it is dyes and tools or the design, they are under our control. So yes, that is what take, we name it in trading account. If you look at companies like Havells or Philips, then it is 100% trading for them because they outsource their manufacturing. So this is what we do. There is a second part of trading what we do is, we’re entering into a lot of new verticals, okay. So when I say new verticals, mainly we have entered into 3D projection mapping, because one of the last order — large order which we have taken in Surat, which we are yet to execute it, which will be executed next month. 3D projection mapping is something wherein it’s more of a design way, it is design, it is content development and execution skills.

So there are companies who manufacture projectors, we don’t manufacture projectors. So that will come under trading, that is pure trading form. What trading figures you are seeing in the balance sheet is not trading, it is manufactured for us and we sell it, but we put it in trading. There is another area of trading, which is coming, wherein we are buying from some international companies, okay, for outdoor applications. We were a indoor company till last year, we have just started investing in outdoor. I’ve been in Europe for last one month exploring what are the technologies available and how we can get edge over others. So typically, as a company, when we started retail also, we were also associated with one of the largest companies in the world. We learned from that company, and then we started manufacturing. This is the same thing what we were doing in outdoors, we were learning from last one and a half, two years, how outdoors, what are the strengths, weaknesses, what are the difficulties, what are the limitations brands have and then we wanted to get into manufacturing. So another two years we’ll be investing very heavily in outdoor product, and we’ll be investing by ourselves in those technologies. And we want to add value.

So the reason we were trading is one of the large orders what we did was Kundalpur, a Jain Temple, so that was 100% pure trading, buying from a manufacturer, buying from a brand and selling it here. But in that process, we understood the limitations, in that process we understood what are the problems clients face and the whole idea was that how we can come out with a technology where we can eradicate all this problem. So now we are going into the manufacturing process. We are going through their design process some of the electronics to every small thing and then we will manufacture.

Shubham Doultani — Hexagon Assets — Analyst

Okay. Great. And just one more thing, you said INR15 crores, INR20 crores revenues from railways, so how many years for next year you were saying?

Amit Sheth — Managing Director & Founder

Sorry, come again, I didn’t get your question.

Shubham Doultani — Hexagon Assets — Analyst

You just mentioned INR15 crores to INR20 crores revenue from railway right for upcoming years?

Amit Sheth — Managing Director & Founder

For this year.

Shubham Doultani — Hexagon Assets — Analyst

For this year, FY’24?

Amit Sheth — Managing Director & Founder

Yeah.

Shubham Doultani — Hexagon Assets — Analyst

Okay. Thank you.

Amit Sheth — Managing Director & Founder

Yeah, this is our first year as an approved vendor, so overall railway as a vertical, we see a potential that we will cross in another two years somewhere around INR70 crores to INR80 crores. Yeah, but being the first year we are not keeping very high targets for us.

Shubham Doultani — Hexagon Assets — Analyst

Okay. Great.

Amit Sheth — Managing Director & Founder

Yeah.

Operator

Thank you. Our next question is from the line of Devesh Shrimali from DS Investments. Please go ahead.

Devesh Shrimali — DS Investments — Analyst

Yeah, hi, congratulations for good numbers. I just wanted a broad idea about, we did about 105 last year, where presumably retail was quite heavy. This year, we are almost 170 now. And next year, we’re sort of saying that we have big order, temple, Surat project, railway, which put together roughly INR50 crores additional to the retail growth that we expect. So number one, is that reading right that INR170 crores, take INR50 crores of these orders and the retail would be around 120%, 130%. Is that the right way to look, I’m not asking numbers, but directionally, is that the right way to see top-line?

Amit Sheth — Managing Director & Founder

So okay. I’ll let — let me make it very easy for all of us. I have been telling this last year also, there are two things. So when we are internally discussing, I’d like to be honest, but that’s the best part of it, right. So somebody from the meeting told me that let’s not discuss the last quarter, because last quarter was very good. I said what’s wrong if you are comparing it and we have been very, very clear that if you compare, we as a company, please don’t compare us quarter-to-quarter, if you compare it quarter-to-quarter, then there will always be certain big action. There will be certain, you will feel that why this quarter is bad and last quarter was good or the previous quarter was good, something like that

We are into project business, so lot of companies, lot of investors, they ask us, what are your projections, we don’t have projections. We are working on certain large projects. We know that it might come, it might not come, okay. So if that comes that quarter becomes very good, Number-one. In terms of projection also, it is very difficult for us to forecast today that there was a question from your side that retail will grow by INR30 crores, or INR50 crores or whatever, overall growth will be INR50 crores, all what we see is that there will be an exponential growth, which vertical retail, where the opportunity comes, we don’t know, today. Okay, all I can say is that there was a time two years back, where our project value was not more than INR1 crore, INR2 crores, today our project value, last year was INR15 crores, now we are working on a single large project between INR30 crores to INR100 crores.

Okay. These are the type of large projects we are working on. So a single large project comes back, completely changes the turnover of the company. We are working on it and these are some government projects, these are some private projects. We don’t know today when this project will materialize, whether it will materialize this year or whether it will materialize this year. So I’ve been telling all the investors that you have to look we as a company, not even year to year. You have to look at the three to five years projection.

If you ask me that where we will be after five years, we know that, because we know that what are the types of projects we are doing, what are the types of investments we are doing on technology, what are the types of products we are bringing in, like what are the gaps we are filling in, that we know, but if you’re looking for short-term, we are not a right company and this is an exact statement I had given last quarter also. So, my humble request is that, yes, every investor is looking that year-on year what will be the growth, but as a company, what we are looking is three years planning and five year’s planning, certainly not year to year plan.

Devesh Shrimali — DS Investments — Analyst

Got it. That’s absolutely clear. Right. The second part would be more, cash flow, what would be your view going forward? I think just broadly qualitative comment in terms of how do you see cash flow spanning out in this year, next year?

Amit Sheth — Managing Director & Founder

See, till date, we have been a debt-free company. Okay. We are currently a debt free company and with turnovers there will be cash flow issues, there will be pressure on cash, because these are large projects what we are working on. Okay, these are really, really large projects we are working on and we might face some problems, till railway is concerned, we will not face problems because railway whatever purchase orders are there banks are ready to discount it by 98% or 90%, I don’t know the exact figure, but somewhere it is like that.

Till other government projects are concerned, where we are working right now, if one of those projects come in, we will have some problems, but we will — it’s like when you reach there, we will see how we manage it, it’s not that we are going to lose orders on that, because of that, but in our day-to day activity, today, we don’t have any cash flow problems. The only with what we’ll see is if there are extremely large, let’s say, a single order of INR100 crores comes, any company will like, we’re INR170 crores, let’s say, INR200 crores company, okay, if you guys have a single order of INR100 crores you will have some problem, right. It’s not going to be easy. But the question is whether we can manage it? The answer is, yes. We will be able to manage it.

We are also working behind the scenes on how we are going to arrange this type of money. We are talking to lot of investors, we are talking to banks that how we can discount it, or how we can do it on LC, right, we can manage it. Till overall our industry is concerned, our payment cycle is somewhere around 70 days, Tarun, it is 60 days or 70 days?

Tarun Udeshi — Chief Financial Officer

It’s 68 days.

Amit Sheth — Managing Director & Founder

68 days is our payment cycle, which is very good. Okay, we are trying to improve it. Okay, our target is that we can improve it somewhere around 60 days this year. We want to bring it to somewhere around 45 days. And this is where we don’t have cash flow problems, but for large orders, yes, we might face it. We might have some liquidity crunch and we will work-out with our banks, we’ll work-out with our Investors.

Devesh Shrimali — DS Investments — Analyst

Got it. Thanks for the response and wish you good luck for next year.

Amit Sheth — Managing Director & Founder

Okay. Thank you so much.

Operator

Thank you. Our next question is from the line of Sameer Parekh from Greshma Shares & Stocks Ltd. Please go ahead. Mr. Parekh, your line has been unmuted. Please go ahead with your question.

Sameer Parekh — Greshma Shares & Stocks ltd — Analyst

Hi, good morning. Am I audible?

Amit Sheth — Managing Director & Founder

Yes, audible.

Sameer Parekh — Greshma Shares & Stocks ltd — Analyst

So firstly, congratulations on fantastic performance. I have a few questions. Should I go one after the other or should I just lay them all out first and then.

Amit Sheth — Managing Director & Founder

I’ll suggest one after another, I have a short-term memory. It becomes easier for ourselves.

Sameer Parekh — Greshma Shares & Stocks ltd — Analyst

Okay. Sure, no problem. Perfect. So just first question, on our performance, we have seen a profit growth of almost over almost 90% and revenue growth has been about 15%. Now, this revenue growth compared to the December quarter has been lower, again, I’ve heard from some of your previous answers that you can’t predict some of this thing, but can you throw some light over there on how this revenue growth run-rate can be maintained or?

Amit Sheth — Managing Director & Founder

There is no maintenance, and I already answered this question and I’m repeatedly telling that we are into project business.

Sameer Parekh — Greshma Shares & Stocks ltd — Analyst

Okay.

Amit Sheth — Managing Director & Founder

We will see, as an investor, I again suggest and I again request, don’t look at us, okay, if you really looking at that this company has to grow quarter to quarter, then I can stay invested, then we are not the right company. In fact, to be very honest. So we are into project business, when and there are projects to materialize, we don’t know when a builder will get a NOC, we don’t know when the government will get a permission to execute the project. We have no idea on that. There are certain days given to us, okay, based on those assumptions if I give it to you and if it doesn’t happen, then in the next quarter you will say, hey, what’s going on. You gave us this commitment. So we are not giving you those commitments. We are here. We are looking for growth, we have growth. We have potential and we have exponential potential. But this growth, if we are looking at for three years to five years, bandwidth, yes. Then we are talking on it. It is not possible that I can talk every quarter like what was last quarter, and why this quarter, why this quarter so much of jump, this type of things are going to happen with us.

Sameer Parekh — Greshma Shares & Stocks ltd — Analyst

Okay. My second question is on our closing stock. So we had — our closing stock number was about INR38.5 crores compared to INR23.5 crores previously, so that’s a significant rise in the closing stock number, so this would mean probably there is some sale that has either not been booked or is postponed into the next quarter. If you can throw some light on that?

Amit Sheth — Managing Director & Founder

You can appreciate the turnovers have almost doubled as compared to the stocks this has not doubled. There are certain — there are closing, even the stocks, there are a lot of fluctuating stocks we have. Okay, so there are certain names, as I told you just a minute back, at times customers say that, okay, this site is ready and you need to deliver, and they have some — after that they have certain problems with the state or with the government. certain approvals they have not gotten, sometimes those stocks line up. But as compared to the turnovers, our stocks have overall come down. Tarun, if you can, we were just discussing day before yesterday, Tarun if you can just highlight this.

Tarun Udeshi — Chief Financial Officer

Yes. Just compared to the turnover, if you see our inventory level has come down in terms of percentage. But as sir rightly said some stock inventories lying because of some approvals and all, but definitely it is a moving stock, it is not that the stock will lay down for two months and all. And if you see the ratio also the inventory turning ratio also, we have been moving the stock I think around four times. So this stock also will move. It’s not a problem at all. Inventory in-line ratio is 4.38% as just sir mentioned.

Sameer Parekh — Greshma Shares & Stocks ltd — Analyst

Okay. Okay, so the concern?

Amit Sheth — Managing Director & Founder

Yes, there is a concern, and the concern comes only when the stock is not moving for more than 365 days.

Sameer Parekh — Greshma Shares & Stocks ltd — Analyst

Correct.

Amit Sheth — Managing Director & Founder

That is where the concern comes, but currently we don’t have concerns, we are moving the stock in a year. Our percentage, our overall percentage compared to the turnover has gone down, and we have, as I discussed in last quarter also, we are really working hard on systems wherein it’s a vertical storage system, we are investing very heavily so complete electronics now has gone into those vertical storage systems. We are also now heavy items. We are putting it in vertical storage system. We have currently reduced our stock from the floor to this vertical storage system by 25%. We are doing and everything is integrated with SAP. The process order will take another two months to three months for us to learn and to adjust to it, but if this system works out, then we’ll be investing and we’ll ensure that 100% of the materials comes in back.

Sameer Parekh — Greshma Shares & Stocks ltd — Analyst

Yeah, okay. Thank you. My next question is we have received permission, I believe, to invest about INR100 crores in four subsidiaries. So just wanted to understand what the status is of that? And is this investment going to be only us or are there any other strategic investors or anybody involved in the subsidiaries and what kind of revenue potential, if any, we have idea from what these subsidiaries are going to be doing?

Amit Sheth — Managing Director & Founder

All subsidiaries.

Sameer Parekh — Greshma Shares & Stocks ltd — Analyst

Right.

Amit Sheth — Managing Director & Founder

Sorry, Tarun, what are the four subsidiaries.

Tarun Udeshi — Chief Financial Officer

Yeah, we have Dubai, Singapore, they are two subsidiaries, wholly-owned subsidiaries.

Amit Sheth — Managing Director & Founder

Those are wholly-owned subsidiaries.

Sameer Parekh — Greshma Shares & Stocks ltd — Analyst

Those are wholly-owned, okay. And so, our investment, for somebody, I don’t know I could have missed it, but we were proposing to invest INR100 crores in these subsidiaries.

Amit Sheth — Managing Director & Founder

Okay. So we have, this was also discussed in last quarter, we are repeating these questions again and again. But anyway, I’ll answer this. See, we have one more vertical called Xandos, where Focus is a 51% stakeholder. And wherein we are working on lot of government projects. So there are three investors from outside who owns 16%, 16%, 16% percent roughly and we own 51%. And the deal is very clear, they have good — they are doing some business in government, and we have technology, we have products, and they have connections, where they can give us a platform to showcase what we can do and how we can add value. So that is where we have taken this limit, so that if at all there is a large project that comes in, we don’t delay it.

Sameer Parekh — Greshma Shares & Stocks ltd — Analyst

Okay. My next question, and I think you have already answered this previously, but I’ll just try to. Our performance has been great so far, and previously we had, I mean, from our turnover and as you said we cannot measure our performance quarter-on-quarter, etc. because that is visible in our quarterly turnovers etc. too. But at what point, I mean is there can we issue year-on-year guidances, if not, quarter-on-quarter, because that will generally help the entire investor community to get a better idea.

Amit Sheth — Managing Director & Founder

I appreciate this question, and okay, why I am requesting investors to look for a broader picture of three years or five years. The reason is that, today somebody asked that, what is the trading figure and some large projects that are being executed by trading and I answered that this was a learning curve for us. Now, we are investing on it, typically, please understand one thing, any company could start from design, development, trading, execution, the process is of somewhere one and one and a half year. Okay. Once you have your own manufacturing, the growth is exponential. Right now, whatever we are doing till outdoor is concerned, outdoor lighting, we are trading. We have been associated with two big companies, other top companies from Europe and we are working hand-in-glove. For the large projects we are executing here in India. Now those things we will manufacturer after two years. So for me to predict it, year-on-year there be a growth year-on-year, in terms of what percentage, I really don’t know, but the real growth we will see after three years, when we have our own products in-hand. So that’s why I’ve been telling that look at a bandwidth of three to five years’ time.

Sameer Parekh — Greshma Shares & Stocks ltd — Analyst

Okay. And just quickly my last question. So, I know definitely you won’t be able to comment a whole lot, but I’ll just throw it out. Just fantastic that…

Amit Sheth — Managing Director & Founder

There are a lot of other investors also who wants to ask question, apology if you can limit the questions why we invest, then it will be easier, because there were lot of complaints, sorry, with regards to everybody, there were lot of complaints that we didn’t get the opportunity to ask questions. I have no problem you can continue, but we have a limited timeline.

Sameer Parekh — Greshma Shares & Stocks ltd — Analyst

Sure, sure. No, I’ll just last quickly, we’ve moved to market cap of almost over INR1,000 crores and now we are at about somewhere around INR800 crores and price has moved, so any comments on why even after fantastic results we’re seeing some erratic stock price movement?

Amit Sheth — Managing Director & Founder

I really, I don’t have control and I’m sure you will appreciate that as a company and as an individual, me as an individual, I don’t have control what you you investor do.

Sameer Parekh — Greshma Shares & Stocks ltd — Analyst

Okay.

Amit Sheth — Managing Director & Founder

Okay. So for me to answer this, even after giving such fantastic results, why investors, what happens in the market is not in our control. So how do we answer this.

Sameer Parekh — Greshma Shares & Stocks ltd — Analyst

Okay. Fine. No problem. Thank you so much.

Amit Sheth — Managing Director & Founder

Thank you.

Operator

Thank you. [Operator Instructions] Our next question is from the line of Navin from Bellwether Capital. Please go ahead.

Navin JR — Bellwether Capital Private Limited — Analyst

Am I audible?

Amit Sheth — Managing Director & Founder

Yeah, Navin, you are audible.

Navin JR — Bellwether Capital Private Limited — Analyst

Sir, this is pertaining to your balance sheet, there is a significant jump in your other financial assets, it’s gone from INR94 lakhs to INR11 odd crores. So wanted to understand why this?

Amit Sheth — Managing Director & Founder

I think Tarun can answer on that.

Tarun Udeshi — Chief Financial Officer

Yeah. Sorry, other financial assets you’re saying?

Navin JR — Bellwether Capital Private Limited — Analyst

Yeah, under non-current assets, other financial assets jumped from INR94 lakhs from INR94 lakhs to INR11.41 crores. Meanwhile, can I ask one more question, sir.

Amit Sheth — Managing Director & Founder

Yeah, Tarun if you can just cross check and come with the answer on it.

Navin JR — Bellwether Capital Private Limited — Analyst

Yeah, this is regarding your segment results, when I look at your manufacturing the segment, there is lot of volatility in the margin. Is it because of the different verticals or the product mix change or can you explain the things?

Amit Sheth — Managing Director & Founder

It certainly because of different verticals and different margins. Okay, and you will see those types of volatility, but as a company, what we are seeing is how overall we can maintain EBITDA and PAT.

Navin JR — Bellwether Capital Private Limited — Analyst

Okay. Understood.

Amit Sheth — Managing Director & Founder

And also, project business, there are certain business, which happens on bidding. Okay and there are footprint process where you know that you are not L1 and then they offer you that this is the price, if you want to match it, you can still get the orders. So, those are certain decisions we take it whether we want to do this business or not and what are the advantages we are having, for example, when we were doing one of the government — very prestigious government project, Delhi Airport, one of the orders for outdoor, because we were not an outdoor company and we got an opportunity of doing it, but the margins were not nearly great. And we decided we’ll do it because that will give an exposure. Okay, Focus has done outdoor for DL, and because of that we get a lot of other projects from L&T because L&T is the buyer, and they get confident, okay, these guys can execute it, so sometimes we take those types of strategic decisions.

Navin JR — Bellwether Capital Private Limited — Analyst

Makes sense. So, last question is revenue of INR169 crores, can you give a broad breakup between what are the top verticals and revenue contribution from them, so retail you already given railways for that?

Amit Sheth — Managing Director & Founder

I don’t have the exact figures, but we’re seeing the impact, but since he is just looking into your first question, retail is 50% to 60%, what I understand. Outdoor infra is somewhere around 15%, export is somewhere around 15% — 10% to 15% right now we have. Infra done, outdoor done, what is left out is retail. Then we have home lighting, home lighting is somewhere around 15% to 20%, so this is the overall take of what we have. Hello?

Operator

Sir, the line for the participant has dropped. We’ll move to the next question.

Amit Sheth — Managing Director & Founder

Yes, sure. Tarun.

Operator

Our next question is from the line of Ketan Karani from Ketan Karani Research. Please go ahead.

Ketan Karani — Ketan Karani Global Economic Research — Analyst

Good afternoon to all of you and really congratulation on really superb results. I don’t know what market understands from analyst point-of-view, manufacturing companies have to be always valued as quarter-on-quarter — Y-o-Y and not on quarter-on-quarter. Moving from that, I just want to understand that you have been focusing on next — Focus has been focusing on next three to five years and Amit I have been very clear, don’t value as on quarter-on-quarter or Y-o-Y also, for so Y-o-Y is also out. So now the question remains, that what are we looking at from next three to five years perspective?

Amit Sheth — Managing Director & Founder

Thank you. Somebody is asking this question.

Ketan Karani — Ketan Karani Global Economic Research — Analyst

So I want to understand the next three years, this is 2026, ’27, ’28 is something what you would have analyzed and crystallized some data. So I just want to know what kind of revenues or it’s like — are we looking at INR600 crores in ’26 turnover or INR700 crores in 2027 or something like that, which you may have internal figure, if you’re going to share, I don’t want to know the profit, but only the revenue model what you have designed?

Amit Sheth — Managing Director & Founder

As I’ve said I’m allowed to share legally, right, whatever I’m allowed to share, legal have no problem in sharing Ketan bhai, and thank you very much for asking this question. So, Ketan bhai, last 15 years we have been doing retail. Our 2016, when the profits were dipping down, we decided that we need to look into something outside, so as I said, we went for retail, what technologies we can get and then we got an idea that we can do home lighting. So we started investing on home lighting and after that COVID, 2019 we introduced, ’21, ’22 was COVID we could not do, and then for us home lighting or rather that vertical, we call it as B&B it become a very interesting vertical where our profit margins — the GP was somewhere around 60. Okay.

And we realized that it has got a potential that we can from INR20 crores we can jump to INR100 crores in coming five years’ time and we need to invest very heavily. So this year we have been investing, because we didn’t had a complete portfolio, we just started investing on it. Over this process and between ’21 and ’22, we we’ve been working, and we were lucky enough that we got a good exposure for government projects or good exposure for infrastructure projects. We were one of the largest suppliers, a lot of companies have supplies and a lot of companies claim also, but we are doing Central Vista, Central Secretariat. And because of one airport today first time we’ve been — Indian company has been specified for Bombay Airport also. And we are really working on some very large government beautification process. Now this is currently all trading.

The whole idea of what we as Focus has is that how this trading can we convert it into manufacturing, wherein the profitability is higher, number-one. And that is that is the reason I was in Europe for one month, going from company to company and listening what technologies we can bring in, what are the types of A, investments required, what are the types of technologies we require, which will help us for this growth. And so, if you look at the verticals, we have retail. We are bringing some technologies in retail, okay. There we’ll be ensured that this technology is, forget India, but even in Europe, these technologies are not available. I’ve been able at — there is an exhibition of EuroShop and in EuroShop we see the best technology, it’s like a makeup for retail industry. That exhibition, that exhibition you cannot finish it in five days’ time.

But we could not see those technologies there. And we were very happy that if we can bring these technologies, so that, we are working on this technology, we are working on sustainability. Now worldwide sustainability is becoming a very big question. Green technology, sustainability, when we are the first company where we will be using in our product, we use plastics. So it is a problem, I’m not going to be very technical, but it is not technically possible that we can use plastics in our products, we are doing it. So, A, we are creating a brand intake. B, we are creating volumes. Three, we are creating bottlenecks for other companies to easily get into those technologies. This is a retail side.

Coming to infra and outdoor, we have, one year this last one year we have just been trading and infra and outdoor. We did some INR30 crores, INR40 crores business in our overall outdoor, infra, whatever we did, but we realized what are the bottlenecks we had, in infra and outdoor. Now we are working with companies, we are working at physicians, mathematicians to develop technology especially for us. Okay, which will be more, I’m not going into the bottlenecks, if you guys want to know, we can come.

Ketan Karani — Ketan Karani Global Economic Research — Analyst

No, no.

Amit Sheth — Managing Director & Founder

Because you guys will not even understand it.

Ketan Karani — Ketan Karani Global Economic Research — Analyst

I do understand it sir, because I have a big background from research and economic research for last 30, 40 years now. So almost like, so I am really honored to be at least part of the answering part, but I think bringing too much detail, Amit, would be injustice to other participants, so I just want to know what is the kind of revenue model we are looking at in 2026, ’27 maybe just like INR600 crores, INR700 crore revenue volume we are looking at that kind of volume or not?

Amit Sheth — Managing Director & Founder

We are targeting, as a company, we are targeting somewhere between INR400 crores to INR500 crores.

Ketan Karani — Ketan Karani Global Economic Research — Analyst

So that is for ’26 we are targeting.

Amit Sheth — Managing Director & Founder

This is for ’26, ’27, we are targeting. And we are very bullish on three areas, retail, which is our bread-and-butter, home lighting, infra lighting and railways, four areas.

Ketan Karani — Ketan Karani Global Economic Research — Analyst

So just to expand on the same question which you answered, this is the kind of technology development, which we are planning to do it ourselves and manufacture ourselves. So what you said just few minutes ago, it’s like your GP like 60% in retail.

Amit Sheth — Managing Director & Founder

I’ll just give you one simple example. Mr. Modi wants every city to be smart in India.

Ketan Karani — Ketan Karani Global Economic Research — Analyst

Yes.

Amit Sheth — Managing Director & Founder

Now just to give you in a very simplified way, there is a way government can have revenue through our lights, we call it as smart poles. They can do advertisement on it. They can have a revenue model in terms of if some car is breaking the signal, he will be automatically charged, if he was over-speeding, he will be automatically charged, if a lady is harassed on the road, if there is a rape happening, police will get the notification in a fraction of second.

Ketan Karani — Ketan Karani Global Economic Research — Analyst

I think something like Singapore, what is happening in Singapore, it’s like Singapore…

Amit Sheth — Managing Director & Founder

Exactly. It’s a Singapore based company with whom we have tied-up. They are doing transfer of technology to us, and we will have the license to manufacture it.

Ketan Karani — Ketan Karani Global Economic Research — Analyst

Let me just try, I believe that the kind of investment which you mentioned some minutes ago, maybe from 10, 20 minutes ago is like, you are investing, it looks like for projects like INR30 crores to INR100 crores, which you require investment. I think cash flows should never be a problem for a company which is debt-free and expanding and the kind of margin which we are looking at is like, you have been very clear, if I’m doing manufacturing, our GP margin is 60%, so I think for most of the analysts who are with me, I’m just picking their view also over here, it’s like if you’re doing INR500 crores, 60% is the GP margin, probably lesser than that 60%, because I’m not going to say, for INR500 crore you will do INR300 crore profit build here?

Amit Sheth — Managing Director & Founder

So a lot of investors ask us question that if there is a growth in your turnovers, will you be able to maintain GP? And my answer to it is very clear. Last time also I said the same thing, that coming from the lighting industry, if we are not in commodity, our GP cannot be less than 40%.

Ketan Karani — Ketan Karani Global Economic Research — Analyst

Yeah, I remember the last conference call. I heard it, it’s like 1 hour 35 minutes, and already then read 10 times, I remember that. So I’m very clear about that we’re talking about 40%, 50% GP margin on INR500 crores kind of turnover. When we are doing it, we’re going to do all the manufacturing ourselves. So it’s like INR500 crores by 40%, if I take on the lower side of the margin, which you believe is, is like INR200 crores GP in 2026, ’27 is something what you are looking at. We do have typical current market cap, means if current market gap is INR800 crores, then there is like 4 times GP. I don’t know which company in the world is evaluating this level, it is very closely available at prices, we are not concerned with market price. I am looking at three years and if are going to do INR500 crores, I think what you, what I know of somewhat you are the most conservative promoter I’ve seen in my life of like 40 years of research.

Amit Sheth — Managing Director & Founder

It doesn’t make sense to give figures which you have in mind, and if you are not able to do it.

Ketan Karani — Ketan Karani Global Economic Research — Analyst

No, I believe that. I’m really happy that Amit bhai, I am a person who wants to know next five to 10 years. You’ve given me three to five years perspective, like INR500 crores, maybe INR600 crores is possible, and that 40% GP margin are on the lower, 60% on the higher side, you average out at 50% or maybe whatever it is. I am believing that Focus has — is Focus very clear where it wants to be., where it will be and where it may exceed, which you are being very conservative as always, not willing to say, we will achieve this, and I want to give an example of Infosys over here. They have in last 20 years we started doing research of Infosys at INR100 top, without split, without bonus at INR120. They always under promised and over-delivered.

I assure, I’m assured myself and I believe that you are the kind of person, future will hold you, like a Narayan Murthy for a lighting industry, where your views and where your commitments will be taken in a most right spirit, and I promise, I’ve promised myself that you will over-deliver on everything which you have under-promised today. I believe that is the only thing I wanted to know, and there is nothing on quarter, on quarter, there are a lot of questions on quarter-on-quarter, I’m not interested in that. Even in 2024, ’25, I believe what you will achieve is something which you will actually do on expectations. I thank you for your time and thank you very much. I want to understand that ’25, ’26, ’27 what you will do, that’s only what I want to understand?

Amit Sheth — Managing Director & Founder

Yeah. Thank you very much.

Ketan Karani — Ketan Karani Global Economic Research — Analyst

Thank you, Amit bhai. Thank you Tarun bhai. Thank you, Amit bhai, thank you everyone.

Amit Sheth — Managing Director & Founder

Thank you.

Tarun Udeshi — Chief Financial Officer

Thank you, sir.

Operator

Thank you. Our next question is from the line of Sonal Minhas from Prescient Investment Management. Please go ahead.

Sonal Minhas — Prescient Capital — Analyst

Hi, am I audible?

Amit Sheth — Managing Director & Founder

Yeah, you’re audible.

Sonal Minhas — Prescient Capital — Analyst

I would like to hear some of the reason your reports really having such positive view. I have two, three questions. I think just wanted to understand the sustainability of the margins as we go, as you go on a three to five years horizon, in that part of horizon? That’s the first question sir. And second is more around, I’m sure — you’re making, you have it in mind as well, what kind team — hiring you need to do to reconstitute, to make this look more like incrementally more, professionally run company, I have those two questions from my side.

Amit Sheth — Managing Director & Founder

So what was the first question, sustainability on the margins right.

Sonal Minhas — Prescient Capital — Analyst

Yes, sustainability of margins given that this is huge change between FY ’22 and ’23, if you could also color the flip side of margins, like where this will basically taper down, taper up to some extent the numbers in there.

Amit Sheth — Managing Director & Founder

Yes, so we as a company, the sustainability of the margins and it only come with us till the time we invest on technologies which are not easily manufactured by our competitors, number-one. Which are, unless there are patents on it or there are technological barriers on it and that is what we are working on, and that is one of the reasons why I’m looking at three to five years for it and not immediate. We are trying to invent technologies. We are not today now buying technologies, we are trying to invent technologies with a lot of international companies. We don’t have the bandwidth, but we are investing with them. We encourage them to develop it for us. So, we don’t see a very big issue with sustainability of margins with us.

Second, we as a company, we are not investing into any product line today, wherein we are just looking like a commodity and we are getting into those price war game, we are not into that, we are not good into this and there are lot of companies, bigger, much bigger companies who have been working on it and they’ve been extremely successful, it’s not we have not tried, we have miserably failed and we don’t have any aspiration to get into it. What we are really looking is that when we bring it these technologies in India and if we are successful with this technology, which we see we will be successful, how we can improve it to a better GP or a better net margins or better EBITDA. This is what we are trying to work on. Okay.

Sonal Minhas — Prescient Capital — Analyst

So who is the technically capable person. How much is the R&D spend, if you could just highlight that.

Amit Sheth — Managing Director & Founder

We have been — how much is the R&D spend, I don’t have the absolute values of the R&D spend, but we’ve been investing very heavily. Average, I think, 7% to 10% right now we will be investing on research, development of the product. This year, it might go even much higher than that, number-one.

Sonal Minhas — Prescient Capital — Analyst

So 7% to 10% of your top-line is what you think in your R&D.

Amit Sheth — Managing Director & Founder

This year it will be 10% of our top line. It will be not on R&D only for dyes, tools, manufacturing and everything.

Sonal Minhas — Prescient Capital — Analyst

Anything in our product development. People, team cost also is included in that?

Amit Sheth — Managing Director & Founder

No, it’s not people, team cost, this is only products, only product, product and more product. It may be high, it might double up to 20% also. Okay, that’s a call we will be taking it over a period of time, once it happens. Till R&D is concerned, we have a team, a professional team based in Ahmedabad in factory, we have softwares, we have solidwork license, nine solidworks license we have, we have complete lab for testing, we have the only lab which has been NABL accredited. So we don’t have to go outside to test our product, to do all those R&D. We have lot of international consultants, designers working on our R&D. So it’s a team effort. I have that team. I don’t take part in day-to-day sales, since is not my forte today, my forte is development, my forte is to bring technologies. That’s what my passion is, so that is what I head and that is what I enjoy and that is what I do. Sales has been taken care of by, there is a team who takes care of sales all over India or whether it is in Middle East or Southeast Asia. It’s not that I — I only get into this new development, new verticals and new opportunities what we have.

Sonal Minhas — Prescient Capital — Analyst

And then in terms of second question again, three to five years outlook, where do we see gaps in terms of the team, your management, people you need to get in, make it more, make or bring all.

Amit Sheth — Managing Director & Founder

See, please understand one thing, okay. We already have a — there is a fixed-cost which we have invested very heavily, and we have that, till manpower is concerned, normally or typically if you are coming from the outside world, you will think that, okay, INR170 crores turnover, they have 300 people, if INR500 crores, you need 600 people, no it’s that way. Till manufacturing, is concerned, yes, we might require — we might require certain synergies which we are thinking of investing on, if we are going for developing certain product, I’m not getting into it right now, till manpower is concerned, okay, the project values are high, the effort which goes for the project value of INR1 crore, it’s a similar effort goes for a INR15 crore project also. And we already have a team in place, who is doing it, we need to add manpower. It’s not that we don’t need to add, but we don’t need to double up, we need to add it by 10%, 15% on a higher or 20% max. But we don’t need to double up to get this type of turnovers. We still have the bandwidth, we still have the capacity with the existing team also we can at least grow by 50% to 70%. Till manufacturing is concerned, the labor is concerned, factory has got the capacity, if it is just an assembly line, we can at least three times of turnover this existing factory can take it. But if it is a complete new vertical, new line, this factory we cannot adopt it, then we will be looking at another factory also.

Sonal Minhas — Prescient Capital — Analyst

Understand that. Okay. That’s it from my side. Thank you.

Operator

Thank you. [Operator Instructions] Our next question is from the line of John George [Phonetic], Individual Investor. Please go ahead.

John George — Individual Investor — Analyst

Hi, thanks. Thanks for the time. And Mr. Amit sir, congratulations on the good results, and also, I got a lot of good details from the previous questions and answers. So, I have a few questions. The first one now remaining questions, the first one is related to your partner entity that is the manufacturing entity called Shethvinod. I understand that you use Shethvinod for manufacturing, but related to that, I can see in related party transactions, there is a set of sales tools in Shethvinod. Can I know what is that for? And also, another question related to Shethvinod, if you look at the statements of Shethvinod there is a net profit of say INR1 crore, INR2.4 crores, equivalent the last two years. If — had that been an in-house manufacturing facility like your BYDO Ahmedabad plant, this profit amount would not be incurred by Focus, which would be straightaway add to the bottom-line. So why would this arrangement?

Amit Sheth — Managing Director & Founder

Which data, which year data are you looking at my friend?

John George — Individual Investor — Analyst

I have taken — yeah, the statements I’ve taken from Shethvinod, is from tofler.in I got the statement from that website, which shows Shethvinod.

Amit Sheth — Managing Director & Founder

Shethvinod is a fully owned subsidiary of Focus Lighting. Fully owned subsidiary. So, where is the question now being Shethvinod manufacturing, Shethvinod was into existence some three year back, three years back we bought over Shethvinod and today there is no existence of Shethvinod, there is no business in Shethvinod. And just to give you a background, Shethvinod, Focus never had a manufacturing facility, Shethvinod was the first company, which was originally known Shantilal & Brothers manufacturing department. Shantilal & Brothers manufacturing department was a manufacturing company and we were traders. So we were buying from Shantilal, and I had an emotional attachment with that company because it was my father’s company. And that company has been merged into Focus Lighting and from last two years or three years, there is no business in there, everything has been diverted to Focus Lighting. So the data you have, is not correct. Maybe you’re referring to some old data. Tarun, if you can just answer.

Tarun Udeshi — Chief Financial Officer

Mr. George, I think you’ve sent email also regarding the — asking for a different explanation on this. So the sales figure, what you’re seeing from Shethvinod to Focus is nothing but the attempted stock transfer which happened three years back from Shethvinod to Focus. As sir said previously, Shethvinod was manufacturing for Focus, so now what we have done is we have transferred the manufacturing from Shethvinod to Focus, in that process, whatever stock and the effects that Shethvinod had, that we have sold from Shethvinod to Focus, that is what we are seeing as a sale from Shethvinod to Focus.

Amit Sheth — Managing Director & Founder

That’s a three-years old story, why are we discussing it today?

John George — Individual Investor — Analyst

But your 2022 Annual Report still has Shethvinod as a related transaction party, there is a sale and there is trading balances related-party transaction there. And in my previous email, response to my previous email, you said there is no question of merging, there is no plan for merging Shethvinod as well. But now you’re saying it is already merged. I’m confused here.

Amit Sheth — Managing Director & Founder

Done three years back, who has sent you this email, can you send me some — whatever email coordination that you had. Okay, let’s not…

John George — Individual Investor — Analyst

We’ll continue, we’ll continue offline.

Amit Sheth — Managing Director & Founder

To summarize it and make it easy for you. Shethvinod has been — so there has been a stock transfer, stock sale from Shethvinod to Focus Lighting three years back, during COVID times. And Shethvinod is no more existence, because we had a larger manufacturing facility in Ahmedabad, it was a conscious decision that we don’t want to add another cost by keeping Shethvinod.

John George — Individual Investor — Analyst

Okay. Understand. Thanks for the details and let me add one more quick question, so I can see that there was a capex of around INR27.5 crores from 2018 to 2022 and there was a INR31 crore preferential issue in 2022, I think that capex was for the Ahmedabad and the Bhiwandi plant, and in your recent interviews you said this is not for…

Amit Sheth — Managing Director & Founder

Bhiwandi factory was first shutdown. If you are talking about Bhiwandi, Bhiwandi factory was under Focus Lighting name only and it was first shutdown and we shifted Bhiwandi to Ahmedabad, and after that we shutdown Shethvinod and we shifted it to Ahmedabad. So everything is manufactured under one unit, and whatever the capex was, the capex was for Ahmedabad factory. Ahmedabad factory is 80,000 square feet. Okay, so to build that factory, to get machineries, to get all the infrastructure there, there was a capex that was spent.

John George — Individual Investor — Analyst

Yeah, my question is, what was that INR31 crores preferential issue used for, what was it used for? It’s already around INR30 crores you have spend for this Ahmedabad plant over the years, what was this additional 31 crores used for, the preferential issue what you raised in 2022?

Amit Sheth — Managing Director & Founder

It’s a strategic planning for the company, okay, that we want to invest in future, there is investment which you are doing, year-on-year. We are doing lot of development on lot of verticals. So that money, so that is the reason of this preferential issue. And that is the reason our investor is coming.

John George — Individual Investor — Analyst

Yeah, but what that — you mean for future expansion you’re saying. But you said already in the recent interview what I understand is…

Amit Sheth — Managing Director & Founder

That is past. We are mixing two things, one, we are talking about 2022 our investor coming in Focus and before that there was an investment which was done for Ahmedabad factory. These are two separate things.

John George — Individual Investor — Analyst

Yeah, so what I’m trying to understand is what is this INR31 crores being used for the future. So what will it be, if you can give some color on that.

Amit Sheth — Managing Director & Founder

Technology, I told, development, product development, software.

John George — Individual Investor — Analyst

For the new lines of products or?

Amit Sheth — Managing Director & Founder

Sir, we had one vertical. Today, we have five, six verticals. Okay, there is an investment that goes into product design. There is investment that goes into dyes and tools there. The investment that goes into technology, you need liquidity for that, right.

John George — Individual Investor — Analyst

Okay. Understand. Okay, if I can, I got it, I understand that. So let me add one more question. Just to…

Amit Sheth — Managing Director & Founder

There are a lot of other — we are having this call from last one hour, we have only completed four investors. Please understand and please respect others also.

John George — Individual Investor — Analyst

Okay, I’ll come back in the queue. I’ll come back in the queue, no worries. Thanks for that.

Operator

Thank you. Our next question is from the line of Devdeep Sarkar [Phonetic] Individual Investor. Please go ahead.

Devdeep Sarkar — Individual Investor — Analyst

Hello. am I audible?

Operator

Yes, please go ahead.

Devdeep Sarkar — Individual Investor — Analyst

Yes, good afternoon. I would like some idea about the rail segment business, the business. The things I would like an input on is the total approximate order value that is given to the lighting sector by this industry. How we are trying to capture that, any new product updates so far?

Amit Sheth — Managing Director & Founder

You’re talking about railways, right?

Devdeep Sarkar — Individual Investor — Analyst

Yes, yes, the rail segment, correct. And also, I would like one more thing, what do we expect when we become approved vendor, like you said, we can apply for 20% of the products and now we can go ahead for 80%, so how closely is that linked to the total order value given out by this industry?

Amit Sheth — Managing Director & Founder

Okay. In absolute value from railway to lighting industry was the first question, right?

Devdeep Sarkar — Individual Investor — Analyst

Correct. Yeah.

Amit Sheth — Managing Director & Founder

Honestly, the figures are somewhere around INR500 crores to INR700 crores. I don’t know the exact figures, and it’s very difficult for me to get the exact figures. So you need to bear with me for that.

Devdeep Sarkar — Individual Investor — Analyst

Yes, definitely.

Amit Sheth — Managing Director & Founder

Yeah, when you are in development, so there are lot of companies who are trying to partner with railways. And there is a difference when you are a developed vendor and when you are a approved vendor. So, in developed vendor that is also a non-ready, you have to do a particular quantity to become an approved vendor. So there are lot of — there are chances that a lot of developed vendors, they don’t want to make margins, so rather they make losses also, but to get that quantity, minimum quantity so that after a year they become an approved vendor. Now, just to come to the margin part, the margin part in terms of margin, margin, the gross margin of an approved vendor is much higher than developed vendor, because an approved vendor list, there are not many approved vendor list, for all the 16 product which we are bidding for. So there are 16 products requirement for the in-house course of railways and that is what we have developed and we are getting approved for all the 16 products.

Devdeep Sarkar — Individual Investor — Analyst

Okay.

Amit Sheth — Managing Director & Founder

Now coming to the future development as I — that was the first question, which I answered, I’m again repeating it. We have taken an initiative for Vande Bharat and it is not an initiative from railways, we have taken it as Focus, they are facing some problems. So there are lot of lights, which are not working in Vande Bharat and they’ve been telling that how we can improve the quality. We are not telling that how we can improve the design nodes. So what we are doing is we are working with our existing product designer based in Germany, we are designing three options for them and showing them that what can be done in terms of energy efficiency, in terms of with certain surveys like typically if you switch on the reading lights, the person sitting beside you also gets this stuck, which is not in the case, if you go and in those IC trains or if you’re go any of airlines, and this is what we are trying to propose that the reading light has to be really concentrated, it has to be very low glare, and this is what we are developing for them.

We are also developing one product which is used very widely by them, which is news for general lighting. Now, there is lot of glare and there is a lot of light pollution, and we are giving them a technology, which we will be showcasing it next month. So these are all initiatives by us. And third, but not the last we are we are working on IoT, wherein we are proposing that in the night-time the lights will be only near 20% so other person can go and get start. It saves them power also. If there are no pillar in the common areas in the passageways the light will switch off automatically. In the night-time the light will change the colors to warmer, so that it gives people calm, it is something called human-centric lighting, I’m not going into the technicality of it.

So we’re bringing all these things for railways. This is the whole idea of this is show them that how they can be at par with any international country in railways. And today railway is ready to spend, but they don’t have exposure. And we think it’s a big opportunity, huge opportunity for us. If instead of just doing the 16 standard products, where do we have competition, here we get absolute monopoly with railways if we get approved. So that’s calculative based on our award assumptions, thought processes and past experience we are taking. Hello?

Operator

Thank you. Our next question is from the line of Divyam Gupta [Phonetic] Individual Investor. Please go ahead.

Divyam Gupta — Individual Investor — Analyst

Yeah, hi sir. Good afternoon and thank you for the opportunity. I really appreciate it. Sir, I was looking at your annual reports of the last year, and it mentioned that the research and development charges were just INR2.61 lakhs for the whole year and now you’ve been mentioning on this call that our research and development charges are approximately 10%, and it will move on to 10% to 20% range. So sir, your words don’t really match the numbers, which are mentioned in the annual report.

Amit Sheth — Managing Director & Founder

So I was very clear, and there are two things what do you consider as R&D, product development, Tarun, under what it had all this thing comes, whether it’s a product investment, dyes and tools and all those things, what is the percentage of that if you can please answer.

Tarun Udeshi — Chief Financial Officer

So, it comes under tools and others, where we capitalize it under tools and others. So the expense what you’re seeing is, you’re referring to profit and loss account or which…

Divyam Gupta — Individual Investor — Analyst

No, sir, I’m actually mentioning on page number 20 of the annual report. So it’s mentioned, research and development charges were approximately INR2.61 lakh for the whole year.

Tarun Udeshi — Chief Financial Officer

Unfortunately, I don’t have that in my hand, so I will just…

Amit Sheth — Managing Director & Founder

Okay. It’s okay. Let me answer it. Okay, so this is your accounting pattern. Okay. For us, when I say that we are going to do, I’ve been very clear, that our investment goes into development. Development for us is design, technology, tools and then production, so production does not come under development. And this is our investment what we are doing. So what you are looking is only one area. So whatever tools we manufacture, whatever the design cost we incur, same cost Tarun where do you put it?

Tarun Udeshi — Chief Financial Officer

Under P&L only.

Amit Sheth — Managing Director & Founder

But which area, so if you can answer him and if you can give him the percentage, what we can do is you can get in touch with our CFO, he will give you the actual percentage and actual which area it is coming in profit and loss or wherever it is coming, So that it can be clarified.

Divyam Gupta — Individual Investor — Analyst

Sure sir, I’ll do that. Thank you very much. That’s all.

Operator

Thank you. Our next question is from the line of Ashit Koti [Phonetic] Individual Investor. Please go ahead.

Ashit Koti — Individual Investor — Analyst

Yeah, good afternoon, sir. Sorry, my question might be of repetitive nature. I joined a bit late and wanted to understand when you’re talking about gross margin for an approved vendor would be higher, so how much the difference is between an approved margin for approved vendor and in normal circumstances? That is one. And second is, we had shown fourth quarter as sales were down. Now, normally when you are dealing with most of the PSUs, or government sectors, fourth quarters are always better. So if we could get color on our sales segment wise, railways or governments and then private sector, within private sector if our major focus is on resale or whether on malls and showrooms then that kind of categorization, if it is possible to share?

Amit Sheth — Managing Director & Founder

So, everything is possible to share, and that’s the reason the CEO is on this call. And whatever data you need he will share it with you. That’s not a problem. Yes, you certainly joined late, and this has been a repetitive question on the quarter-to-quarter. And nothing from last and a half, hour and this is the fourth time, I have to repeat this.

Ashit Koti — Individual Investor — Analyst

No, then don’t repeat. I’ll go through the transcription.

Amit Sheth — Managing Director & Founder

That would be — I’ll be very happy if you can go through it. So I’ll answer the first question because that question has not come up till now. What is the difference between — what is the margin difference between approved vendor and a developed vendor. So, I just explained a few minutes back, a lot of developed vendors, they need to complete the quantity to become an approved vendor, so they are really ready to go down the margins. So a development vendor is working at an average margin of not more than 20% to 25% gross. An approved vendor is not working anything less than 50% to 60% gross. And if approved vendor, or if the vendor who has been working with railways, and if he is developing some new product where for example, for Vande Bharat, then their gross margins can be more than 70% to 80% also.

Ashit Koti — Individual Investor — Analyst

Okay.

Amit Sheth — Managing Director & Founder

Yeah. Now where do we get these figures, because this is, everything goes on e-tender. It is not on GeM, it is on IREPS, I guess, and we get the pricing once the then that is open for all the vendors, and that’s why we have realized that the large quantities, which are going, which is 18% to approved vendors they are bidding at much higher price and they are still getting it, because there are very few approved vendors.

Ashit Koti — Individual Investor — Analyst

With regards to the sales breakup?

Amit Sheth — Managing Director & Founder

This is also sales breakup also, I will request, so vertical wise, we have already discussed this. But today, also retail is dominant. Second is, home lighting. Second and third is home lighting and infrastructure lighting. Then it is railways and IoT. And percentage, Tarun, if you can give the exact percentage, because I could not give on this call.

Tarun Udeshi — Chief Financial Officer

So 43% — sorry, 58% of projects, residence is around 15% and rest infra is around 7.5% to 8%.

Ashit Koti — Individual Investor — Analyst

7.5% is infra, retail is….

Tarun Udeshi — Chief Financial Officer

58%.

Ashit Koti — Individual Investor — Analyst

Retail, retail?

Amit Sheth — Managing Director & Founder

Home lighting,

Tarun Udeshi — Chief Financial Officer

Home lighting, sorry. Home lighting is around 15%.

Ashit Koti — Individual Investor — Analyst

15%, so where does the commercial lighting, the major area are malls…

Amit Sheth — Managing Director & Founder

That comes under retail products.

Ashit Koti — Individual Investor — Analyst

That comes in retail products. Okay. And sir, when you are working on a project-level business kind of with railways and for Vande Bharat per se, the lightings, are you also providing solutions for the stations, lighting solutions?

Amit Sheth — Managing Director & Founder

Currently, no. Now we are getting into it, it’s more of a commodity. So we are not ready.

Ashit Koti — Individual Investor — Analyst

No, here I’m not really a technical person, but when you are talking about saving energy, I mean, say, based on overall people flow with sensors and things like that, you could decide and you can — you know switching it on or off, certain areas where mass movements are there, more lights, where less movements are there comparatively lesser lights, switches might be there, but you would control the power a way to have more — that kind of a solution whereby station operating expense on lighting goes down. Today, we do not have an air-conditioned stations per se, but tomorrow, if we have that kind of — then the overall energy expense would be substantially higher for the railway stations and in that scenario, we have an issue.

Amit Sheth — Managing Director & Founder

I understood your question. I’ll answer it. So we had done a survey. We were thinking and this is a very good idea impact from your side, if we can implement IoT for railway stations, now you need to understand one thing. A, railway stations are opened in daytime, and from all sides. If you see, most of the railway stations all over the country. In the night-time also the customer flow is so high, see the sensors works on two areas, one is occupancy, so what is the density of people inside the station. Okay. And second is, heat mapping. So if there are too many humans, there will be lot of heat and the lights really blown to an optimum output. Now the occupancy goes down, then the lights will go down and you can save on amenity. Unfortunately, in most of the areas, okay, the occupancy is always been very, very high and the energy saving part has not been very great. Yeah, what we had crosschecked, except for if you go to a small village, fee tie-up…

Ashit Koti — Individual Investor — Analyst

But what about underground metros, I mean to say, underground trains, as we are moving towards that in many areas?

Amit Sheth — Managing Director & Founder

Yeah, underground trains and all we have still not bidded for that. Maybe this is for future, and underground metros are still coming up, it has not come up. And we are — today, we are working with only three railway bodies, ICF, RCF and MCF. Okay, and coach manufacturers who manufacturers for railways. Our major focus is railways is huge, as you’re right, I projected, and it is not possible that you can enter all the areas together, okay. So, this is something this took us almost three years from getting ourselves — or then getting our product approved and getting the lab approved, it’s a long process. So, first, we want to — and there is a big chunk here. So we want to first get this market and then we will go to another market.

Ashit Koti — Individual Investor — Analyst

Okay. Last question I won’t take too much of yours, where do Focus stands as far as international product and competition is concerned and whether Focus has intend to get into exports in a bigger way or can they compete with Chinese?

Amit Sheth — Managing Director & Founder

I’ll answer your last question first. Chinese, no, we cannot compete and we don’t intend to compete. Till our product-line is concerned, today the technology what we have, a very few European companies also — rather not many European companies have this technology, you can say. Till international market is concerned, we already have presence in Middle East and Southeast Asia. We have not explored 100%, the potential is huge in Middle East and Southeast Asia. We will first explore that. It’s not that we have not tried for European market, we have tried for Europe, but we really have a language barrier and the cost getting into it is very high. So, we are little bit — we want to take baby steps before entering to Europe, we want to be the first successful in Southeast Asia and Middle East, once we are successful, we have sustainable same amount of turnover, or higher turnover in those markets than India, then we will go to European market. We are already working with one of the largest firms in Europe for retail industry and we are developing some technologies for them. And they are the largest suppliers to our contractors through supermarkets and hypermarkets in Europe.

He company is from Italy called [Indecipherable] and we are the only partner from Asia. They have not even approved products from China or any part — any other countries. Yeah, but baby steps still Europe is concerned, and there are certain bottlenecks. We have a huge opportunity, since this topic has come out, we have a huge opportunity that we are working with Mercedes-Benz. And we are an approved vendor with Mercedes-Benz. So today Mercedes-Benz has given us Middle East, Egypt and Africa to work on and they’re also talking with us on European market, same is with Uniqlo, but their term is that we have to give made in Europe product. So we are already in talk with certain OEMs who will we manufacture for us under our brand name. So that it is a made in Germany product and that process is on and, yeah, we should get that business, but in full-fledged light in terms of having offices and all, no, currently we are not looking at.

Ashit Koti — Individual Investor — Analyst

The which we use sustainable, I mean, that was from the business angle, but this is a new train, but the new train which is coming up is on sustainability. So are we also looking at that?

Amit Sheth — Managing Director & Founder

Yeah, so we are taking lot of initiatives, and this is serious initiatives. So I told you that I’ve been informing on this platform that I was in Europe for one month and I have been discussing with a lot of private company, retailers, we’ve been interacting and their biggest concern is sustainability. I had been into one of the buildings, where they have also realized that they will not buy any material outside 60 kilometers radius, because it’s not the freight cost, but CO2 emission. Yeah, so, Europe is taking this thing very seriously and we are trying to build it up in future when we enter European market or even for Southeast Asia, this has taken very seriously. So we are working very hard on sustainability. It is strategic planning, like we have just — we have taken a conscious call that we will zero down on plastic in our products.

So normally, every product, it comes with a plastic bag. So it has been converted into paper bag. The cost is little higher, we can afford it. We are converting our product into recycle plastics wherever possible, we can, let whatever technological barrier we have, but it’s a huge step. These are the steps, which are really helping us like we are trying to use a lot of recycling, we are doing some office where we are using recycle cork inside the light fixtures as a decorative element, we are not using any aluminum. So those are the initiatives we are taking and these are highly appreciated and in long-term any international company coming into India, they come with these norms. And there are very few companies today who are able to supply this type of products, sustainable products. So, we will not see immediate effect in six months-to one year’s time, but over a long-term, this will play a very important role.

Ashit Koti — Individual Investor — Analyst

Okay and of our projects or products getting any benefit on carbon credit?

Amit Sheth — Managing Director & Founder

No.

Ashit Koti — Individual Investor — Analyst

We are not getting eligible for that.

Amit Sheth — Managing Director & Founder

No, no we are not a heavy polluter, what we do is…

Ashit Koti — Individual Investor — Analyst

No, no, not as a polluter, but when you are opening a solution, which reduces emissions or which reduces the consumption of power then do we — can we opt or can we get the…

Amit Sheth — Managing Director & Founder

Currently, we’re not looking to it, but this is something we will after this point you have raised, we will look into this matter.

Ashit Koti — Individual Investor — Analyst

Okay.

Amit Sheth — Managing Director & Founder

But till date, no.

Ashit Koti — Individual Investor — Analyst

Fine. I have a couple of others, but I’ll come in queue, is possible or maybe one-to-one?

Amit Sheth — Managing Director & Founder

Whatever you’re comfortable with.

Ashit Koti — Individual Investor — Analyst

Yeah, right sir.

Operator

Thank you. Ladies and gentlemen, due to time constraints that was the last question of our question-and-answer session. I now hand the conference over to Mr. Vastupal Shah from Kirin Advisors for closing comments.

Vastupal Shah — Associate Partner

Thank you from the management and all the participants who have joined the call of Focus Lighting & Fixtures Limited. If you have any query, you can write us at research@kirinadvisors.com. And once again many thanks to management and every participant of the call. Thank you.

Amit Sheth — Managing Director & Founder

Thank you.

Tarun Udeshi — Chief Financial Officer

Thank you so much.

Operator

[Operator Closing Remarks]