Ikio Lighting Ltd (NSE: IKIO) Q2 2025 Earnings Call dated Nov. 11, 2024
Corporate Participants:
Hardeep Singh — Chairman and Managing Director
Sanjeet Singh — Whole Time Director
Atul Kumar Jain — Chief Financial Officer
Analysts:
Suyash Samant — Analyst
Mayuresh M. — Analyst
Madhur Rathi — Analyst
Karan Gupta — Analyst
Sanjay Sood — Analyst
Bhavesh — Analyst
Dhiren Khatri — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the IKIO Lighting Limited Q2 and H1 FY ’25 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] I now hand the conference over to Mr. Suyash Samant from Stellar IR Advisors. Thank you, and over to you, sir.
Suyash Samant — Analyst
Thank you. Good evening, everyone, and thank you for joining us today. We have with us today the senior management team of IKIO Lighting Limited, Mr. Hardeep Singh, Chairman, and Managing Director; Mr. Sanjeet Singh, Whole Time Director; and Mr. Atul Kumar Jain, Chief Financial Officer; who will represent IKIO Lighting Limited on the call. The management will be sharing the key operating and financial highlights for the quarter and half year ended September 30, 2024, followed by a question-and-answer session.
Please note, this call may contain some of the forward-looking statements, which are completely based upon our beliefs, opinions, and expectations as of today. These statements are not a guarantee of our future — of our future performance and involve unforeseen risks and uncertainties. The company also undertakes no obligation to update any forward-looking statements to reflect developments that occur after a statement is made. I’ll hand over the conference to Mr. Hardeep Singh. Thank you and over to you, you, sir.
Hardeep Singh — Chairman and Managing Director
Yeah. Thank you — thank you all of you for joining on the Q2 and H1 FY ’25 earnings call. Our presentation has been uploaded on stock exchange and I hope you all have a chance to look at it. We are happy to mention that overall traction continues with revenue growth of 11% on year-on-year INR25 — INR252 crores in H1 FY ’25. This was an account of all three business verticals we are doing. Coming to Q2 FY ’25 highlights, the revenue was up 6% year-on-year and marginally down by 2% Q-on-Q. The Q1 — the Q-on-Q impact is on account of changes product categories in ODM segment as some of the old SKUs are being phased-out and new SKUs are being introduced. We expect the sales to pick-up in the coming quarters. The continued growth Q-on-Q and Y-on-Y in-product display segment. Also, we have started supplying to Gulf Region where we have foray in Q1 FY ’25. The Energy Solution and other segments, we witnessed double-digit growth Q-on-Q, Y-on-Y as inventory clearance continued gradually in our RV products in USA.
Coming to profitability, we are happy to report that in Q2 FY ’25, our gross margins improved to almost 43% due to favorable product mix and operation stabilizing at the USA subsidy. Our EBITDA margin was at 18% improvement Q-on-Q in-line with expectations. As the revenue from the new facility and product categories added operating leverage. Year-on-year negative impact is on — in fact is on account of front-roading expense like higher employees costs led by team expansion for new facilities and new product categories. PAT grew 4% Q-on-Q to INR30 crores in Q2 FY ’25. However, growth in — impacted due to higher depreciation on account of commercial commercialization of new facility. Block 1 of the greenfield project effective May 2, 2024, and mentioned earlier for the EBITDA decline. Now I will request Mr. Sanjeet Singh to provide his thoughts on the quarter. Over to you, Mr. Sanjeet.
Sanjeet Singh — Whole Time Director
Thank you. Let me now take you through key business initiatives undertaken to boost growth further and give some more insights about how things are progressing. As you know, we have successfully commercialized Block 1 of two lakh square feet-in May 2024. This is just one part of our overall greenfield expansion project of five lakh square feet. Block 2 of another two lakh square feet is expected to be completed by March 2025. As of now, we are undertaking the civil construction.
As we mentioned in the previous call, we are expanding our product basket and have forayed into the hearables and wearables. I am happy to inform you that the company has got orders and onboarded seven to eight top brands in the domestic market. We would like to highlight that we are expanding our global footprint. In the USA, in addition to the RV business, we have started supplying our industrial and solar products to energy services companies. Also forayed into the Gulf market for the export of our products under the product display segment. As a result of an effort to diversify our revenue streams, [Technical Issues] the contribution stands at 20% in the first-half of FY ’25.
To conclude from my side, we believe it is imperative that we take these steps in new markets to help us diversify our revenue streams, both product-wise as well as geography-wise. We are looking-forward to exciting times ahead as our new initiatives will start bearing fruits in the long-run. With this, I conclude my remarks on our strategy for the way forward. I now request Mr. Atul to please go through the key financials.
Atul Kumar Jain — Chief Financial Officer
Thank you. Let me now take you through our financial performance and the utilization of our IPO proceeds. Our financial position continued to remain strong with a net debt-free balance sheet and well-funded capex cycle. As mentioned earlier by Hardeep sir, our growth trajectory continue in H1 financial year ’25, we witnessed a revenue growth of 11% year-on-year to INR252 crore and the gross margin remained largely stable at 39%. The EBITDA stood at INR39 crore in H1 financial year ’25 versus INR50 crores in H1 financial year ’24 and PAT stood at INR25 crores in H1 financial year ’25 versus INR32 crores in H1 financial year ’24. In Q2 financial year ’25, our consolidated revenue up by 6% year-on-year and down marginally by 2% quarter-on-quarter at INR125 crore. EBITDA margin was at 18%, improved by 460 basis-points Q-on-Q, in-line with expectations as revenue generation from the new facility and product categories added operating leverages. It is down by 490 basis-points year-on-year as the impact is on account of front-loading of growth expenses like higher employee costs led by team expansion for the new facility and new product categories.
PAT stood at INR13 crore, up 4% quarter-on-quarter and down by 29% year-on-year. The growth was impacted due to-high depreciation on account of commercialization of new facility Block 1 of the greenfield project effective May ’24 and the reasons mentioned earlier for the EBITDA decline. On the IPO proceeds, the repayment of debt was completed immediately after the IPO. Block 1 is now operational. For Block 2, civil construction is ongoing and completion is expected by March ’25.We have now deployed around 60% of the IPO fund and are on the course to complete deploying the rest within the timeline we set for ourselves. That’s all we have from the company side. I request the moderator to please open the forum for questions.
Questions and Answers:
Operator
Thank you so much, sir. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Mayuresh M. [Phonetic], who is an Individual Investor. Please go ahead.
Mayuresh M.
Good afternoon. Am I audible?
Suyash Samant
Yes.
Atul Kumar Jain
Yes. First of all, congratulations for the opening of our new facility. It will certainly give us boost in the manufacturing process of the — of the new products that we are going to look-forward. For me, I am more interested in the energy solutions category that we — that we have, for example, the solar panels, rotary switches, the lithium battery. I would like to know what is the current revenue-share of this category of energy solutions? And what is the revenue-share that we are looking-forward in the coming two or three years? And also, do we — I see it’s the solar panels of RVs, are we also looking-forward to create a production unit for solar panels like in, in general right in, in a large amount?
Hardeep Singh
So first of all, I’ll start for the backwards because as I said, solar panels we are making — right now we are making basically for recreational vehicles, RVs and the market is growing like on month-on-month, it is giving a good response and next year because in USA, the year-ends — year starts from Jan to December. So this year, we are doing good, and we understand the market very well over there and we are getting the repeated orders as well as the — we are adding the new customers. So that segment is going very well. To your second — second question about going into the energy segment sector for solar, for domestic sector, we are not looking at that at all. But we are looking at USA market where the complete project is there, not only the solar, where there are ESCO projects, which are only energy solutions, it includes the solar lighting, etc. So we are like our company is getting the orders for them and that revenue is also like quarter-on-quarter basis, it is increasing. So this is the thing for the energy section. Any other question?
Mayuresh M.
So, so we are not looking-forward to manufacture solar panels for creating big solar projects domestically or in the U.S. specialized solar panels used for lighting.
Hardeep Singh
No, we actually we are not manufacturing the solar panels. We are getting it done from with our specifications and all from other vendors and giving to the projects in USA.
Mayuresh M.
All right. All right, understood. And how about the lithium battery?
Hardeep Singh
Lithium battery we are using for ourselves, but lithium battery because of so many constraints, it is little down, but we are now — we have started the hearables and wearables. It also consumes lot of batteries. So we are planning to have those aligned lithium batteries.
Mayuresh M.
Yes, understood. Thank you. And any projections on the revenue-share from the energy solutions in the coming two or three years?
Sanjeet Singh
So for the Energy solutions, basically, right now the way we have divided or we are presenting the business is through three categories. So one of the categories, Energy Solution and others. So basically, it comprises of the business that we are doing in the US that comprises of the RV business, the energy solution business, and also the business that we are doing in the export market. So as you might have noticed that revenue-share is also going up. Like last year, it was somewhere close to 15% of the overall business that we have — we did. And this year in first-half itself, it has contributed to 20% of the overall revenue. So that share is increasing. And because we are very new in that energy-saving — energy services business, the business that we are doing with the — the ESCO that we are doing there in the U.S. market, it holds huge potential and we are working on those lines and we are like what Mr. Hardeep also mentioned, it is not just the solar panel or just a lighting product, it’s a package where we are supplying a mix of a lot of products depends on project-to-project basis, what the requirement is. So that is why we have two streams of catering to that market. One is the direct export that we are doing from the Indian market and the second is the subsidiary that we have created in the U.S. so directly from that subsidiary also.
Mayuresh M.
Thank you. Thank you. Thank you very much for the clarification. I appreciate your answers and time. Thank you, very much and good luck.
Sanjeet Singh
Thank you so much.
Hardeep Singh
Thank you, Mr. Mayuresh
Operator
Thank you very much. [Operator Instructions] The next question is from the line of Madhur Rathi from Counter Cyclical Investments. Please go ahead.
Madhur Rathi
Hi, sir, thank you for the opportunity. Sir, I have a question on our margin sustainability. Sir, when I look at our margin, sir, I went through the previous con-call, and sir, I understand that we provide some R&D as well as we are backward integrated, that’s why our margins are better. But sir, when I look at branded lighting peers, branded OEMs, so their margins — most of the margins are in single-digits and sir so that’s what I’m trying to understand, sir, can we face a pressure from OEM going-forward whereby it would lead to our margin compression? As well as the second question would be, sir, we are increasing our scale in the lighting business with Philips, Block 1. So will there be another instance of a margin pressure as scale increases because we were doing only niche products till now and going-forward, as we focus on selling up our capacity, there could be some kind of margin pressure going-forward?
Sanjeet Singh
So hi, Mr. Madhur thank you for — I mean the couple of questions that you asked. The first one related to the margin compression. If you — I mean, if you’re closely following the results and the quarterly investor calls, then the margin compression right now has happening on account of basically the onboarding of — the front-loading of expenses that we are doing for the new verticals and the new product line. So the new plant that has also come up, it is yet to give the desired results or basically the production is yet to start in that man — in that scale. So it will take some time. You know, I hope you understand that creating a facility and then bringing in business, it’s a — it’s a process that takes a lot of approvals from the customer end as well. So we are in discussion with a lot of new customers also, some of them in very advanced stages where we are talking about product approvals and all of that.
So the margin compression, like I said, is largely due to the front-loading of expenses that we are doing and on account of the depreciation as well because of the new facilities that we have created. So once all these new plants, machines, they start generating the revenue. So automatically the margins will start improving. And if you — if you compare the margins from Q1 to Q2, there is anyways — there is an improvement in the EBITDA margin from Q1 to Q2. And going-forward, the new verticals that we are — we have started like in — you know in the U.S. market or if I talk of the hearable, wearable. So to begin with, we are doing right now OEM business, but our plans is to go ODM, like I’ve been — we’ve been talking about this since past quarter or two. So we are on that path. We are developing a lot of things in-house. So — but it will — eventually take some time, but another few quarters and you will start seeing those results as well.
And your second part of the question that was related to the Block 1, increasing the sale and again the doubt on margin for the Block 1. So basically, in Block 1, if you look at the presentation also, we will be doing the lighting products that we are already doing. But apart from lighting, we are also diversifying in that unit and that is you know, very much I would say evident from the type of infrastructure that we have created. So the PSMT lines, the machinery that we have installed that is not only for the lighting industry, but it is capable of handling a lot of other electronics that — we intend to manufacture in the near-future for which we already are taking a lot of traction. So going-forward, we will keep updating our trajectory and also the performance that is happening. And right now, we are in-line with what we’ve been talking of, in terms of the revenue and the margins and we’ll keep you posted on that.
Madhur Rathi
Yeah. So good. Sir, my question was on a longer-term basis. So sir, my question was basically, sir, when I look at branded lighting distribution companies or SMEG companies, sir, their margins are similar in the single-digit or at much low-double-digit, but whereas we are making 20 volumes of margin. So I’m trying to understand, is this margin sustainable? And sir, why would the OEMs not like-kind of pressure us to reduce our margins going-forward? So on those front and sir, so why are our margins better? But sir, can you explain it in — can you clarify regarding this?
Sanjeet Singh
[Indecipherable] So basically if I think looking at the margins — consolidated margins, but if you look at the standalone margins, our margins are — in standalone figures, our margins are on the lower side only. And that is again because being an ODM business, but still because it is ODM and we are manufacturing everything in-house, the margins are still decent, but on the lower side. But if you look at the consolidated numbers, the margins are better because it involves a lot of other activities, other product lines that we are doing where in certain verticals, the margins are slightly better, and in certain verticals because we are doing everything in-house and though the margins of the backward integration that we are doing are also getting added in the consolidated revenue. So it is that effect that you are seeing in the consolidated numbers. And just because you know, although I have discussed this in the previous calls as well, but I’ll just reiterate. If you look at our numbers, you know, if you look at our history, maybe six years before or around that time, when we were not doing a lot of backward integration. So our margins were lower on the lower side only. It is — it’s only after the backward integration that we sort of started doing from 2017, ’18, that is when the margins started improving and it is a result of that only.
Madhur Rathi
Okay. So standalone business is pure-play the lighting ODM part and sir, what would be the consolidated numbers other than the RV business where the margins are higher?
Sanjeet Singh
Sorry.
Madhur Rathi
So on the standalone business, I would expect that the pure-play the lighting ODM or the lighting EMS part of that. But when I look at consolidation, sir, what all business would be added where the margins are higher?
Sanjeet Singh
So like I said, right now, we are presenting a business in three categories, although there are more verticals to that, but we are presenting in three categories just to simplify for the investors. One is the ODM business, second is the product displays and third is the energy solution and others. So basically, in the ODM, we talk of only the lighting that we are doing, as you know in the ODM category, the high-end home decorative lighting. And when I talk of the product display segment in that, there are three — three categories within the product display segment as of now, that is the store lighting that we are doing and the refrigeration lighting and as well as the hearable, wearable that we have recently added.
And in energy savings and others, it’s basically referring to the business that we are doing in the U.S. and the business that we are doing in the Gulf and the — and the production that is — I mean the products that are being exported to these markets. So this is how we’ve bifurcated the categories as of now. You were asking about bifurcation only, right?
Madhur Rathi
Yes. So apart from the ODM business, everything is under a consolidated entity, under our subsidiaries recently. Is that understanding right?
Sanjeet Singh
Correct. Correct.
Madhur Rathi
Okay. And just as a final question and then I’ll get back-in the queue. Sir, we are guided for a 20% 25% revenue growth and our 20% to 20% kind of margin.
Sanjeet Singh
Voice is a bit muffled. So it’s not very clear.
Madhur Rathi
Sorry, sir, is it better right now?
Sanjeet Singh
Slightly better, yeah.
Madhur Rathi
Yeah. So I’m just asking about the guidance that you had given, sir, can we expect that guidance to follow-through or there would be some pressure and following that guidance of 20% to 25% growth and the margin guidance?
Sanjeet Singh
So right now, we are in-line with the guidance that we had provided and because by the — this quarter and the next quarter, the exit — I mean the quarter where we are right now, this and the next quarter, we believe — we have planned to introduce certain new products, even the hearables and wearables will start kicking-in the revenue — decent revenue in the revenue mix. So we are in-line with what we had projected. And if there will be any sort of maybe clarity that needs to be given, I think in the third quarter, we will give you that clarity if there will be any. But right now, we feel we are exactly on-track to what we had projected for the financial year.
Madhur Rathi
Sir, on the margin front as well.
Sanjeet Singh
Sorry?
Madhur Rathi
Sir, on the margin front as well, because I understand that the year — the hearables and wearables would be a lower-margin because of the OEM kind of starting in this business.
Sanjeet Singh
Yeah, so right now, like I said, it’s the OEM strategy that we are following and the ODM strategy because it’s under development, we are developing the tools, molds, and all these for the products that we will be doing from scratch. So, they will probably start kicking-in from the fourth quarter and then eventually from the next financial year. So, revenue-wise, we are in-line with what we had projected and in — and in terms of margin guidance also, we have maybe a lower — you know close to around 20% figure is what we are expecting by the end-of-the financial year.
Madhur Rathi
So that makes sense, sir. Thank you so much and all the best.
Sanjeet Singh
Thank you so much, Mr. Madhur.
Operator
Thank you very much. The next question is from the line of Karan Gupta from Rely Investments [Phonetic]. Please go ahead.
Karan Gupta
Hello, sir. I had a few questions. I just — understand the company better. Sir, can you just probably share some of your unlisted space competitors who are maybe your peers in what you’re trying to do give. I remember you have told previously that there is no exact competitor, but could you just kind of throw some light on whom you feel would be your right competitors?
Second question is, sir, like you have an ODM relationship with Signify. And if I understand correct, Signify has mentioned a 20% growth vis-a-vis 10% growth in the segment. So given the fact that they are pretty much bullish on the India business, so how do you see that percolating to your business visibility because that I understand is a more forecastable business, based on your visibility provided by Signify.
And one final question before I join further in the queue, sir, could you just provide some thought on how you are able to kind of price. So is it affected by any kind of China-based dumping on LEDs or things like that. So on your — basically your ODM part, which is your more growing part, ODM and OEM. So these questions first and I’ll follow-up. Listed or unlisted. I mean.
Sanjeet Singh
Yeah. Hi, Mr. Karan. So basically, the first part of your question I think was related to the unlisted competitors. Yeah, it’s actually very difficult for me to name any competitor as such because like we are in multiple verticals and multiple streams. So honestly, I cannot think of a single name where I can give you any idea related to who is our unlisted competitor because in each category maybe we have a someone as a regional player or something of that sort. So, I’m really sorry. We never looked up — we have never looked up, you know that kind of information. So, I — I won’t be able to give you any name as such.
And I think the second part of your question was related to the Signify business that we are doing. So, the growth that you had mentioned, so I’m not sure actually I have not gone through the numbers of you know what growth have they reported. But actually, in lighting also, there are multiple verticals within the lighting segment also. And we are in the you know the high-end home decorative lighting space, which is also called the functional decorative lighting. So, I’m not sure what is the number that they have reported in that category. But on — I mean, what I can tell you about our de-growth in this quarter for the OTM business, that is largely due to the fact of the — some of the existing products getting phased-out. So sometimes it takes a while for us to get that information related to the demand that is there in the market.
And because it’s a long cycle, so it takes maybe a couple of quarters for us to understand and adjust our products accordingly. So this happens like once in every two years that something like this because of the long list of SKUs that we have. And we’ve already started working on the new product categories to sort of bring into the market to replace the existing ones and we are also talking to some new customers. I cannot name them right now, but we are talking — they — actually they have visited the facility and with some of them, we are in the advanced stages of discussion. So maybe a couple of quarters more and we will be able to throw more light on this aspect as well.
And I think the third-part of your question was related to the pricing for the ODM segment if I’m correct.
Karan Gupta
Yes, sir, the general LED-based lightings and where you are more dependent on the market rather than your exclusivity.
Sanjeet Singh
So actually in the pricing of the ODM segment, it you know I would call them — it’s not more dependent to the market, it is just that the products that we try and bring for the OTM segment, it’s not the generic products that are there in the market and that is why we are there in that niche high-end home decorative lighting space. And the pricing we do is it differs from product-to-product, but we do have a set costing method that is approved by our customers and basis on that, basis on the raw-material pricing and everything, we are constantly evolving the pricing of our products as well. So it’s a simple system where we have a set cost-plus method which we follow for our ODM products.
Karan Gupta
And sir, can you just throw some of the very strong tailwinds because your other ODMs may be not of exactly your business, but maybe similar business in electronics and lighting manufacturing. So they are kind of saying that five years back, they were not so bullish, and right now and you are already on your CapEx mode. So how do you kind of see the general bullishness including the US markets on a consol basis or which segments do you per se that you are seeing you know a lot of growth which was not seen. Historically we have been in the same line for many, many years. So could you just throw some light there?
Sanjeet Singh
So actually, our ODM business has generally been doing well, say if you look at the past few years. And apart from that, it’s growing at its own pace. But apart from that, the newer verticals or the other segments like the product display category and the export market, this is where we see most of the growth coming in the near-future. And obviously, the new areas where we are working because it’s very difficult to, you know, make you understand without naming a few things which I cannot do right now. But we are working on those directions. So these — the new categories, especially the export market, we are very bullish in the export market, the new venue where we have started working in the — for the ESCO.
So that is one area plus the geographical expansion that we are doing. So there are a lot of things that are happening in the back-end. And along with that, the capacity expansion, the new plant. So we are in that phase where we have created the facility and we have initiated the discussions. It is just a matter of time where the capacities will start filling in. So these new verticals and the — even the existing ones apart from, let’s say, the ODM, we are expecting good growth in these categories.
Karan Gupta
Right. So I’ll follow back-in the queue and allow more participants to ask their questions.
Sanjeet Singh
Okay. Sure. Thank you so much.
Operator
Thank you very much. The next question is from the line of Madhur Rathi from m Counter Cyclical Investments. Please go ahead.
Madhur Rathi
Hi, sir. Thank you for the opportunity on the. Sir, if I just go back over —
Operator
May we request you please use handset mode while asking your question?
Madhur Rathi
Is my audio better right now?
Hardeep Singh
No, your voice is quite…
Operator
Quite muffled sir. Please may we request you to use your handset mode?
Madhur Rathi
Yeah using handshake mode only. Is it better right now?
Hardeep Singh
Slightly better.
Sanjeet Singh
But sir not really.
Hardeep Singh
Maybe if you could speak a little louder, it will help.
Madhur Rathi
Yes, sir, I’ll do that. Sir, if I look at our consolidated margins, the standalone numbers. So the margins are for the past two years are in the 30% 33% range. So I’m just trying to understand, I think as this business will grow, our margins will improve further going-forward. So what is that we do that we own such high-margin in this business? And sir, just forward-looking, like where-is this business? How are we different from other players? Because I think China would be another competitor in provide more provider to most of these countries in the export markets also on that front?
Sanjeet Singh
So I will try to answer your question because I got your question part. So correct me if I’m wrong somewhere. So I think you were asking about the margins largely comparing to probably last year to this year and the second part of your question was related to China being our competition and how we are unique in that matter. Am I correct?
Madhur Rathi
Yes, sir. Sir, sir, the second question, I’ll just repeat my first question, sir. The first question was, sir, if I just remove the standalone numbers from the consolidated numbers, our margins are in the 30% 33% range for the past two years. So I’m trying to understand what is that you do exactly that we are owning such a high margin because sir, I don’t have a fairly good understanding regarding the company, so that would help very much.
Sanjeet Singh
I think I heard you said if we remove — if we remove the standalone margin, then our margins are in the range of 30% to 33%.
Madhur Rathi
Yes, sir, yes, sir. That’s right.
Sanjeet Singh
I will have to check. I don’t think that — okay. So the difference is going to be probably 2% to 3% only because the ODM business is somewhere close to around 40% 45% of the overall revenue-share that we have. So even if I remove that, I think the effect is going to be maybe 2% or 3% higher than the consolidated number. Yeah.Understood, On the China front? Sorry?
Madhur Rathi
On the China front, on the Chinese — the Chinese competition.
Sanjeet Singh
China front, basically China being our competitor and how we are different to them, right?
Madhur Rathi
Yes, yes, sir.
Sanjeet Singh
Yeah. So there are a number of factors which you know properly highlight, the USP — USPs that we carry as compared to China being our competitor. First and foremost, I’ve spoken about this in previous calls as well that if you go to China and if you look at the one of [Technical Issues]
Operator
[Operator Instructions]
Sanjeet Singh
So should we continue from where we left?
Operator
Yes, sir, please continue.
Sanjeet Singh
So I was actually answering Mr Madhur’s question related to that comparison with China. So I’ll continue with that. I hope he is online.
Madhur Rathi
Yes, sir.
Operator
Yes, sir. So we have him online.
Sanjeet Singh
All right. So yeah, so if you compare us to China, I was mentioning about the USPs that we carry as compared to China. Most importantly, the reason why we started doing backward integration and everything in-house was to bring in the quality-control to the products that we are manufacturing. And if you compare to China, if you go to China and look at a factory doing similar kind of business like what we are doing. So basically, they would be not doing the kind of backward integration that we are into. And that is because of the already available infrastructure in China that they have. So there are factories if a factory is manufacturing drivers, so they will be manufacturing drivers only. And if there is a factory manufacturing fixtures or is into powder coating, so they will be doing that only. And so it’s because of the infrastructure that is already available, but that is not the case in India. And because of that, we went into that direction because of the necessity in order to control the quality and in order to grow the number of SKUs that we are doing. So we are doing more than 1,000 plus SKUs today. And that is not possible if we sort of import from China.
So there are two aspects of this comparison. One is if we bring in the products from China and one is if we are competing with the Chinese players. So if we are competing with them, then we have a much better-quality control, much better, I would say, production control because we are just buying plastic, metal, and electronic components and then converting them into the finished products. And in this way, we are able to better service our customers with better lead times and a much better control over the quality of the products. Plus we — starting from the designing phase of the product, whether it is the aesthetic design or the electronics design, we don’t really have to depend on a third-party for that. So these are very strong advantages that we carry and hence these are the reasons why we are able to get into these new niche verticals which require a lot of development and planning.
Madhur Rathi
Okay. Sir, just a final question from my side. Sir, why are you getting into the watches and audio equipment scale because sir, lighting is such a big category and I think we can grow much higher and faster in this space doing niche — niche applications that we are doing right now for the exports market. So why are we moving into a new territory all of altogether when we can grow our mean business only much — many coals from this stage?
Sanjeet Singh
So there also, I will apply to that because this also phase, right, what we are doing because the integration what we have created is a lot of — I think it is for like the. So here also because the Indian market is dependent on China. So that because we have quite a lot of previous experience in this in audio. So because we were making DVD and home theatre systems and all. So this is a similar market and the volumes are actually used and so — and frm the market.
Operator
Sir, sorry to interrupt you, but we are getting a disturbance from your line.
Sanjeet Singh
From us.
Operator
Yes, sir.
Sanjeet Singh
I can hear you very clearly.
Operator
So now it’s —
Hardeep Singh
I think it’s better and because our room is very quiet as of now.
Operator
Okay, sir. So now I can hear you clearly.
Sanjeet Singh
Okay, okay. Yes. So the — because this is — we are into electronics and hardware. So this is a part of that, that is why we are entered into this. And it is completely new team and new vertical, but we know the product and the market. That is why we entered into that. And it is again like in the drivers we are looking for the lighting, it is the power supply for the prefire. So it is same in our same housing, injection loading, maybe is some type. So there is nothing what we are doing for lighting we have to do three or something new. We have all the inform what is required for those products.
Madhur Rathi
Okay. But sir, I understand that the process is similar and the capabilities of manufacturing products are similar. But my question was, why not scale the lighting — so sir, where do we see lighting business as a percentage of overall revenue over the next three to five years? And where do we see these new businesses going-forward over the next three to five years? So that is my final question. Thank you so much.
Sanjeet Singh
Like we entered to solar. Solar is also not the lighting, but we enter into solar because it has the charge charge controllers and also charge controller again is the injection molding, designing, electronics, same with the refrigeration, refrigeration electronics. It is same — it is the same vertical what we have not any added any new infrastructure for that market. Only the team leader is from the industry. So he’s managing the team and we are seeing very good growth in this segment. We can foresee very good growth in this. So actually, it’s just a question of we are better utilizing our capabilities. We have that capability. And if you look at our company historically, your last 20, 30 years of what we’ve been doing. Lighting is something that we started, 14, 15 years back, but previously to that, we were into electronics only. So that is our core strength.
Understanding of the electronics is our core strength and we’ve been doing electronics, injection molding, sheet metal work and all these things for many, many years now. So if — I mean, obviously, we are expanding our lighting business, that is why geographically also we are, you know going beyond our boundaries now Gulf being one example for the lighting products and U.S. for lighting and other products. But at the same time understanding our capabilities and better utilizing those capabilities and to diversify the business further to bring in more revenues, that is the whole idea. And we are not trying to reinvent the wheel or do something completely out of our knowledge base or understanding. It is just a better utilization of our knowledge, our capabilities and the infrastructure that we have created.
Hardeep Singh
And also, in the lighting also, we are not like we are now making very-high very high-end lighting with all the smart controls and all nighting is like our core area, sir, sir, we are focusing lighting as well. It is not we are defocus or lighting is a separate thing and this is vertical, we can see that we can develop this vertical along with the lighting.
Madhur Rathi
Okay sir, Thank you so much.
Hardeep Singh
Thank you.
Sanjeet Singh
Thank you, Mr. Mathur.
Operator
Thank you very much. The next question is from the line of Sanjay Sood, [Phonetic] who is an Individual Investor. Please go ahead.
Sanjay Sood
Thank you for giving me this opportunity. I have a couple of questions. My first question is just — I was browing through and I could come across the website Ikioworld.com in the U.S. Does this company belong to you because website is similar. They just out of query I’m asking.
Hardeep Singh
It is not same, it is not same. That is a different company, nothing related. I mean nothing to do with us. They are one of our customers.
Sanjeet Singh
They are your customers, okay, because website and color combination, everything looks to be same.
Hardeep Singh
Maybe they liked over idea.
Sanjay Sood
Yes. Okay. And the second question is, you have — which brands you are — who you are supplying with smart watches hearables and wearables.
Sanjeet Singh
So all type four, five brands, we are in touch with them, all four, five top — top brands and we have NDAs with them, so we cannot disclose the name of those companies.
Sanjay Sood
Okay. And my last question is, what will be your portfolio product portfolio approximately estimated portfolio goods portfolio after one year or so, we’ll be adding some new products definitely. So how will it look like?
Hardeep Singh
We are working on because if you get a chance to come to our facility in your — not our facilities, you are investor of our company and you are a partner of us, you must-see that what we are doing and what is our strength, cool strength. So I appreciate if any of the investors or anyone who want to visit the facility, we are happy to show that.
Sanjay Sood
Thank you.
Hardeep Singh
Thank you.
Operator
Thank you very much. The next question is from the line of Bhavesh, [Phonetic] who is an Individual Investor. Please go ahead.
Bhavesh
Good evening, sir. Congratulations on a good set of numbers. My first question is with respect to your capacity utilization. What is the current capacity utilization, if you can tell us?
Sanjeet Singh
So basically capacity utilization for us is slightly different as compared to, you know our peers in the industry because I think this question comes up in every earnings call. And so how we look at capacity utilization is, you have to understand that one single factory taking care of, let’s say, 700, 800 SKUs. So it is not just about the capacity utilization, it is about the number of SKUs that are being handled. So this way, if you look at the product mix that we have and the revenue that a particular plant can generate. So we look at the number of SKUs that the plant can handle. So that way the new facilities that have come up, that is there for future expansion. But if you talk of the product display segment, so that is a plant that is relatively new also, because we sort of shifted the manufacturing facilities a couple of years back only to that facility. So there we still are you know if I talk of percentage, which is not a — not a true a presentation of what I’m trying to explain, but just to make things a little simple, maybe let’s say for us, it is — the peak is at around 70 75. So in that unit, we are maybe at 50-55. So there is still a lot of scope left in that plant because like I said, it’s relatively new.
And the ODM division, we are like I said, we are handling more than 700, 800-odd SKUs. So manufacturing those products in 30 days, these many number of SKUs in itself is an achievement, I would say. And so that is why for us, if you — if you visit the facility, if you understand what we are doing because we are not manufacturing products in millions like maybe a bulb or tube light which are being manufactured in millions of pieces. So there we can talk of capacity utilization and it’s very clear in terms of how much of it is being utilized, whereas in our case, it’s a little tricky to understand that and it’s something that is sort of evolving as we are growing. So once you come visit and understand what we are doing, so you will understand in a much better way what I’m trying to explain right now.
Bhavesh
Okay, understood. Understood. Got it. Got it. So coming to your TWS segment, your hearables and wearables. So what is the time taken to onboard a customer like one month, three months, six months, and your solar panels also?
Sanjeet Singh
So I think in that wearable segment, I would say that we’ve been fortunate enough that we are currently working with seven to eight, I would say, the top brands in India, the good brands in India who are selling their products in large volumes. And we’ve been able to onboard them. We started this activity almost 10 — 10 months — two quarters.[speech overlap] Two — the operation started two quarters back and before that, we started some groundwork to laying the foundation of this particular vertical and all of that. So we’ve been — we’ve been fortunate that, you know and I think the setup that we have created and the kind of business that we are doing, so that is really helping. So once the customer visits, he understands our capability, understands how we are different to our competition in this category. So these are some of the advantages that we have and they see what they can do with us in the future. So we are trying to shift this product category to ODM now, which I think wasn’t really thought of up until now.
So people were relying on the kits from China and just doing the repackaging. So that is the first phase how we have also started the business. But going-forward, like I said, we are doing a lot more than that and probably from the first-quarter of next year, we will be rolling out products which will be — manufactured completely in-house in that sense, the way we are doing in lighting.
Hardeep Singh
Again, but like in this segment also like this question, we just add-up with our Honeywell, we got their first approval for their security products. So they are also electronics and hardware and we have already started getting the purchase orders from them for fire alarm systems, sensors, etc. So it is — it is not lighting, but it is related to all electronics and hardware. So our core strength is electronics and hardware and that is why the lighting is also one of the part of that.
Bhavesh
Understood, sir. So you will be manufacturing the solar panels and hearables and wearables in this new facility, right?
Hardeep Singh
And no, we have new facility we are going to dedicate for lighting products as well as Honeywell home security products like the — their fire alarm systems and systems.
Sanjeet Singh
And there are other non-lighting categories also, including lighting and non-lighting, which we plan to do in the new facility. So we will continue informing about these new developments as and when we are in that position to speak about them publicly. Like I said, we started talking about wearables just I think maybe a quarter back or a couple of quarters back, but whereas the work had started almost an year back. So once we are in a state to talk about the new developments also, so every quarter, we’ll keep on adding and updating our investors of the development that we are doing.
Bhavesh
Okay, but your presentation says that you’ll be manufacturing Solar panel systems in your — apart from your lighting and any other new product lines you’ve been manufacturing solar panel system. So what is the capacity allocated for this solar panels?
Hardeep Singh
Okay. So solar panels, we have seen the solution like it has a charge controller, or it has the assembly fee for Recreational vehicles, then it has all the other systems for — to install down those solar panels. So we are selling the complete system, not only the solar panel, it is for the specific, for recreation vehicles.
Bhavesh
You manufacture, not only you won’t assemble, but you get the sales and then you…
Sanjeet Singh
No. We will not right now going to manufacture. [Speech Overlap]
Bhavesh
Sir couldn’t hear you.
Sanjeet Singh
So basically, we are doing the assembly of the solar panels. The solar cells we don’t manufacture. So we are buying those solar cells and creating the product around it, whatever is required then in-house and then assembling the product. So this is what we are doing in solar panels. And we believe that as this — the — RV is one category where we are supplying, but we believe that this category — the ESCO category, once it starts gaining traction, it is already doing well for the time that we have started this vertical, it’s very, very new, but it’s already doing well and we believe that going-forward in this category, there will be more-and-more requirement of these kind of products as well.
Bhavesh
Okay. That was helpful…
Sanjeet Singh
[Speech Overlap] it will be required for the expansion that we will do in the lighting and non-lighting products, both. So this is being set-up in that way.
Bhavesh
Perfect. Understood, sir. Thank you so much for the clarification and all the best for your upcoming quarters. Thank you.
Sanjeet Singh
Thank you. Thank you, Mr. Bhavesh Thank you.
Operator
Thank you very much. The next question is from the line of Dhiren Khatri, [Phonetic] who is an Individual Investor. Please go ahead.
Dhiren Khatri
Sir, good afternoon. In the last quarter — in the last quarter, you said that you will be growing at a rate of 20% in respect to last year, right? Till half yearly results, we are growing at 11%. So are you sure that you will be able to achieve your guidance of 20% in respect of revenue as well as PAT and margins?
Sanjeet Singh
So in respect to revenue, because a lot of the new product categories are yet to kick-in. So they are eventually like this particular quarter, the third quarter where we are right now. So the hearables and wearables, I would say mass production has started in the third quarter now. So second quarter, it was just few initial of maybe trial or sample lot approvals and all those things were happening. So that is why these new verticals are — every quarter new and new products will be getting added and the newer segments which we are talking of like Mr. Hardeep mentioned about the Honeywell business, the Hearable wearable coming in — kicking-in the third quarter. So these are the things that are — that will add-up to the revenue that we are doing till now in the third and the fourth quarter. So that is why in initially also in the call, we did mention that we are in line with the projections in terms of the revenue. And if there is any deviation, then probably in the third quarter, we will update, but we are in-line to what we had projected. And in terms of the revenue, the EBITDA margins, like I said in some of — I think one of the previous questions also, close to around 20% or in that lower band of what we had projected is what we are targeting.
Dhiren Khatri
Okay. Thank you.
Sanjeet Singh
Thank you. Thank you so much, Mr.Dhiren.
Operator
Thank you very much. In the interest of time, we will take that as a last question. I now hand the conference over to Mr. Hardeep Singh, Chairman and Managing Director for closing comments.
Hardeep Singh
So I thank you all who took out the time and you know being a part of the call and asking the questions. So I’m actually looking-forward to the times ahead, the quarters ahead because we are making a lot of efforts for some new categories and product lines and we are we are working towards achieving our goals and targets. And I thank you all for taking out the time and see you all in the next quarterly call.
Operator
[Operator Closing Remarks]