Salzer Electronics Limited (NSE: SALZERELEC) Q2 2025 Earnings Call dated Nov. 18, 2024
Corporate Participants:
Savli Mangle — Investor Relations
Rajesh Doraiswamy — Joint Managing Director
Analysts:
Poonam Sanghavi — Analyst
Vipin Abraham — Analyst
Deepak Poddar — Analyst
Prathamesh Dhiwar — Analyst
Naman Parmar — Analyst
Venkata Sai Siddhartha Vemuri — Analyst
Pranjal Mukhija — Analyst
Mohit Madhiwalla — Analyst
Mayuresh — Individual Investor
Bala Murali Krishna — Analyst
Rajesh — Individual Investor
Nanda Kumar — Individual Investor
Prashant — Individual Investor
Chinmay Nema — Analyst
Jagadeesh Sharma — Individual Investor
Suresh Parikh — Individual Investor
Ankur Agrawal — Analyst
Unidentified Participant
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Salzer Electronics Limited Q2 and H1 FY25 Earnings Conference Call. As a reminder, all participants’ 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] Please note that this conference is being recorded.
I now hand the conference over to Ms. Poonam Sanghavi from Progressive Shares. Thank you, and over to you, ma’am.
Poonam Sanghavi — Analyst
Thank you, Neha. Good afternoon, everyone. On behalf of Progressive Shares, I welcome you all to the Q2 and H1 FY25 post-earnings conference call of Salzer Electronics Limited. This conference call may contain forward-looking statements, which are based on the beliefs, opinions and expectations of the company as of the date of this call. These statements are not a guarantee of future performance and involve risks and uncertainties that are difficult to predict.
I now invite Ms. Savli Mangle for the opening remarks to be followed by a question-and-answer session. Over to you, ma’am.
Savli Mangle — Investor Relations
Thank you, Neha. Good afternoon, everyone, and thank you for joining us on the call today to discuss the unaudited financial performance for the quarter and half year ended 30th September 2024. On the call with us, we have Mr. Rajesh Doraiswamy, Joint Managing Director; Mr. P. Sivakumar, Assistant Vice President, Marketing; Mr. S. Venkatachalam, General Manager, Commercial; Ms. R. Menaka, General Manager, Accounts; Mr. K.M. Murugesh, Company Secretary; and Mr. Raman, Chief Operating Officer, Kaycee Industries.
I shall now take you through the consolidated financial performance of the quarter and half year ended September 2024. During the quarter, our revenues increased by 23% to INR344 crores from INR281 crores in the previous corresponding period. This growth was mainly driven by higher demand for industrial switchgear as well as wires and cable businesses, mainly due to high-demand products like 3-phase dry type transformers, wire harness, relays and new products like contactors etc.
The EBITDA, excluding other income was INR35 crores in Q2 FY25 as against INR27 crores in Q2 FY24, a year-on-year growth of 32%, mainly on account of increased sales in the higher-margin switchgear products. The EBITDA margin for the quarter increased by 72 basis points to 10%. The PAT grew by nearly 170% to INR27 crores in Q2 FY25.
Coming to our half-yearly financial performance, in the six months ended September 30, 2024, the net revenue was INR701 crores as against INR569 crores in H1 FY24, a year-on-year growth of 23%. This growth was driven by the businesses of industrial switchgear and our wire and cable. The EBITDA, excluding other income stood at INR69 crores in H1 FY25 as against INR53 crores in H1 FY24, a year-on-year growth of 30%. This was mainly on account of higher sales in high-demand products like wire harness, relays, contactors, etc. The EBITDA margin was 10%, a year-on-year increase of 52 basis points. And the PAT was INR42 crores, a year-on-year growth of 107% with the margins at 6%.
Moving on to the break up of revenue as per business division. The Industrial Switchgear contributed 62% of the total revenues in this quarter and 57% in the first half of the year. This business has grown 34% year-on-year in Q2 FY25 and 27% in H1 FY25. The margin — the EBITDA margin for this business was at 12% in Q2 and 13% in the first half of the year.
Coming to the Wires and Cables business, this business contributed to nearly 34% of our revenues in the quarter, and 39% in the first half. There has been a 10% year-on-year increase in this division during the quarter and 21% in H1 FY25. The EBITDA margin for this business stood at 7% in Q2 and 6% in H1 FY25.
Coming to the Building Products division. This business has contributed 5% to our revenues in the quarter and 5% in the first half of the year. Coming to exports, we continue to see a steady growth, mainly due to higher sales in Middle East and African countries as well as North and South America and Asia. Exports to the Americas grew 7% year-on-year, Asian countries grew 17%, Middle East and Africa grew 43% combined year-on-year in this quarter. For this quarter, the export share of the revenue was nearly 29%, whilst for the full year, it was 28%. Growth in exports has been 3% year-on-year in the quarter and 17% year-on-year in the first half.
Thank you. And I would now like to hand it over to Rajesh to take us through these business developments and way ahead.
Rajesh Doraiswamy — Joint Managing Director
Thank you very much, Savli. I once again like to warmly welcome all of you to Salzer Electronics earnings conference call for the second-quarter financial year ’24, ’25. Thank you all for taking time to join us today. We have shared our results update presentation and the media release. I hope you all must have read it. And also I think Savli explained in detail about the financials just now.
A little bit about the outlook and the future. On the market outlook, as we all know, the global switchgear market size is close to $94 billion in 2023 and is expected to reach $150 billion by 2032 with a 5.5% CAGR during the forecast period ’24 to ’32. This growth is mainly driven by increasing demand for electricity, expanded use in transportation, renewable energy investments, rising electricity needs from manufacturing and replacement of old switchgears. Key trends include the adoption of digital technologies, innovation and development of products to meet power generation, investment in eco-efficient solutions, the deployment of IoT enabled switchgears for automated operations and promotion of automated switchgear for smart grid operation and the development of various specialized switchgears for critical industries.
Coming to India, the Indian switchgear market is projected to grow by $4.14 billion with a CAGR of 7.5% from 2023 to 2028 for the next five years. This growth is again driven by the investments in infrastructure, industrialization and urbanization across the country. Furthermore, India’s strong push towards renewable energy, particularly solar, wind, underscores the need for robust switchgear solutions in renewable plants and grid integration projects. Additionally, the adoption of smart grid technology requires advanced switchgear that enables automated and remote operation, further fueling the demand in the sector.
At Salzer, we are committed to swiftly adapt to these evolving dynamics as always, embracing a proactive approach to drive growth and resilience. We see challenges and opportunities for innovation and evolution and have strategically positioned ourselves to respond effectively to changing economic and technical landscape. As we broaden our product portfolio and pursue new growth avenues, we remain confident in our ability to achieve our strategic objectives and deliver value to our stakeholders.
Coming to the key developments on the business performance, as a part of our growth strategy, I’m very pleased to announce that we have received our first order for the smart meters for a value of INR5 crores from a leading AMISP in India. Though this is a very small step forward, but this is a big achievement and it is a testament to our team’s dedication to advancing smart metering technology. Our solution has garnered significant interest with evaluations currently underway by various AMISPs across India. We are also in advanced discussions with these partners and are very optimistic about securing further quantity orders. This momentum reinforces our commitment to supporting India’s digital transformation in energy management through cutting-edge smart meter technology.
On the EV charging market, we are focusing on the DC fast chargers. We are positioning ourselves as a supplier to various charge point operators. While this market is still in its very early stages, we see promising growth potential with an estimated need of [Technical Issues]. Though we anticipate competition, the capabilities will allow us a share of emerging markets. [Technical Issues] wholly-owned subsidiary is being established [Technical Issues] aiming to meet the local demand and enhance access to various GCC markets.
Looking ahead, we have a positive outlook for the Switchgear segment, projecting a growth of over 20%, driven by strong demand in both domestic as well as export market. Exports are expected to gain momentum in the coming quarters. On the domestic front, we are seeing substantial growth potential across various sectors, including power, renewables, data centers, new factory setups, which will drive demand for our products.
Coming to our subsidiary, Kaycee Industries Limited, the sales have been growing well and EBITDA margins are also getting better. Kaycee’s top line grew 13.3% to INR13.34 crore from INR11.77 crore last year. EBITDA grew 41.5% to INR2.15 crore from INR1.52 crore last year. PAT margins in H1 FY25 stood at 11.5% as against 8% in H1 FY24, which is an improvement of close to 3.5%.
Looking ahead to FY26, we anticipate robust revenue growth, projecting a 20% increase in our existing businesses, aiming to reach close to around INR1,600 crores in total revenue. The Smart Meter segment alone is expected to contribute an additional INR700 crores approximately, underscoring its strategic importance. Furthermore, we are focusing on margin improvement, targeting a margin of at least 11% EBITDA by FY26 as we drive operational efficiencies across divisions.
For FY25 and beyond, our growth strategy is rooted in diversification into high-potential markets such as DC fast-charging and smart meters, both of which are expected to add significantly to our top line as well as bottom line in the coming years. I thank the entire team at Salzer Electronics for their untiring efforts and all our stakeholders for your continued support and faith in our company.
This is all from our side for now. I would like to thank you all once again very much for your time and attention. We can now take questions.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Vipin Abraham from Integritechnologies Private Limited. Please go ahead.
Vipin Abraham
Sir, congratulations on a very good set of numbers. And also a very good outlook for the next year and [Technical Issues] and also for the order on smart meters. My question is that, sir, the other income what you have seen in the — in this quarter of around INR15.6 crore, what is that pertaining to and would that continue?
Rajesh Doraiswamy
The other income includes profit on sale of shares of our subsidiary, Kaycee Industries Limited to the extent of 1.5%. So that contributes to around INR15.6 crores and that’s what is in the other income.
Vipin Abraham
Okay. All right. Thank you.
Rajesh Doraiswamy
So to add to that, just to add one more point for all the participants today, so that other income is a part of the profit today. I think that’s why we see a substantial increase in PAT close to 170% from INR10.10 crores last year to INR27.28 crores this year, which includes this other income. But if you remove the other income and also remove the long-term capital gain tax that we paid on the tax, the net impact will be around INR13.8 crores on the PAT. So even without that, our PAT will be at around INR13.5 crores, which is still a 33.5% growth compared to the last quarter. So that’s the point that I would like to highlight here for other participants [Speech Overlap].
Vipin Abraham
Yeah. I have one more question, sir.
Rajesh Doraiswamy
Yeah.
Vipin Abraham
The smart meters, I know we are actually about to start. There are already a lot of players also coming to that segment. And what kind of margins do you expect from the smart meters approximately for the next year?
Rajesh Doraiswamy
I think we are definitely expecting not less than 12% to 14% of EBITDA margins is what we expect in smart meters. But as we go along, we will know how this business again pans out because this is looking to be a very high volume, high value business. And as you said, there are also a lot of new competitions that might come in and we will have to see how the business pans out. Because as of now, we see its EBITDA can be between 12% and 14%.
Vipin Abraham
Okay, sir. Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Deepak Poddar from Sapphire Capital. Please go ahead.
Deepak Poddar
Yeah, am I audible, sir?
Rajesh Doraiswamy
Yes, sir. Very much.
Deepak Poddar
Yeah, thank you very much, sir for this opportunity. Sir, first up, just a clarification. You mentioned INR1,600 crores of revenue FY26 with 11% EBITDA margin. That’s on Switchgear segment, right? And Smart Meter INR700 crores at 12% to 14% EBITDA margin will be over and above that.
Rajesh Doraiswamy
INR1,600 crores plus INR700 crores is what we expect for FY26.
Deepak Poddar
Yeah. And switchgear would be 11% EBITDA margin and smart meter 12% to 14%. That’s what [Speech Overlap].
Rajesh Doraiswamy
Yes, yes.
Deepak Poddar
And what about…
Rajesh Doraiswamy
11%, No, no, no, sorry, the 11% EBITDA is that it’s a blended margins overall for the company.
Deepak Poddar
Okay, 11% is the blended margin. Then what is the switchgear margin we are expecting for next year on INR1,600 crores?
Rajesh Doraiswamy
Out of INR1,600 crores, around 50% to 55% will be the switchgear business and the rest will come from wire and cable and the building segment. [Speech Overlap] Yeah, switchgear margin EBITDA, we expect around 12.5% approximately.
Deepak Poddar
Okay. No, so sir, just a clarification. This blended margin of 11%, that excludes the smart meter. I mean, except smart meter, whatever the business, all the two, three segments, blended margin would be 11%, right?
Rajesh Doraiswamy
Correct, sir. You’re right. Yeah.
Deepak Poddar
Okay, okay, fair. And what about FY25? I mean I missed if you have mentioned about FY25 as well in terms of outlook.
Rajesh Doraiswamy
FY25, I think we already mentioned in last quarter, we are definitely expecting to grow between 22% and 23% in the top line as well as in the bottom line. It looks like I think we are in line with that projection as of now. This is excluding the smart meters again. And we don’t expect big revenues to flow in on the smart meters for this year. However, we expect to secure orders in this financial year.
Deepak Poddar
Okay. So earlier, we were expecting some revenue to come from smart meter, right, maybe INR100 crores, INR200 crores.
Rajesh Doraiswamy
We expected around INR200 crores of revenue we expected, but looks like that might not happen because we are only around four or five months away right now from the year end. And even if we are ready to supply after the orders, I think the customers won’t be ready to take the orders and install the meters to that extent. Though we will see some revenue, it won’t be to that extent.
Deepak Poddar
Understood. And this 20%, 22% on top line, bottom line is blended — blended company-level, right?
Rajesh Doraiswamy
Yes. Yes, sir. Yes, yes.
Deepak Poddar
Okay. Fair enough. I think that would be it from my side. All the very best to you. Thank you.
Rajesh Doraiswamy
Thank you, sir.
Operator
Thank you. The next question is from the line of Prathamesh Dhiwar from Tiger Assets. Please go ahead.
Prathamesh Dhiwar
Yeah, sir, just couple of questions. First one is regarding the smart meter side. I think earlier [Indecipherable] we have projected around INR1,000 crores of revenue to be coming from smart meters, but now we are expecting around INR700 crores. So is there any like order delays from the industry standpoint [Technical Issues] to understand.
Rajesh Doraiswamy
No, there is no change in what we have said. I think the capacity that we have set-up is still at INR1,000 crores or around INR1,000 crores, a little bit more than that. We are just being a little pessimistic looking at the market scenario and looking at how the customers are giving the schedules for the orders. So we expect that this can be a realistic figure for FY26.
Prathamesh Dhiwar
Okay. Fair enough, sir. And sir, like how has been industry orders been performing in smart meter side for let’s say in the last six months? Has there been any delay in like tenders coming into the markets because of election or some other reason?
Rajesh Doraiswamy
Can you repeat your question, sir? I think your voice is still not very clear to me.
Prathamesh Dhiwar
Yeah, am I audible, sir?
Rajesh Doraiswamy
You’re audible, but it’s not clear.
Prathamesh Dhiwar
Okay.
Rajesh Doraiswamy
You repeat the question.
Prathamesh Dhiwar
Yeah, sure. My question was regarding the industry in the smart meter side. Like till now, has there been any delays from the government for bringing up the tenders? So how has been the industry overview as of now?
Rajesh Doraiswamy
Yes, I think post election there’s one or two tenders have come up and some bidders have won. But the process is actually a very slow process. Even after winning the bid, there is a reverse bidding that will happen, which will take a month or so to complete. And then there is again a lot of process that the bid winners have to undergo before they secure an LOI from the government to start the work. So it’s a long process that’s happening post election. Definitely something is happening, I’m not saying nothing is happening. But wherever the tenders have already been awarded, the tender winners are working in the field to start the installation of the meters.
Though it is starting slow, this is starting, but then this is a — what a field area where I think the initial start will definitely be slow because it’s very complicated in the field to install a smart meter. There are multiple challenges for the bid winners to start the process in a full-fledged manner and at a very fast pace. So that’s why I think the things are a little slow at this moment. But I’m sure that with the objective of the government, with the way that these people have won the tenders and things are going on, things will pick pace as in the next couple of quarters.
Prathamesh Dhiwar
Okay. Got it, sir. Just sir, if I want to talk in terms of numbers. So in the industry for FY25, and for FY26, how much has been the outlay for smart meters? And let’s say for this year, how much government has spent out of total FY25 outlay for smart meters?
Rajesh Doraiswamy
As far as the information, it’s all in the Internet, I think if you go to the RDSS website, there’s a website for this specifically, you can find all information. As far as I know, I think approximately 1 crore meters have been installed until now out of whatever has been tendered so far.
Prathamesh Dhiwar
Okay, got it, sir. I think — thank you so much. That’s it from us.
Rajesh Doraiswamy
Less than 7% — 6%, 7% of the total tender quantity.
Prathamesh Dhiwar
For FY25.
Rajesh Doraiswamy
Yes, for FY24.
Prathamesh Dhiwar
Okay.
Rajesh Doraiswamy
’24-’25 until now.
Prathamesh Dhiwar
Okay. Thank you so much, sir.
Rajesh Doraiswamy
Yeah.
Operator
Thank you. The next question is from the line of Naman Parmar from Niveshaay Investment Advisors. Please go ahead.
Naman Parmar
Yeah, good afternoon, sir. Thank you so much for the opportunity, and congrats on the great set of numbers. So I just wanted to know on the EV charging side. So currently, how much means in the industry is if you see majorly control unit and the power module. So what is the status by the government, it has been indigenous by the June ’24 and December ’24.
Rajesh Doraiswamy
Say that again, sir. Control unit and power module…
Naman Parmar
Control unit and power module. So control unit used to be indigenous by the June ’24. So any update on that side that it has been majorly indigenized or procured from India only or if you still import from the…
Rajesh Doraiswamy
There is no mandate or anything from the government on such things. I don’t — I have not heard about anything like that. There are a lot of components within the charger that is being produced locally and a lot of components we produce it ourselves, but there are certain components that needs to be imported from various other countries, including China, which we are doing.
Naman Parmar
Yeah. Okay.
Rajesh Doraiswamy
And I have not heard about any mandate or any percentage or anything like that so far.
Naman Parmar
So on the EV charger side, so you will be selling this all to the OEMs like all marketing company or you will be staying as a CPO charging point operator for them?
Rajesh Doraiswamy
We will explore all opportunities. I’m not saying that we will not do this or do that, but we will find all opportunities. We will sell to charge point operators. We will sell to OEMs if we get an opportunity. So we look forward for all areas.
Naman Parmar
Okay. And lastly, means you have get the test pass for the EV charger. Your one test was left to be passed, right?
Rajesh Doraiswamy
We are trying a different route to get the test passed on that. So I think once we do that, I think proper information on that, we will be giving it to the market. Until now, that particular test is still not passed, but we are trying to find an alternative to overcome the requirement and then pass the test.
Naman Parmar
Okay, that’s it. Thank you so much, sir.
Rajesh Doraiswamy
Thank you, sir.
Operator
Thank you. [Operator Instructions] The next question is from the line of Siddhartha Vemuri from Caprize Financial Services. Please go ahead.
Venkata Sai Siddhartha Vemuri
Hi. So hi, sir. This is Siddhartha. I’m quite new to this company and I’ve joined this call a bit late, so could you again, repeat FY26 and FY27 numbers, sir.
Rajesh Doraiswamy
There is lot of numbers that has been given out. So I think it will be very difficult for you to capture if I give just the, I mean, the final numbers because there are different segments of business, different segmental growth, geographical growth and projections. So…
Venkata Sai Siddhartha Vemuri
I know sir [Speech Overlap].
Rajesh Doraiswamy
For you also if you have not followed earlier, it will be very difficult for you to understand even if I give the numbers out.
Venkata Sai Siddhartha Vemuri
Okay. Thank you.
Operator
Thank you. The next question is from the line of Pranjal Mukhija from GrowthSphere Ventures LLP. Please go ahead.
Pranjal Mukhija
Hi, good afternoon. Am I audible?
Rajesh Doraiswamy
Yes, sir.
Pranjal Mukhija
So hi, sir. Congratulations on a good set of numbers. So I have a couple of questions on the smart meter side, sir. So initially you spoke about how you got up one contract worth INR5 crores, right, from one of the AMISP. Can we just — can you just throw some light on the kind of volumes you have to supply under this contract?
Rajesh Doraiswamy
The specifics regarding the quantity of smart meters have particularly not been disclosed because of the confidentiality agreement. And also we don’t want to give the pricing ideas to the competition. So that’s the reason that we just said the value of the order and also the customer details have not been disclosed because of the contractual obligations. So we will start invoicing for this INR5 crore smart meter order from this November or starting December and we will see some revenues coming in the smart meter business in this quarter. Though it is small, I think that’s a significant first step for us.
Pranjal Mukhija
Sure. That’s okay.
Rajesh Doraiswamy
I hope you understand our position.
Pranjal Mukhija
Yeah, yeah, I get that, sir. So the second question was, sir, what all states are we targeting for smart meters? I mean, where do we see the incremental demand coming from?
Rajesh Doraiswamy
Sir we are looking — targeting all states because A, with different AMISPs have taken orders in different states. And the first initial implementation is being happening in Gujarat, in West Bengal, in UP, in Maharashtra and also Punjab. So these are some of the states that the implementation is happening and AMISPs are procuring the maintenance for these states. So this is where our concentration is now right now for us. And going forward, it will be for the other states also including Tamil Nadu or Telangana or Andhra Pradesh.
Pranjal Mukhija
Okay. So, sir, are we like only focusing on — like our focus will be only on smart meters or maybe like two, three years down the line, we will also want to forward integrate into the let’s say the communication tech piece or the HCS or the MBMS or are we going to like solely stick to smart meters? What will be our plan here?
Rajesh Doraiswamy
As of now our focus is on manufacturing of smart meters and doing anything on — around smart meters. What you are talking about is a software integration on — with the smart meters. So right now, we are not really looking at anything on that because we are trying to partner with various software developers or people who already have HCS and MBM. So we are trying to partner with them and then give a wholesome solution for the customer. That’s what we are trying to do now.
Pranjal Mukhija
All right. And sir, one final question. Just like a quick overview of the — on the competitiveness of the industry, because we are seeing like a lot of players are entering the industry and in the current bout of that 11 crore meters that have been given out, I think major — majority of them are, I think sort of — I mean people have already bid for a major chunk of them. And I just wanted your like piece on your understanding on like where do we see the margins going forward in the industry? Because I think right now most players are operating at 14%, 15% margin. But with the increase in competition like maybe two, three years ahead, like where do you see the trajectory of these margins going ahead?
Rajesh Doraiswamy
Yes, I think so, as you said, this is around 13 crore, 14 crore orders have been given out already — tenders have been given out. And that’s what I mentioned in earlier to your question. Approximately around 1 crore meter have been installed in the last 1.5 years or something, which I said is a very slow pace because that is how this process starts. So definitely future there will be more competition, things will hot up. But it also we have to see how many will remain in the market because this is a very complicated product. It’s not a just easy product that you will make it because you need to be there in the field for 10 years next after you supply the meter. There is a 10-year warranty, you have to maintain it, the product has to work for 10 years.
So it’s a long-term play. So it’s not a short-term play. So we will have to see how it evolves, how the competition is going to remain in the field for a long time. And that is where I think these margins will get fixed. Whether the supply is too much for the demand or the demand is too much for the supply. So it depends on that and that’s where the pricing.
Today people are getting better margins because there is too much demand and the supply is less. So definitely it will come down. And that’s why I said that it will be — it will start for us anywhere between 12% and 14%. But as we move forward, if the competition is still high, it might drop by around 1% or 2% from there.
Pranjal Mukhija
So, sir, the reason I was asking this question is because there are some big players already that are playing in this market and given that like a company like Salzer, I mean you guys are targeting around 40 lakh, 50 lakh meters, right? And in the previous few calls, you mentioned that number. So I just wanted to understand like what will be our right to win in this industry when like the order books like the basically tender pipelines for like are already getting consolidated and again, like we are a very new company in this segment and…
Rajesh Doraiswamy
See order book is not consolidating. I think that’s not a right notion to have because order book is consolidating with the AMISPs, and the AMISPs are looking for the meter suppliers. So the second line order book is still not consolidated where they’re just evaluating because there is no supply today of smart meters to that requirement and the customers are also not ready still to pick-up that kind of a volume from the suppliers. So it is still evolving. That is what I said.
Meter manufacturing scope in portfolio is still evolving. So you will see how and who are all the customer — suppliers coming into this field in the next three, six, eight months. And as you said, what is our right to win? I think we are — we’ve already proven to almost all the AMISPs that we are working, to showcase that, I think our smart meter is one of the top-class comparable to any of the other India’s top quality smart meter manufacturers. And that’s why I think we were able to secure the first order and we are in very close negotiation to secure the next set of orders also from these AMISPs. So we — our right to win is going to be our quality and service.
Pranjal Mukhija
All right, sir. Thank you. Thank you for this opportunity.
Operator
Thank you. [Operator Instructions] The next question is from the line of Mohit Madhiwalla from Envision Capital. Please go ahead.
Mohit Madhiwalla
Hello, sir. Thank you for taking my question and congratulations on a good set of numbers. So the first question was on the industrial switchgear and the wires and cables segments. So we have seen very strong growth in H1 FY25 on both these segments. I just wanted to kind of understand, is this due to or rather, yeah, is this due to winning new clients or is this due to upselling, let’s say, higher-value products to existing clients? Is it a mix of both? Any light you can — anything you can share on that?
Rajesh Doraiswamy
No, I would say that it’s a normal growth that is coming from various industry sectors. As you’ve seen both industrial switchgear and wire and cable have been giving — almost 20% plus growth in this H1. So there is nothing specific, no new products. Of course, there are some new clients, which are not very significant that we have added. So this is a very normal growth that we are seeing in the industry because of the economic activity that is happening.
Mohit Madhiwalla
Okay, sir. Understood. And in each segment, I think I missed it initially. Could you please repeat the EBITDA margin for each segment in Q2?
Rajesh Doraiswamy
The EBITDA margins in Q2 for, I’ll say H1 or Q2? Q2.
Mohit Madhiwalla
For Q2, industrial switchgears and wires and cables.
Rajesh Doraiswamy
It’s around 12.5% industrial switchgear, 7%, 6.9% for the wire and cable. For building segment, we are still at negative 4%.
Mohit Madhiwalla
Okay, sir. Understood. So just coming to the building products segment, I just wanted to understand specifically what are the major products that are sold in this? And any reason for this flattish kind of H1 performance in building products?
Rajesh Doraiswamy
Building products includes the switches for home, the wires that we use for the buildings, house wires, the circuit breakers, distribution boards and changeovers and some accessories, all the electrical accessories that you use. So these are the products that’s in this segment here. And I think the segment as such is a retail segment where we are operating, we have still not expanded beyond the five Southern states. So the region also is limited for us. So within the region also, we are not very aggressive because I think this will burn a lot of cash if we are too much aggressive in this. So we are going slow in this and that is also a reason we see a very flattish growth in this.
We expect to push on this business segment and improve the sales and see how it can grow to become another INR100 crore, INR200 crore segment for us internally. I think that’s where our target is. We’re trying to push there and see how we can get there. If there are some internal realignments we are doing, so hopefully, we will see some improvements post this next two quarters.
Mohit Madhiwalla
Okay, sir. Fair enough. Understood. And just one last question, if I may. Any specific reason for the stake sale in Kaycee? Because as I understand it, it was more of a strategic investment. So any reason — any specific reason for the stake sale?
Rajesh Doraiswamy
There is no specific reason, but we saw some good valuations and so we thought we will dilute some stake. And it was just 1.3% and we still continue to hold 70% plus with the company. And it’s definitely a strategic investment. We will continue to run Kaycee Industries.
Mohit Madhiwalla
Okay, sir. Fair enough. And good luck for the future. Thank you for asking — for answering my questions.
Rajesh Doraiswamy
Thank you very much, sir.
Operator
Thank you. The next question is from the line of Mayuresh [Phonetic], an individual investor. Please go ahead.
Mayuresh
Thank you for taking my questions. My question is regarding the EV charger business. I see it’s taking too much time. It’s taking more than six months for us to get clearance. And do you have any strategy already defined in terms of timeline as soon as we get the clearance, what will be our production capacity and how many units per year do we plan to produce on the EV charger business?
Rajesh Doraiswamy
Yeah, I think before this financial year is what is the timeline that we have fixed, we should be able to move forward on this business. And the capacity [Speech Overlap].
Mayuresh
Unit being set up or already set up…
Rajesh Doraiswamy
We already have a capacity setup for 100 chargers a month.
Mayuresh
Okay, 100 chargers and all of them are DC chargers.
Rajesh Doraiswamy
Yeah, yeah
Mayuresh
And for — I see you have — you had given the projection of INR2,300 crores for FY26 for smart meters and for the switchgear business, but I did not hear anything regarding the EV charger business. So looking forward, what kind of sales do we see in terms of EV charger business considering the fact that it’s [Speech Overlap].
Rajesh Doraiswamy
We’ll be able to give a projection — we will be able to give a projection on EV chargers once we are fully into the market with the product. So that’s why we have not projected anything for EV chargers for FY26, that is one. Secondly, we expect — we don’t really expect FY26 can be a big year for EV chargers. So EV chargers, real big business can start post FY26 is what we expect.
Mayuresh
Okay. So from end of 2027 or something or mid-2027, it will pick it up.
Rajesh Doraiswamy
FY27 can be a good year for EV chargers. Though FY26 we might see some revenues, but it’s not going to be significant enough in this INR2,300 crore projection.
Mayuresh
Yeah. And what is the reason behind the delay because the joint venture was formed in 2021. Kostad is an already established player in Europe. They do have a good technology. It’s been almost three years, but we are not able to develop a product and put it in the market yet, to see 2027 feels almost five years to six years taken to develop a product and sell it, it’s a long-time, isn’t it, sir?
Rajesh Doraiswamy
I agree, I think it’s a very long delay. There have been multiple challenges between everything technically, I think we were not able to solve a lot of issues. And when we started, there were not enough domain knowledge people around in India to absorb the technology and take it forward. So like this, there were multiple reasons, and that is the reason for this very long delay. But now I think we have come to a understanding how this works, how this entire industry works, how the product is, what the product is. So we now know what we are doing. So in the next six months, I think we will see good progress in this area.
Mayuresh
Thank you. Thank you very much for answering my questions, and good luck.
Rajesh Doraiswamy
Thank you.
Operator
Thank you. The next question is from the line of Bala Murali Krishna from Oman Investment Advisors. Please go ahead.
Bala Murali Krishna
Hi, good evening, sir. So I joined a little bit late, maybe I could have missed the information. So I think we are going to grow in FY25 by 20% to 25%, FY26 we guided for INR2,600 crores? Is it right, sir or any changes…
Rajesh Doraiswamy
Yes, sir, FY25, we will be growing around 20% to 22% is what we have projected as a company, excluding smart meter business. And we don’t expect significant smart meter revenues coming in FY25. For FY26, we — our top-line for our existing business, we are expecting again around 20%, which will take us to around INR1,600 crores and we expect around INR700 crores coming from smart meters, which is around INR2,300 crore in total. That’s the break up that we have given.
Bala Murali Krishna
Okay, sir. And so in FY26, we can expect some improvement in margins basically some business…
Rajesh Doraiswamy
Yes, sir, we are looking for at least around 1.5%, 2% improvement in the margin from the current levels from the EBITDA levels — at the EBITDA levels.
Bala Murali Krishna
Okay. And smart meter side sir, I think we are in discussion with a few customers, you mentioned in the presentation. So is there any further progress so far or they…
Rajesh Doraiswamy
We have already received the first order for INR5 crores and we are in advanced discussions with the same customer as well as various other customers for further quantity orders.
Bala Murali Krishna
Okay. Can you update on this Tamil Nadu tender, sir, whether it’s finished or at what stage…
Rajesh Doraiswamy
No information out yet. But I think as soon as they finalize the tender, the information will be out for us to see. So far, no.
Bala Murali Krishna
Okay. And lastly on the EV charger side, so I think the testing was done at the time [Indecipherable]. So any further progress on that, sir?
Rajesh Doraiswamy
There’s no further progress on the testing, but we are working to solve the issue and then get this forward. So just now before you joined, I answered one participant about the timeline. I think before end of March this year, we should be solving all issues on the charging area and then come out with a plan for this business.
Bala Murali Krishna
Okay. And lastly on this — our subsidiary investment in this Hyderabad-based EV charging company. So what is the contribution from that? So how we are going to take any advantage of that business or how it will contribute to Salzer, sir?
Rajesh Doraiswamy
I think it’s still very initial stages for us to comment on that. Maybe in the next call or so, we will know — we will give you a plan for that investment also, how we are going to work on that, and what advantages that we will have out of that investment.
Bala Murali Krishna
Okay, sir. And any new products in the existing, I mean, traditional business we are introducing in the coming quarter or this quarter, sir?
Rajesh Doraiswamy
No, sir. Nothing, significant. We are just focusing on consolidating whatever we have done in the last year, smart meters and charging. Once we do this, then we will see how we can move forward with other areas, I mean other new products.
Bala Murali Krishna
Okay, that’s all. Thanks a lot. All the best.
Rajesh Doraiswamy
Thank you, sir.
Operator
Thank you. The next question is from the line of Rajesh, an individual investor. Please go ahead.
Rajesh
Yeah, thank you for the opportunity. Sir, my question is on the transformers business. So basically how big is your transformers business in terms of annual revenue? And also, we keep hearing about a lot of demand for power distribution transformers, renewable energy transformers. So given that, are you looking at increasing your capacity and range of transformers business?
Rajesh Doraiswamy
Sir our total transformer business approximately, because I don’t have the product-wise sale break up with me, but I know approximately we will be doing around INR250 crores to INR300 crores of transformer business in the current revenue approximately. And I want to be very specific here. We are not into manufacturing distribution transformers. We are not supplying any transformers to the discoms or utilities. Our transformer business is in the low-voltage segment, we make single-phase and three-phase low-voltage transformers. Low voltage, I mean it’s at the maximum, it can work at 690 volt. So it is all for the application within the buildings, within the equipments is what is the application of these products.
Rajesh
Okay, sir. And how do you see the growth prospects here? Is it…
Rajesh Doraiswamy
The growth is quite good. I think the product has been growing very well, in H1, I think our transformer business has grown again close to around 30% plus year-on-year, which is actually one of the main reason that our switchgear business also in H1 has grown significantly.
Rajesh
Okay, sir. And one last question. So you said you are not into the utility-related transformers. So I mean, is it logically possible to get into that? And is it worthwhile business for you to consider getting into?
Rajesh Doraiswamy
We are not focusing on that product-line right now.
Rajesh
Okay. Thank you.
Operator
Thank you. The next question is from the line of Nanda Kumar, an individual investor. Please go ahead.
Nanda Kumar
Yeah, good evening, sir. Can we expect any more stake dilution in Kaycee Industries, sir?
Rajesh Doraiswamy
It’s a difficult question to answer. Yes and no, it depends on the situation where we are going to be in the next future. We won’t definitely disturb the market. But if there is an opportunity, there are multiple ways to do it if required. Otherwise, no, we will continue to stay with 70% stake as of now, 70% plus.
Nanda Kumar
Okay, sir. And my second question is, how can we expect the debt levels to be at the end of the year?
Rajesh Doraiswamy
Debt levels right now has increased compared to what it was in FY24. But I would say it will remain at this level. We are at around INR320 crores in working capital, and INR17 crore term-loan, which is for the smart meter factory and other investments that we have made. The term loans might go up a little bit by INR2 crores or INR3 crores maximum. Our working capital will remain at this level for this financial year.
Nanda Kumar
Okay, sir. Thank you. That’s it from my end.
Operator
Thank you. The next question is from the line of Prashant, an individual investor. Please go ahead.
Prashant
Hello?
Rajesh Doraiswamy
Yes, sir.
Prashant
So my first question is regarding the Saudi Arabia plant. So when will the plant be commissioned and what would be the products that would be manufactured? And the revenue at 100…
Rajesh Doraiswamy
The revenue?
Prashant
And revenue at 100% capacity utilization and what would be EBITDA margins?
Rajesh Doraiswamy
Our idea is to manufacture our existing industrial switchgear products, some of the industrial switchgear products in Saudi Arabia. That is the idea. So we’re not taking all our products and going to manufacture there. And the idea also is to do this on a leased space. So our investments are going to be only on the machineries and equipments. This is the idea that we are planning. So for now, I think we have established a firm there, an 100% subsidiary. And we are looking for a place and then completing other formalities of Saudi Arabia to get the visas and things like that.
So once this is done, so there is huge demand for space in Saudi Arabia as of now. So we have applied for a space and we are waiting in the queue. So once we get the space, then our operation will start after that. So we expect that this will happen 4 months to 6 months from now, that is the timeline that we have got from various Saudi Arabian authorities on the getting the space. So once we get the space, we will start the operation. And this is going to be INR10 crore to INR12 crore of investments in the equipments and machineries. And in 2 years to 3 years time we should be able to see INR100 crore revenue coming from Saudi Arabia.
Prashant
Okay. And any rough idea on the EBITDA margins?
Rajesh Doraiswamy
It will remain at the levels that we are doing right now for the switchgear business with a slight improvement maybe because we are growing there. Our price advantage will be there and then the advantage of locally made products will be there. But then before committing then we will have to really see how the operations start evolving there. But definitely not below than what we are getting right now in our switchgear business.
Prashant
Okay. So my second question is regarding, have you received the necessary certificates — certifications for the three-phase smart meters?
Rajesh Doraiswamy
Yes, we have received.
Prashant
Okay. And what is the market split across single-phase and three-phase smart meters?
Rajesh Doraiswamy
I think 85% is single-phase, 15% is three-phase. That’s the rough separation that we have today.
Prashant
Okay. And also is the company participating directly in the smart meter tenders?
Rajesh Doraiswamy
I think I mentioned this already in some previous calls. Yes, we are not ruling it out. If we get an opportunity, we will definitely participate because we already have the AMISP license. And only thing is we need to have some experience for which also we are working with some partners who can be consortium partners to bring the experience to us. So we are not ruling it out, but there is nothing significant happening as of now.
Prashant
Okay. Thank you, all the best.
Rajesh Doraiswamy
Thank you.
Operator
Thank you. The next question is from the line of Chinmay Nema from Prescient Capital. Please go ahead.
Chinmay Nema
Good afternoon, sir. Sir, first question — a general question on the smart meters business. Just want to understand, is this — could you give some color on the manufacturing? So is it essentially a assembling business where you’re sourcing parts and then assembling them or is there a large component of in-house manufacturing going or [Speech Overlap].
Rajesh Doraiswamy
It’s a large component of in-house manufacturing is what we are doing. Of course, every product needs a final assembly, which we are doing definitely there, but we also do a lot of backward integration and do a large part of manufacturing in-house.
Chinmay Nema
Okay, sir. And what about the software part of it?
Rajesh Doraiswamy
Software part of it, we have developed the software, and it is with us.
Chinmay Nema
Okay, sir. And secondly, just wanted to double-check on your guidance. So in the previous quarter, you had guided around INR200 crores of revenue from this vertical — division in this year. However, I think you’ve changed the guidance in this quarter. So I just want to understand what went wrong over there or if you could provide any color on that?
Rajesh Doraiswamy
Actually, nothing went wrong. Maybe last quarter I mentioned this, I was expecting that we will have the orders by now and we will start executing from now and then before end of March, we will be able to see that kind of a revenue. But looks like it might not happen. Though we might secure the orders, we might not be able to execute or the customers might not be able to absorb the supplies. So that’s why I’m changing what I said the last quarter. But I’m still optimistic that we will definitely secure the orders in this quarter, and we will see some revenues. It may not be to the extent of INR200 crores or INR100 crores, but definitely, some revenues we will see on smart meters in this year.
Chinmay Nema
Got it, sir. And any color on the conversion kits business? My line dropped off, so I’m not sure if you have already covered it in the comments.
Rajesh Doraiswamy
I think the business was shutdown, closed. We’re not proceeding on that.
Chinmay Nema
Okay, sir. Thank you.
Operator
Thank you. The next question is from the line of Jagadeesh Sharma [Phonetic], an individual investor. Please go ahead.
Jagadeesh Sharma
Sir, thanks for this opportunity, sir. Congratulations for the result. I have two questions. First one is, what is the TAM for the EV charging market, which you have mentioned right now, sir.
Rajesh Doraiswamy
What is the?
Jagadeesh Sharma
TAM, total addressable market for the EV charging? You just mentioned in the opening remarks.
Rajesh Doraiswamy
I just mentioned I expect that 800,000 charges might be required for the country if we start adopting the electric vehicles.
Jagadeesh Sharma
800,000, that is 8 lakh chargers.
Rajesh Doraiswamy
Yeah, 8 lakh chargers over a period of next 5, 10 years.
Jagadeesh Sharma
In the next 5, 10 years. Okay. My second question is, sir, we have been entering into smart meters, EV charging, like Gen Z business, new gen business, right? Are we also planning to enter into railway KAVACH by any chance?
Rajesh Doraiswamy
Which one?
Jagadeesh Sharma
Railway KAVACH, KAVACH system.
Rajesh Doraiswamy
No, I didn’t get it. Railway?
Jagadeesh Sharma
Railway KAVACH, it’s a protection which — Yes, yes, sir.
Rajesh Doraiswamy
No, no, the train protection mean, accident protection system, right?
Jagadeesh Sharma
Correct. Because all the — all are in the same pace now. So are we planning to enter or are we even thinking about entering it in the future, sir?
Rajesh Doraiswamy
No, sir. No, we have — we are not — there is no plan as of now. But you have given a good idea. We will look into it.
Jagadeesh Sharma
Great, sir. Thank you, sir. If you are entering, let us also know, it will be great, sir.
Rajesh Doraiswamy
Of course it will be — the market will know if we do something like that.
Jagadeesh Sharma
Definitely, definitely. Thanks, sir. Please look into it. Thank you, sir. All the best.
Operator
Thank you. The next question is from the line of Suresh Parikh, an individual investor. Please go ahead.
Suresh Parikh
Yeah. Thank you. My question is regarding smart meters. So what is the installed capacity, I mean, volumes for smart meters and what kind of volumes do we expect for the year FY25 and FY26?
Rajesh Doraiswamy
So capacity is 40 lakh meters.
Suresh Parikh
Okay.
Rajesh Doraiswamy
At full capacity it will be INR1,000 crore revenue.
Suresh Parikh
Okay. Thank you.
Operator
Thank you. The next question is from the line of Ankur Agrawal from RC Business House Private Limited. Please go ahead.
Ankur Agrawal
Sir, my question on the debt side. What is your plan to reduce debt in future?
Rajesh Doraiswamy
Sir, I think once we start seeing positive cash flows and then when we slow down on the new investments and new growth area investments, I think that’s when you will see the working capital going down.
Ankur Agrawal
So the debt level as today is now.
Rajesh Doraiswamy
Right now, we still are at a good interest coverage ratio. So we are not worried on that. But we will also ensure that we are not really going over and above what we are right now.
Ankur Agrawal
Not at any depth in future?
Rajesh Doraiswamy
Yeah.
Ankur Agrawal
Okay, that’s all. Thank you.
Operator
Thank you. The next question is from the line of Nilesh Mehta from NSR [Phonetic]. Please go ahead.
Unidentified Participant
Hi, sir. Congrats for the good set of numbers. I’m just wondering if you can just give me an overview of the EV market for the next, say, current status and what are the developments that are taking place in — from the government side, please?
Rajesh Doraiswamy
The government is trying to encourage EV definitely in various aspects. However, the adoption has been a little slow, not just here, I think even in Western markets, it has slowed down a bit is what we understand from various market sources. So India also is definitely a little slow in adopting the electric vehicles. But now plus I think if you look at China, I think the adoption has been wonderful. Close to around 40% of vehicles today are electric vehicles in China, is one of the largest electric vehicle market today in the world. So I’m sure that I think it will start happening here because we are also a very similar country and definitely there are advantages in electric vehicles.
So the charging market space I just mentioned, I think if we start adopting at that pace, we definitely would need close to around 8 lakh chargers across the country over the next 5 years to 8 years or 10 years. So that’s going to be a large market. This is very approximate projection because the market is still evolving. The prices are still not fixed. The price points will keep varying depending on the volumes. When we start, there is a price point and then the volumes come in, I think a lot of things will change to start declining. So it’s very difficult for now to put a value for a charger, and say that this is how it is going to be. So as we move forward, we will know once how it moves — goes.
Unidentified Participant
Okay. Okay, thanks. This is the information I wanted. Thanks a ton.
Rajesh Doraiswamy
Yeah.
Operator
Thank you. Ladies and gentlemen, we’ll take this as the last question. I now hand the conference over to Mr. Rajesh Doraiswamy, Joint Managing Director of Salzer Electronics Limited for closing comments.
Rajesh Doraiswamy
Thank you very much everyone for your enormous interest in Salzer’s growth story. And I’m sure that we will do all that we can to ensure what we have committed is happening. So thank you very much for listening to this and looking forward to interact with you soon in the next quarter. Thank you all.
Operator
[Operator Closing Remarks]