Salzer Electronics Ltd. — Call Transcript 2018

Nov 3, 2018

Salzer Electronics Limited Q2 & H1 FY19 Earnings Call Conference Call

29[th] October 2018

Speaker Name: D Rajesh Kumar – Joint Managing Director & Chief Financial Officer

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Moderator

Good day, ladies and gentlemen and welcome to the Q2 & H1 FY19 Earnings Conference Call for Salzer Electronics Limited. Please note, this conference call may contain forward-looking statements about the Company, which are based on the beliefs, opinion and expectations of the Company as on the date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict.

All participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing 0 then * on your touchtone phone. Please note that this conference is being recorded.

I now hand the conference over to Mr. D Rajesh Kumar, Joint Managing Director and Chief Financial Officer. Thank you and over to you sir.

Rajesh Kumar

Thank you very much. Good afternoon everyone and thank you all for joining our earnings call for the second quarter and half-year ended September 30, 2018. I have with me Savli Mangle and Smit Shah from Bridge Investor Relations, Mr. Bhaskara Subramanian, Director Corporate Affairs and Company Secretary, and also Mr. Murugesh, Assistant Company Secretary of our Company.

We have shared our results update presentation and I hope you all must have received it and also gone through the same. Before going into the financials just a few brief introductions of the Company.

Our company started as a single product manufacturer; manufacturing cam operated rotary switches in India in 1985. Over the years we have evolved from a single product manufacturer to a company that offers total complete and customized electrical solutions to our customers.

Over the years, we as a company have made sure that we are always in the forefront of technological development by getting into technical associations with reputed companies across the world. Our four state-of-the-art manufacturing facility is located in Coimbatore. We also have our in-house R&D lab, which is recognized by government of India.

Through all these initiatives we were able to bring in high quality products of international standards and gain leadership position in a few of them. Be it our association with Larsen & Toubro from 1993 to Plitron from Canada in 1995 or the Trafomodern from Austria in 2016. We have always focused on getting into technology, which are niche and of great value to the company.

Through this focus and sheer determinations to come out with products of highest quality, we have been able to get a preferred vendor status with global giants with like GE and Schneider. All our products are internationally certified. Though we are operating under the electrical, electronics product group, for the ease of analysis, we have classified our business into four divisions, namely the Industrial Switchgears business, the Wire and Cable business, the Building Segment business and the Energy Management business.

Before we discuss the quarterly business and financial performance, I would like to share with you all about a significant development on the credit rating front. That our credit rating has been upgraded by CRISIL to A/Stable from A minus pocket for the long-term borrowing and A1 reaffirmed for short-term borrowings, reflecting the leading market position in domestic rotary switches market and an adequate financial risk profile.

It is also to be noted that this is the second upgrade that we’ve got in the last three years from CRISIL. Also, I would like to inform that we’ve withdrawn our acquisition proposals relating to the two overseas companies that we had announced in the end of June 2018.

This is fourth details that we conducted so mutually agreed by the board of directors and the management that the acquisition evaluation we are not in-line with expectation and so it was dropped. Keeping in mind the long-term value creation of Salzer group.

Coming on to our quarterly and half yearly financial and business performance, our financials for this current and past quarters have been restated as per India's accounting guidelines.

I am happy to share that despite domestic industry, especially the Switchgear market not supporting growth or showing any sign of increase in demand, the financial squeeze experienced by the SME companies all across the sector, we have continued to be stable and also have been able to grow. We registered as increase in revenue of 34% year-on-year at 135 crore in the second quarter FY19.

Our revenue for the first half September 30, is at 261 crore compared to 205 crore last year, which is a year-on-year growth of 27%. Our share from domestic market is 84% of our revenue as we witnessed growth coming from our new products in the building and in the Switchgear segment.

Also, our legacy products such as rotary switches, toroidal transformers have shown growth and uptick in demand. Our two new products Three Phase Dry Type transformers and Wire Harness have also witnessed good traction compared to last year.

The EBITDA, for the quarter stood nearly at Rs. 17 crores that’s compared to Rs. 13 crores in the corresponding previous quarter, which is a growth of 30% mainly on account of better product offerings. The EBITDA for H1 FY19 grew by 30% year-on-year to nearly Rs. 31 crore from Rs. 23 crore last year. The profit after tax was maintained at 5.6 crores in Q2 FY19 as against 5.8 in the corresponding quarter. For H1 FY19 the PAT grew a 3% to 10.2 crore compared to 9.9 in H1 FY18.

Moving on to the breakup of revenue as for the business divisions the Industrial Switchgear division contributed 44% to the total revenue in this quarter, and 40% in H1 FY19. The segment has grown by 17% year-on-year in Q2 FY19 of product rotary switches, toroidal transformers have continued to show growth. We have also seen good traction in other products, three phase dry type transformers and wire harness.

The Wire & Cable division contributed around 43% of our revenue this quarter and 49% in the first half. One significant happening in this first half is that we have now started to manufacture and sell wires and cables under our brand Salzer we are seeing a growing opportunity here. This is apart from our brand labeling business that we were doing for L&T, Crompton and few other large brands under the Wire & Cable division.

Moving on to the building products division this business is the only B2C business that we have. Going forward we are confident of increasing contribution from this division to around 10% level as it has opened new opportunities in the real estate sector, where we have got some annual rate contracts with major builders.

This division has contributed around 9% this quarter and 8.4% in the first half of the financial year driven by the increase in sales and good traction for our product offering such as modular switches, MCBs, distribution boards, change overs and wires and cables. We’ve also increased our focus on retail segment and are formulating strategy to further strengthen our presence in this segment. The sale of this division has grown from 9.38 crore last half year to around 22 crores this current half year.

The fourth is Energy Management division which has contributed 5% revenue in this quarter. This is an order book driven business and this quarter we have been able to book revenue of which was due to us for the second year of the contract that we were doing in Tamil Nadu state.

I would like to briefly speak on our balance sheet. Our market share that as on 30 September 2018, total debt decreased by 10% to around 122 crores from 135 crores on March 31. And debt to equity ratio improved to 0.4. The net working capital in days have come down to 100 days as compared

to 130 days from six month ago. And we continue to focus on bringing that down and improve our capital efficiency further.

In conclusion our focus continues to remain on profitable growth and capital efficiency. We continue to look at adding new products, which are customized and value added in nature. We are also continuously on the lookout for new geographies, new customers which can help us get better margins.

As part of our history we’re always open for technological collaboration or association that can help us strengthen our position in the market.

I would once again like to thank everyone for your time and attention. We can now take questions.

Question-and-Answer Session

Moderator

Thank you. Ladies and gentleman, we will now begin with the question and answer session. We have question from M M Savla Consultancy Services. Your line is un-muted.

Mulesh Savla

Good morning and congratulations on good set of numbers.

Rajesh Kumar

Good morning and thank you sir.

Mulesh Savla

Yes, I just have one question on our financial numbers like employees’ cost, other expenditure, depreciation and interest, these four cost have gone up in this quarter. So can you please throw some more light on the component or reason for increasing such cost? Thank you.

Rajesh Kumar

If you look at quarter-on-quarter – or sorry year-on-year the finance cost and depreciation has gone up, this is because we have acquired all the magnet wires as a business. So that’s the interest costs of that company and the depreciation of that company has been added, which was not present in the last – first half last year

Mulesh Savla

Right. Right.

Rajesh Kumar

The employee cost has gone up. I think we have revised that the yearly increment needs to be given normally in May, June that to the tune up the around the 9%. And because of that the employee costs have increased. The other expenses, I think, it is in line with the increasing growth as a percentage.

Mulesh Savla

Okay. And what is your outlook for the coming years? And how do you see the economy they have standing out and the challenges faced by the industry due to liquidity crisis and all?

Rajesh Kumar

I think the liquidity crisis have definitely affected the SME which has overall got the economy – it was actually very buoyant, I would say, from April. But suddenly we see slow down or little pessimistic opinion in the market from August onwards. But we don’t see major setback because of that. The output for us for the full year we see that we will continue to grow at around 20% minimum. On top line, as well as bottom line is what we expect.

Mulesh Savla

Alright, good, good. And that’s all from my side. Thank you so much all the very best.

Moderator

Next question comes from Sharmin Nasser. Your line is un-muted. He is an Individual Investor.

Sharmin Nasser

Hi Mr. Rajesh, congrats on the fabulous performance sales have grown as expected. Sir what would be the debt level you would expect by the end of the year? That is my question number one. Question number two, this being an election year will you foresee any growth targets of 20% going up little bit haywire during the next two quarters? These are the two questions from my side. Thank you.

Rajesh Kumar

First on the borrowing, I think, this will continue to be at the current level or it will go down there is no necessity to increase this further. Apart from one project that we are concentrating is to setup a lan cable manufacturing facility. If that group decides, that maybe a small term loan that we might take by the last quarter. But apart from that we don’t see the deck going up and it continues to be a certain level.

Sharmin Nasser

What would the – I mean the basic…

Rajesh Kumar

The term loan will be approximately around Rs. 12 crores to Rs. 15 crores. On the growth, we are actually lucky that we have been at growing at around 27%, 28% partly because of the acquired business and the rest is because of the legacy product that has been growing. So we don’t foresee big set back because of the election year. But because of the election we definitely foresee that economy is going to slow down a little bit which we have already seen. But as far as our business is concerned because of two new product conditions that we’ve made which is actually growing at more than 75% year-on-year. the three transformers and the wire harness and also because of the acquired business that we have done in the last year. So all this put together we definitely see minimum 25% whatever we have grown in the first half we will continue to maintain this growth level in the second half also.

Sharmin Nasser

Thank you, sir. Thanks a lot.

Moderator

We have a question from Kirti Jain from Sundaram Mutual Fund. Your line is un-muted.

Kirti Jain

Sir, on this Wires & Cables side like there is a little slower growth relatively. Like is there a deliberate thing to run down what is the strategy – Wires & Cables strategy?

Rajesh Kumar

If you traditionally look at on the second quarter, it has always been lower. If you go back to FY 17 18 in the Q1 we did around 57 crores, but in Q2 it was dropped to around 46 crores. Similarly, here I think FY’18 last year we did around 69 crores and this quarter, I think, we are at around 57 crores.

Traditionally Q2 the Wires & Cables business goes down because of the seasonality. But if you really look at the year-on-year, I think, we have still grown at around 23%. So there is no deliberate intention to reduce this business.

Kirti Jain

No sir, like there is an inorganic peak also in this in these 46 to 57 balance rate gap rates.

Rajesh Kumar

Out of that 23% growth there is almost I make it percentages because of the acquisition business.

Kirti Jain

Correct sir,

Rajesh Kumar

Without that, I think, we have grown by around 3.5% compared to last quarter Q2 FY’18.

Kirti Jain

So like the market is slowing down or what has happened like the growth is relatively illustrative. Is it because of the day subject or…

Rajesh Kumar

No I don’t think the market is slowing down. It is mainly because – since we are comparing it with last year when there was no acquired business and this year with acquired business. But last year we had a sale that we made to the acquired business which is hopefully, negative now.

Kirti Jain

Okay, okay.

Rajesh Kumar

That is why there is slight mismatch. So, we have to combine both the businesses, then we see a 24% year-on-year growth in H1.

Kirti Jain

Building products – what is leading the attraction sir, which you are continuing to…

Rajesh Kumar

Building products as I – mentioned earlier in my last call I think added products, we’ve added MCB’s, we have added distribution board. We have added wires and cables Salzer branded into the segment. So, these three products have actually pushed the sale out one and one other happening is that we have actually signed contract with V-Guard for branding switches to them. These are the happenings in that segment which has actually pushed the sale up to almost half year to the growth of 130%.

Kirti Jain

So we should see similar momentum in the H2 also right sir for this…

Rajesh Kumar

I think may be – much more because of our full year target is close to around 55 to 60 crores as against 22.5 last year.

Kirti Jain

Sir, industrial segment what has driven the kind of 18% growth in this quarter, sir?

Rajesh Kumar

Out of 18% growth you can say that the three phase transformers and wire harness have grown significantly, together I think in H1 we have achieved around 10 crores in three phase transformers and wire harness is around 14 crores. Apart from that I think the regular traditional legacy products like rotary switches and Toroidal Transformers both has grown in the domestic market. So we see a year-on-year growth of 18% in that segment in the first half and we see a better momentum in the second half.

Kirti Jain

Sir, any scope of margin improvement sir, what are the – like have you been able to fully pass on the commodity and other inflation pressure sir?

Rajesh Kumar

To some extent, no, we were not able to pass on the full increase in the price There is time lag between the price increase and our change in price which has slightly affected our margins in this quarter. But in fact, because of – even though it just happened, we are still grown in the EBITDA margin. If you look at the EBITDA margin percentage this quarter is actually being 12.45% that’s mainly due to the revenue share, mix of revenue share and we have also got some energy management business coming in this quarter.

But if we go to the Q3 and Q4, we will definitely see better EBITDA margins or at least maintain at the current level which will actually take the blended margins to around 12% for the full year.

Kirti Jain

Okay, sir.

Rajesh Kumar

But as far as the copper price increase is concerned whatever happened which has been completely passed on. There is no time lag or there is no delay in that, so in the switch gear business we have small time lag.

Kirti Jain

Sir, inventory any scope for optimization from the current there is 130 crores we are having.

Rajesh Kumar

Yes, I think that’s what I mentioned in my speech, we had 110 day inventory which has actually dropped out to 96 days now. We are actually looking at reducing this further to around 85 to 80 days. And in debtor if you see we were 94 in March when comparing with March, it is more relevant, if it dropped out to around 85 days.

Kirti Jain

Correct sir.

Rajesh Kumar

So overall the networking capital form 130 we have been able to bring it down to 97. So I see the inventory levels coming down to around 85 to which can reduce another 14, 15 days of networking capital.

Kirti Jain

We can go towards the inventory, what’s your industry is like…

Rajesh Kumar

70 to 75 is what we are targeting the next six to 12 months. And we are comfortable within debtor days 85.

Kirti Jain

Yes, data we are looking – similar to invest data, the inventory was little bit on highest side actually. So other income is lower due to the low forex gain

Rajesh Kumar

Correct, correct.

Kirti Jain

Okay, okay.

Moderator

Yes, thank you. Next question comes from the line of Rupen Rajguru from Julius Baer Group. Your line is unmuted.

Rupen Rajguru

First extension to what the previous gentlemen asked, so in the current quarter what is the total revenue of cost while Salzer Magnet?

Rajesh Kumar

Current quarter the sales of Salzer Magnet wire is around 15 crores, 15.5 crores.

Rupen Rajguru

And as you said in the last year, it could have been included so what was the similar number for last year?

Rajesh Kumar

That could have been around 10 crores.

Rupen Rajguru

Okay, so in our last year number, we would have that 10 crores of magnet revenue and which is now 15 crores. That’s correct?

Rajesh Kumar

Yeah, correct.

Rupen Rajguru

For the quarter two so what would be the break-up of margins between the Switchgear’s versus the combined wire?

Rajesh Kumar

The Switchgear has given us around 16.8% EBITDA.

Rupen Rajguru

Okay.

Rajesh Kumar

The wire and cable business is driven around 8.1%.

Rupen Rajguru

Okay.

Rajesh Kumar

Building segment also has given 8.1%.

Rupen Rajguru

Okay.

Rajesh Kumar

And energy management has given the 20% EBITDA.

Rupen Rajguru

So, on the energy management what’s your outlook in the sense historically it has been quite lumpy and very difficult to kind of predict about the revenue and the margins, but rather more is on revenue side.

Rajesh Kumar

That is how the business is but whatever income that we have shown, now this is going to be a steady income for the next 3 years. We are going to see a minimum of 10 crores, 12 crores.

Rupen Rajguru

Okay. For next three years, okay.

Rajesh Kumar

In between we are not sure about any projects that are coming. If there are projects that are coming then that can be additional revenue out of this.

Rupen Rajguru

Okay. And as per dry type transformers are concerned what is the H1 revenue that we have kind of clocked in that?

Rajesh Kumar

H1 FY2019 we have got around 10 crores compared to H1 FY2018 5.5 crores.

Rupen Rajguru

Okay, but isn’t there the – ramping up or probably revenue kind of likely slower than our expectation?

Rajesh Kumar

No, I don’t think so because we look at the half year growth is around 82%.

Rupen Rajguru

See growth is the number but are…

Rajesh Kumar

Yes.

Rupen Rajguru

Absolute number 10 crores because if I am not mistaken, we were earlier planning to have 30 odd crores full year revenue in that. So are we still high in that?

Rajesh Kumar

We are on target to around 27 crores, 28 crores this year.

Rupen Rajguru

Okay, and what kind of margins will be having in that?

Rajesh Kumar

I think at 10 crores we are only at around 14.5% EBITDA margin.

Rupen Rajguru

Okay and ….

Rajesh Kumar

We ramp up I think it can be better.

Rupen Rajguru

Okay. So on full capacity this can give us 75? Okay 17%, 18%...

Rajesh Kumar

The revenues given today.

Rupen Rajguru

Yes, revenue would be about 75 crores, 80 crores in full capacity?

Rajesh Kumar

Full capacity I think we can touch around 90 crores revenue.

Rupen Rajguru

Okay, with the 17% margins.

Rajesh Kumar

Yes.

Rupen Rajguru

Okay. And when do you kind of see that happening?

Rajesh Kumar

In two years. This year we do around 27, next year we can double it again and then we can look at 90 crores year after that.

Rupen Rajguru

So, you have FY21 kind of number?

Rajesh Kumar

Yes, yes.

Rupen Rajguru

And you are fairly confident of achieving that number?

Rajesh Kumar

Yes.

Rupen Rajguru

Okay. I think recently promoter have also shown confident by increasing the stake like to what percent and considering the way the stock price has also behaved in line with the general market, will you plan to increase it by the – based on whatever regulatory you can do it?

Rajesh Kumar

I think promoters have already shown the inclination that want to take and being close to around 40%.

Rupen Rajguru

Okay.

Rajesh Kumar

It will change the thinking.

Rupen Rajguru

Yes.

Rajesh Kumar

And it will be informed in earlier calls also. So within these creeping acquisitions, whatever is possible will be there.

Rupen Rajguru

Okay. So we’re at what? 36% kind of on this, is it?

Rajesh Kumar

35% now, it’s 34.5% to 35%.

Rupen Rajguru

Okay, we’re at 35%. So we can intention is to over next, whatever one or two years to create it to 40%.

Rajesh Kumar

Yes, yes. Yes.

Rupen Rajguru

And one last question on the tax rate. So, considering now all the other merger and all that, so what should be the tax rate that we should keep in mind for the full year?

Rajesh Kumar

I think this tax rate is a little bit confusing, because we also have a deferred tax included in that.

Rupen Rajguru

Correct, correct, correct.

Rajesh Kumar

So together, I think it should be around 33.5%.

Rupen Rajguru

Okay.

Rajesh Kumar

For a direct mean, actual tax – minus deferred tax, if you see we are always at around 25%.

Rupen Rajguru

Okay.

Rajesh Kumar

The tax outgo at 25%.

Rupen Rajguru

Okay. And just one last one if I can squeeze in, although I have not calculated it. So in this halfyear, what kind of free cash have we generated?

Rajesh Kumar

Even I don’t have the calculation with me.

Rupen Rajguru

But any…

Rajesh Kumar

I have no idea on that right now.

Rupen Rajguru

Is this possible?

Rajesh Kumar

Yes, yes, sure.

Rupen Rajguru

Okay, I will be in the queue, but if you can in the meantime, get that number for me, that would be really good.

Rajesh Kumar

I will try that.

Rupen Rajguru

Okay, thanks a lot and all the best to you.

Moderator

Next question comes from the line of Chirag Patel from Chirag Investments. The line is unmuted, sir.

Chirag Patel

Yes. What is the contribution of export revenue in current Topline?

Rajesh Kumar

16.5%.

Chirag Patel

16.5%?

Rajesh Kumar

Yes.

Chirag Patel

Okay. And can you give full year guidelines on the same that what will be the contribution in overall FY 2019?

Rajesh Kumar

The export will continue to be around 17, 17.5%. Used to be at around 20%, 21%, but it has dropped down because we have acquired the Salzer Magnet Wires business, which is purely domestic.

Chirag Patel

Okay. And what is the EBITDA margin setting that particular export segment overall?

Rajesh Kumar

EBITDA margin in the exports – export is all industry feature business. So whatever exports, we do the EBITDA margins are always at around 18% to 20%.

Chirag Patel

Okay, sir. And one more question, can you give some outlook on the retail segment which we have started recently, like B2C?

Rajesh Kumar

We have been in the B2C segment for quite some time, but with just one product, the modular switches. We have established more than around 80 dealers, direct dealers across the five states in the south.

Chirag Patel

Okay.

Rajesh Kumar

And since we had this network established, we wanted to launch new products into that and in line with that we have launched, MCB, distribution boards, changeovers and also wires and cables, which we have been manufacturing and brand labeling for others. We have launched all these products into the same segment as we have been selling modular switches for the last seven, eight years. Our idea is to add more products in this segment and also grow geographically going forward.

Chirag Patel

Okay. And outlook on raw material cost of percentage of revenue for the next upcoming two quarters?

Rajesh Kumar

The raw material percentage will continue to be the same, because we are not seeing any significant changes in the materials prices from here on.

Chirag Patel

Okay.

Rajesh Kumar

And even if there is going to be very significant price changes, we will be able to pass it on with the time lag of two to three months.

Chirag Patel

Okay. Okay, sir. Thank you.

Moderator

Thank you, Mr. Patel. Next question comes from the line of Kalpesh Sharma. He’s an individual investor. The line is unmuted, sir.

Kalpesh Sharma

And so thank you for giving me this opportunity. Just to understand a bit more about your acquisition that you made. So what is the inter-segmental revenue calculation otherwise would have been? So the impact is what we are trying to understand, I am trying to understand, before and now.

Rajesh Kumar

This full year, the acquired business should be able to generate approximately around Rs.65 crores of sales. Whereas last year, we would have made an inter segment sale because of the acquired – our sale to the acquired business, what we have made from Salzer Electronics was approximately around Rs.33 crores.

Kalpesh Sharma

So again Rs.33 crores will be incurring or getting a revenue of Rs.65 crores?

Rajesh Kumar

Yes, for this year.

Kalpesh Sharma

So, what is the sale that company otherwise would have made if it would have been not acquired?

Rajesh Kumar

That company still would have made Rs.65 crores but buy Rs.33 crores from us.

Kalpesh Sharma

Got your point, okay. And how much of contribution is this going to give to our bottom line, I mean to the margins?

Rajesh Kumar

That company has been – this half year the acquired business has generated around 8.65% EBITDA margin.

Kalpesh Sharma

Okay. Sorry, I missed the opening remark. But have we given any guidelines about the branded sale, how much was it in the previous quarter and how much is the target for this year?

Rajesh Kumar

The branded sale? Means you are talking about Salzer branded sale?

Kalpesh Sharma

Yes, yes, yes.

Rajesh Kumar

On the retail segment?

Kalpesh Sharma

Yes.

Rajesh Kumar

No, we have not given any target, but this year we have – I think the division has grown by around 130% to Rs.22 crores. We expect this to continue to grow at the same pace. The full year target that we are looking at from this retail division is around Rs.60 crores.

Kalpesh Sharma

So the Salzer branded radiances, is this what you’re aiming at?

Rajesh Kumar

Correct.

Kalpesh Sharma

And what was it last year, if I may know?

Rajesh Kumar

Last full-year, we did around Rs.21 crore.

Kalpesh Sharma

So Rs.21 crores to Rs.60 crores. I mean – and then what is the margin differential between our products and cable division that otherwise it caters to?

Rajesh Kumar

Okay, this is little bit detailing you need here, because on the retailing front that we do, it is not just wires and cable, it’s a combination of various products. The Rs.22 crores sales that we have done includes wires and cables, switches, MCBs, distribution boards. Whereas the wire and cable business that we do is only brand labeling, which is around Rs.127 crores that we have done. This majority of production is brand labeling to Larsen and Toubro to Crompton to Texmo and various other companies.

Kalpesh Sharma

So I just wanted to understand the growth and margins that we may actually see with this growth from Rs.22 crores to Rs.60 crores as a branded sale to the retail segment.

Rajesh Kumar

Correct. With that segment will definitely see a better EBITDA. That segment was at around 6.5% to 7% EBITDA until Q1. In Q2 the EBITDA has increased to around 8.5%, 8.01%. We expect that go up around 10% to 12% by end of the year.

Kalpesh Sharma

Okay, that’s fair and that’s encouraging rather. So about this energy management order or revenue that we have seen in this quarter, and you have said that is going to come for the next two years as well. So next three years. Now where is this energy management actually coming from? Which area/ location or project, if you may…

Rajesh Kumar

We’ve actually engaged in a PCP project in Tamil Nadu state for three corporations. The total cost of the project was around Rs.94 crores, out of which we have already built around Rs.55 crores to Rs.60 crores, in the last two years. The balance will be now seen from the revenue – balance revenue we have seen coming in for the next three years. So that is what I said, we will get around Rs.12 crores – Rs.10 crores to Rs.12 crores every year for the next three years.

Kalpesh Sharma

Okay, and that’s a good clarification rather. And this was something that you were waiting, if I am not mistaken.

Rajesh Kumar

No problem.

Moderator

Yeah. We have a question from Rupen Rajguru from Julius Baer Group. The line is unmuted.

Rupen Rajguru

Yeah. Hi, just one more follow-up, since you have called off the two overseas acquisition which you were planning earlier because it was probably not that shareholder friendly, now to meet your overall vision of Rs.1,000 odd crores revenue by 2021, so do you want to still pursue any inorganic, because you have to meet that number you have to do some kind of inorganic, so are you actively looking into any acquisitions either domestically or international as we speak?

Rupen Rajguru

So, I was mentioning about the acquisition strategy, because overall vision of having the Rs.1,000 crore revenue by 2021, if the status currently on, are you right now pursuing any activity either domestically or internationally any new acquisition strategy or considering the overall environment you think that you would take a pause and relook into our overall vision or probably you look at the vision based on the market scenario?

Rajesh Kumar

Okay. First, I think on the Rs.1,000 crore target the acquisition was never a part of it.

Rupen Rajguru

Okay.

Rajesh Kumar

We had our own plan to get to around Rs.900 crores to Rs.1,000 crores that is double that what we are looking at from last year.

Rupen Rajguru

Okay.

Rajesh Kumar

The acquisition was not part of it, the opportunity came in between, we looked at it, when we did the due diligence we found that it is the value was not giving us, the valuations were not as expected, and they were not giving enough value to us, so we have to drop it.

So, leaving that apart yes, we are definitely actively looking at other acquisitions, but definitely we will do something from – in the same field which is – which has something in our business, that one core advantage that we have, we will definitely look at it. So, there is nothing to announce as of now, but we are always on the lookout.

But, typically Rs.900 crore to Rs.1,000 crore the plan is always there with us with whatever investments we have made already and the investments that we are planning to make in the next two or three years, at least we still have the target in mind and we are working towards that.

Rupen Rajguru

Okay, so on the acquisition strategy, so basically do you have any kind of price of the business in mind or do you have what kind of valuations you are waiting or you would look into both the parameters and roughly again now, I can understand you can’t mention but what was the size that you were looking to the acquisition which has got got called off, what about the size of the Company?

Rajesh Kumar

Price of the company was around topline was around Rs.55 crores but the acquisition price that we estimated was close to around to $10 million to $11 million but you know the expectation was much higher.

Rupen Rajguru

What EV you were willing to give? EV by EBITDA?

Rajesh Kumar

Because we were looking around 5.5 times to 6 times.

Rupen Rajguru

5.5 times and 6 times. Okay, and ask rate was much higher. Okay, because considering our own valuations have come down significantly on EV by EBITDA and because ideally from a minority shareholder perspective if you are planning an acquisition by issuing your shares, this would not be the ideal time to use your currency in that. I guess that’s right, I hope that’s kept in mind. All the best to you.

Rajesh Kumar

I will come back to you on the free cash flow.

Rupen Rajguru

Okay, thank you.

Moderator

Thank you Mr. Rajguru. Next question comes from the line of Mulesh Savla, M M Savla Consultancy Services your line is unmuted.

Mulesh Savla

Thanks for just taking the follow-up question, I just wanted to make one passing suggestion, can you not think of keeping conference call after the market hours, and rather than keeping it during the market hours, because I have noticed, almost every time our conference calls are generally during the market hours.

Rajesh Kumar

Point noted, we will take care of it.

Mulesh Savla

Yes, thank you. Thank you, so much.

Moderator

As there are no further questions from the participants, I’d like to hand the floor back to Mr. Rajesh for final remarks. Thank you sir.

Rajesh Kumar

I’d like to thank everyone for your kind attention and your interest in the Company, thank you very much.

Moderator

That does conclude our conference for today, thank you for participating, you may all disconnect now. Thank you all.